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Issues Involved:
1. Deletion of addition of excess depreciation claimed 2. Restriction of disallowance u/s 14A to 1% of the dividend income Deletion of Addition of Excess Depreciation Claimed: The appeal was filed by Revenue against the order of the ld. CIT(A)-VI, Kolkata for A.Yr. 2007-08, specifically challenging the deletion of addition of excess depreciation claimed amounting to Rs. 1,35,87,876. The issue revolved around whether the Assessing Officer was obligated to rectify the Written Down Value (WDV) of the block of assets for subsequent assessment years following the rejection of the claim for depreciation for A.Y. 1999-00. The ITAT upheld the decision of the ld. CIT(A), emphasizing the justifiability of the rectification application filed by the assessee. The Tribunal noted that the assessee consistently claimed depreciation on an enhanced WDV post the disallowance for A.Y. 1999-00, with previous appeals supporting this claim. The A.O. disallowed the excess depreciation based on departmental appeals against earlier decisions. However, the ITAT concurred with the CIT(A) and dismissed the Revenue's appeal, citing consistency with past decisions and lack of High Court intervention. Restriction of Disallowance u/s 14A to 1% of Dividend Income: The second issue pertained to the restriction of disallowance under section 14A to 1% of the dividend income. The AO disallowed Rs. 73,66,549 u/s 14A based on Rule 8D of the IT Rules, following a Special Bench decision. However, the ld. CIT(A) restricted the disallowance to 1% of the dividend income, citing inapplicability of Rule 8D for the relevant assessment year. The Tribunal concurred with the CIT(A), noting that 1% of exempted income could be treated as expenditure related to earning exempted income, in line with previous decisions. The Revenue's appeal was dismissed as the Tribunal found no fault in the CIT(A)'s order, which aligned with established precedents.
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