Asst. CIT, Circle-13(1), Hyderabad V. M/s Padmalaya Tele Films Ltd., Hyderabad

ITA 278/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98430 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 24-02-2014
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Bad and doubtful debts; Assessment record; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 278/HYD/2014 ASSESSMENT YEAR: 2003-04 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13(1), HYDERABAD VS M/S. PADMALAYA TELE FILMS LTD., HYDERABAD [PAN: AABCP9095Q] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. AMISHA S. GUPT, DR FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR DATE OF HEARING : 02-07-2015 DATE OF PRONOUNCEMENT : 02-09-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS APPEAL IS FILED BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, HYDERABAD D ATED 31-10-2013. THE ISSUE IN THIS APPEAL IS WHETHER CERTAIN AMOUNTS DISALLOWED BY THE ASSESSING OFFICER (AO) BUT CLAIMED BY ASSESSEE AND ALLOWED BY CIT(A) WERE CLAIMED TWICE OR NOT? 2. BRIEFLY THE FACTS ARE THAT SURVEY OPERATIONS U/S . 133A OF THE INCOME TAX [ACT] WAS CONDUCTED IN THE BUSINESS PREM ISES OF ASSESSEE ON 22-08-2003. DURING SURVEY OPERATION, CERTAIN INCRI MINATING MATERIAL I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 2 -: WAS FOUND AND IMPOUNDED. SUBSEQUENT TO THE SURVEY O PERATION, ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2003-04 ON 01-12-2003 DECLARING A TOTAL INCOME OF RS.15,53,62, 011/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 28-04-2004. SUBSEQUENTLY DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASS ESSEE FILED A REVISED RETURN DECLARING THE TOTAL INCOME OF RS. 4,02,01,74 7/ -. THE ASSESSMENT WAS COMPLETED U/ S 143(3) OF THE ACT ON 29-3-2006 D ETERMINING THE TOTAL INCOME AT RS. 20,49,50, 000/ -. THEREAFTER, THE ASS ESSEE FILED A PETITION U/S. 154 OF THE ACT BEFORE THE ASSESSING OFFICER CO NTENDING THAT THE CLAIMS MADE IN THE REVISED RETURN WERE NOT CONSIDER ED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, REJECTED THE APPLICATIO N MADE U/S. 154 OF THE ACT BY OBSERVING THAT ALL THE CLAIMS MADE BY THE AS SESSEE 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 REG ARD TO NON CONSIDERATION OF CLAIMS MADE TOWARDS DEDUCTION ON A CCOUNT OF REDUNDANT ANIMATION PROJECTS WIP AND REDUNDANT S OFTWARE WIP AMOUNTING TO RS. 4,06,12,414/- AND RS. 4,98,19,572/ - RESPECTIVELY. THE INCOME-TAX APPELLATE TRIBUNAL IN ITA NOS. 783 AND 7 84/HYD/2012 DATED 11-07-2008 PASSED AN ORDER ACCEPTING THE CONTENTION S OF THE ASSESSEE THAT THE CLAIMS MADE IN THE REVISED RETURN TOWARDS THE AFORESAID DEDUCTIONS HAVE NOT BEEN CONSIDERED BY THE ASSESSIN G OFFICER WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT. T HE ITAT REMITTED THE MATTER TO THE FILE OF THE AO. ACCORDINGLY, THE CAS E WAS TAKEN UP AGAIN AND THE ASSESSMENT WAS COMPLETED ON 31-12-2009 U/S. 143(3) R.W.S 254 BY MAKING CERTAIN ADDITIONS AS SHOWN IN THE FOLLOWI NG COMPUTATION OF TOTAL INCOME: I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 3 -: TOTAL INCOME AS PER ASSESSMENT ORDER DATED 29-03-20 06 RS.20,49,49,996/- ADD: DEPRECIATION ALLOWED IN THE ASSESSMENT ORDER CONSIDERED SEPARATELY RS. 9,06,17,754/- ---------------------- RS. 29,55,67,750/- LESS: PRODUCTION EXPENSES ADDED IN THE ASSESSMENT ORDER CONSIDERED SEPARATELY RS. 30 ,00,000/- ---------------------- RS. 29,25,67,750/- LESS: DEPRECIATION ALLOWABLE AS PER SCHEDULE ENCLOSED RS. 7,39,70,913/- ---------------------- RS. 21 ,85,96,837/- ADD: PRODUCTION EXPENSES SUSTAINED BY ITAT @.5% RS. 25,16,750/- ---------------------- RS.22,11,13,587/- LESS: ASSIGNMENT CHARGES PAYABLE AS DISCUSSED ABOVE RS. 10,00,000/- ---------------------- RS.22,01,13,587/- LESS: REDUNDANT ANIMATION PROJECTS WIP RS. 2,48,83,969/- REDUNDANT SOFTWARE WIP RS.2,49,09,786/- ---------------------- NET TAXABLE INCOME RS. 4,97,93,755/- ---------------------- RS.17,03,19,832/- (OR) RS.17,03,19,830/- ---------------------- 3. AGGRIEVED ON THE ABOVE ORDER, ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT(A) ON THE ABOVE CLAIMS AND SUBMITTED THAT I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 4 -: (A) DISALLOWANCE IN RESPECT OF REDUNDANT ANIMATION PROJECTS WIP (RS.1,57,28,968/-): THE AO HAS DISALLOWED AN AMOUNT OF RS.1,57,28,445/- OUT OF TOTAL AMOUNT OF RS. 4,06,12,414/- CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME AS DETAILED BELOW: REDUNDANT ANIMATION PROJECTS