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2015 (9) TMI 1181 - AT - Income TaxAddition made by the AO on account of deduction u/s 80HHC on DEPB - CIT(A) deleted the addition - Held that - Respectfully following the ratio laid down by the Hon ble Supreme Court in the aforesaid referred to judgment 2015 (4) TMI 193 - SUPREME COURT do not see any merit in this ground of the departmental appeal wherein held that we find that in essence the High Court has quashed the severable part of third and fourth proviso to sec. 80HHC (3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction - Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal. - Decided against revenue. Disallowance on account of depreciation - CIT(A) deleted the addition - Held that - In the present case, it is noticed that the disallowance of depreciation on vehicles was restricted by the ld. CIT(A) to the extent of 6% by following the decision of the ITAT in assessee s own case for the preceding assessment year 2001,2002, during the course of hearing, nothing contrary to the said decision was brought on record. Therefore, we do not see any valid ground to interfere the findings of the ld. CIT(A). As regards to the disallowance of depreciation on the building, the ld. CIT(A) categorical stated that the assessee had claimed the depreciation @ 5% on the additions made after 30.09.2001 while the AO allowed the depreciation @ 5% on all the additions in the building account without considering that certain additions were prior to 30.09.2001 on which the depreciation at the rate of 10% was available. The ld. CIT(A) deleted the addition after considering the various details which were called for and were duly submitted by the assessee. Therefore, the impugned addition was also rightly deleted by the ld. CIT(A).The remaining addition on account of depreciation on Plant and Machinery was also made by the AO by assuming the installation date to be post 30.9.2001 while the ld. CIT(A) categorically stated that the assessee furnished all the details called for with proper evidences and after being satisfied, he deleted the addition made by the AO, on the basis of the evidences furnished by the Assessee. We therefore, do not see any merit in this ground of the departmental appeal since nothing contrary to the observations of the ld. CIT(A) is brought on the record.As regards to the Cross Objections filed by the assessee, the ld. Counsel for the assessee submitted that he has the instruction not to press the same and gave in writing C.O. s withdrawn. In view of that the Cross Objections filed by the assessee are dismissed as withdrawan.
Issues Involved:
1. Deletion of addition made by the AO on account of deduction u/s 80HHC on DEPB. 2. Deletion of disallowance on account of depreciation made by the AO. Issue-wise Detailed Analysis: 1. Deletion of Addition Made by the AO on Account of Deduction u/s 80HHC on DEPB: The primary issue in the departmental appeals concerns the deletion of the addition made by the Assessing Officer (AO) related to the deduction under section 80HHC on Duty Entitlement Pass Book (DEPB). The assessee, engaged in the manufacturing and export of various artwares, claimed deductions u/s 80HHC on DEPB credits amounting to Rs. 68,13,755 for the assessment year 2002-03 and Rs. 93,40,792 for the assessment year 2003-04. The AO disallowed these claims. The assessee argued that DEPB licenses are export incentives directly arising from export activities, and thus, they should be eligible for deduction under section 80HHC. The CIT(A) accepted this argument, citing the Gujarat High Court's decision in the case of M/s Avani Exports vs. CIT, which held that retrospective amendments denying such deductions were ultra vires to the extent of their retrospective effect. The department appealed, contending that DEPB receipts do not directly arise from exports and thus should not qualify for the deduction. However, the Supreme Court, in its order dated 30.3.2015, ruled in favor of the assessee, stating that all exporters, regardless of their turnover, should be treated similarly. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the department's appeal on this ground. 2. Deletion of Disallowance on Account of Depreciation Made by the AO: The second issue pertains to the disallowance of depreciation on various assets by the AO. The AO disallowed depreciation on vehicles, factory/office buildings, and machinery & plant blocks for the assessment year 2002-03, totaling Rs. 8,11,230. The disallowances were based on the AO's observations regarding the lack of documentation and assumptions about the use and installation dates of the assets. The assessee contested these disallowances, providing detailed explanations and supporting documents. The CIT(A) reviewed the submissions and deleted the disallowances, noting that the AO had not requested specific certificates and that the assets were indeed in use. The CIT(A) also aligned the disallowance of vehicle depreciation with the ITAT's decision in the assessee's case for the preceding year, reducing it to 6%. The department appealed, but the Tribunal found no merit in the department's arguments. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's disallowances were based on assumptions and that the assessee had provided adequate evidence to support its claims. Conclusion: The Tribunal dismissed the department's appeals and the assessee's cross objections. The Tribunal's decision was pronounced in court on 02/09/2015.
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