TMI Blog2020 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... hanced rate without examining the eligibility of the same. The Hon ble Delhi High Court in the case of BSES Rajdhani Power Ltd. vs. PCIT [ 2017 (11) TMI 588 - DELHI HIGH COURT] had held that the non consideration of larger claim of depreciation and consideration of only part of it by the AO who did not go into the issue with respect to the whole amount was an error that could be corrected u/s 263. In this case it is our considered view that the AO has not examined the complete aspect of the case and has allowed the assessee s claim without any inquiry. The action of the Ld. Pr. CIT is bound to be upheld. The Hon ble Apex Court in the case of Deneal Merchants Pvt. Ltd. vs. ITO and another [ 2017 (12) TMI 476 - SUPREME COURT] has categorically held that where the Commissioner of Income Tax had passed an order u/s 263 of the Act with observation that the AO did not make any proper inquiry while making the assessment and had accepted the explanation of the assessee, such order was to be upheld. Thus, we uphold the validity of section 263 proceedings on the issue of enhanced depreciation claimed by the assessee at 100% on alleged air pollution control equipment. Claim of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, the Ld. Pr. CIT has held that the original assessment order in the assessee s case passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called the Act ) vide order dated 11.12.2013 was passed without proper appreciation of facts of the case and without due application of provision of law in so far as depreciation was allowed at 100% and finance cost was allowed as deduction although it was attributable to the period prior to the commencement of business. 2.0 Brief facts of the case are that the assessee had filed its return of income showing a loss of ₹ 54,53,847/-. Thereafter, the return was revised declaring a loss of ₹ 41,89,49,543/-. The assessment was completed u/s 143(3) of the Act at the revised loss of ₹ 41,89,49,543/-. 2.1 Thereafter, on scrutiny of assessment records it was seen that the assessee company was engaged in managing operations of ground power unit and pre-conditioned air unit at Indira Gandhi International Airport, New Delhi. It was further seen that in the original return of income, the assessee had claimed depreciation on Ground Power Unit (GPU) and Pre Conditioned Air Unit (PCA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had not brought any evidence on record to establish that GPU and PCA caused lesser pollution. The Ld. Pr. CIT concluded that there was excess allowance of depreciation by the AO thereby making the order erroneous and prejudicial to the interest of revenue. Similarly, with respect to the finance expenses, the Ld. Pr. CIT observed that from the documents available on record it could not be ascertained whether the entire claim of interest pertained to post commencement period or not. The Ld. Pr. CIT observed that as the AO has failed to examine the matter, the order was erroneous and prejudicial to the interest of the revenue. The assessment order dated 11.12.2013 was set aside and the AO was directed to reframe the assessment order in accordance with the directions given in the impugned order after making the required verification. 2.4 The assessee is now in appeal against this order passed u/s 263 of the Act. 3.0 The Ld. AR submitted that the AO had made due inquiry during the course of assessment proceedings with respect to the claim of depreciation. He drew our attention to the submissions of the assessee dated 26th Septemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% depreciation was a beneficial provision for providing incentive to the assessee for installing air pollution control equipment and, therefore, the same should have been interpreted liberally. It was also submitted that the tax audit report filed by the assessee had not been negated by the Ld. Pr. CIT and, therefore, the jurisdiction u/s 263 could not be invoked. The Ld. AR also argued that the order could not be erroneous and prejudicial to the interest of the revenue only for the reason that no detailed discussion had been made in the assessment order whereas detailed inquiries had been made by the AO. It was further submitted that it was at the most a case of inadequate inquiry and not a case of no inquiry and, therefore, Explanation 2 to section 263 could not have been invoked. 3.2 With respect to the issue relating to the interest expense, it was submitted that during the year assessee had paid finance charges to DIAL and IDBI and based on the period for which the loan has been taken, the assessee had suo moto capitalised the interest pertaining to the period prior to the commencement of business. It was also submitted that in this regard detailed inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation had been claimed on ground power unit and pre conditioned air unit @ 15% while in the revised return the assessee claimed depreciation @ 100% by holding that the same fell under the category of air pollution control equipment which was eligible for 100% depreciation. The AO allowed the claim of the assessee. The Ld. Pr. CIT was of the view that the assessee s claim of depreciation at enhanced rate has been allowed by the AO without making due inquiries in this regard. It is the assessee s contention that the AO had raised query in this regard and the assessee had filed submissions in response thereto and the AO had allowed the claim after duly considering the assessee s submissions. We have gone through the questionnaire issued by the AO and the responses submitted by the assessee. However, we note that there is no specific query raised by the AO with respect to the assessee s claim of depreciation @ 100%. The AO has simply asked for details pertaining to fixed assets. No specific query has been raised by the AO as to why the ground power unit and the preconditioned air unit fell in the category of air pollution control equipment eligible for depreciation @ 100%. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO who did not go into the issue with respect to the whole amount was an error that could be corrected u/s 263 of the Act. In this case it is our considered view that the AO has not examined the complete aspect of the case and has allowed the assessee s claim without any inquiry. The action of the Ld. Pr. CIT is bound to be upheld. The Hon ble Apex Court in the case of Deneal Merchants Pvt. Ltd. vs. ITO and another in SLP No. 2396/2017 has categorically held that where the Commissioner of Income Tax had passed an order u/s 263 of the Act with observation that the AO did not make any proper inquiry while making the assessment and had accepted the explanation of the assessee, such order was to be upheld. Thus, we uphold the validity of section 263 proceedings on the issue of enhanced depreciation claimed by the assessee at 100% on alleged air pollution control equipment. 5.2 As far as the second issue regarding assessee s claim of interest is concerned, it is the assessee s contention that the assessee has duly bifurcated the interest expense between pre and post business commencement period and has made disallowance accordingly. Again, no specific query has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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