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TMI Blog2021 (5) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument advanced by the ld DR that provisions of Explanation 1 clause (c ) of section 263(1) of the Act does not come into operation in the instant case, holds good and deserves to be accepted. We find that the ld. PCIT had presumed that the investment in plant and machinery and other assets have been made out of borrowed funds of the assessee. In this regard, we find that the ld AR vehemently argued that the assessee was having sufficient interest free funds in its kitty to make investment in plant and machinery. However, we find that there is no finding of fact to this effect in the orders of the lower authorities. We find that this matter certainly requires factual verification and the ld AO had to give a factual finding as to whether the assessee is indeed having sufficient interest free funds which would explain the investment in plant and machinery. To this extent, the order of the ld PCIT u/s 263 of the Act stands modified as per the aforesaid directions to the ld AO to examine the availability of interest free funds with the assessee. Accordingly, the grounds raised by the assessee are partly allowed. Production expenses disallowed u/s.40(a)(ia) of the Act for v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company during the A.Y.2013-14 was engaged in business of content production and related services to various studios, advertising agencies and production houses. The return of income for the A.Y.2013-14 was filed by the assessee company on 30/11/2013 declaring total loss of ₹ 2,19,18,870/-. The assessment for the A.Y.2013-14 was completed u/s.143(3) of the Act by the ld. AO on 22/12/2016 determining total income at ₹ 13,20,220/-. In the said assessment, depreciation on plant and machinery to the extent of ₹ 2,42,70,730/- was disallowed. In the course of assessment proceedings, a reference u/s.142A of the Act was made to ld. District Valuation Officer (DVO) by the ld. AO on 31/03/2016 to estimate the fair market value of plant and machinery at MAD Studios Private Limited at 12/13/14, Unit No.2, Aarey Milk Colony, Goregaon (E), Mumbai. The ld. AO observed in the assessment order that assessee has shown cost of investment in plant and machinery at ₹ 39,71,78,488/-. The ld. DVO vide its report dated 21/10/2016 estimated the cost of investment in plant and machinery in respect of the aforesaid unit of the assessee at ₹ 8.26 Crores. Accordingly, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation of plant and machinery was prima facie made by the ld. AO on account of the allegations made by the ld. AO that plant and machinery and other fixed assets acquired by the assessee were over valued and that the borrowed funds were allegedly used for non-business purposes. The said issue of disallowance of depreciation on the differential investment amount on plant and machinery was the subject matter of dispute before the ld. CIT(A). Hence, it was pleaded by the ld. AR that the issue of interest expenses is also connected with the primary issue of over valuation of plant and machinery which is the subject matter of dispute before the ld. CIT(A). Accordingly, it was pleaded that the same cannot be the subject matter of revision proceedings by the ld. PCIT u/s.263 of the Act. 3.4. Per contra, the ld. DR vehemently supported the order of the ld. PCIT u/s.263 of the Act by stating that the ld. AO in the original proceedings had omitted to look into the utilisation of borrowings for non-business purposes for the differential cost of investment in plant and machinery to the extent of ₹ 31.50 Crores and accordingly, the interest expenditure corresponding to such non-u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ld AR vehemently argued that the assessee was having sufficient interest free funds in its kitty to make investment in plant and machinery. However, we find that there is no finding of fact to this effect in the orders of the lower authorities. In our considered opinion, we find that this matter certainly requires factual verification and the ld AO had to give a factual finding as to whether the assessee is indeed having sufficient interest free funds which would explain the investment in plant and machinery. To this extent, the order of the ld PCIT u/s 263 of the Act stands modified as per the aforesaid directions to the ld AO to examine the availability of interest free funds with the assessee. Accordingly, the grounds raised by the assessee are partly allowed. 4. In the result appeal of the assessee for A.Y.2013-14 in ITA No.3049/Mum/2019 is partly allowed. ITA No.3045/Mum/2019 (A.Y.2014-15) 5. This appeal in ITA No.3045/Mum/2019 for A.Y.2014-15 preferred by the order against the revision order of the ld. Principal Commissioner of Income Tax-12, Mumbai u/s.263 of the Act dated 06/03/2019 for the A.Y.2014-15. 6. The facts of this appeal are that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the details of production expenses in pages 36-49 of the paper book filed before us. It was pointed out by the ld. AR that from the said details, it could be seen that assessee has furnished the entire details of the payees together with their PAN, service tax component, tax deducted at source, remittances of TDS thereon together with the date of payment and challan number of TDS remittance. The said statement also reveals that in respect of certain parties where payments made to the payees are below the taxable limit, the assessee has not deducted tax at source as they were below the threshold limit. It was pleaded by the ld. AR that these details were also filed before the ld. PCIT. It was also pleaded by the ld. AR that assessee has not been held to be an assessee in default u/s 201 of the Act and hence, no disallowance u/s.40(a)(ia) of the Act may be made in its hands. We find that ultimately this is a matter requiring factual verification. There is no mention as to whether these details were filed by the assessee before the ld. AO in the course of original assessment proceedings. Hence, it could be safely held that the ld. PCIT had indeed validly assumed revision jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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