TaxTMI 
TaxTMI 
2018 (12) TMI 748
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....(Rs.) %disallowed Amount disallowed (Rs.) Staff welfare expenses 43,406.00 20 8,681.00 Business promotion 1,84,158.00 25 46,040.00 Telephone Expenses 1,42,721.00 20 28,544.00 Travelling Expenses 2,41,686.00 25 60,422.00 Vehicle Running Expenses 1,45,587.00 25 36,397.00 Vehicle depreciation 5,58,940.00 25 1,39,735.00 Vehicle Insurance 38,811.00 25 9,703.00 Servant Salary 2,97,000.00 50 1,48,500.00 Total 16,52,309.00 50 4,78,022.00 3.That the learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by Assessing Officer of Rs. 55,150/- being 50% of the Membership fee on American Express Credit Card. 4.That the learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs. 1,13,,65,036/- made by the Assessing Officer being the depreciation claimed on the Fixed Assets (Media Library) created by capitalization of stock and scrap in trade in the F.Y. 2006-07 (AY 2007-08)" 2. Briefly stated facts of the case are that, the assessee a resident company is engaged in the business of production of T....
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....vant material on record. In the assessment year 2007-08, the assessee revalued certain part of media library (films etc. produced by the assessee) at Rs. 3,19,95,873/- which was appearing at nil value in the stock in trade and converted the same as capital asset eligible for depreciation. The Tribunal in ITA No. 210/Del/2011 for assessment year 2007-08 however, rejected the claim of the assessee of conversion of the stock in trade into capital asset and held that for the purpose of Income- tax, the relevant part of the stock in trade shall be continued at nil value and denied the claim of the depreciation on such a revalued fixed assets. In the year under consideration, the Ld. CIT(A) , following the finding of the Tribunal rejected the claim of the depreciation of the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: "4.4 Ground No. 5 of appeal is directed against disallowing a sum of Rs. 1,13,65,036/- out of depreciation claimed by the assessee on media library. AO observed that during the AY 2007-08, the assesse has converted stock-in-trade of Rs. 3,19,95,873/- into fixed asset under the head media library. The intangible assets(media library) in ....
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....s of account. The case of the assessee is that the value of these items had been taken as nil as there was no buyer for these items. However, with a view to show improved balance-sheet for taking higher loan from the banks these assets have been shown in the balance- sheet now. Nonetheless, no item could be sold in this year also. We have considered this submission also. We find that the assessee has not incurred any expenditure which has not been recorded in the books of account. The ld. CIT(Appeals) has given a clear finding that all expenses regarding production of films etc. have been duly accounted for in the books. Therefore, it cannot be said that these assets have come out of any unaccounted income. In this light, it becomes clear that the assessee was in possession of these assets, which were valued at nil for the purpose of arriving at the value of work-in-progress. In the light of this fact, it is reasonable to infer that un-saleable work-in-progress, which was valued at nil in earlier years, has now been valued at Rs. 3,19,95,890/-. This value admittedly is an artificial value because this work-in-progress is un-sellable even now though there is a possibility o....
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....k-in trade to fixed asset. Hon'ble ITAT held that re-classification , of the assets and the value placed thereon in the books will have no consequence as far as income tax assessments are concerned. It was held that the assets for the purpose of income-tax shall continue to be grouped as stock-in-trade at nil value. In view of the above, the claim of depreciation by the assessee on the above assets as fixed assets is not allowable. Therefore, the disallowance made by the AO is fully justified. The appeal is dismissed in this ground." 7. Before us, the Ld. Counsel submitted a chart of addition/deletion and depreciation claimed on media library during the assessment year 2007-08 to 2011-12, which is available on page 18 of the paper book. The said chart is reproduced as under : " Particulars A.Y.2007-08 A.Y.2008-09 A.Y.2009-10 A.Y.2010-11 A.Y.2011-12 Opening Balance 79,700,000 79,913,783 60,808,523 45,460,140 Add:-Additions 79,7000,000 * 213,783 1,121,148 - - Less-Deletions - - - 195,000 - Total 79,700,000 79,913,783 81,034,931 60,613,5....
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....cle depreciation 5,58,940.00 25 1,39,735.00 Vehicle Insurance 38,811.00 25 9,703.00 Servant Salary 2,97,000.00 50 1,48,500.00 Total 16,52,309.00 50 1,48,500.00 11. According to the Assessing Officer, the assessee did not maintain any logbook for vehicles and no details of telephone expenses and other expenses was maintained. The Assessing Officer has also mentioned that no documentary evidence such as invoice or voucher to prove the genuineness of the expenses were submitted before him. In view of the facts, the Ld. Assessing Officer made disallowance of Rs. 4,78,022/- in respect of the above heads of expenses. The Ld. CIT(A) upheld the disallowance of observing is under: "4.1 I have carefully considered the submissions of the AIR of the appellant company, the facts of the case as well as the findings of the A.O. Ground no. 1 of appeal is general in nature and not pressed for by the appellant. Therefore, no adjudication is called for. Ground no. 2 of appeal is directed against disallowance of expenses being in the nature of personal expenses. AO observed that expenses have been debited to the P & L a/c which has element of pe....