TMI Blog2019 (8) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... ile documents in respect of existence of plant and machinery on which depreciation is claimed. No evidence to establish prima facie existence of machinery has been brought on record. Under such circumstances ratio of decisions relied upon by Ld. ar is not applicable to the facts of present case. - Decided against assessee. Addition u/s 14A in computing book profit u/s 115 JB (2) Explanation 1 clause (f) - HELD THAT:- Admittedly, there is no exempt income earned during the year by assessee. This issue therefore stands covered by the ratio laid down by Delhi Special Bench in case of ACIT vs Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . We therefore direct AO to delete disallowance computed under section 14 A while computing book profits. Suo-moto disallowance computed by assessee u/s 14A in regular provisions - HELD THAT:- It is a legal claim of assessee that by assessee inadvertently even though no exempt income was earned during the year under consideration may be deleted by following the ratio laid down by Hon able Delhi High Court in case of CIT vs Chem Investment [ 2015 (9) TMI 238 - DELHI HIGH COURT] . As the issue is set aside to Ld.AO in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to ₹ 7,31,285 on plant and machinery, alleging that the plant and machinery have not been put to use for the purpose of the business of the appellant during the relevant assessment year, without appreciating the fact that the plant machinery was given on operating lease to the lessee. 2.1. The Ld. AO has vitiated the principle of natural justice by not giving proper opportunity of being heard to the appellant before disallowing the aforesaid claim of depreciation. That the Ld. AO has erred on facts and in law in disallowing security deposit written off amounting to ₹ 14,68,800 under section 37(1) of the Act, alleging that the same is in the nature of capital loss, without appreciating that the same is in the nature of business expense incurred by the appellant during the relevant assessment year for the purpose of the business of the appellant. 4. That the Ld. AO has erred on facts and in law in making disallowance under section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 amounting to ₹ 24,58,013, without appreciating the fact that the appellant has not earned any exempt income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1431/Bang/2018( AY: 2012-13) 1. That the Deputy Commissioner of Income-tax Circle 7(1) (2) (hereinafter referred to as 'Ld. AO') has erred on facts and in law in assessing the Profit of the appellant at ₹ 35,94,321/- as against the returned loss of ₹ 1,22,61,807/-. The order of the Ld. AO is bad in law and on the facts to that extent, apart from being unjust. 2. That the Ld. AO has grossly erred on facts and in law in disallowing the claim of depreciation on plant and machinery amounting to ₹ 5,79,130/-, alleging that the plant and machinery have not been put to use for the purpose of the business of the appellant during the relevant assessment year, without appreciating the fact that the plant machinery was given on operating lease to the lessee. 2.1. The Ld. AO has vitiated the principle of natural justice by not giving opportunity of being heard to the appellant before disallowing the aforesaid claim of depreciation. 3. That the Ld. AO has erred on facts and in law in disallowing the interest claim amounting to ₹ 1,52,76,998 being interest paid on borrowings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck of assets depreciable at 15%. He argued that test of ownership and existence of such general plant and machinery has not been disputed since A.Y:2000-01. 4.1 Ld.AR submitted that plant and machinery being dumpers, concrete mixer s etc., were on lease to its customers, though, no lease rent was generated during years under consideration. However, he submitted that, these assets existed with assessee and even for earlier years in books of account forming part of block of assets. Referring to page 67 of paper book containing schedule to financial statements and page 251-to 55 of paper book containing schedule depreciation schedule forming part of tax audit report for assessment year 2008-09 to 2011-12, he submitted that no sale of such assets have taken place. 4.3 Ld.AR in written submission filed on 11/07/19 after hearing was concluded submits that, in preceding years assessing officer disallowed claim of depreciation, without appreciating fact that, these assets were part of block of assets since long, however to buy peace of mind and to avoid further litigation assessee did not file any appeal before appellate authorities for preceding years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not have income from lease of alleged plant and machinery, against which depreciation could be claimed. Merely because assessee included these plants and machinery in block of assets, would not establish these plant and machinery to be existing and have been used for purposes of business ,as assessee do not have any evidence to establish the same. While the case was being argued by Ld.AR this bench called for production of lease/hire purchase agreements entered into by assessee with various parties, to whom these plant and machinery was given on lease/hire purchase. In paper book filed before us, we do not find any such agreements. Even along with written submissions filed subsequently on 11/07/19, there are no such agreements placed on record by Ld.AR in order to substantiate his claim. Further Hon ble Kerela High Court in CIT vs Geo Tech Construction Corporation reported in (2000) 111 Taxman 373, referred to by assessee at page 481-483 of paper book has considered various decisions on this issue passed by Hon ble Supreme Court and Hon ble Bombay High Court, held as under: Like every other animate and inanimate object, business premises, machinery, plant or fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereinabove which is based upon the discussions mutatis mutandis to ground No. 1 herein. Accordingly Ground No. 1 raised by assessee stands dismissed. 14. Ground No.2 is in respect of addition under section 14 A made while computing book profit under section 115 JB (2) Explanation 1 clause (f). 15. Ld.AR submitted that assessee had inadvertently computed suo moto disallowance under section 14 A under normal provisions. Placing reliance upon page 59 of paper book being the financial statement, it is submitted that there is no exempt income earned during the year under consideration. 15.1 Ld.AR placed reliance upon the decision of Delhi Special Bench in case of ACIT vs Vireet Investments Pvt. Ltd., reported in (2017) 58 ITR (T) 313. 16. Ld. DR relied upon the orders of authorities below. 17.1 We have perused submissions advanced by both sides in the light of the records placed before us. 18. We have referred to computation of income and financial statements placed in paper book, relied upon by Ld.AR. Admittedly, there is no exempt income earned during the year by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with Vectra Advanced Engineering Pvt.Ltd on 01/04/2010, for advancing loan at 5.5% which was further revised to 9 % vide addendum dated 01/04/2011. Ld. ar submitted that the agreement is placed at page 276-281 of paper book. Subsequently it is submitted that assessee entered into an agreement for borrowing of loan with SREI Infrastructure Finance Ltd on 22/04/11 at 14% for development of oil and gas exploration activities and other investments in the group. 24.1 He submitted that Ld.AO made proportionate disallowance for the reason that there is a diversion of funds and that agreement between assessee and M/s Vectra Advanced Engineering Pvt. Ltd was not as per market price. Is also been submitted that Ld.AO adopted 15.5% instead of 14% for computing the disallowance of interest. 25. Ld.AR submitted that as both assessee as well as M/s Vectra Advanced Engineering Pvt.Ltd are loss-making companies therefore question of diversion of funds or transaction not being at arms length does not arise. Alternatively Ld.AR submitted without prejudice that, if disallowance of interest is to be upheld, corresponding deduction may be directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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