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TMI Blog2013 (6) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and hence computation of disallowance u/s 14A is not permissible thereon. – Matter is sent for recomputation of disallowance to AO, if any. Rejection of claim of additional deprecation related to purchase of plant & machinery – Revenue appeal - Held that:- After perusal of material records and papers it highlights that the freight charges and other charges are directly linked to the purchase of plant and machinery and cannot be delinked. It is not in dispute that normal depreciation was allowed by the AO by treating the impugned expenditure as part of the expenditure incurred on plant and machinery since the impugned expenditure was capitalised and treated as part of cost of plant and machinery. It is also not in dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixed assets cannot be held as machinery or plant related to manufacturing activity, for which the freight and other charges were claimed." 3. The facts concerning ground No. 1 are that the assessee is engaged in the business of manufacturing of tyres. Assessee company invested substantial amount in shares and mutual funds. Further, during the year under consideration, the assessee showed dividend income and claimed exemption thereon. Since the assessee company has not disallowed any expenditure against the said exempt income, the AO invoked provisions of section 14A of the Act read with Rule 8D of the I.T. Rules to hold that a sum of Rs. 36,51,878/- deserves to be deducted from the total income by applying the formula prescribed under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank documents in regard to the loan/credit facilities given to the appellant in respect of which the interest payments have been claimed in profit and loss account. It is seen that the bank has given the loan/credit facilities for the purpose of working capital and there are sufficient checks and balances including periodical checks so that the appellant will not be able to utilise the borrowed funds for purpose of investments in shares and mutual funds. Hence the interest liability cannot at all be attributed to investments in shares and mutual fund units. Therefore the interest disallowance under section 14A for earning exempt dividend income is not justified. The case of the appellant is also supported by the decision of the Hon'ble Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h evidence. On the contrary the AO has proceeded on certain assumptions which prompted the assessee to furnish necessary details before the CIT(A) to show that banks loans were obtained only for the purpose of working capital and not for making investments in shares and mutual funds. The learned CIT(A) also perused the bank documents in regard to the loan/credit facilities given to the assessee. Admission of additional evidence by the learned CIT(A) is not in dispute. However, the Balance Sheet placed before us shows that the assessee has not only obtained working capital loans but has also obtained other kinds of secured and unsecured loans. In so far as the credit facility obtained for the purpose of working capital is concerned there can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l depreciation. Before the first appellate authority the assessee contended that the AO never called for any details. In fact the AO failed to appreciate that whole of the new plant and machinery was utilised for manufacturing activity and the impugned expenditure is directly connected to the acquisition and installation of machinery. Freight and transportation charges are meant to bring the machinery to the factory and the total cost is calculated as machinery cost and hence disallowance of additional depreciation is not in accordance with law. 7. The learned CIT(A) observed that freight charges, etc. are directly linked to the price of plant and machinery which was installed and utilised for manufacturing process. Therefore the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o new plant and machinery are as per clauses (A) to (D) of the proviso to Sec. 32(1)(iia). Furthermore, the case laws cited by the appellant also lay down that additional depreciation cannot be disallowed if any such plant and machinery has been used for the said purpose. In view of this therefore, the addition made by the Assessing Officer can not be sustained. The same is hereby deleted." 8. Further aggrieved, Revenue is in appeal before us. We have heard the learned D.R. as well as the learned counsel for the assessee and carefully perused the record including the material papers placed before us which highlights that the freight charges and other charges are directly linked to the purchase of plant and machinery and cannot be delinked ..... X X X X Extracts X X X X X X X X Extracts X X X X
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