RS.2,48,83,968/- REDUNDANT ANIMATION PROJECTS CLAIMED UNDER REPAIRS & MAINTENANCE RS.1,57,28,968/- ------------------------- TOTAL RS. RS. 4,06,12,414/- ------------------------- IN THIS CONNECTION, IT IS TO SUBMIT THAT THE AO ERR ED IN ALLOWING ONLY THE EXPENDITURE CLAIMED UNDER THE HEA D 'REDUNDANT ANIMATION PROJECTS' AND NOT ALLOWING THE EXPENDITUR E CLAIMED UNDER THE HEAD 'REPAIRS & MAINTENANCE'. WE WOULD LIKE TO SUBMIT THAT A PART OF ANIMATION PROJECT COST WAS BOOKED UNDER THE HEAD REDUNDANT ANIMATION PROJECTS AND THE OTHER PART INC LUDING SPECIFIC SOFTWARE'S, HARDWARE'S ETC EXPENDITURE WHICH WAS SP ECIFICALLY INCURRED FOR ANIMATION PROJECTS WERE BOOKED UNDER T HE HEAD 'REPAIRS & MAINTENANCE'. THEREFORE, BY FOLLOWING HO N'BLE ITATS ORDER AND CONSIDERING THE CLAIM OF ASSESSEE AS MADE IN REVISED RETURN, THE COMPLETE EXPENDITURE RELATING TO REDUND ANT ANIMATION PROJECTS I.E RS.4,06,12,414/- SHALL BE ALLOWED IN T HE A. Y 2003-04 ONLY. FURTHER, THIS EXPENDITURE IS IN THE NATURE OF 'PRODUCTION EXPENDITURE' ONLY. IT IS THEREFORE REQUESTED TO KIN DLY ALLOW THE BALANCE EXPENDITURE OFRS. 1,57,28,968/-. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, WE WOUL D LIKE TO SUBMIT THAT THE HON'BLE ITAT HYDERABAD VIDE ITS ORD ER 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 ASSES SING OFFICER TO MAKE A TOKEN DISALLOWANCE OF 0.5% OF TOTAL PRODUCTI ON EXPENSES CLAIMED BY ASSESSEE. RESPECTFULLY FOLLOWING THE SA ME ORDER OF THE HON'BLE JURISDICTIONAL ITAT IN ASSESSEE'S OWN CASE, A TOKEN DISALLOWANCE OF 0.5 % OF THE ABOVE PRODUCTION EXPEN DITURE CLAIMED IN RESPECT OF 'REDUNDANT ANIMATION PROJECTS WIP' CA N BE MADE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 5 -: (B) DISALLOWANCE IN RESPECT OF REDUNDANT SOFTWARE P ROJECTS WIP (RS.2,49,09,785/-) THE AO HAS DISALLOWED AN AMOUNT OF RS. 2,49,09,785/ - OUT OF TOTAL AMOUNT OF RS. 4,98,19,751/- CLAIMED BY ASSESS EE IN ITS RETURN OF INCOME AS DETAILED BELOW: REDUNDANT SOFTWARE PROJECTS: RS. 2,49,09,786/- REDUNDANT SOFTWARE PROJECTS CLAIMED UNDER REPAIRS & MAINTENANCE RS. 2,49,09,7 85/- -------------------------- RS. 4,98,19,751/- -------------------------- IN THIS CONNECTION, IT IS SUBMITTED THAT THE ASSESS ING OFFICER ERRED IN ALLOWING ONLY THE EXPENDITURE CLAIMED UNDER THE HEAD 'REDUNDANT SOFTWARE PROJECTS' AND NOT ALLOWING THE EXPENDITURE CLAIMED UNDER THE HEAD 'REPAIRS & MAINTENANCE'. WE WOULD LIKE TO SUBMIT THAT THE A PART OF SOFTWARE PROJECT COST WAS BOOKED UNDER THE HEAD REDUNDANT ANIMATION PROJECTS AND THE OTHER PART INCLUDING SPECIFIC SOFTWARE'S, HARDWARE'S ETC EXPENDITURE ON WHICH WAS SPECIFICALLY INCURRED FOR SOFTWARE PROJECTS WERE BO OKED UNDER 'REPAIRS & MAINTENANCE'. THEREFORE, BY FOLLOWING HO N'BLE ITAT ORDER AND CONSIDERING THE CLAIM OF ASSESSEE AS MADE IN RE VISED RETURN, THE COMPLETE EXPENDITURE RELATING TO REDUNDANT SOFT WARE PROJECTS I.E. RS. 4,98,19,751/- SHALL BE ALLOWED IN THE AY. 2003-04 ONLY. FURTHER, THIS EXPENDITURE IS IN THE NATURE OF 'PROD UCTION EXPENDITURE' ONLY. IT IS THEREFORE REQUESTED TO KINDLY ALLOW THE BALANCE EXPENDITURE OF RS. 2,49,09,785/-. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, WE WOUL D LIKE TO SUBMIT THAT THE HON'BLE ITAT HYDERABAD VIDE ITS ORD ER DATED 04-07- 2008 IN ITA NOS. 410 TO 413/HYD/2006 IN ASSESSEES OWN CASE FOR THE AY. 1999-2000 TO 2002-03 HAVE DIRECTED THE AO T O MAKE A TOKEN DISALLOWANCE OF 0.5% OF TOTAL PRODUCTION EXPE NSES CLAIMED BY THE 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 I N RESPECT OF 'REDUNDANT SOFTWARE PROJECTS WIP' CAN BE MADE FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 6 -: (C) DISALLOWANCE OF NON-COLLECTABLE LOANS & ADVANCE S AND BAD DEBTS (RS. 4,59,13,909/- ) THE ASSESSEE COMPANY HAD CLAIMED WRITTEN OFF NON CO LLECTABLE LOANS & ADVANCES AND BAD DEBTS WRITTEN OFF AS DETAILED BE LOW: NON COLLECTABLE 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 ASSESSE E STATING THAT THE LOANS & ADVANCES AND DEBTORS ARE NOT WRITT EN OFF IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY FOR THE A Y. 