MAMMON CONCAST PRIVATE LIMITED,AGRA vs. INCOME TAX OFFICER, WARD-2(1)(1), AGRA

The appeal in ITA No. 610/AGR/2025 for AY 2018-19, arises out of the order of the ld National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 11.07.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.04.2021 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘ld. AO’).

At the out, we find that there is a delay in filing of appeal by the assessee before us by 88 days. Considering the reason adduced by the assessee, we are inclined to condone the delay and admit the appeal of the assessee for adjudication.

Ground Nos. 1 to 5 of raised by the assessee are challenging the confirmation of disallowance of depreciation on plant and machinery in the sum of Rs. 1,16,07,019/-.

We have heard the rival submissions and perused the material available on record. The assessee company was engaged in the business of manufacturing of MS ingots and billets. During the year under consideration there was no manufacturing activity carried out by the assessee due to temporary suspension of manufacturing of operations. The business was ultimately closed in December 2018. The return of income for AY 2018-19 was filed by the assessee company on 11.10.2018 declaring total income of Rs. Nil after setting off of business loss of Rs. 1,32,44,437/- with the income from other sources of Rs. 1,21,21,945/- resulting in carry forward, business loss of ₹11,24,492/-.

The ld AO observed that the assessee did not carry on any business and accordingly the plant and machinery was not put to use during the year. Hence, the assessee would not be eligible for depreciation on plant and machinery in the sum of Rs. 1,16,07,019/-. The ld AO also noted that amount shown under the head ‘income from other sources’ is nothing but the forfeiture of amount received against sale of machinery to Magnum Steel Limited. The assessee furnished all copies of agreement entered with Magnum Steel Ltd and letter of forfeiture due to non-performance of sale contract on the part of the Magnum Steel Limited. This forfeiture was also used as a tool by the ld AO to come to the conclusion that the intention of the assessee was to sell the entire plant and machinery to M/s. Magnum Steel Limited, thereby stopping the production activity. The ld AO noted from the ITRs of AYs 2019-20 and 2020-21 that no business was carried out by the assessee. Accordingly, he proceeded to conclude that assessee would not be eligible for depreciation on plant and machinery in the sum of Rs. 1,16,07,019/- as this machinery was neither put to active use nor passive use by the assessee. This action was upheld by the ld CIT(A).

At the outset, we find that the provisions of Section 38 of the Act are very clear to take care of this type of situation. For the sake of convenience, the provisions of Section 38 of the Act are reproduced here under:-

Ground No. 6 raised by the assessee is seeking the benefit of set of absorbed depreciation of Rs. 3,39,50,057/- and brought forward business loss of ₹4,29,77,636/-. We find that this matter requires factual verification of the ld AO and same has been rightly restored back by ld CIT(A) to the file of ld AO in para 9.6.3. Hence, we do not find any infirmity in the said order of the ld CIT(A) for this ground. Accordingly, Ground No. 6 raised by the assessee is dismissed.

Ground No. 7 raised by the assessee is general in nature and does not require any specific adjudication.

In the result, the appeal of the assessee is partly allowed for statistical purposes.