TMI Blog2017 (11) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ANT MAHARISHI, ACCOUNTANT MEMBER For The Department : Smt. Paramita Tripathy, CIT (DR) For The Assessee : Shri Sameer Gupta, Advocate ORDER PER AMIT SHUKLA, J.M. The aforesaid appeals have been filed by the revenue and cross objections by the assessee against separate impugned order of even date 11.8.2014, passed by Ld. CIT (Appeals)-I, New Delhi for the quantum of assessment passed under section 153A read with section 143(3) for the assessment years 2009-10 and 2010-11. 2. Since common issues are involved in all the appeals arising out of identical set of facts, therefore, the same were heard together and have been disposed of by way of this consolidated order. We will first take up revenue s appeal and cross objection for the assessment year 2009-10. In the grounds of appeal the revenue has raised following grounds:- 1. The order of Ld. CIT (A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT (A) has erred in law in deleting the disallowance of ₹ 9,71,73,724/- made by AO on account of disallowance u/s 14A read with Rule 8D of the Income Tax Act. 3. On the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - has been sustained and therefore, again adding the entire disallowance is uncalled for. 5. After hearing both the parties and on perusal of the impugned orders, one very important fact which is permitting through is that, during the year assessee has not earned any exempt income and this fact has been noted by the AO also in the impugned assessment order as well as by the Ld. CIT(A) in the impugned order. The assessee had relied upon certain decisions before both the authorities contending that, if there is no exempt income, then no disallowance u/s 14A can be made. This fact is borne out from the discussions appearing on para 4.1 of the Ld. CIT (A) order. Whence 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, reported in 378 ITR 33 (Del). Thus, on this ground alone, we hold that the disallowance u/s 14A read with Rule 8D for sums amounting to ₹ 9,71,73,724/- cannot be sustained and is directed to be deleted. 6. So far as the issue raised in ground No. 3, i.e., deletion of addition of ₹ 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) held that no such disallowance has been made in the assessment order which prima facie appears to be incorrect finding as the A.O. has made specific disallowance of ₹ 20 lacs as per discussion appearing at paras 4 and 5 of the assessment order which reads as under:- The reply of the assessee company has been examined and has been found non tenable in view of the fact that Mr. Suresh Nanda as well as Mr. Sanjeev Nanda are not the Directors in the assessee company and officially they have not been provided any car by these companies. It is important to mention here that neither Mr. Suresh Nanda nor Mr. Sanjeev Nanda has offered any income for letting out their premises for parking of cars by M/s. Claridges Hotels Pvt. Ltd. In view of the facts, it can be stated that these cars cannot be said to be wholly exclusively for the purpose of the business. The assessee has furnished of depreciation claimed but has not furnished the expenses related to fuel, maintenance, driver salaries etc. In the absence of details a lump sum amount of ₹ 20 lacs is considered as expense related to these cars for their running in addition to depreciation claimed. Therefore, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 338/- is to be allowed, whereas the balance amount of ₹ 11,05,058/- cannot be allowed as it was in the nature of trade advances and assessee could not produce any evidence. 10. After hearing both the parties on this issue, we find that the assessee had stated that amount treated as bad debt amounting to ₹ 7,75,338/- had been duly offered to tax in the earlier years for which year wise details of income offered alongwith the copy of ledger account was submitted before the AO as well as before the Ld. CIT(A). When this fact is not disputed that the said amount has been offered to tax in the earlier year and assessee has written-off the said amount from its account in this year, then as per the law bad debts written-off has to be allowed in this year and assessee does not have to prove that the amount has become bad. So far as the trade advance of ₹ 11,05,058/- was concerned, the same was made to M/s. Pasio Industries (S) Pte Ltd. for supply of raw material, cooking items etc., who had failed to execute the order. Despite the best efforts by the assessee, order could not be executed nor could the amount be recovered. Hence, the assessee has written off the said su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 20 lacs in respect of expenses of running and maintenance of cars, as discussed in the departmental appeal, the assessee owns various cars which are part of fixed assets and is being used for the purpose of hotel business of the assessee. The 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.O. 14. Since we have already decided the issues on merits, therefore, the legal ground raised vide ground Nos. 1 and 2 in the cross objection have become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further addition of ₹ 2,42,26,219/- made by the revenue to the returned income is deleted. This ground of appeal is decided in these terms. 17. After considering the rival submissions, once it is an admitted fact that assessee has not earned any exempt income, then in view of the judgment of Hon ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. ACIT reported in 378 ITR 33 no disallowance u/s 14A can be made. Thus, disallowance made by the AO over and above the amount offered by the assessee is directed to be deleted and only the amount suo-motto expense disallowed by the assessee shall remain sustained. In the result ground No. 1 raised by the revenue is dismissed. 18. So far as the issue raised in ground No. 3 is concerned, that is depreciation on cars at their WDV, admittedly this issue is similar to ground raised in ground No. 3 of revenue s appeal for the assessment year 2009-10 and therefore, in view of the finding given therein which is applicable on the facts in the present case mutatis mutandis, we hold that the addition made on account of disallowance on depreciation on cars by the AO cannot be sustained and the same has rightly been deleted b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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