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TMI Blog2017 (2) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Rules 1962 read with section 14A of the Income Tax Act ("Act") without satisfying the nexus of Depreciation and dividend income earned. 2. That on the facts and in the circumstances of the case, the lower authorities erred in law in disallowing Depreciation allowance which does not have any direct and immediate connection with dividend income of Rs. 1,12,19,944/-. Depreciation allowance is not an expenditure incurred "in relation to " dividend exempt income. 3. That on the facts it is contended that Depreciation is allowed with reference to cost of the eligible assets and is not dependent upon earning of taxable or non-taxable income. 4. The lower authorities erred on facts and in law in concluding that Depreciation is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant itself in the computation of income towards security transaction tax. The appellant had also claimed a sum of Rs. 4,28,653/- towards depreciation on fixed assets. The assessee submitted before the Assessing Officer that he holds securities, shares as a promoter in U-FLEX LTD. and in a number of other unlisted companies, which were engaged in purely business activities. The equity shares of the above listed and unlisted companies were held for a number of years and it has been shown under the investment portfolio. The investment in equity shares were made not for the purpose of earning exempt income, but for having controlling interest in the listed and unlisted companies. These contentions were not accepted by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before us : (i). Vishnu Anant Mahajan vs. ACIT, 137 ITD (Ahd.)(SB) 22 (ii). Nectar Beverages P. Ld. Vs. DCIT, 314 ITR 314 (SC) 5. On the other hand, the ld. DR relied on the order of the authorities below. 6. After hearing both the parties and perusing the materials available on record before us, we find that the assessee has claimed depreciation allowance on fixed assets which was used for the purpose of business. The depreciation claimed on fixed assets is not an expenditure. It is notional expenditure which is computed as per section 32 of the IT Act for arriving at taxable income of the assessee in the relevant assessment year. For the sake of convenience the provisions of section 32(1) with Explanation 5 is reproduced as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be : [Provided also that where an asset referred to in clause (iia)or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991: Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the succ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with such method as may be prescribed19, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act : Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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