NIRMAL KUMAR PRADEEP KUMAR ,MAIN ROAD. RANCHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RANCHI

Shri Shubham Choudhary, Shri Shubham Choudhary, ld AR appeared for the assessee. Shri ed for the assessee. Shri Khubchand T Pandya, Khubchand T Pandya, ld Sr DR represented on behalf of the revenue. represented on behalf of the revenue.

It was submitted by ld AR that the assessee is an HUF and in the business of Mining. It was the submission that during the year 2013-14, the mining business has come to halt because of certain legal complications. It was the submission that the litigation was pending in respect of restarting of mining business. It was the submission that the assessee had in the mean time used his funds for making investment in shares and mutual fund. It was the submission that investment in mutual funds and shares had yielded exempt income of nearly Rs.22,97,468/-. The Assessing Officer had invoked the provisions of section 14A r.w. Rule 8D and had disallowed Rs.10,51,903/. It was the further submission that the Assessing Officer had disallowed the assessee’s claim of depreciation holding that the business of the assessee in respect of mining has been stopped. It was the submission that in respect of disallowance u/s. 14A r.w. Rule 8D, the Assessing Officer has considered the entire investment in shares and mutual funds instead of such investments which have yielded exempt income. In respect of depreciation, it was the submission that most of the assets which were left with the assessee for mining activities which has been purchased in 2013 have been sold and there was only a weigh bridge left. It was the submission that there is no cessation of the business of mining by the assessee.

In reply, ld Sr DR submitted that the Assessing Officer has considered the investment in shares as per section 14A r.w. Rule 8D in

We have considered the rival submissions. A perusal of the assessment order at page 5 shows that the Assessing Officer has considered the entire investment of the assessee in Mutual Funds and shares for the purposes of computing the disallowance u/s.14A r.w Rule 8D. It is also noticed that the Assessing Officer has disallowed 1% of the total investments. This is not as per section 14A r.w. Rule 8D. This being so, the Assessing Officer is directed to recompute the disallowance u/s.14A r.w Rule 8D by considering only such investments which have yielded the exempt income. With these directions, the issue is restored to the file of the AO for readjudication.

In regard to disallowance on account of depreciation, it is noticed that the assessee has to maintain his office for business and the said expenditures have also been incurred only for the purpose of business. The depreciation would also be allowable on such assets which have been used for the business of dealing in shares and also to settle the litigation in respect of mining activities. The Schedule-A –Fixed Assets at page 7 reads as follows:

From the above, it is noticed that there is a weigh bridge having WDV of Rs.14,83,830.30 on which the depreciation of Rs.2,22,574.55 has been claimed . The depreciation on this item is liable to be disallowed as no business in respect of this item has been done during the impugned assessment year. Rest of the items used for the business of the assessee and, therefore, the assessee is entitled to depreciation on other items. The depreciation to the extent of Rs.2,22,574.55 is directed to be disallowed and balance of the depreciation is to be allowed by the AO in the computing the total income of the assessee. Needless to say that when computing the disallowance u/s.14A r.w. Rule 8D, the Assessing Officer shall allow reasonable opportunity to the assessee.

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