2021 (9) TMI 524 - AT - Income Tax

Depreciation on Plant Machinery leased to various parties - AR has pointed out that for the AY 2010-11 this Tribunal has decided the issue in favour of the assessee and allowed the claim of depreciation - HELD THAT - As to maintain the rule of consistency, we follow the earlier order of this Tribunal 2020 (10) TMI 606 - ITAT DELHI and allow the claim of depreciation. The addition made by the AO on this account is deleted. Addition u/s 14A r.w.r. 8D - Onus to prove - assessee has not claimed that the suo moto disallowance - HELD THAT - We find that the AO has clearly pointed out while issuing the show cause notice to the assessee that the assessee has not given any basis for the suo moto disallowance of ₹ 10 lacs which amounts to recording the satisfaction by the AO. When the facts for the two assessment years are entirely different then the reasoning recorded by the AO for the year under consideration cannot be compared for the AY 2010-11. Hence, we do not find any substance in the contention of the ld. AR of the assessee that addition made by the AO is liable to be deleted. Since, the AO has computed the disallowance by applying the formula under Rule 8D which is 0.5% of the average investment then we do not find any fault in the computation of disallowance made by the AO. As we have already discussed that there is a regular transaction of purchase and sale of shares and securities by the assessee, therefore, the administrative expenses which is incurred both for the taxable income and exempt income has to be apportioned as per the formula provided in Rule 8D. Hence, this issue is decided against the assessee and in favour of the Revenue.

Summary

Issues:
1. Disallowance of depreciation on Plant & Machinery leased to various parties.
2. Disallowance made by the AO u/s 14A read with Rule 8D.

Issue 1: Disallowance of Depreciation on Plant & Machinery:
The appeal concerns the disallowance of depreciation on Plant & Machinery leased to various parties by the assessee, a Public Sector Company. The AO disallowed the depreciation claim, following earlier orders in the assessee's own case. The CIT(A) upheld the disallowance, prompting the appeal. The Tribunal noted that in previous years, including AY 2010-11, it had consistently ruled in favor of the assessee on this issue. The Tribunal cited the precedent and held that the facts and circumstances remained the same, leading to the allowance of the depreciation claim. The AO's addition on this account was consequently deleted to maintain consistency.

Issue 2: Disallowance u/s 14A read with Rule 8D:
The second issue pertains to the disallowance made by the AO u/s 14A read with Rule 8D. The assessee argued that a similar issue for AY 2010-11 had been decided in their favor by the Tribunal. The AO rejected the suo moto disallowance of &8377;10 lacs made by the assessee, citing lack of evidence to establish no expenses were incurred in earning dividend income. The Tribunal noted a significant difference in investments between 2010 and 2012. The AO's disallowance was based on administrative expenses, and the Tribunal found no justification for the suo moto disallowance, as the basis was not explained other than being the same amount disallowed for AY 2010-11. The Tribunal emphasized that each year is a separate assessment unit, and the facts for 2012-13 were different, thus the earlier decision did not bind the current case. The Tribunal upheld the AO's computation of disallowance under Rule 8D, considering the regular transactions of shares and securities by the assessee. Consequently, the appeal was partly allowed, with this issue decided against the assessee and in favor of the Revenue.

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