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TMI Blog2021 (4) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... xempt income. The Hon'ble Supreme Court in the case of CIT vs. Chettinad Logistics Pvt.Ltd. [ 2018 (7) TMI 567 - SC ORDER] has upheld the findings of the Hon ble Madras High Court that section 14A cannot be invoked, where no exempt income was earned by the assessee in the relevant assessment year. In this case, the learned CIT(A) has recorded categorical finding that the assessee has not earned any exempt income for the relevant assessment year. Therefore, we are of the considered view that findings recorded by the learned CIT(A) in light of the decision of Hon ble Jurisdictional Madras High Court in the case of M/s. Redington India Ltd. Vs.Addl.CIT (supra) is in accordance with law and does not call for any interference. - Decided in favour of assessee. Disallowance of depreciation of plant and machinery - AO disallowed depreciation claimed on plant and machinery on the ground that although plant and machinery was installed and commissioned before 30.03.2013, but the same has not been put to use in the business of the assessee - HELD THAT:- In this case, on perusal of various details filed by the assessee including commissioning report of plant and machinery, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Year, without appreciating the fact that exempt income bearing investments are held by the assessee, and therefore the provisions of section 14A read with Rule 8D will get triggered. 2.2 The learned CIT(A) erred in following the decision of the jurisdictional high Court decision in the case of M/s. Redington (India) Limited, without appreciating the fact that the decision of the Hon ble High court pertains to A.Y. 2007-08, which is prior to introduction of rule 8D, and the case in hand relates to the A.Y. 2013-14, thereby a decision of the High Court in the pre 8D era cannot be applied to a case in the 8D era. 2.3 The learned CIT(A) ought to have appreciated the circular in 5/2014 dated, which clearly explains that the provisions of section 14A read with Rule 8d are applicable even in a situation, when the assessee does not earn any exempt income but exempt income bearing investments are held by the assessee, and the Board s circular is binding. 3.1 The learned CIT(A) erred in deleting disallowance of depreciation claimed of ₹ 1.61 crores though it was not established that plant and machinery was put to use during the relevant previous year. 3.2 The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is engaged in the business of manufacture of components, subassembly for motors and tools etc. filed its return of income for the assessment year 2013-14 on 29.11.2013 admitting total income of ₹ 3,58,42,730/-. The case was selected for scrutiny and assessment has been completed u/s. 143(3) of the Act on 30.03.2016 and determined total income at ₹ 7,14,81,039/- by making additions towards disallowance of expenses relatable to exempt income u/s.14A of the Act and disallowance of depreciation claimed on plant and machinery on the ground that assets were not put to use in the business of the assessee for the relevant assessment year. The assessee carried the matter in appeal before the first appellate authority. The learned CIT(A) for the detailed reasons stated in his appellate order dated 31.01.2018 deleted additions made by the Assessing Officer towards disallowance u/s.14A and disallowance of depreciation u/s. 32 of the Income Tax Act, 1961. Aggrieved by the learned CIT(A) order, the Revenue is in appeal before us. 7. The first issue that came up for our consideration from ground no.2 of revenue appeal is disallowance of expenses relatable to section 14A of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 14A cannot be invoked, where no exempt income was earned by the assessee in relevant assessment year . 10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The issue of disallowance of expenses relatable to exempt income u/s.14A, in a situation where there is no exempt income earned for the relevant assessment year has been subject matter of deliberations by various High Courts, including the Hon'ble Jurisdictional High Court of Madras in the case of M/s. Redington India Ltd. Vs. Addl.CIT (supra), in the light of the provisions of section 14A of the Act, where it was clearly held that provisions of section 14A r.w.r 8D cannot be made applicable in a vacuum i.e., in the absence of exempt income. The Hon'ble Supreme Court in the case of CIT vs. Chettinad Logistics Pvt.Ltd. (supra) has upheld the findings of the Hon ble Madras High Court that section 14A cannot be invoked, where no exempt income was earned by the assessee in the relevant assessment year . In this case, the learned CIT(A) has recorded categorical finding that the assessee has not earned any exempt income for the relevant assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery was put to use during the relevant previous year . The DR further submitted that although the learned CIT(A) while agreeing that the assessee could not have produced such volumes of finished goods in one day thereby in agreement with the findings of the Assessing Officer that plant and machinery could not have been put to use on the last day of the relevant assessment year, but erred in holding that depreciation was allowable on plant and machinery, even though the same is ready for use by relying on the decision of jurisdictional Madras High Court in the case of CIT Vs. Chennai Petroleum Corporation (supra). 14. The learned A.R., on the other hand, supporting the order of the learned CIT(A) submitted that assessee has placed all evidences to prove that plant and machinery was put to use in the business of the assessee and based on the evidences placed by the assessee, the learned CIT(A) has rightly held that the assessee has put to use the plant and machinery in the business for the relevant assessment year to delete the additions made towards disallowance of depreciation. The A.R further referring to the paper book filed by the assessee submitted that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The jurisdictional High Court of Madras in the case of CIT Vs. Chennai Petroleum Ltd.(supra) has considered an identical issue and held that where assessee s business was a going concern and machinery could not be put to use due to raw material paucity beyond assessee s control, depreciation claimed u/s.32 of the Act could not be denied. The sum and substance of ratio laid down by the above two decisions of Hon ble High Courts are that even if plant and machinery is not put to use for the relevant assessment year, but was installed and ready for use, then depreciation claim can be allowed on such plant and machinery . 16. In this case, on perusal of various details filed by the assessee including commissioning report of plant and machinery, we find that all plant and machinery were acquired and installed before the end of the financial year. In fact, the assessee has placed on record production details of finished goods from newly installed plant and machinery. Therefore, we are of the considered view that the Assessing Officer has erred in disallowing depreciation on plant and machinery on assumption and surmises that in one day so much units of finished goods cannot be produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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