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2015 (10) TMI 1509 - AT - Income TaxDisallowance u/s.14A r.w. Rule 8D(2)(ii) - CIT(A) deleted the addition - Held that - Considering all the submissions of both the parties and facts and circumstances of the case and judgment of Hon ble Bombay High Court in the case of Reliance Utilities & Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY ), we find that the assessee had sufficient funds in the form of Share Capital amd Reserves & Surplus so as to enable it to make tax free investments. Further the exempt income is merely to the tune of ₹ 500/-, received in the form of dividend in the investments made in earlier years. It is further noted by us that the disallowance of ₹ 2,99,801/- on account of proportionate expenses out of indirect expenses incurred by the assessee, has been accepted by the assessee. Under these facts and circumstances, we find that the order of Ld. CIT(A) in deleting the disallowance on account of interest for ₹ 7,13,542/- is justified and no interference is called for in the order of Ld. CIT(A) on this issue. - Decided in favour of assessee. Disallowance of Depreciation on Imported Car. - CIT(A) deleted the addition - Held that - Disallowance made by the AO was not justified. It has been observed by us that AO has not anywhere mentioned that the said car was not used for the purpose of business of the Baroda 7 Rayon Co. Ltd.. assessee company. The accounts of the assesee company are audited by the statutory auditors as well as by the tax auditors. No defect has been pointed out in any audit report. The depreciation claimed on the car was on account of opening value of the WDV. The depreciation has been allowed on this car in earlier years. Thus, in our considered view the disallowance made by the AO was not justified and Ld. CIT(A) has rightly deleted the same - Decided in favour of assessee.
Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961. 2. Disallowance of Depreciation on Imported Car. Issue 1 - Disallowance under section 14A: The appeal was filed by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2008-09. The revenue challenged the deletion of an addition made under section 14A of the Income Tax Act, 1961. The disallowance was made by the Assessing Officer (AO) for interest expenses and indirect expenses. The Ld. CIT(A) deleted the disallowance of interest expenses but upheld the disallowance of indirect expenses. The Appellate Tribunal noted that the assessee had sufficient funds from Share Capital and Reserves to make tax-free investments. The Tribunal relied on precedents and held that the AO failed to establish a nexus between the interest expenditure and tax-free investments. The Tribunal upheld the Ld. CIT(A)'s decision to delete the disallowance of interest expenses, as the exempt income was minimal, and the disallowance of indirect expenses was accepted by the assessee. The Tribunal dismissed the revenue's appeal on this ground. Issue 2 - Disallowance of Depreciation on Imported Car: The revenue challenged the deletion of an addition made by way of disallowance of Depreciation on an Imported Car. The AO disallowed the depreciation claimed by the assessee on the car's written down value due to lack of supporting evidence. The Ld. CIT(A) deleted the disallowance, noting that the depreciation had already been allowed in earlier years and the car was part of the block of assets. The Tribunal considered the submissions and found that the AO did not justify the disallowance, especially as there was no evidence that the car was not used for business purposes. The Tribunal upheld the Ld. CIT(A)'s decision to delete the disallowance, as the depreciation was claimed on the opening value of the WDV and had been allowed in previous years. The Tribunal dismissed the revenue's appeal on this issue. In conclusion, the Appellate Tribunal upheld the decisions of the Ld. CIT(A) in both issues, dismissing the revenue's appeal in its entirety.
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