TaxTMI 
TaxTMI 
2015 (9) TMI 1239
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed U/s. 143(1) of the Act on 28-04-2004. Subsequently during the scrutiny assessment proceedings, the assessee filed a revised return declaring the total income of Rs. 4,02,01,747/ -. The assessment was completed u/ s 143(3) of the Act on 29-3-2006 determining the total income at Rs. 20,49,50, 000/ -. Thereafter, the assessee filed a petition u/s. 154 of the Act before the Assessing Officer contending that the claims made in the revised return were not considered by the Assessing Officer while completing the assessment U/s. 143(3) of the Act. The Assessing Officer, however, rejected the application made U/s. 154 of the Act by observing that all the claims made by the assessee had been duly considered. The assessee challenged the assessment order before the CIT(A) who dismissed the appeal. Aggrieved by the order of the CIT(A), assessee preferred an appeal before the Income-tax Appellate Tribunal in which the assessee raised specific grounds with regard to non consideration of claims made towards deduction on account of 'Redundant Animation Projects WIP' and 'Redundant Software WIP' amounting to Rs. 4,06,12,414/- and Rs. 4,98,19,572/- respectively. The Income-tax Appellate Tribunal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....specific software's, hardware's etc expenditure which was specifically incurred for Animation Projects were booked under the head "Repairs & Maintenance". Therefore, by following Hon'ble ITAT's order and considering the claim of assessee as made in revised return, the complete expenditure relating to Redundant Animation Projects i.e Rs. 4,06,12,414/- shall be allowed in the A. Y 2003-04 only. Further, this expenditure is in the nature of "Production expenditure" only. It is therefore requested to kindly allow the balance expenditure ofRs. 1,57,28,968/-. Without prejudice to the above submissions, we would like to submit that the Hon'ble ITAT Hyderabad vide its order dated 04-07-2008 in ITA Nos. 410 to 413/Hyd/2006 in assessee's own case for the A.Y 1999-2000 to 200203 have directed the assessing officer to make a token disallowance of 0.5% of total production expenses claimed by assessee. Respectfully following the same order of the Hon'ble jurisdictional ITAT in assessee's own case, a token disallowance of 0.5 % of the above production expenditure claimed in respect of "Redundant Animation Projects WIP" can be m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Loans & Advances Rs.3,25,64,086/- Bad Debts written off Rs. l,33,49,823/- Repairs & Retained Rs. 2,11,732/- Total: Rs. 4,59,13,909/- However, the AO disallowed the claim of the assessee stating that the Loans & advances and Debtors are not written off in the books of account of the appellant company for the AY. 2003-04 and accordingly proposed to allow the same in the next assessment year i.e, AY. 2004-05. In this regard, we would like to submit that the above advances and debtors have been written off in the financial year 2002-03 relevant to the assessment year under consideration i.e. AY. 2003-04 only. We would like to submit that the entire Animation Work requires expertise skills in animation to complete the projects and hence, the assessee, engaged experts from various places to carry out the project in much efficient and excellent way at mutually agreed consideration with all comforts to revise. Since the work is of specialized skills, the Animators have to be paid in advance some of the agreed value and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing the order of the Hob'ble ITAT, I direct the assessing officer to disallow the 0.5% of Rs. 1,57,28,968/- and allow the balance amount as revenue expenditure. Hence, the ground of the assessee in this regard is partly allowed. 8.1 The issue under consideration is similar to the matter covered in the ground no. 2. adjudicated in the forgoing paras. Following the same, I direct the assessing officer to disallow 0.5% of Rs. 2,49,09,785/ - and allow the balance amount as revenue expenditure. In the end, this ground of appeal stands partly allowed". 5. With reference to bad debts, the Ld. CIT(A) considered the issue and allowed the same as under: "9.2 I have carefully gone through the assessment order and the written submissions filed in this regard. The AR of the appellant company contended before me that the appellant company had paid advances to persons and firms for carrying out the animation works. However, due to various reasons, the work could not be finished and therefore, the appellant company decided to dismiss the idea of carrying o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sidering the fact that the revenue has filed appeal before High Court against the order of the ITAT. 2. The ld. CIT(A) erred in allowing the claim of the assessee under the head repairs and replacements towards Redundant Animation Projects WIP and Redundant Software Project WIP without appreciating the fact that the A.O. had disallowed the same on the ground that the assessee had capitalized the expenditures and claimed depreciation. 3. The ld. CIT(A) erred in deleting the addition of noncollectables loans & advances and bad debts written off though the same was not debited to P&L A/c during the year under consideration". 