2015 (6) TMI 208 - AT - Income Tax

Disallowance u/s.14A - Held that - As per Rule 8D of the IT Rules, 1962, the expenditure should be related to the exempt income which does not form part of the total income. Therefore, the AO should have verified whether the expenditure which he proposed to disallow related to the exempt income or not. In the case in hand, the assessee s contention qua the interest expenditure is that it had sufficient interest-free funds and the investment has been made out of such funds. The fact that the expenditure is not related to the exempt income and the investment wherefrom exempt income is earned is made out of interest-free fund needs verification. Therefore, the issue is restored to the file of AO for verifying the contention of the assessee that the interest expenditure is not related to exempt income and also investment out of which exempt income is earned was made out of interest-free fund. In case, the AO finds the contention of the assessee is correct, he would delete the addition. - Decided in favour of assessee for statistical purposes Excess depreciation on vehicle - CIT(A) deleted the addition - Held that - The assessee is required to demonstrate that assessee-company has purchased vehicles during the year under consideration, the delivery of such vehicles has also been taken and such vehicles were put to use for business purposes. It would not be sufficient that the assessee obtained the registration certificate from the state transport authority to prove that the vehicles have been put to use for business purposes. For claiming depreciation, onus is on the assessee that the vehicles so purchased have been put to business as in the case in hand delivery of vehicles to the assessee is not proved, however registration of vehicles is proved. In our considered view, the assessee should have furnished other evidences for proving that in fact vehicles were put to use. Therefore, the order of the ld.CIT(A) is hereby set aside. The issue of allowability of depreciation is restored to the file of AO for decision afresh. - Decided in favour of revenue for statistical purposes.

Summary

Issues involved:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Disallowance of excess depreciation on a vehicle.

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961:

The case involved cross-appeals by the Assessee and the Revenue against the order of the Ld. Commissioner of Income Tax(Appeals) for Assessment Year 2008-09. The Assessee appealed against the disallowance of Rs. 17,14,615 under section 14A of the Act. The Assessee argued that the interest expenses incurred were for specific business purposes, and there was no nexus between the interest expenditure and the investments made. The Assessee contended that Rule 8D should not have been applied as the interest paid for working capital facilities should have been excluded. The Assessee cited relevant judgments to support their case. The Tribunal found merit in the Assessee's arguments and decided to restore the issue to the Assessing Officer for verification. If the AO confirms the Assessee's contentions, the addition would be deleted. Consequently, the Assessee's appeal was allowed for statistical purposes.

Issue 2: Disallowance of excess depreciation on a vehicle:

The Revenue's appeal challenged the deletion of the addition of Rs. 3,28,175 made by the AO for excess depreciation on a vehicle. The Revenue argued that the Assessee failed to provide evidence that the vehicles were used for business purposes. The Assessee submitted invoices and registration documents as evidence, but the Tribunal found these insufficient to prove business use. The Tribunal requested delivery challans from the vehicle dealer, which the Assessee could not provide. Therefore, the Tribunal set aside the order of the Ld. CIT(A) and directed the AO to re-examine the issue. The Assessee was given the opportunity to prove that the vehicles were indeed used for business purposes. Consequently, the Revenue's appeal was allowed for statistical purposes.

In conclusion, both the Assessee and Revenue's appeals were allowed for statistical purposes, with the issues of disallowance under section 14A and excess depreciation on a vehicle being remanded back to the Assessing Officer for further examination and decision.