2012 (8) TMI 1125 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 14A of the Income-tax Act, 1961.
2. Disallowance of depreciation on civil construction towards ETP/STP plant.
3. Disallowance of depreciation on electric installation.

Summary:

Issue 1: Disallowance u/s 14A of the Income-tax Act, 1961

The assessee challenged the disallowance of Rs. 40,00,000/- for AY 2007-08 and Rs. 60,16,000/- for AY 2008-09 u/s 14A, which pertains to expenses incurred in relation to income that does not form part of the total income. The CIT (A) upheld the disallowance, referencing the Hon'ble Delhi ITAT Special Bench decision in M/s. Cheminvest Ltd. vs. ITO and M/s Daga Capital Management. The Tribunal, considering the submissions and the judgment in Maxopp Investments Ltd. & Ors. Vs. CIT, restored the issue to the Assessing Officer for a fresh decision. The grounds related to disallowances u/s 14A in both Assessment Years were allowed for statistical purposes.

Issue 2: Disallowance of depreciation on civil construction towards ETP/STP plant

The assessee contested the disallowance of Rs. 27,12,770/- on civil construction towards ETP/STP plant, claiming it as an integral part of the plant entitled to 100% depreciation. The CIT (A) upheld the disallowance, stating the appellant failed to prove the civil structures were integral to the ETP/STP process. The Tribunal, noting the inadequate evidence, directed the Assessing Officer to inspect the site and decide afresh whether the civil construction is an integral part of the ETP/STP. This ground was allowed for statistical purposes.

Issue 3: Disallowance of depreciation on electric installation

The assessee challenged the disallowance of Rs. 51,74,135/- for AY 2007-08 and Rs. 22,57,685/- for AY 2008-09 on electric installations, arguing these should be classified as part of plant and machinery and eligible for 15% depreciation. The CIT (A) upheld the disallowance, categorizing the items as electrical fittings eligible for 10% depreciation. The Tribunal reviewed the details and concurred with the lower authorities, stating the majority of expenses were towards electrical fittings, not plant and machinery. The grounds of appeal were dismissed.

Conclusion:

Both appeals of the assessee were partly allowed for statistical purposes. The Tribunal restored the issues related to disallowances u/s 14A and civil construction depreciation to the Assessing Officer for fresh consideration, while upholding the disallowance of depreciation on electric installations.