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2017 (11) TMI 1067 - AT - Income TaxDisallowance u/s 14A - Held that:- As assessee has not earned any exempt income, then no disallowance u/s 14A can be made in this year in view of the ratio and principle laid down by the Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. ACIT (2015 (9) TMI 238 - DELHI HIGH COURT). Thus, on this ground alone, we hold that the disallowance u/s 14A read with Rule 8D cannot be sustained and is directed to be deleted. Disallowance of depreciation and car running expenses - personal use of assets - Held that:- There is no dispute that these cars are assets of the assessee company which have been shown as part of the fixed assets in the balance sheet. Most of the cars are appearing as WDV in the schedule of fixed assets and depreciation has been claimed. Once the cars are owned by the assessee company and is found to part of fixed assets then, ostensibly depreciation has to be allowed. The assessee before the AO as well as before the Ld. CIT (A) has categorically submitted that since renovation work was carried out at hotel premises, therefore, these cars were parked at the residence of Shri Suresh Nanda and his son Shri Sanjeev Nanda who held majority stake directly or indirectly in the assessee company. Mere parking of cars at the premises of these persons, cannot ipso facto lead to an inference that the depreciation has to be disallowed which otherwise are the assets of the assessee company. Assessee had also submitted that these cars were used purely and wholly for the purpose of hotel business and in absence of rebuttal of this explanation, depreciation cannot be disallowed and accordingly, we held Ld. CIT (A) has rightly allowed depreciation.- Decided in favour of assessee. Disallowance of bad debts - Held that:- The amount written off as bad debt has been admitted to be offered to tax in the earlier years and it has been written off from the books of accounts in this year and hence, the conditions as laid down u/s 36(2) read with section 36(1)(vii) stands satisfied and therefore, the bad debt written off has to be allowed as deduction.- Decided in favour of assessee. Allowability of trade advance written off - Held that:- It is not in dispute that the amount of ₹ 11,05,058/- is a trade advance given during the course of business and for business purpose which had become irrecoverable. In this situation, ostensibly such an amount has to be allowed either as business expenditure u/s 37(1) or as a business loss while computing the profit and gains u/s 28 read with section 29, because such a trade advance was given during the course of the running of the business. Thus, the said amount though may not be allowed as bad debt but has to be allowed as business loss. Accordingly, we hold that the amount of trade advance written off in this year has to be allowed and consequently, ground No. 3 is allowed. Adhoc disallowance in respect of expenses of running and maintenance of cars - Held that:- AO while making the disallowance has made purely adhoc disallowance without pin pointing any specific nature of expenditure which can be said to be not for the purpose of business. In the case of the company, which is running a five star hotel and using cars for its hotel business and maintaining all the records, the AO has to point out as to which part of the expenditure debited are not been verifiable. Simply because cars were parked for temporary period at the premises of promoters, it does not mean it were used for non-business purpose. Such an adhoc disallowance cannot be sustained. Ld. CIT (A) has not examined this issue at all and gave a wrong finding of fact that AO has not made any such disallowance. Accordingly, we direct the deletion of such adhoc disallowance made by the A.0. - Decided in favour of assessee. Depreciation on gym equipments installed in the premises of Managing Director - Held that:- Simply because it is being used by Managing Director it cannot be held to be for private use so as to warrant disallowance of depreciation. At the most if any equipment has been placed for exclusive use of Managing Director the same should be added as perquisite in the hands of the said Director but cannot be disallowed in the hands of the assessee company when this asset already forms part of the block of the assets and depreciation has been allowed earlier. Accordingly, we do not find any reason to sustain such disallowance and the same is directed to be deleted. - Decided in favour of assessee.
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