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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 18/11/2016 of the Ld. First Appellate Authority, Mumbai, restricting the allowance of depreciation on electrical installation at the rate of 10% i.e. Rs.27,61,498/- by considering the same as furniture and fittings and not allowing the claim of depreciation @ 15% i.e. Rs.39,80,153/- by considering the electric installation as plant and machinery.
During hearing, the ld. counsel for the assessee, Ms. Jinita B. Bhimani, claimed that identically, for Assessment Year 2011-12, the Tribunal, vide order dated 31/01/2018 (ITA No.4285/Mum/2016) remanded the issue back to the file of the Ld. Assessing Officer for adjudication, therefore, for this Assessment Year also, it may be set-aside to Assessing Officer. On the other hand, the Ld. DR, Shri Nishant Samaiya, though defended the impugned order, but did not controvert the factual matrix that for Assessment Year 2011-12, the Tribunal, identically, remanded the issue to the file of the Ld. Assessing Officer.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 31/01/2018 for ready reference and analysis:-
“1. The captioned appeal by assessee for Assessment Year [AY] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-12 [CIT(A)], Mumbai, Appeal No.CIT(A)-12/DCIT6(1)(1)/21/14-15 dated 29/04/2016. The assessment for impugned AY was framed by Ld. Deputy Commissioner Of Income Tax 6(1), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 18/03/2014. The assessee has raised the following effective grounds of appeal:-
1. The Learned Commissioner of Income-tax (Appeals) erred in confirming disallowance of Rs.7,60,254/- u/s. 14A of the Income-tax Act 1961 consisting of disallowance out of interest of Rs.1,35,254/- and disallowance out of expenses of RS.6,25,000/-. Your appellants submit that the said disallowance of Rs.7,60,254/- u/s.14A is not at all warranted and the same ought to be deleted. Without prejudice to the above, your appellants submit that the disallowance u/s.14A made by the learned Assessing Officer is excessive and ought to be reduced substantially.
2. The learned Commissioner of Income-tax (Appeals) erred in confirming the allowance, of depreciation of Electrical Installation at Rs.21,61,264/-, being 10% of Rs.2,16,12,646/- on Electrical Installations by considering the same as furniture & fittings and not allowing the appellants claim of depreciation of RS.32,41,897/-, being 15% of RS.2,16,12,640/- by considering the Electrical installations as Plant & Machinery. Your appellants submit that they have rightly claimed the depreciation on Electrical Installation at 15% being the rate applicable to Plant & Machinery and submit that the depreciation as claimed by them ought to have been allowed.
3. The learned Commissioner of Income-tax (Appeals) erred in confirming the addition of sum of Rs.7,60,254/- being amount disallowed u/s.14A while computing the book profit u/s.115JB. Your appellants submit that this addition of Rs.7,60,254/- is not warranted and the learned Assessing Office be directed to delete the same while computing the book profit u/s.115JB. Without prejudice to the above, your appellants submit that the disallowance is excessive and ought to be reduced substantially. 2.1 Facts, in brief, are that the assessee being resident corporate assessee engaged in the business of manufacturing of bearings was assessed at Rs.35.37 Crores after certain adjustments / disallowances as against returned income o Rs.35.19 Crores e-filed by the assessee on 31/08/2011. The issue under dispute is disallowance u/s 14A and rate of depreciation on certain electrical installations. 2.2 It was noted that the assessee reflected exempt dividend income of Rs. 4.64 Lacs and during assessment proceedings, furnished working of disallowance u/s 14A read with Rule 8D for Rs.7.60 Lacs which comprised of interest disallowance of Rs.1.35 Lacs u/r 8D(2)(ii) and expense disallowance of Rs.6.25 Lacs u/r 8D(2)(iii). The same was accepted by Ld. AO and accordingly added to the income of the assessee under normal provisions as well as while computing Book Profit for the purpose of Minimum Alternative Tax [MAT] u/s 115JB. 2.3 The second issue pertains to rate of depreciation on certain electrical installations. The assessee, treating them as Plant & Machinery, claimed depreciation @15% which was restricted to 10% by Ld. AO, treating them as part of furniture and fixture. The differential addition came to Rs10.80 Lacs.
3. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 29/04/2016 where Ld. CIT(A) confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us.
The Ld. Authorised Representative for assessee [AR], while drawing our attention to the documents placed in the paper- book, contested the additions where Ld. Departmental Representative [DR] placed reliance on the stand of lower authorities.
We have heard the rival contentions and perused relevant material on record. It emanates from the record that major investments made by the assessee for Rs.12.50 Crores is in the shape of equity capital of NSK-ABC bearings Ltd. and the assessee has contended that these investments are in joint ventures as business investment and old investments made in AY 2008-09. Further, the assessee has not earned any exempt income from the said investment during the year. These factors are not controverted by the revenue. Further, a perusal of the financial statements placed on record reveals that the interest free funds in the shape of Share Capital and Reserves far exceeds the investments made by the assessee and therefore, in the absence of nexus between interest bearing loans vis-à-vis investments made by the assessee, the presumption has to be drawn in assessee’s favor that the investments were made out of interest free owned funds. Upon similar facts, we find that the Tribunal in assessee’s own case for AY 2008-09 dated 06/01/2016 deleted disallowance u/s 14A by finding that own funds far exceeded the investments made by the assessee. Therefore, after considering the factual matrix, we find that impugned addition was not justified and therefore, by deleting the same, we allow this ground of assessee’s appeal which makes Ground No. 3 infructuous. Resultantly, Ground No.1 stands allowed whereas Ground No. 3 stands dismissed.
So far as rate of depreciation on Electrical installation is concerned, we note that Ld. CIT(A), at para-5 has dismissed assessee’s appeal since the facts on record could not spell out the functions of such electrical fittings. We also find that the assessee, before Ld. CIT(A), had raised a plea that no opportunity of being heard was granted by Ld. AO to the assessee to explain the nature of these electrical fittings. Hence, without delving much deeper into the issue, the matter is remitted back to the file of Ld. AO to re-appreciate the factual matrix with a direction to the assessee to substantiate his claim in this regard. Resultantly, this ground stands allowed for statistical purposes.
Resultantly, the assessee’s appeal stands partly allowed in terms of our above order.” We note that identically on the rate of depreciation on electric installation, the Tribunal vide aforesaid order dated 31/01/2018, set-aside the issue to the file of the Ld. Assessing Officer to examine the nature of these electrical fittings. Thus, on the same reasoning/identical directions, the issue in hand is sent to the file of the Ld. Assessing Officer to examine the factual matrix, consequently, the appeal of the assessee is allowed for statistical purposes only.
Finally, the appeal of the assessee is allowed for statistical purposes.
This order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of the hearing on 08/08/2018.