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 ANIMATI ON TO COMPLETE THE PROJECTS AND HENCE, THE ASSESSEE, ENGAGED EXPER TS FROM VARIOUS PLACES TO CARRY OUT THE PROJECT IN MUCH EFFICIENT A ND EXCELLENT WAY AT MUTUALLY AGREED CONSIDERATION WITH ALL COMFORTS TO REVISE. SINCE THE WORK IS OF SPECIALIZED SKILLS, THE ANIMAT ORS HAVE TO BE PAID IN ADVANCE SOME OF THE AGREED VALUE AND THE BA LANCE SHALL BE PAYABLE AFTER THE DELIVERY OF THE ASSIGNMENT. THE W ORK WAS COMMENCED BUT THE SAME COULD NOT BE DELIVERED AT TH E EXPECTED AND REQUIRED LEVEL FROM MANY OF THE ANIMATORS. THE UNFI NISHED WORK CAN'T BE SOLD IN THE MARKET AND WILL NOT BE USEFUL TO ANYBODY. THE COMPANY WILL HAVE TO INCUR MORE LOSSES IF THE COMPA NY DOES NOT DECIDE THE ISSUE ON TIME. THEREFORE, IT DECIDED TO DISMISS THE IDEA OF CARRYING OUT THE ENTIRE ANIMATION WORK AND THERE BY THE AMOUNT OF RS. 3,25,64,086/- PAID TO THE ANIMATORS WAS WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION AS BAD DEBTS & NON COLLECT ABLE LOANS & ADVANCES AND THEREFORE, IT IS AN ALLOWABLE EXPENDIT URE. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 7 -: IN THIS REGARD, WE PLACE OUR RELIANCE ON THE ORDER OF ITAT IN THE CASE OF KALYANI REFINERIES LIMITED VS. DY. CIT VIDE ITA NO. 567/HYD/2007 DT. 23-10-2009. 4. LD. CIT(A) AFTER CONSIDERING THE DETAILED SUBMIS SIONS OF ASSESSEE HAS ALLOWED THE ABOVE THREE GROUNDS BY STATING AS U NDER: 7.1 THE EXPENDITURE TOWARDS 'REDUNDANT ANIMATION P ROJECTS WIP' IS IN THE NATURE OF 'PRODUCTION EXPENSES'. AS CAN BE SEEN FROM THE ORIGINAL ASSESSMENT ORDER, THE APPELLANT HAD CL AIMED 100% OF THE EXPENDITURE UNDER THE HEAD 'REPAIRS & REPLACEME NTS'. IT IS ALSO AN UNDISPUTED FACT THAT THE APPELLANT COMPANY HAD C LAIMED THE SAME AMOUNT BEFORE THE HON'BLE ITAT UNDER THE HEAD REDUNDANT ANIMATION PROJECTS WIP AND REDUNDANT SOFTWARE PROJE CTS WIP. THEREFORE, THE ASSESSING OFFICER IS NOT CORRECT IN OBSERVING THAT THE APPELLANT COMPANY HAS NOT AGITATED CAPITALIZATION O F AMOUNT UNDER THE HEAD 'REPAIRS & REPLACEMENTS'. ON VERIFICATION OF THE FACTS AVAILABLE ON RECORD, IT IS CLEAR THAT THE APPELLANT COMPANY HAD CLAIMED 100% OF EXPENDITURE TOWARDS 'REDUNDANT ANIM ATION PROJECTS WIP' AND 'REDUNDANT SOFTWARE PROJECTS WIP ' INCLUDING THE AMOUNT INCLUDED UNDER THE HEAD 'REPAIR & REPLACEMEN TS'. THEREFORE, THE ASSESSING OFFICER OUGHT TO HAVE TREA TED THE ENTIRE AMOUNT OF RS. 4,06,12,414/ - AS REVENUE EXPENDITURE ONLY. 7.2 FURTHER, THE ITAT HYDERABAD, VIDE ITS ORDER DAT ED 04.07.2008 IN ITA NOS. 410 TO 413/HYD/2006 IN ASSES SEE'S OWN CASE FOR THE A.YRS 1999-2000 TO 2002-03, HAVE DIREC TED THE ASSESSING OFFICER TO MAKE A TOKEN DISALLOWANCE OF 0 .5 % OF TOTAL PRODUCTION EXPENSES CLAIMED BY THE APPELLANT. RESPE CTFULLY FOLLOWING THE ORDER OF THE HOB'BLE ITAT, I DIRECT T HE 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 FOR GOING 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 STA NDS PARTLY ALLOWED. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 8 -: 5. WITH REFERENCE TO BAD DEBTS, THE LD. CIT(A) CONS IDERED THE ISSUE AND ALLOWED THE SAME AS UNDER: 9.2 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER AND THE WRITTEN SUBMISSIONS FILED IN THIS REGARD. THE A R OF THE APPELLANT COMPANY CONTENDED BEFORE ME THAT THE APPELLANT COMP ANY HAD PAID ADVANCES TO PERSONS AND FIRMS FOR CARRYING OUT THE ANIMATION WORKS. HOWEVER, DUE TO VARIOUS REASONS, THE WORK CO ULD NOT BE FINISHED AND THEREFORE, THE APPELLANT COMPANY DECID ED TO DISMISS THE IDEA OF CARRYING OUT THE ENTIRE ANIMATION WORK AND THEREFORE, THE AMOUNT PAID TO THE ANIMATORS AS ADVANCES WAS WRITTE N OFF IN THE BOOKS OF ACCOUNT. IN THIS REGARD, THE BOARD OF DIRE CTORS OF THE APPELLANT COMPANY HAD PASSED A RESOLUTION ON 30.01. 2003 FOR WRITING OFF THE BAD DEBTS AFTER CONSIDERING THE STE PS TAKEN TO RECOVER THESE DUES. 9.3 THE MATTER IN RESPECT OF WRITING OFF OF BAD DEB TS UNDER THE PROVISIONS OF PROVISIONS OF SECTION 36(1)(VII) AFTE R ITS AMENDMENT WITH EFFECT FROM 1-4-1989 HAD COME UP BEFORE A SPEC IAL BENCH OF HON'BLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI IN TH E CASE OF DEPUTY COMMISSIONER OF INCOME-TAX, SPECIAL RANGE-27 VS. OMAN INTERNATIONAL BANK SAOG [2006] 100 ITD 285 (MUM.) ( SB) WHEREIN IT IS HELD THAT AS PER EXISTING PROVISIONS OF SECTION 36(1)(VII) AFTER ITS AMENDMENT WITH EFFECT FROM 1-4-1989, IT IS NOT OBLI GATORY ON PART OF ASSESSEE TO PROVE THAT DEBT WRITTEN OFF BY HIM IS I NDEED A BAD DEBT FOR PURPOSE OF ALLOWANCE UNDER SECTION 36(1)(VII). 9.4 FURTHER, THE JURISDICTIONAL ITAT IN THE CASE OF KALYANI REFINERIES LIMITED VS. DY. CIT VIDE THEIR ORDER IN ITA NO. 567/HYD/2007 DATED 23.10.2009 HAS HELD THAT 'SINCE THE ASSESSEE RECOGNIZED THE DEBTS AS BAD DURING THE YEAR UNDER C ONSIDERATION, FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF OMAN INTERNATIONAL BANK (SUPRA), WE FIND THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSES SEE IN RESPECT OF BAD DEBTS. WE ACCORDINGLY SET ASIDE THE ORDER OF TH E CIT (A) ON THIS ISSUE, AND DIRECT THE ASSESSING OFFICER TO ALLOW TH E CLAIM OF THE ASSESSEE IN RESPECT OF BAD DEBTS. 