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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
आदेश / O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: These appeals of Revenue are arising out of the orders of the Commissioner of Income Tax (Appeals)]-24, Mumbai, [in short CIT(A)], in appeal Nos. CIT(A)-24/ACIT-15(1)(2)/IT-582 & 410/2016-17 dated 07.02.2019 & 31.01.2019. The assessments were framed by the Asst.
2. The first common issue in these appeals of Revenue is against the order of CIT(A) deleting the disallowance of expenses relatable to exempt income made by Assessing Officer invoking the provision of section 14A of the Act read with Rule 8D of the Rules. For this, Revenue has raised the identical worded grounds in both the years i.e. ground Nos. 1 and 2. Hence, for the sake of brevity, we are discussing the grounds as raised in AY 2013-14. The relevant grounds read as under: - “1. On the facts and in the circumstances of the case and in law, Ld. CIT(A), Mumbai erred in deleting the disallowance of Rs.12,18,952/- made u/s. 14A of the IT Act by holding that no disallowance u/s. 14A of the I T Act, is called for, when there is no exempt income received or receivable by the assessee during the relevant previous year?"
On the facts and in the circumstances of the case and in. Law, the Ld.CIT(A), Mumbai erred in deleting the disallowance u/s. 14A for A.Y.2013-14 without appreciating the fact that the circular No.5 of 2014 dated 11th February, 2014, issued by the Central Board of Direct Taxes clearly, provides for disallowance of the expenditure even where tax
The Assessing Officer during the course of assessment proceedings disallowed the expenses relatable to exempt income under Rule 8D(2)(ii) at Rs. 10,84,345/- and under Rule 8D(2)(iii) at Rs. 1,34,607/-, thereby the total disallowance was made at Rs.12,18,952/-. The assessee before Assessing Officer as well as before CIT(A) contended that there is no exempt income earned by the assessee during the year and the Assessing Officer has assumed that there will be income likely to arise in future. The CIT(A) relying on the decision of Tribunal’s order in earlier year in assessee’s own case deleted the addition and also relied on the decision of Hon’ble Bombay High Court in the case of PCIT vs. Ballarpur Industries Ltd. in of 2016 dated 13.10.2016 (Bombay High Court).
We noted that this issue is also covered by the decision that Hon’ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [2018] 402 ITR 640 (SC), wherein it is held that once, there is no exempt income, no disallowance under section 14A Read with Rule 8D of the rules can be made. Hence, we find no infirmity in the order of the CIT(A) and these two appeals of the Revenue are dismissed.
The next common issue in this two appeals of Revenue in the order of CIT(A) deleting the claim of depreciation. For this, Revenue has raised the following ground No. 3 and 4, which are identical in both the years except the quantum:-
4. On the facts and in the circumstances of the case, whether the Ld.CIT(A) was correct in Law, in deleting the disallowance of depreciation amounting to Rs.2,21,35,877/-, by relying on the decision in the case of DCIT vs. Gearhert India Ltd (1999) 64 TTJ (Del) 63 and the decision of CIT vs. HLS Inida Ltd (2011) 335 ITR 292 (Delhi) and holding that the assessee is entitled for depreciation as per IT Rules, ignoring that in both the said decision the matter was set aside to the file of the AO to re-examine whether nature of operations and equipment in question were same as used by the assessee and mineral concern i.e., OIL/ONOC, thereby the Ld.CIT(A) has unilaterally arrived at the conclusion that the nature of operations and equipment in question is same as used by the assessee and mineral concern without giving any opportunity to the AO to verify the same."
“11. We have carefully considered the rival submissions and perused the material placed before us including the impugned order and case law cited by the assessee. The undisputed facts of the case are that the assessee is a sub- contractor/contractor rendering the job services under the marine and used machines under the seawater in deep sea for oil and natural gas exploration. Thus, it is clear that the assessee was not itself engaged in the activity of oil and marine exploration but was rendering the job of services to the other companies which were engaged in the said business. Now, the issue before us is whether the machinery and equipment owned by the assessee and used for the said business in under water in connection with oil and natural gas exploration are entitled to claim depreciation at the rate as admissible under the Rules at 60% specifically when the assessee rendering the
…… Depreciation allowance is a kind of tax benefit which is given to the business concerns for promotion of business activities in any particular field of business. In the instant case depreciation is allowable to mineral oil concerns at the rate of 100 per cent on the equipments used below the earth surface. If the same depreciation is not allowed to other business concerns on the ground that the owner of these equipments is not a mineral oil concern but it is just providing an assistance or leasing these equipments to a mineral oil concern then definitely this 'other concern' will charge more for these services and consequently the mineral oil concerns will be commercially forced not to outsource wireline logging activities to other companies but to do it themselves. However, practically this is not a viable option because oil companies are facing immense pressure to increase the output to meet the energy needs of our growing economy and this has resulted in extra work load.”