2018 (12) TMI 1855 - HC - Income Tax

Disallowance of interest expense made u/s 14A in respect of exempt income u/s 80P(2)(d) - Tribunal directing the A.O. to compute the deduction u/s 80P(2)(d) (on gross receipt) after considering the provisions of section 80AB - HELD THAT - It is an admitted position that the controversy raised vide the said questions is no longer res integra as the same stands concluded by a judgment and order passed by this court in the assessee s own case 2014 (6) TMI 977 - GUJARAT HIGH COURT whereby the questions have been answered in favour of the assessee and against the revenue. Under the circumstances no question of law can be stated to arise out of the said questions. Disallowance on account of additional depreciation on Milk Cans - milk cans are for collecting and storage purposes and being movable assets are not installed and therefore cannot be treated as plants in view of the provisions of section 32(1)(iia) -Tribunal after considering the definition of plant as contemplated under section 43(3) of the Act has found that milk cans are plant as per the said definition and has accordingly deleted the disallowance - HELD THAT - Having regard to the fact that the Assessing Officer has himself considered milk cans as plant for the purpose of normal depreciation he was not justified in disallowing the claim for additional depreciation by holding that such milk cans cannot be treated as plant. The Tribunal therefore did not commit any error. Question (C) therefore does not raise any substantial question of law. Disallowance on account of additional depreciation on Plant Machinery - HELD THAT - Existing provisions of section 32 of the Act and more particularly to the third proviso thereto was introduced with effect from 1.4.2016 whereas in the present case we are concerned with the assessment year 2012-13. As submitted that in the absence of any such provision in the Act at the relevant time the Tribunal was not justified in holding that the assessee was entitled to additional depreciation on the new machinery or plant even in the succeeding year. The following substantial question of law arises for consideration - Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting the disallowance claimed on account of additional depreciation on plant and machinery?

Summary

Issues:
1. Disallowance of interest expense under section 14A of the Act for exempt income under section 80P(2)(d) of Income Tax Act, 1961.
2. Computation of deduction under section 80P(2)(d) in consideration of section 80AB of the Act.
3. Disallowance of claimed additional depreciation on Milk Cans.
4. Disallowance of claimed additional depreciation on Plant & Machinery.

Analysis:
1. The appellant challenged the order by the Income Tax Appellate Tribunal regarding the disallowance of interest expense under section 14A for exempt income under section 80P(2)(d). The court noted that the issue was already settled in a previous judgment in favor of the assessee. Hence, no new question of law arose from this issue.

2. Regarding the computation of deduction under section 80P(2)(d), the court found that the Assessing Officer had disallowed the claimed amount on account of additional depreciation on milk cans. However, the Tribunal considered the definition of "plant" under section 43(3) of the Act and concluded that milk cans qualified as plants. Since the Assessing Officer had already treated milk cans as plants for normal depreciation, the disallowance of additional depreciation was deemed unjustified.

3. The court further analyzed the disallowance of additional depreciation claimed on Plant & Machinery. The appellant argued that a specific provision introduced in 2016 did not exist during the assessment year in question, making the Tribunal's decision on allowing additional depreciation in the succeeding year incorrect. The court admitted this issue as a substantial question of law for consideration.

4. Consequently, the primary issue for consideration was whether the Income Tax Appellate Tribunal was justified in deleting the disallowance of claimed additional depreciation on plant and machinery. This question was admitted for further examination based on the arguments presented by the appellant's counsel.