7. Ld. DR submitted that as far as bad debts are concerned, they were in fact written off in the next year and hence CIT(A) erred in allowing the same this year. With reference to claim of deduction of Rs. 4,08,49,962/- under repairs and replacements, the contention was that the amount was claimed twice and hence the same cannot be allowed. The detailed submissions of the Revenue in writing is as under: a) Deduction of R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; However, before Ld CIT(A), the assessee took a new plea, that this amount was nothing but Production Expenses, and as per the ITAT order on Production expenses for AY 1999-2000 to 2002-03, 99.5% of production expenses are to be allowed as deduction. Ld CIT(A), vide para 7.1 and 7.2 of his order, accepted assessee's contention of this amount being production expense without questioning the same, and allowed deduction. The plea of the assessee to treat the contentious amount as Production expense should not be accepted for the following reasons: 1. This is nothing but an afterthought, as the assessee resorted to the plea of this amount being Production expense only after receiving a favorable order regarding production expense from the Hon'ble Tribunal for earlier years. 2. A deduction of Depreciation on this head after capitalizing this mount has already been allowed to the assessee in the original assessment proceedings, tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing officer in his original Assessment order and also revised Assessment order for the deprecation calculation. * The Assessing officer in his original assessment order 143(3) dated 29-03-2006 mentioned as follows is Para (iv) of page number 2:- "The assessee claimed an amount of Rs. 4,08,49,962/-towards repairs and replacements u/s 31 of IT Act (100%) which was claimed as additions to fixed assets in the Balance Sheet. The details for the additions were called for. The assessee admitted Rs. 1 Lakh under the head "Plant and Machinery", Rs. 4,07,49,962/- under the head 'Computer Hardware and Software'. The assessee's claim for written of the entire expenditure of Rs. 4.08 Crores is not considered treating the same as capital expenditure and depreciation allowable as per IT Rules is allowed." However The AO mentioned in the original Assessment order that repairs & replacement expenditure which was claimed 100% in the original return of Income and additions made to Computers & pant machinery is one and same. It is to submit that the additions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entioned as follows in para "a" of page number 4: "The Assessee claimed deprecation of Rs. 11,02,16,915/- in the computation of income enclosed to the revised return. But, as per the deprecation schedule enclosed to the revised return, claimed is Rs. 9,57,55,777/-. The Assessee could not produce any evidence in support of the claim of deprecation of Rs. 11,02,16,915/-. In the absence of any details, the additional deprecation of Rs. 1,44,61,138/- ( Rs. 11,02,16,915 - Rs. 9,57,55,777) claimed is not entertained. The correct deprecation admissible consequent to the assessment orders of earlier years is worked out as per the deprecation schedule enclosed and the same is allowed" Ultimately the AO allowed deprecation Rs. 7,39,70,913/-(Annexure - C) in the revised Assessment order which does not include the claim of 4,08,49,962/ - towards redundant animation projects, software projects. In view of the above details it is very clear that the Assessing officer considered deprecation amounting to Rs. 7,39,70,913/- in the revised assessment order passed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n submissions wherein, additions upto 30th September were bifurcated to Rs. 1,45,57,132/- and additions after 30th September were taken at Rs. 3,36,76,016/-. As seen from the P&L A/c originally filed in the return of income along with annual accounts of assessee placed in the Paper Book, the additions to the assets as per the P&L A/c was to the tune of Rs. 4,82,33,000/-. These amounts in the P&L A/c tally with the fixed assets list given by the Revenue as well. But, surprisingly, there is no other 'repairs and replacement' claim in the P&L A/c as can be seen from various schedules. Thus, it can be deduced that either the assessee has claimed the additions in the gross block mentioned in the annual report as an 100% expenditure under the repair head in the computation of income or brought from any other scheduled of balance Sheet. Whether the same amount was claimed twice or not can only be examined, if the depreciation schedule as claimed by assessee of Rs. 9,57,55,777/- originally was examined. Now, the difficulty arises in the sense that the depreciation claim is varying from order to order depending on the opening WDV, consequent to the effect of various orders in earlier years.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amounts were already considered as part of depreciation schedule on which depreciation was allowed. 16. As seen from the contentions raised before us, the issue boils to whether 100% revenue expenditure under the head 'Repairs and Replacements' in the original computation was added in the assets schedule during the year. Even though the Revenue relied on certain depreciation schedules and assessee also furnished certain schedules, same could not be verified by us in the absence of the original claim of depreciation schedules, the AO's working of depreciation, submissions of assessee in the course of assessments. As already stated above, there is no separate repairs and replacement expenditure in the schedules to the P&L A/c as verified by us. Whether it was part of any other head of account and claimed in the computation or from balance sheet amounts or from any other schedules of expenditure could not be verified as assessee has not placed the complete certified P&L A/c copies. Assessee being a public limited company, the annual reports filed with the Company Law Authorities and also the Income Tax computations at the time of assessments required to be examined. Since they are....