9.5 RESPECTFULLY FOLLOWING THE ABOVE CITED DECISION S, I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE I N RESPECT OF NON COLLECTABLE LOANS & ADVANCES WRITTEN OFF AMOUNTING TO RS. 3,23,52,355/- AND BAD DEBTS WRITTEN OFF AMOUNTING T O RS. 1,33,49,823/-. HENCE, THE GROUNDS OF APPEAL IN THIS REGARD ARE ALLOWED. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 9 -: 6. REVENUE IS AGGRIEVED AND RAISED THE FOLLOWIN G GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN ALLOWING EXPENDITUR E OF REDUNDANT ANIMATION PROJECTS WIP AND REDUNDANTS SOF TWARE PROJECTS WIP AS REVENUE EXPENDITURE WITHOUT CONSIDE RING 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 TH E ASSESSEE UNDER THE HEAD REPAIRS AND REPLACEMENTS TOWARDS RED UNDANT ANIMATION PROJECTS WIP AND REDUNDANT SOFTWARE PROJE CT WIP WITHOUT APPRECIATING THE FACT THAT THE A.O. HAD DIS ALLOWED THE SAME ON THE GROUND THAT THE ASSESSEE HAD CAPITALIZE D THE EXPENDITURES AND CLAIMED DEPRECIATION. 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF NON- COLLECTABLES 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 CO NCERNED, THEY WERE IN FACT WRITTEN OFF IN THE NEXT YEAR AND HENCE CIT(A) ERRED IN ALLOWING THE SAME THIS YEAR. WITH REFERENCE TO CLA IM OF DEDUCTION OF RS. 4,08,49,962/- UNDER REPAIRS AND REPLACEMENTS, THE C ONTENTION WAS THAT THE AMOUNT WAS CLAIMED TWICE AND HENCE THE SAME CAN NOT BE ALLOWED. THE DETAILED SUBMISSIONS OF THE REVENUE IN WRITING IS AS UNDER: A) DEDUCTION OF RS 4,08,49,962/- : THE FIRST ISSUE PERTAINS TO THE DEDUCTION OF RS 4,0 8,49,962/- CLAIMED BY THE ASSESSEE UNDER THE HEAD 'REPAIRS AND REPLACEMENTS' IN HIS REVISED COMPUTATION FILED ON 2 9.03.2006 (COPY OF REVISED COMPUTATION ENCLOSED VIDE ANNX 1). IN CO URSE OF SET ASIDE PROCEEDINGS, THE ASSESSEE ALSO FILED DETAILS OF THI S EXPENDITURE WHICH INCLUDED RS 4,07,49,962/- UNDER COMPUTER HARD WARE AND SOFTWARE, AND RS 1,00,000/- UNDER THE HEAD PLANT AN D MACHINERY. (COPY OF DETAILS ENCLOSED VIDE ANNEXURE 2) I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 10 - : THE AO IN HIS SET ASIDE ASSESSMENT ORDER, HOWEVER, STATED THAT THE SAME AMOUNT HAD ALREADY BEEN CLAIMED BY TH E ASSESSEE IN HIS ORIGINAL RETURN UNDER THE HEAD 'REPAIRS AND REP LACEMENTS U/S 31' (COPY OF ORIGINAL COMPUTATION ENCLOSED VIDE ANN X 3). IN THE ORIGINAL ASSESSMENT ORDER, THE AO HAD, INSTEAD OF A LLOWING 100% DEDUCTION U/S 31 AS CLAIMED BY THE ASSESSEE, HAD CO ME TO THE CONCLUSION THAT THIS WAS CAPITAL EXPENDITURE, AND H ENCE ALLOWED DEPRECIATION ON IT. (COPY ENCLOSED VIDE ANNX 4). TH IS STAND OF THE AO WAS ACCEPTED BY THE ASSESSEE AND HENCE NOT AGITATED BEFORE CIT (A) TOO. HENCE, IN THE SET ASIDE ASSESSMENT ORDER, THE AO CL EARLY BROUGHT OUT THE ABOVE FACTS VIDE PG 6, FIRST PARA O F THE ASSESSMENT ORDER DENYING THE DEDUCTION, AND STATED THAT ANY FR ESH DEDUCTION OF THE SAME AMOUNT UNDER ANOTHER HEAD WILL AMOUNT TO D OUBLE DEDUCTION. RELEVANT EXTRACT OF THE ORDER GIVEN BELO W: 'FROM THE ABOVE, IT IS CLEAR THAT THE AMOUNT OF RS 4,08,49,962/- CLAIMED UNDER THE HEAD 'REPAIRS AND REPLACEMENT' RELATE TO PLANT AND MACHINERY AND COMP UTER HARDWARE AND SOFTWARE. THIS AMOUNT HAS BEEN CAPITAL IZED AND DEPRECIATION ALLOWED. THIS HAS BEEN ACCEPTED BY THE ASSESSEE SINCE THE SAME HAS NOT BEEN AGITATED BEFOR E THE APPELLATE AUTHORITIES. SINCE THE EXPENDITURE UNDER THE HEAD REPAIRS AND REPLACEMENTS HAS ALREADY BEEN CONSIDERE D IN THE ASSESSMENT ORDER, THE ASSESSEE IS NOT ENTITLED TO REALLOCATE THE SAME AMOUNT TO OTHER HEADS AND CLAIM DEDUCTION AGAIN' HENCE, A SECOND TIME DEDUCTION OF THE SAME AMOUNT W AS NOT ALLOWED BY THE AO. HOWEVER, BEFORE LD CIT(A), THE ASSESSEE TOOK A NEW PLEA, THAT THIS AMOUNT WAS NOTHING BUT PRODUCTION EXPENSES, AN D 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 D EDUCTION. LD CIT(A), VIDE PARA 7.1 AND 7.2 OF HIS ORDER, ACCEPTE D 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 A MOUNT AS PRODUCTION EXPENSE SHOULD NOT BE ACCEPTED FOR THE F OLLOWING REASONS: I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 11 - : 1. THIS IS NOTHING BUT AN AFTERTHOUGHT, AS THE ASSE SSEE RESORTED TO THE PLEA OF THIS AMOUNT BEING PRODUCTIO N EXPENSE ONLY AFTER RECEIVING A FAVORABLE ORDER REGARDING PRODUCT ION EXPENSE FROM THE HON'BLE TRIBUNAL FOR EARLIER YEARS. 