M/S CARBORUNDUM UNIVERSAL LIMITED,CHENNAI vs. DCIT,LTU-1, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi dated 27.04.2023 for the assessment year 2011-12.

Brief facts of the case are that the assessee filed its return of income for the assessment year 2011-12 on 30.11.2011 admitting a total income of ₹.117,65,52,629/-. The case was selected for scrutiny and assessment under section 143(3) r.w.s. 923CA of the Income Tax Act, 1961 [“Act” in short] was completed on 31.03.2015 by determining the income of the assessee at ₹.120,92,74,451/-. On further perusal of the records, the Assessing Officer has noted that assessee company has claimed 200% deduction under section 35(2AB) of the Act, for capital expenditure amounting to ₹.6.08 lakhs and revenue expenses of ₹.70.47 lakhs. Form 3CL dated 15.04.2014 available on record shows that out of the same capital expenditure approved by DSIR is ₹.6.08 lakhs and revenue expenditure is ₹.58.36 lakhs. However, the assessee claimed 200% deduction of revenue expenditure amounting to ₹. 70.47 lakhs overlooking the approval granted by DSIR. On this issue excess deduction of Rs.24.18 lakhs was claimed by the assessee. Further in Column 14(d)(ii) of Form 3CD audit report it is reported that the assessee earned foreign exchange gain of ₹.16,29,235/- during the year. It is stated therein that such sum is credited to P & L account and not adjusted to cost of asset. However, in the income computation statement, it is deducted from profits. In short, ultimately such gain is neither included in profit nor in cost of assets under section 43A of the Act. On this issue excess deduction of ₹.16,29,235/- was claimed. Thus the assessee has taken double advantage of such gain. Further, In the computation statement, the assessee has deducted a sum of ₹.74,86,082/- being “lease payments". Since this is capital expenditure the same is not eligible for deduction. Schedule 17(iii) to Printed Annual Accounts show that such transactions were finance lease. On this issue, excess deduction of ₹. 74,86,082/- was claimed by the assessee. Moreover, as per Schedule 5 forming part of the printed Annual Accounts as on 31.03.2011, opening WDV of software being “intangible asset” is ₹.21.30 lakhs. Though it was disclosed as software license being “intangible asset” in the Annual accounts of the company, it was termed as “software” eligible for depreciation at the rate of 60% in the depreciation schedule prepared for income tax purposes as against the eligible rate of depreciation at the rate of 25%. Since, the assessee have purchased only license to use software and not software as such, as evident was placed before the shareholders, the assessee cannot shift its stand for income tax purposes alone. On this issue excess depreciation of ₹.7,45,500/- was claimed by the assessee.

In view of the above, the Assessing Officer believed that the income chargeable to tax has escaped he assessment and accordingly, issued notice under section 148 of the Act and served to the assessee on 31.03.2016. Notices under section 143(2) and 142(1) of the Act were also issued on 16.09.2016. After considering the submissions of the assessee, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 147 of the Act dated 30.11.2016 assessing total income of the assessee at ₹.122,15,53,268/- after making various additions. On appeal, the ld. CIT(A) dismissed the appeal filed by the assessee since there was no response to the hearing notices or filed any submission.

On being aggrieved, the assessee is in appeal before the Tribunal.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 25th July, 2023 at Chennai.