2018 (11) TMI 602 - HC - Income Tax

Disallowance u/s 14A r.w.r. 8D - Held that - It is accepted and admitted by the counsel for the Revenue that the assessee had not earned any dividend or exempt income in this year. Once this factual position is accepted, the issue raised is covered against the Revenue vide decision of this Court in the case of Commissioner of Income Tax-IV Vs. Holcim India Private Limited, (2014 (9) TMI 434 - DELHI HIGH COURT) and judgement in Cheminvest Limited Vs. Commissioner of Income Tax-VI, (2015 (9) TMI 238 - DELHI HIGH COURT). Depreciation on electrical fittings - rate of depreciation - Held that - As examined the list and would observe that wall mounting fans, copper flexible cable, tube fitting etc. could possibly fall under the category of electrical fittings whereas certain other items like 4KVA voltage Stabilizer, online UPS 1 KVA etc. may not fall under the category of electrical fittings . However, the disallowance made by the Assessing Officer was ₹ 11,89,000/-. The amount being paltry, we are not inclined to issue notice in the present appeal on the question of rate of depreciation. Disallowance of depreciation on canteen building - canteen contractor had submitted the final bill on 27th April, 2010, i.e. after the end of the financial year - Held that - Commissioner of Income Tax (Appeals), had rightly observed and held that mere submission of the final bill by the canteen contractor would not show that the canteen had not been put to use and was not operationalized in the Assessment Year itself. After examining the bills of canteen contractor, which pertained to the earlier period, it has been held that the canteen had been operationalized before the Assessment Year had ended. The factual finding has been upheld by the Tribunal. There is no ground and reason to interfere with the said factual finding. - Decided against revenue

Summary

Issues:
1. Deletion of disallowance under Section 14A of the Income Tax Act.
2. Depreciation claimed at 15% per annum on certain items.
3. Disallowance of depreciation on the canteen building.

Analysis:

Issue 1:
The first issue pertains to the deletion of the disallowance of ?1,39,58,000 made under Section 14A of the Income Tax Act. The respondent-assessee did not earn any dividend or exempt income in the relevant year. The court referred to previous decisions to support the deletion, citing cases such as Commissioner of Income Tax-IV Vs. Holcim India Private Limited and Cheminvest Limited Vs. Commissioner of Income Tax-VI. The court upheld the decision based on these precedents, indicating that the issue was covered against the Revenue.

Issue 2:
The second and third issues raised by the Revenue relate to depreciation claimed by the respondent-assessee at 15% per annum on specific items categorized as plant and machinery. The Assessing Officer and the first appellate authority had determined that the items should be depreciated at 10% as they fell under the definition of 'electrical fittings' as per the Income-tax Rules, 1962. The court examined the list of items and noted that some could be classified as 'electrical fittings' while others may not. Despite a disallowance made by the Assessing Officer, the court deemed the amount insignificant and chose not to address the question of the rate of depreciation further.

Issue 3:
The third ground raised by the Revenue concerns the disallowance of depreciation on the canteen building amounting to ?5,83,812. The disallowance was based on the timing of the final bill submission by the canteen contractor, which occurred after the financial year had ended. However, the Commissioner of Income Tax (Appeals) and the Tribunal found that the canteen had been operationalized before the end of the Assessment Year, as evidenced by bills from the canteen contractor related to the earlier period. The Tribunal upheld this factual finding, concluding that there was no basis to interfere with it.

In conclusion, the court dismissed the appeal filed by the Revenue without any order as to costs, addressing all the issues raised in the case comprehensively.