2. A DEDUCTION OF DEPRECIATION ON THIS HEAD AFTER C APITALIZING THIS MOUNT HAS ALREADY BEEN ALLOWED TO THE ASSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THAT STILL STAND. ANY FURTH ER DEDUCTION ON THIS HEAD WILL AMOUNT TO DOUBLE DEDUCTION. 3. A LOOK AT THE DETAILS OF THIS AMOUNT (ANNX 2) CL EARLY SHOWS THAT THIS IS NOTHING BUT AMOUNT SPEND ON PRINTERS, TV, COMPUTERS, EDITING SYSTEMS, MEDIA EQUIPMENT ETC. ALL THESE PUR CHASES ARE CAPITAL IN NATURE, HENCE CORRECTLY CAPITALIZED BY T HE AD IN ORGINAL ASSESSMENT ORDER. BY NO STRETCH OF IMAGINATION CAN THE ASSESSEE NOW CLAIM THEM AS PRODUCTION EXPENSES. 4. NOW, BEFORE THE HON'BLE COURT, THE ASSESSEE IS T RYING TO CLAIM THAT THIS AMOUNT IS DIFFERENT FROM THE AMOUNT CLAIMED IN THE ORIGINAL RETURN. HOWEVER, THIS IS ONLY AN ATTEMPT B Y THE ASSESSEE TO CONFUSE THE AUTHORITIES BECAUSE ANY CONTENTION MADE BY THE ASSESSEE IN COURSE OF PRESENT PROCEEDINGS HAS TO BE CONFINED TO HIS CLAIMS MADE IN REVISED COMPUTATION, WHICH IS NOTHIN G ELSE BUT THE CLAIM UNDER THE HEAD REPAIRS AND REPLACEMENTS AMOUN TING TO RS 4,08,49,962/- ONLY. THEREFORE, IT IS REQUESTED THAT THE CONTENTION OF T HE ASSESSEE BE REJECTED AND NO FURTHER DEDUCTION UNDER THIS HEA D BE ALLOWED TO THE ASSESSEE. 8. IN REPLY, IT WAS THE CONTENTION OF THE LD. COUNS EL THAT AO HAS NOT ALLOWED DEPRECIATION ON THE AMOUNT OF RS. 4,08,49,9 62/- AND SO QUESTION OF DOUBLE ALLOWANCE DOES NOT ARISE. HE SU PPORTED THE ORDERS OF THE CIT(A) AND FILED WRITTEN SUBMISSIONS IN EXPLAIN ING THE AMOUNTS AS UNDER: EXPLANATION FOR ADDITIONS TO FIXED ASSETS: THE ASSESSEE COMPANY ORIGINALLY FILED ITS RETURN OF INCOME FOR THE A.Y 2003-04 HAS CLAIMED DEPRECIATION OF RS. 9,5 7,55,777/- AND REPAIRS AND REPLACEMENT EXPENDITURE U/S 31 OF T HE ACT @ 100% AMOUNTING TO RS. 4,08,49,962/-. (KINDLY REFER PAGE NO. 2 OF PAPER BOOK II FILED). I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 12 - : THE TOTAL ADDITIONS TO FIXED ASSETS IN THE FINAN CIAL YEAR 2002- 2003 IS AMOUNTING TO RS. 4,82,33,148/ _ HAS CONSIDE RED IN COMPANIES ACT DEPRECATION STATEMENT AND INCOME TAX DEPRECATION STATEMENT. IN ORIGINAL RETURN OF INCOME ASSESSEE HAVE CLAIM ED INCOME TAX DEPRECATION AMOUNTING TO RS. 9,57,55,777/- WHERE AS THE ASSESSING OFFICER ALLOWED DEPRECATION AMOUNTING TO RS. 9,06,17,754/- (ANNEXURE A ENCLOSED) IN HIS ORIGINAL ASSESSMENT ORDER. IT CLEARLY ESTABLISHED THAT RS. 4,08,49,962/ - DID NOT ALLOWED BY THE ASSESSING OFFICER IN HIS ORIGINAL AS SESSMENT ORDER AND ALSO REVISED ASSESSMENT ORDER FOR THE DEPRECATI ON 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 T HE BALANCE SHEET. THE DETAILS FOR THE ADDITIONS WERE C ALLED FOR. THE ASSESSEE ADMITTED RS. 1 LAKH UNDER THE HEAD 'PL ANT AND MACHINERY', RS. 4,07,49,962/- UNDER THE HEAD 'COMPU TER HARDWARE AND SOFTWARE'. THE ASSESSEE'S CLAIM FOR WR ITTEN OF THE ENTIRE EXPENDITURE OF RS. 4.08 CRORES IS NOT CO NSIDERED TREATING THE SAME AS CAPITAL EXPENDITURE AND DEPREC IATION ALLOWABLE AS PER IT RULES IS ALLOWED.' HOWEVER THE AO MENTIONED IN THE ORIGINAL ASSESSMENT ORDER THAT REPAIRS & REPLACEMENT EXPENDITURE WHICH WAS CL AIMED 100% IN THE ORIGINAL RETURN OF INCOME AND ADDITIONS MADE TO COMPUTERS & PANT MACHINERY IS ONE AND SAME. IT IS TO SUBMIT THA T THE ADDITIONS TO FIXED ASSETS AND REPAIRS & REPLACEMENT EXPENDITURE ARE NOT ONE AND SAME. BOTH ARE DIFFERENT. ALSO THE ASSESSING OFFICER IN THE COMPUTATION OF TO TAL INCOME IN ORIGINAL ASSESSMENT ORDER DID NOT ALLOW ANY DEPR ECIATION ON THE REPAIRS AND REPLACEMENT IN THE ASSESSMENT ORDER PAS SED DATED 29.03.2006 AND DISALLOWED ENTIRE CLAIM OF RS. 4,08, 49,962/- WHICH WAS AN REPAIR & REPLACEMENT EXPENDITURE (REFER TO P AGE NUMBER 3 OF ASSESSMENT ORDER DATED 29.03.2006) ALSO ORIGINAL COMPUTATION OF INCOME FILED BY THE ASSESSEE IS ENCLOSED. