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2018 (8) TMI 1047 - AT - Income TaxDisallowance u/s 14A r.w.r 8D(2)(iii) - earning of exempted dividend income - rate of depreciation on moulds used in electronics goods - 30% or 15% - Held that - disallowance of expenditure incurred in relation to an exempt income earned by the assessee u/s 14A of the 1961 Act cannot exceed exempt income earned by the assessee during relevant period. - Decided against the revenue. Higher rate of depreciation on moulds - Hedl that - in view of the consistency, we are of the opinion that the claim of the assessee should have been accepted by the Assessing Officer as no new facts have been brought on record to justify for different stand taken during the year under consideration - Decided against the revenue.
Issues Involved:
1. Disallowance of expenditure under Section 14A of the Income-tax Act, 1961. 2. Allowability of depreciation rate on moulds used in manufacturing electronic goods. Detailed Analysis: 1. Disallowance of Expenditure under Section 14A: The first issue pertains to the disallowance of expenditure amounting to ?13,92,540/- incurred by the assessee in relation to earning exempt income. The Assessing Officer (AO) invoked the provisions of Section 14A of the Income-tax Act, 1961, read with Rule 8D(2)(iii) of the Income-tax Rules, 1962, and computed the disallowance at 0.5% of the average investment of ?27,85,08,000/- held by the assessee. The assessee had voluntarily disallowed ?33,333/- under Section 14A, which was claimed to be incurred in relation to earning exempt income, and the AO added the balance amount of ?13,59,207/- to the income of the assessee. The CIT(A), following several judicial precedents, restricted the disallowance under Section 14A to the extent of the exempt income of ?97,314/- earned by the assessee. The CIT(A) relied on the judgments in cases such as Shivam Motors Private Limited, CIT v. Corrtech Energy Private Limited, Delite Enterprises, CIT v. Winsome Textiles Industries Limited, Joint Investments Private Limited v. CIT, and Pr. CIT v. Empire Package Private Limited. The Revenue, aggrieved by the relief granted by the CIT(A), appealed before the Tribunal. The Tribunal, after considering the material on record and hearing the rival contentions, upheld the CIT(A)'s decision. The Tribunal noted that the authorities below did not record proper satisfaction as mandated under Section 14A before invoking Rule 8D. The Tribunal also emphasized that disallowance under Section 14A cannot exceed the exempt income earned, as upheld by various High Courts, including the Delhi High Court in Joint Investments P. Limited v. CIT and the Bombay High Court in Principal CIT v. Ballarpur Industries Ltd. The Tribunal dismissed the Revenue's appeal on this ground. 2. Allowability of Depreciation Rate on Moulds: The second issue concerns the allowability of depreciation at 30% on moulds (plastic) used for manufacturing electronic goods. The AO allowed depreciation at 15%, although noting that the Tribunal had previously allowed 30% depreciation on such moulds in the assessee's own case. The AO disallowed the claim, citing that the Revenue had not accepted the Tribunal's decision and had filed an appeal with the Bombay High Court. The Tribunal, following its earlier decisions in the assessee's own case for assessment years 2006-07, 2007-08, 2008-09, and 2011-12, consistently held that the assessee is entitled to depreciation at 30% on moulds used for manufacturing electronic goods. The Tribunal reiterated its stance from the order dated 31.01.2018 for AY 2011-12, where it allowed the claim for depreciation at 30% on moulds, emphasizing consistency and judicial discipline. The Tribunal dismissed the Revenue's appeal on this issue, confirming the CIT(A)'s order allowing depreciation at 30%. Conclusion: The Tribunal dismissed both the appeals of the Revenue for AY 2013-14 and AY 2014-15, upholding the CIT(A)'s decisions on both issues. The Tribunal's decision was pronounced in the open court on 10.08.2018.
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