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2021 (5) TMI 157 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - HELD THAT - So far as the source of investment up-to AY 2011-12 is concerned it is the consistent finding of the Tribunal that the assessee had surplus interest free funds to make the investments. As per the observation of Ld. CIT(A) there are fresh investment of 183 Lacs during the year which could be said to have been sourced out of borrowed funds. However we find that no such nexus has been established by Ld. AO during assessment proceedings. Another pertinent fact is that own interest free funds far exceeds the investments made by the assessee and therefore the presumption as drawn in earlier years would still prevail that the investments were sourced out of interest free funds and not out of borrowed funds unless the nexus between the two was established and brought on record by Ld. AO. In the absence of such nexus the interest disallowance would not be sustainable in law. Therefore we are inclined to delete the interest disallowance made u/r 8D(2)(ii). So far as expenses disallowance u/r 8D(2)(iii) is concerned Ld.AO is directed to re-compute the same after considering only those investments which have yielded exempt income during the year. Adjustment of disallowance u/s 14A while computing book profits u/s 115JB - HELD THAT - The matter would stand restored back to the file of Ld. AO on similar lines as directed by Tribunal in order for AY 2010-11 2019 (8) TMI 1694 - ITAT MUMBAI . The operative portion has already been extracted by us in preceding paragraphs. Depreciation claim on assets given on finance lease - claim was rejected By Ld. AO since the new claim could be made only by revising the return of income - Ld. Sr. Counsel submitted that the income from the leased assets was specifically mentioned in the respective agreements and the same has been offered as well as assessed as Business Income . This being the case the assessee would be eligible for the depreciation - HELD THAT - Upon due consideration of factual matrix finding strength in arguments of Ld. Sr. Counsel we are of the considered opinion that correct factual matrix is required to be brought on record. Needless to add that if the income has been offered and assessed as Business Income the assessee would be eligible to claim the depreciation. Therefore the impugned order on this issue is set-aside and the issue is restored back to the file of Ld. AO for fresh adjudication after appreciating the correct facts. - Ground stand allowed for statistical purposes.
Issues involved:
1. Disallowance under section 14A and depreciation claim of ?400.64 Lacs. Analysis: 1. Disallowance under section 14A: - The assessee contested the disallowance of ?31,43,96,143 under section 14A by the Assessing Officer, which was confirmed by the CIT(A). - The Assessing Officer invoked Rule 8D to compute the disallowance, considering the interest expenditure and investments made by the assessee. - The CIT(A) upheld the disallowance, noting fresh investments made during the year and higher interest expenditure compared to the previous year. - The Tribunal found that the interest disallowance was not sustainable as the nexus between borrowed funds and investments was not established by the Assessing Officer. - The Tribunal directed the Assessing Officer to re-compute the expense disallowance considering only investments yielding exempt income. - The Tribunal allowed the additional ground raised by the assessee for statistical purposes, following the decision of the Special Bench of the Delhi Tribunal. 2. Depreciation Claim: - The assessee missed claiming depreciation of ?400.64 Lacs on assets given on finance lease during assessment proceedings. - The Assessing Officer rejected the claim, stating it could only be made through a revised return of income and that the assets did not qualify for depreciation. - The CIT(A) observed discrepancies regarding the assets not forming part of the fixed assets schedule and rejected the claim. - The Tribunal, considering the documentary evidence and arguments of the assessee's counsel, set aside the CIT(A)'s decision and directed the Assessing Officer to re-examine the claim with correct facts. - The Tribunal allowed the ground for statistical purposes, emphasizing the eligibility of depreciation if income was assessed as 'Business Income.' In conclusion, the appeal was partly allowed, and the issues were restored back to the Assessing Officer for fresh adjudication based on the correct facts and legal provisions.
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