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 13 - : ON APPEAL, THE ITAT SET-ASIDE THE ASSESSMENT ORDE R TO THE FILE OF AO WITH THE DIRECTION TO CONSIDER THE REVISED RETUR N OF INCOME FILED BY THE ASSESSEE. IN THE REVISED RETURN OF INCOME WE HAVE CLAIMED A MOUNTING TO RS. 4,08,49,962/TOWARDS REPAIRS FOR ANIMATION PROJECTS & SOFTWARE PROJECTS WHICH WAS THERE IN INVENTORIES HEAD IN THE ORIGINAL RETURN OF INCOME. THE BREAKUP OF AMOUNT IS GIVEN BELOW: REDUNDANT ANIMATION PROJECTS RS. 1,57,28,445/- REDUNDANT SOFTWARE PROJECTS RS.2,49,09,785/- OTHERS REPAIRS RS. 2,11,732/- ----------------------- TOTAL AMOUNT RS.4,08,49,962/- ----------------------- IN THE PROCEEDINGS U/ S 143(3) RWS 254 OF THE ACT , THE ASSESSING OFFICER RESTRICTED THE REVISED CLAIM OF DEPRECIATIO N OF RS. 11,02,16,915/- ( ANNEXURE - B) TO RS. 7,39,70,913/- WHICH WAS LESS THAN ALLOWED IN ORIGINAL RETURN OF INCOME. HENCE IT IS CLEAR THAT THE ASSESSING OFFICER NEVER ALLOWED THE CLAIM OF RS. 4, 08,49,962/- WHICH WAS CLAIMED IN REVISED RETURN OF INCOME. THIS CAN BEEN SEEN FROM REVISED ASSESSMENT ORDER DATED 31-12-2009 VIDE LAST PARA IN PAGE NO. 5 AS GIVEN BELOW: THE ASSESSEE CLAIMED AN AMOUNT OF RS. 4,08,49,962/ - TOWARDS REPAIR AND MAINTENANCE AND REPLACEMENT U/S. 31 OF THE I. T ACT (100%) WHICH WAS CLAIMED AS ADDITIONS TO FIXED ASSETS IN THE BALANCE SHEET. THE DETAILS FOR THE AD DITIONS WERE CALLED FOR. THE ASSESSEE ADMITTED RS. 1 LAKHS UNDER THE HEAD 'PLANT & MACHINERY' , RS. 4,07,49,962/- UNDER THE H EAD /I COMPUTER HARDWARE AND SOFTWARE'. THE ASSESSEE CLAIM FOR WRITTEN OFF OF THE ENTIRE EXPENDITURE OF RS. 4.08 C RORES IS NOT CONSIDERED TREATING THE SAME AS CAPITAL EXPENDITURE AND DEPRECATION ALLOWED AS PER I.T RULES IS ALLOWED' IN THE REVISED ASSESSMENT ORDER PASSED BY ASSESSING OFFICER U / S. 143(3) R.W.S 254 OF THE ACT DATED 31-12-2009 THE AS SESSING OFFICER MENTIONED AS FOLLOWS IN PARA 'A' OF PAGE NUMBER 4: I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 14 - : THE ASSESSEE CLAIMED DEPRECATION OF RS. 11,02,16,9 15/- IN THE COMPUTATION OF INCOME ENCLOSED TO THE REVISED R ETURN. BUT, AS PER THE DEPRECATION SCHEDULE ENCLOSED TO THE REVISED RE TURN, CLAIMED IS RS. 9,57,55,777/-. THE ASSESSEE COULD NOT PRODUCE A NY 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 CON SEQUENT TO THE ASSESSMENT ORDERS OF EARLIER YEARS IS WORKED OUT AS PER THE DEPRECATION SCHEDULE ENCLOSED AND THE SAME IS ALLOW ED' ULTIMATELY THE AO ALLOWED DEPRECATION RS. 7,39,70,9 13/- (ANNEXURE - C) IN THE REVISED ASSESSMENT ORDER WHIC H DOES NOT INCLUDE THE CLAIM OF 4,08,49,962/ - TOWARDS REDUNDA NT ANIMATION PROJECTS, SOFTWARE PROJECTS. IN VIEW OF THE ABOVE DETAILS IT IS VERY CLEAR THAT THE ASSESSING OFFICER CONSIDERED DEPRECATION AMOUNTING TO RS. 7,3 9,70,913/- IN THE REVISED ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S 2 54 OF THE ACT BUT NOT THE DEPRECATION CLAIMED WHICH WAS CLAIMED B Y THE ASSESSEE COMPANY IN THE REVISED RETURN OF INCOME. PLEASE REF ER TO PAGE NO. 9 IN THE REVISED ASSESSMENT ORDER PASSED U / S. 143(3 ) R.W.S 254 OF THE ACT, DATED 31-12-2009. IT IS CLEARLY EXPLAINS THAT EVEN THOUGH THE ASSESSI NG OFFICER MENTIONED IN ORIGINAL ASSESSMENT ORDER AND REVISED ASSESSMENT ORDER THAT HE ALLOWED THE DEPRECATION ON CAPITALISE D EXPENDITURE BUT THE DEPRECATION IS NOT CONSIDERED IN THE ASSESSMENT . 9. WITH REFERENCE TO THE SUNDRY DEBTS, IT WAS SUBMI TTED THAT ASSESSEE HAS WRITTEN OFF IN THE REVISED FINANCIAL A CCOUNTS SUBMITTED TO THE AO, THEREFORE OBJECTION OF REVENUE IS NOT MAINT AINABLE. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED VARIOUS PAPER BOOKS FILED. WE HAVE ALSO SOUGHT CLARIFICATI ONS IN THE COURSE OF OUR HEARING THE APPEAL AND BOTH THE PARTIES HAVE GI VEN WRITTEN SUBMISSIONS ENCLOSING CERTAIN DOCUMENTS IN SUPPORT OF THE CONTENTIONS. BASICALLY, THE ISSUE BOILS DOWN TO WHETHER THE AMOU NT OF REPAIRS AND REPLACEMENTS CLAIMED IN THE ORIGINAL RETURN WAS ALL OWED TO ASSESSEE I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 15 - : UNDER THE DEPRECIATION HEAD OR IN THE ABSENCE OF TH E SAME ALLOWABLE AS REVENUE EXPENDITURE AS WAS DONE BY THE LD. CIT(A). BEFORE ADVERTING TO THE ISSUE, IT IS TO BE MENTIONED THAT ASSESSEE ORIG INALLY CLAIMED AN AMOUNT OF RS. 4,08,49,962/- AS 100% DEDUCTION IN TH E COMPUTATION OF INCOME BUT UNDER THE HEAD REPAIRS AND REPLACEMENTS U/S 31. AS SEEN FROM THE ENCLOSURE TO THE RETURN OF INCOME, ASSESSE E ADDED BACK THE BOOK DEPRECIATION AND CLAIMED DEPRECIATION AT RS. 9,57,55,777/-. THE DETAILS OF THE SAME ARE NOT PLACED ON RECORD BY EIT HER PARTY. ALONG WITH THE ABOVE DEPRECIATION CLAIM, ASSESSEE CLAIMED REPA IRS AND REPLACEMENTS U/S. 31 AT 100% OF AN AMOUNT OF RS. 4,08,49,962/-, THE AMOUNT WHICH IS UNDER DISPUTE. THE DETAILS OF THE ABOVE EXPENDI TURE AS FILED BY THE REVENUE IN ANNEXURE-2 TO THE WRITTEN SUBMISSIONS AR E: RS. A. PLANT AND MACHINERY 1,00,000 B. COMPUTER SOFTWARE 4,07,749,962 C. FURNITURE 5,64,717 D. OFFICE EQUIPMENT 3,23,469 E. LIBRARY 64,95,000 TOTAL 4,82,33,148 THESE AMOUNTS ARE EXACTLY TALLYING WITH REFERENCE T O DEPRECIATION