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2012 (9) TMI 296 - HC - Income TaxDisallowance u/s 14A - ITAT deleted it - Held that - Considering law having been declared in Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax 2011 (11) TMI 267 - DELHI HIGH COURT that to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income the assessing officer will have to verify the correcteness of such claim - AS Rule 8D r.w.s. 14A is applicable only from assessment year 2008-09 and, in respect of prior years, expenses relating to exempt income both direct and indirect have to be computed on a reasonable basis after allowing opportunity of hearing to the assessee - case is remitted back for reconsideration - in favour of assessee by way of remand. Depreciation on Aeroplane-Aeroengines - whether the Beechcraft Super King Air B-200C purchased by the assessee fell within the description of aeroplane ? - Held that - With regard to the history of the entry all that can be inferred is that aircraft is a broader description which includes all manner of craft or means of transport aided by flight, (such as balloons, planes etc.) within the Depreciation Rule. For the reasons best known, the rule making authority confined and narrowed definition to aeroplane . This conclusion is also supported by the fact that other entries in Rule III(3) of the depreciation table extend to entire vehicles such as commercially pliable buses, cars etc. They do not confine the scope of depreciation only to parts of such vehicles - as aircraft owned by the assessee has fixed wings and has the characteristics of the aeroplane though it may be of a smaller capacity which is able to fly only nine passengers on board the aircraft owned by the assessee cannot be thrown out of the category of aeroplane and to be considered only as Plant and Manchinery which is a term distinct to such type of aircraft - Thus in view of the above discussion the Tribunal‟s judgment does not disclose any error as regards interpretation of Entry III(3)(i) of the Depreciation Rules and its upholding the depreciation allowable in the present case to the tune of 40% cannot be termed as unjustified or unwarranted - in favour of assessee. Claim of cash payment as deductible expenditure under Rule 6DD(k) - Held that - As the charges payable and claimed by the assessee were in respect of the route navigational and parking charges for an aircraft required by Airport Authority of India there can be no dispute that the Airport Authority of India is a statutory body entitled to claim its dues and even entitled to frame Rules and Regulations under the parent Act in such an eventuality, once the authority required that cash had to be paid as a condition for flight clearance required by the assessee, it had really no choice in the matter. The interpretation urged by the revenue is far removed from reality - in favour of assessee.
Issues Involved:
1. Whether the deletion of disallowance under Section 14A was justified. 2. Whether the depreciation deductible under the head "Plant & Machinery," specifically the entry "Aeroplane-Aeroengines" prescribing 40% depreciation, was applicable and justifiably applied by the Tribunal and the Commissioner (Appeals). 3. Whether the cash payment claimed as deductible expenditure was correctly allowed by the application of Rule 6DD(k) of Income Tax Rules. Detailed Analysis: Issue 1: Deletion of Disallowance under Section 14A The appellant challenged the deletion of disallowance under Section 14A by the Tribunal. The Court referred to the precedent set by Maxopp Investment Limited v. CIT, 2012 (247)CTR 162 (Del), and concluded that the matter should be remitted back to the Assessing Officer. The Tribunal's decision was upheld, and the Assessing Officer was instructed to consider the directions in Maxopp while carrying out the Tribunal's directions. Issue 2: Depreciation Deductible for Aircraft The appellant contested the 40% depreciation rate applied to the "Beechcraft Super King Air B-200C" by the Tribunal. The Tribunal examined the historical context and the changes in the depreciation rates, noting that prior to 1987-88, different rates applied to "aircraft" and "aero-engines." Post-1988, a unified rate of 40% was prescribed for "Aeroplane-Aeroengines." The Tribunal found that the CIT's reliance on the Bombay High Court decision in CIT vs. Kirlosker Oil Engines was misplaced, as the classification under the Appendix-I applicable to the assessee's case was different. The Tribunal concluded that the term "aeroplane" in the current context included the aircraft owned by the assessee, which had fixed wings and was powered by propellers or jets. The Tribunal also noted that the department had previously granted 40% depreciation for similar aircraft in other cases. The Court agreed with the Tribunal's interpretation, stating that the term "aircraft" is broader and encompasses "aeroplane." The Court found no error in the Tribunal's judgment and upheld the 40% depreciation rate applied to the aircraft. Issue 3: Deductibility of Cash Payment under Rule 6DD(k) The appellant claimed that cash payments for route navigational and parking charges to the Airport Authority of India (AAI) were deductible under Rule 6DD(k). The Tribunal noted that AAI required cash payments before the departure of non-scheduled flights, as outlined in a letter dated 22.12.2009. The revenue argued that Rule 6DD(k) was inapplicable because the cash was not paid to an agent. However, the Court recognized AAI as a statutory body entitled to claim its dues and frame regulations under the parent Act. The Court held that the assessee had no choice but to comply with AAI's requirement for cash payments. The Court also referenced Rule 6DD(b), which allows deductions for payments made to the government as per the Government of India Rules. The Court found the revenue's interpretation unrealistic and upheld the Tribunal's decision to allow the cash payment as deductible expenditure. Conclusion: The Court found no reason to interfere with the Tribunal's orders on all three aspects. The appeals were accordingly dismissed.
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