U/s 250(4), the CIT (A) has the power to direct enquiry and call for evidence from the assessee. Under Rule 46A, the assessee has the right to ask for the admission of additional evidence. If the CIT (A) exercises his powers u/s 250(4) to call for additional evidence, the AO need not be given an opportunity to show-cause. However, if the CIT (A) acts on an application under Rule 46A, then the requirement of giving the AO an opportunity as per Rule 46A(3) is mandatory. The argument that in all cases where additional evidence is admitted, the CIT (A) should be considered to have exercised his powers u/s 250(4) is not acceptable as it will render Rule 46A redundant.
The assessee is a owner/host of website www.shaadhi.com where individuals can register and exchange the relevant information for matrimonial alliances on payment of appropriate subscription amount. The facility is available to the resident as well as non residents. Vide service order dated 14.6.2004, the assessee availed the service of Rackspace. The said contract was extended and modified on 1.1.2007. The Rackspace offered advanced type of dedicated hosting solution to the assessee. The services provided by Rackspace to the assessee are stated by the Assessing Officer in the order u/s 201(1) and 201(1A) in para 3 as under:
The assessee was in the business of offset printing and typesetting. It admittedly had converted this land and factory building into stock-in-trade. The Minutes of the assessee-company did the conversion of the land and factory building into stock-in-trade and the business assets of the assessee no more survived as the business asset eligible for depreciation. Once this happens, the business of the assessee would be deemed to have been discontinued.
It is not in dispute that there were cash deposits of the equivalent amounts in the bank accounts of the creditors just before advancing loan to the assessee or on the date of issuing cheques to the assessee. In the case of the creditor, ‘RS’, his bank statement is filed in which Rs. 2,50,000 has been deposited, but neither it is mentioned that it was cash nor it is mentioned how the amount similar to the credit was credited in his bank account.
In a lease transaction also there can be only one owner of the asset, that is, either the lessor or lessee and not both of them or either of them at their discretion. Whereas in the case of operating lease, it is the lessor who is the real owner of the asset, but in case of finance lease, it is the lessee who is to be regarded as the real owner of the asset. Ex consequenti only the lessor can claim depreciation in case of an operating lease and the lessee in a case of finance lease. There is no question of deciding between the lessor and the lessee, as to who should be conferred the benefit of depreciation allowance. Adverting to the facts of the instant case, it can be seen that it is a case of finance lease agreement. The only and the inescapable conclusion which in our considered opinion follows is that the real owner of the leased property is Indo Gulf Fertilizer & Chemical Corporation Limited and not the assessee. We, therefore, decline to grant any depreciation to the assessee-lessor. However the lessee, if so advised, may take recourse to the legal remedy if any, for the grant of depreciation.
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Non-availability of the acknowledgement of the receipt cannot be the sole basis on which the order made can be annulled. The fact that notice was not served on the assessee has to be established by considering all relevant facts. The dispatch number on face of notice is a relevant fact. Once the notice has been issued at the correct address by speed post and same has not been received back then it will be deemed to be served. Therefore, CIT (A) is directed to decide the issue after taking all these relevant facts into consideration.
Assessee’s claim that travel website should be treated as software (and hence website development cost is eligible for 60% depreciation) is not justified. By approaching travel website of assessee, customers/people can approach assessee and conduct business; therefore, website as such cannot be treated as software; it would fall under definition of intangible asset on which depreciation @ 25% is allowable.
Section 80P is applicable to regional rural banks. This position is undisputed in the instant case as well. The only question is the exigibility to deduction thereunder of the impugned incomes. The word ‘investment’ occurring in the definition of ‘banking’ in section 5(b) of the Banking Regulation Act is of importance. Section 6(1)(a) of the said Act provides that apart from the business of banking, a banking company may engage, inter alia, in acquiring, holding, issuing on commission, under-writing, dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds.
Adverting to facts, the expenses under reference could not be strictly called ‘social welfare expenses’, and stood rightly considered as ‘donation. They are in fact toward promotion of activity in specific discipline, viz., music, flower growing – and that too of a particular variety, et. al., and rather in the nature of extending patronage thereto by sponsoring events (to that extent), showcasing talent therein, of interest and, consequently, visited largely by enthusiasts in those areas/disciplines.