ORIGINALLY ALLOWED BY THE AO IN ANNEXURE-A ENCLOSED TO ASSESSEES WRITTEN SUBMISSIONS WHEREIN, ADDITIONS UPTO 30 TH SEPTEMBER WERE BIFURCATED TO RS. 1,45,57,132/- AND ADDITIONS AFTER 30 TH 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 TH E P&L A/C TALLY WITH I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 16 - : THE FIXED ASSETS LIST GIVEN BY THE REVENUE AS WELL. BUT, SURPRISINGLY, THERE IS NO OTHER REPAIRS AND REPLACEMENT CLAIM I N THE P&L A/C AS CAN BE SEEN FROM VARIOUS SCHEDULES. THUS, IT CAN BE DE DUCED THAT EITHER THE ASSESSEE HAS CLAIMED THE ADDITIONS IN THE GROSS BLO CK MENTIONED IN THE ANNUAL REPORT AS AN 100% EXPENDITURE UNDER THE REPA IR HEAD IN THE COMPUTATION OF INCOME OR BROUGHT FROM ANY OTHER SCH EDULED OF BALANCE SHEET. WHETHER THE SAME AMOUNT WAS CLAIMED TWICE O R NOT CAN ONLY BE EXAMINED, IF THE DEPRECIATION SCHEDULE AS CLAIMED B Y ASSESSEE OF RS. 9,57,55,777/- ORIGINALLY WAS EXAMINED. NOW, THE DI FFICULTY ARISES IN THE SENSE THAT THE DEPRECIATION CLAIM IS VARYING FROM O RDER TO ORDER DEPENDING ON THE OPENING WDV, CONSEQUENT TO THE EFF ECT OF VARIOUS ORDERS IN EARLIER YEARS. UNLESS ONE NOTICES THE OP ENING WDV WHICH IS CONSIDERED BY THE AO AND ADDITIONS TO THE ASSETS IN THE BLOCK, THE ISSUE WHETHER THE SAME AMOUNT WAS CLAIMED AND ALLOWED IN THE DEPRECIATION SCHEDULE CANNOT BE EXAMINED. 11. IT IS THE REVENUES CONTENTION THAT THIS AMOUNT IS ALLOWED AS A DEDUCTION AND FURTHER, ASSESSEE HAS ACCEPTED THE SA ME AND HAS NOT BEEN AGITATED BEFORE APPELLATE AUTHORITIES. THIS C ONTENTION OF LD. DR WAS ON THE BASIS OF THE ORDER OF CIT(A) GIVEN IN TH E FIRST ROUND OF APPEALS DT. 20-03-2007. IN THAT, LD. CIT(A) WHEN THE ISSUE WAS CONTESTED BEFORE HIM ABOUT ALLOWANCE OF 100% OF REPAIRS AND REPLACEM ENTS, NOTED THAT AR HAS STATED THAT AO ALLOWED DEPRECIATION AND HE HAS NO GRIEVANCE AGAINST THIS GROUND. IN SPITE OF CIT(A)S FINDING/OBSERVAT ION IN THE ORDER, AS SEEN FROM THE GROUNDS BEFORE THE TRIBUNAL THIS ISSU E WAS CONTESTED AND THERE IS SEPARATE FINDING ON THAT. THEREFORE, THE REVENUES CONTENTION THAT THIS AMOUNT WAS ALLOWED AS DEPRECIATION AND AC CEPTED BY ASSESSEE CANNOT BE ACCEPTED, AS ASSESSEE DID QUESTION THE SA ME. I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 17 - : 12. AS CLARIFIED BY ASSESSEE, OUT OF THE AMOUNT OF REPAIRS OF RS. 4,08,49,962/- IT HAS BIFURCATED THE AMOUNTS AS UNDE R: A. REDUNDANT ANIMATION PROJECTS - RS. 1,57,28,445/- B. REDUNDANT SOFTWARE PROJECT - RS. 2,49,09,785/- C. OTHER REPAIRS - RS. 2,11,732/- 13. IN THE BREAK UP GIVEN BEFORE THE ITAT AS ALREAD Y SUBMITTED BY ASSESSEE IN VARIOUS STAGES, THE REDUNDANT ANIMATION PROJECTS AMOUNT INVOLVES PART OF REPAIR EXPENDITURE OF RS. 1,57,28, 445/- AND A REVISED CLAIM FROM LATER YEAR OF RS. 2,48,83,969/- THUS, TO TALING TO RS. 4,06,12,414/-. OUT OF THIS, AO HAS ALREADY ALLOWED AMOUNT OF RS. 2,48,83,969/- IN THE ASSESSMENT ORDER CONSEQUENT TO THE DIRECTIONS OF THE ITAT. ASSESSEE CONTESTED BEFORE THE CIT(A) IN THE IMPUGNED ORDER THAT THE BALANCE OF RS. 1,57,28,445/- WAS ALSO ELIG IBLE FOR DEDUCTION WHICH THE LD. CIT(A) ALLOWED. 14. LIKE-WISE, THE CLAIM OF REDUNDANT SOFTWARE PROJ ECTS TO THE EXTENT OF RS. 4,98,19,571/- AGITATED BEFORE THE ITAT CONSI ST OF AN AMOUNT OF RS. 2,49,09,786/- BEING A FRESH CLAIM AND RS. 2,49,09,7 85/- OUT OF THE REPAIRS CLAIM ORIGINALLY MADE. HERE ALSO, AO ALLOW ED RS. 2,49,09,786/- WHEREAS, CIT(A) ALLOWED THE BALANCE AMOUNT OF RS. 2 ,49,09,785/- IN THE IMPUGNED ORDER. 15. REVENUES GROUNDS WITH REFERENCE TO THE AMOUNTS ALLOWED BY THE CIT(A) CONTAINS THAT THESE AMOUNTS WERE ALREADY CON SIDERED AS PART OF DEPRECIATION SCHEDULE ON WHICH DEPRECIATION WAS ALL OWED. 16. AS SEEN FROM THE CONTENTIONS RAISED BEFORE US, THE ISSUE BOILS TO WHETHER 100% REVENUE EXPENDITURE UNDER THE HEAD RE PAIRS AND I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 18 - : 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 AOS WORKING OF DEPRECI ATION, 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 BAL ANCE SHEET AMOUNTS OR FROM ANY OTHER SCHEDULES OF EXPENDITURE COULD NO T 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 COM PUTATIONS AT THE TIME OF ASSESSMENTS REQUIRED TO BE EXAMINED. SINCE THEY ARE NOT PLACED BEFORE US, WE CANNOT GIVE ANY FINDING ON THIS ISSUE AT THE MOMENT. 