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2021 (4) TMI 1152 - AT - Income TaxDisallowance u/s 14A - AO noticed that assessee has made huge investments in shares and securities, but did not make suo moto disallowance of any expenses relatable to exempt income and hence, invoked Rule 8D of Income Tax Rules, 1962 and computed disallowance - CIT-A deleted additions made towards disallowance u/s.14A by holding that when there is no exempt income earned for the relevant assessment year, then there cannot be any disallowance relatable to such exempt income - HELD THAT:- 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 case of M/s. Redington India Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT] 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. [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 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. 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 produced without understanding fact that in one day so many lakhs of units can be produced depending upon installed capacity of the plant and machinery. In this case, the observations of the Assessing Officer that so much units cannot be produced in one day was nothing but assumption or surmises, but not based on any facts and figures. Therefore, we are of the considered view that on this ground depreciation claimed on plant and machinery which were installed and put to use in the business of the assessee cannot be denied. Be that as it may, even assuming for a moment, the asset was not put to use in the business of the assessee, but when the plant and machinery is installed and ready for use in the business for the relevant assessment year, then claim of depreciation can be allowed. There is no error in the findings recorded by the learned CIT(A) to delete disallowance of depreciation on plant and machinery. - Decided in favour of assessee.
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