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TMI Blog2021 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y.) 2016- 17 . 2. Ground No.1 and 7 are general in nature which does not require specific adjudication. 3. Ground No.2 and 3 are related to the addition made by the Assessing Officer (AO) amounting to Rs. 4,97,94,565/- in respect of construction of staff quarters. During the assessment proceedings, the AO found that the assessee made additions to staff quarters to the extent of Rs. 12,49,67,676/- during the F.Y.2015-16 relevant to the A.Y.2016-17. The aggregate value of additions made upto the year end was found to be Rs. 22.66 crores, on which the assessee claimed depreciation @5%. Since the AO suspected the genuineness of the construction of the quarters, he made visit to M/s Kallam Spinning Mills, Chowdavaram along with inspectors and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of 152 quarters constructed in the year 2016-17 at Rs. 7,51,73,111/- and the balance amount of Rs. 4,97,94,565/- (12,49,67,676 - 7,51,73,111) was disallowed and added back to the income. 4. Against by the order of the AO the assessee went on appeal before the CIT(A) and the Ld.CIT(A) found that the AO has not disputed the loans obtained by the assessee from the financial institutions for the purpose of construction of staff quarters. Addition u/s 69C is permissible, where the assessee incurred expenditure and fails to explain the source of such expenditure. In the present case, the assessee had explained the source of expenditure, hence, there is no case for making the addition u/s 69C of the Act, accordingly, deleted the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut it includes other amenities provided by the assessee in the factory premises. Therefore, argued that the entire cost of construction of staff quarters along with other infrastructure provided by the assessee was Rs. 12.50 crores which was constructed with the financial assistance of banks. Therefore, submitted that the assessee has correctly reported the capital expenditure under staff quarters and there is no case for making addition u/s 69C as rightly observed by the Ld.CIT(A). Even otherwise, the AO has visited the unit at Chowdavaram and he has not disputed the fact that the assessee has constructed 152 units during the year under consideration at Kunkupadu village. Against 151 units constructed in the immediately preceding financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (Tar) roads in weaving,. Compound wall in weaving, internal cement road ins pinning, RCC underground storage tank etc.. worked out to Rs. 4.55 crores as per the details furnished in page No.150 of the paper book. The said details are also stated to be placed before the lower authorities. Therefore, it is evident from the information placed by the assessee before us that the staff quarters including amenities constructed was Rs. 12.50 crores. The AO himself has accepted that cost of staff quarters in 152 Nos. was estimated to be at Rs. 7.5 crores against the actual expenditure of Rs. 7.96 crores. The AO did not consider other infrastructure facilities and amenities provided by the assessee while working out the capital expenditure for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,44,864/-. 10. Against which the department is in appeal before this Tribunal. 11. We have heard both the parties and perused the material placed on record. In this regard, the CIT(A) has examined the issue in detail and held that the assessee has correctly claimed the depreciation on staff quarters. We have decided in this order that the addition made by the AO is unwarranted and accordingly upheld the order of the Ld.CIT(A). Having decided the issue in favour of the assessee with regard to the cost of construction of staff quarters, we, hold that the assessee is eligible for Depreciation on Staff quarters of Rs. 12.50 crores. On going through the depreciation statement furnished in paper book page No.5, it is seen that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was maintaining regular books of accounts which were duly audited by the qualified chartered accountant. During the assessment proceedings, the AO called for various details, which was furnished by the assessee and verified by the AO. No defects were noticed in respect of the various claims from the information placed by the assessee before the AO. The AO simply compared the electricity connections and disallowed the expenses on the basis of number of connections increased during the year, without looking into the details of various heads of expenditure in maintenance of staff quarters such as cleaning, drainage, maintenance of roads etc. Making the disallowance without any basis and material is incorrect, therefore, we uphold the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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