17. AS SEEN FROM THE ORDERS OF CIT(A), HE HAS CONSI DERED THAT THE AMOUNT WAS NOT ALLOWED TO ASSESSEE IN THE DEPRECIAT ION SCHEDULE AND ALLOWED IN HIS ORDER AND MADE FURTHER DISALLOWANCE OF 0.5% OF THE CLAIM AS HE CONSIDERED THE AMOUNT AS PART OF PRODUCTION E XPENSES, DISALLOWED THAT AMOUNT ON THE BASIS OF ORDERS OF ITAT IN EARLI ER YEARS AS WELL IN THE IMPUGNED YEAR. TO THAT EXTENT, CIT(A)S ORDER IS T O BE CONFIRMED. 18. HOWEVER, IN CASE THE SAME AMOUNT WAS ALREADY AD DED IN THE DEPRECIATION SCHEDULE AS AN ADDITION DURING THE YEA R BUT CLAIMED AS REVENUE EXPENDITURE AT 100% UNDER THE HEAD REPAIRS AND REPLACEMENT, THE SAME CANNOT BE ALLOWED AS IT WILL BE A DOUBLE C LAIM. IN CASE THE CLAIM OF REPAIRS AND REPLACEMENT IS IN ADDITION TO THE ADDITIONS TO ASSETS SHOWN IN THE SCHEDULE AND THOSE TWO FIGURES ARE ENT IRELY DIFFERENT, THEN I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 19 - : REVENUES CONTENTIONS THAT THERE IS A DOUBLE CLAIM, CANNOT BE ACCEPTED. HOWEVER, THESE REQUIRE DEEPER ANALYSIS WITH ENTIRE ASSESSMENT RECORD AND UNFORTUNATELY, NEITHER PARTY PLACED COMPLETE DE TAILS BEFORE US EVEN THOUGH WRITTEN SUBMISSIONS ARE GIVEN, RELYING ON TH EIR OWN STATED POSITIONS. THEREFORE, WE ARE OF THE OPINION THAT T HIS ISSUE REQUIRES EXAMINATION BY THE AO AFRESH. ACCORDINGLY, HE IS D IRECTED TO 1. EXAMINE THE CLAIM OF REPAIRS AND REPLACEMENT AND TH E ORIGINAL ACCOUNTS FROM WHICH THE AMOUNTS WERE CLAIMED IN THE COMPUTATION OF INCOME AT THE TIME OF FILING ORIGINA L RETURN. 2. WHETHER THE AMOUNTS CLAIMED UNDER THE HEAD REPAIRS AND REPLACEMENT IS SAME AS THAT OF ADDITIONS SHOWN IN THE BALANCE SHEET AS NEW ASSETS WHICH THE AO HAS CONSIDERED AND ALLOWED DEPRECIATION. 19. AO IS DIRECTED TO EXAMINE ALL THE DEPRECIATION SCHEDULES AND ALSO ACCOUNT SCHEDULES AND DETERMINE WHETHER THE AMOUNT IS DIFFERENT FROM THE AMOUNTS CONSIDERED IN DEPRECIATION SCHEDULE OR NOT? IN CASE THE SAME AMOUNT WAS TAKEN IN THE DEPRECIATION SCHEDULE, AO IS DIRECTED TO EXCLUDE THE SAME AND ALLOW THE AMOUNT AS REVENUE EX PENDITURE AS PER THE DIRECTIONS OF LD. CIT(A). IN FACT THE ENTIRE C LAIM OF REDUNDANT ANIMATION PROJECT, REDUNDANT SOFTWARE PROJECT WA S DIRECTED TO BE EXAMINED AND ALLOWED BY ITAT BUT AO ALLOWED PARTLY AS REVENUE EXPENDITURE. THEREFORE, WE DO NOT SEE ANY REASON T HAT BALANCE OF THE AMOUNT SHOULD BE CAPITALIZED. ACCORDINGLY, AO IS D IRECTED TO EXCLUDE THE SAME, IF IT IS CLAIMED AND ALLOWED IN THE DEPRECIAT ION SCHEDULE ALSO. WITH THESE DIRECTIONS, WHILE UPHOLDING THE ORDERS O F THE CIT(A) TO THAT EXTENT, AO IS DIRECTED TO RE-EXAMINE THE ABOVE ISSU ES ON THE BASIS OF THE RECORD AND SCHEDULES OF P&L A/C AND GIVE A FINDING WHETHER THERE IS ANY I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 20 - : DOUBLE CLAIM? IN CASE THE AMOUNT WAS ALSO INCLUDED IN THE DEPRECIATION SCHEDULE, HE IS DIRECTED TO EXCLUDE THE SAME AND RE -WORK OUT THE DEPRECIATION ON THE BALANCE AMOUNT. THE AMOUNT IS ELIGIBLE FOR DEDUCTION AS REVENUE EXPENDITURE SUBJECT TO DISALLO WANCE AS DIRECTED BY CIT(A). GROUNDS ARE CONSIDERED PARTLY ALLOWED FOR STATISTICAL PURPOSES. 20. NEXT ISSUE IS WITH REFERENCE TO BAD DEBTS CLAIM . HEREIN ALSO IT IS THE CONTENTION OF ASSESSEE THAT HE HAS FILED A REVI SED P&L A/C SCHEDULE TO THE AO WHEREIN THE AMOUNT OF BAD DEBTS CLAIM WAS WRITTEN OFF. ASSESSEE PLACED THE REVISED FINANCIAL STATEMENTS FO R FY. 2002-03 IN ONE OF THE PAPER BOOKS FILED AT PG. 12 TO 16 (PAGE NUMB ERS ARE NOT CONTINUOUS PAGE NUMBERS). HOWEVER, WHETHER THIS RE VISED FINANCIAL STATEMENTS WERE ONLY FILED FOR THE PURPOSE OF INCOM E TAX OR THE COMPANY REVISED THE ACCOUNTS, NOT ONLY IN THIS YEAR BUT ALS O IN LATER YEAR, WAS NOT PLACED ON RECORD. IN CASE ASSESSEE HAS WRITTEN OFF THE AMOUNTS IN THE REVISED FINANCIAL ACCOUNTS IN THIS AY, THE CLAIM OF ASSESSEE IS ALLOWABLE. TO THAT EXTENT, ORDER OF CIT(A) IS TO BE UPHELD. A O IS DIRECTED TO EXAMINE AND IF REVISED FINANCIAL SCHEDULES ARE ACCEPTED, A SSESSEES CLAIM IS ALLOWABLE. WITH THESE OBSERVATIONS GROUND IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. 21. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND SEPTEMBER, 2015 SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUN TANT MEMBER HYDERABAD, DATED 2 ND SEPTEMBER, 2015 TNMM I.T.A. NO. 278/HYD/2014 M/S. PADMALAYA TELE FILMS LTD., :- 21 - : COPY TO : 1. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13(1), 2 ND FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. PADMALAYA TELE FILMS LTD., H.NO. 8-3-222/1/ 123, PLOT NO. 138, MADHURANAGAR, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD. 4. CIT-I, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.