2024 (4) TMI 193 - AT - Income Tax

Disallowance u/s 14A - as argued no expense has been incurred to earn such exempt income - assessee has suo-moto disallowed expenses to the extent exempt income earned during the year - HELD THAT - Since the exempt income earned has already been offered for tax by the assessee, no disallowance in this regard is called for. Accordingly, following the above precedent in the case of Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT has held that disallowance under section 14A should be restricted to the exempt income earned we set aside the orders of the authorities below and decide the issue in favour of the assessee. Allowance of depreciation on Canter used for supply of goods to customers - @ 15% OR @ 30% - AO made the disallowance on the ground that the assessee was not engaged in the business of running the vehicles on hire, hence, allowed depreciation on canters @ 15% - HELD THAT - It is undisputed that vehicles used are not hired for running but were used for assessee s own business. There is no hire income shown in the profit and loss account to reflect any hire charges received. In these circumstances, in our considered view, authorities below have passed well-reasoned order which does not require any interference on our part. Accordingly, we affirm the same on this issue. Decided against assessee.

Summary

Issues involved:
The judgment involves two main issues:
1. Disallowance of expenses u/s 14A of the Income-tax Act.
2. Disallowance of depreciation on canter used for supply of goods to customers.

Issue 1: Disallowance of expenses u/s 14A of the Income-tax Act:
The appeal challenged the disallowance of expenses amounting to INR 60,53,665 u/s 14A of the Act, despite the assessee having earned exempt income of INR 11,138 during the AY 2017-18 and having voluntarily disallowed expenses to the extent of the exempt income. The counsel argued that as the exempt income had already been offered for tax, no further disallowance was warranted. Citing the precedent of Cheminvest Ltd. vs. CIT, it was contended that disallowance u/s 14A should be limited to the exempt income earned. The tribunal, following the precedent, set aside the orders of the lower authorities, ruling in favor of the assessee.

Issue 2: Disallowance of depreciation on canter:
The second issue pertained to the disallowance of depreciation on canter used for transporting goods to customers. The Assessing Officer disallowed excess depreciation claimed by the assessee, arguing that the vehicles were not used for running them on hire, thus allowing depreciation at 15% instead of the claimed 30%. The assessee contended that the canter was specifically designed for transporting auto components to Maruti Suzuki India Ltd., its primary buyer. Despite the appeal, the CIT (A) upheld the addition, reasoning that the higher rate of depreciation at 30% applied only when vehicles were used for hire. As the canters were not hired out but used for the assessee's business, no hire income was shown, leading to the affirmation of the disallowance. The tribunal concurred with the lower authorities, upholding the disallowance of depreciation at 30%.

In conclusion, the appeal related to the disallowance of expenses u/s 14A was partly allowed, while the appeal concerning the disallowance of depreciation on the canter was dismissed. The tribunal affirmed the decisions of the lower authorities on both issues.