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2008 (11) TMI 275 - ITAT BOMBAY-EDisallowance of depreciation - Option for claiming depreciation - Income form other sources or not - service charges realised for various services, under corporate agreements relating to the commercial premises let out by it - Disallowance u/s 14A - notionally attributing interest expenses towards investment in shares and units - Claim for long-term and short-term capital loss reduced. Disallowance of depreciation - Option for claiming depreciation - CIT(A) held that option of not claiming depreciation was available only to an assessee, who did not claim set off of unabsorbed depreciation of earlier years as forming part of or merged in the current depreciation - HELD THAT:- We find that the decisions relied on by the CIT(A) for confirming the forced allowance of depreciation on the assessee are not relevant in the facts of this case. we find that High Court in the case of Sree Senhavalli Textiles (P) Ltd.[2002 (10) TMI 68 - MADRAS HIGH COURT] held that Expln. 5 to s. 32(1) would apply only from 1st April, 2002. Again, In the case of CIT vs. Kerala Electric Lamp Works Ltd.[2003 (2) TMI 61 - KERALA HIGH COURT] held that Expln. 5 to s. 32(1) having come into effect only from 1st April, 2002 and assessee having not claimed depreciation for earlier years, AO was not justified in thrusting such depreciation on the assessee - Ld DR was unable to point out any decision directly on the issue which went against the decisions of Hon'ble Madras and Hon'ble Kerala High Court. Therefore, we are of the opinion that assessee has to succeed in its ground. AO is directed not to thrust the depreciation which was not claimed by the assessee for the impugned year. Income form other sources or not - service charges realised for various services, under corporate agreements relating to the commercial premises let out by it - HELD THAT:- We find from para 13 of the order of this Tribunal that similar grounds were dismissed by this Tribunal relying on the decision of SHAMBHU INVESTMENT P. LTD. VERSUS COMMISSIONER OF INCOME-TAX [2003 (1) TMI 99 - SC ORDER] of the apex Court. Respectfully following this decision, we dismiss ground No. 2 of the assessee. Disallowance u/s 14A - notionally attributing interest expenses towards investment in shares and units - According to the assessee, there were no borrowings for making such investments and these were made out of internal accruals - HELD THAT:- As for the decision in S.G. Investments & Industries [2003 (5) TMI 198 - ITAT CALCUTTA-C], interest was relatable to investments in shares for earning exempt dividend income. Here, on the other hand, assessee has been able to establish clearly that none of its loan funds were used for the purpose of such investments. For invoking s. 14A the first condition is that expenditure should be incurred by the assessee in relation to such income which does not form part of the total income - As long as no such expenditure is involved, in our opinion, there cannot be a disallowance u/s.14A. Therefore, we delete the disallowance being the notionally attributed interest expense relatable to the investments in shares and units - the issue of the assessee, therefore, stands allowed. Claim for long-term and short-term capital loss reduced - HELD THAT:- It is noteworthy that neither the AO nor CIT(A) has alleged that any colourable device was used by the assessee through these transactions so as to evade, or for that matter, avoid any taxes. None of the transactions were alleged to have been entered into a pre-planned manner without commercial objective. In fact M/s ZES who acquired M/s PGL was not a related party at all - Therefore, in our opinion, CIT(A) fell in error when he added Re. 1 consideration received by the assessee from M/s ZES, to the sum infused by ZES into PGL as a part of the consideration for the equity shares transferred. In fact, managing director of the ZES was examined by the AO of M/s ZES in relation to these transactions and in his report, it was clearly stated that the sum paid to M/s Voltas Ltd. was by way of discharging the liability of M/s PGL. It was not anywhere stated that it was a part of the sale consideration received for selling the equity shares - Therefore, we have no hesitation to set aside the order of CIT(A) and direct the AO to accept the long-term and short-term capital loss as computed by the assessee. Therefore, ground No. 4 of the assessee stands allowed. Consequentially, assessee's appeal is partly allowed.
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