M/S. KAY JAY FINCAP LIMITED,NEW DELHI vs. ACIT, NEW DELHI

The grievance of the assessee read as under :-

At the very outset, the counsel for the assessee stated that neither the AO nor CIT(A) have understood the facts in true perspective. It is the say of the counsel that the assessee has not transferred entire plant and machinery but some of the plant and machinery in the block were used by the assesee in its business, therefore, the depreciation has been disallowed on erroneous appreciation of facts.

The DR fairly stated that the issue may be restored to the files of the AO for fresh adjudication.

We have carefully considered the rival submissions, we find force in the contention of the counsel. It appears that both the AO and the CIT(A) has not understood the underlying facts in the issue in true perspective. Therefore, in the interest of justice we restore this issue to the files of the AO. The AO is directed to examine whether entire plant and machinery have been transferred by the assessee and the assessee is directed to substantiate its claim that some of the plant and machinery were still in use by the assessee in its alternative business. Ground No.1 is allowed for statistical purpose.

Ground No.2 relates to the addition on account of profit of sale of machinery. Once again the counsel vehemently stated that the AO and the CIT(A) have totally misunderstood the facts in making / confirming the addition of Rs.32,32,293/-. The Counsel stated that the assessee has claimed depreciation as per companies Act and the profit has been computed accordingly. It is the say of the Counsel that the AO without understanding and without examining the facts made the impugned addition.

The DR once again stated that the issue may be set aside to the files of the AO for fresh adjudication.

We have carefully considered the underlying facts in the issue. We find that neither the AO nor the CIT(A) has appreciated the underlying facts in the issue in true perspective. Therefore, in the interest of justice we restore this issue to the files of the AO.

Ground No.3 relates to the disallowance of weighted deduction u/s. 35 (2AB) of the Act.

The basis of the disallowance is that the AO was of the opinion that during the period under consideration the assessee was not engaged in any activity of manufacture or production of eligible article.

Before us the Counsel for the assessee vehemently stated that the assessee was very much engaged in the eligible business activities which is evident from the audited statement of account and the audit report.

We have carefully perused the orders of the authorities below. In our considered opinion neither the AO nor the CIT(A) has gone into the merits of the facts and have simply formed a belief that the assessee was not doing any business. In the interest of justice we restore this issue to the files of the AO. The assessee is directed to demonstrate that R & D assets in the books of accounts were very much used by the assessee on which the weighted deduction u/s. 35 (2AB) of the Act has been claimed and the AO is directed to examine the issue afresh after affording a reasonable and sufficient opportunity of being heard to the assessee.

In the result, the appeal by the assessee is allowed for statistical purpose. The order is pronounced in the open court on 20.06.2022.