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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 02.09.2014,of the CIT(A)-1,Mumbai, the Assessing Officer (AO)has filed the present appeal. Assessee, company,engaged in the business of construction and civil engineering, filed its return of income on 15/10/2007,declaring income at Rs.148.79 crores.The Assessing Office(AO) completed the assessment u/s.143(3) of the Act,on 3/3/ 2013,determining the income of the assessee at Rs.160.84 crores.
2.Effective ground of appeal is about restricting the disallowance to Rs.4,30,550/- u/s.14A of the Act.During the course of assessment proceedings,the AO found that the assessee had claimed exempt income of Rs.1.68 lakhs u/s. 10(34) of the Act being dividend on shares.He , vide questionnaire dated 29.12.2012,sought details of inadmissible expenses within the meaning of section 14A of the Act r.w.r 8D of the I.T.Rules, 1962.The assessee in its reply stated that relevant investment yielding exempt income has been made out of own surplus funds and not from the interest bearing funds and the investments were made when the dividend income was taxable, that if all the disallowance u/s.14A had to be made, it should be restricted to the extent of exempt income. The AO made a disallowance of Rs.34.29 lakhs u/s. 14A r.w. Rule 8D of the Rules.As the assessee had made a disallowance of Rs.5.63 lakhs on its own so,he added Rs.28.66 lakhs to the income of the assessee.
2.1.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that investment in shares was made in 7141/M/14 Gannon Dunkerley earlier years and not during the year,that the investments were made prior to AY.1997-98 and that own funds were utilized for making investment,that the assessee had adequate interest free funds and that no borrowed funds were used to make the investments, that no direct expenditure was incurred by the assessee during the year under appeal, that the assessee had on its own disallowed Rs.5.63 lakhs. After considering the order of the AO and the submissions of the assessee,the FAA held that the AO had not brought on record any evidence to prove that interest bearing funds were diverted towards the investment in shares, that the investments were made out of own funds in the earlier years,that his predecessors,while deciding the appeasl for the AY.s. 2008-09 and 2009-10,had accepted the claim made by the assessee, that there was no proof of direct nexus of interest bearing funds in making investment,that the AO was not justified in making disallowance on account of interest expenditure.He restricted the disallowance to Rs.4.30, lakhs following the order of his predecessor for the AY 2009-10.
2.3.During the course of hearing before us,the Departmental Representative (DR) supported the order of AO the Authorised Representative (AR) referred to the case of HDFC Bank Ltd. (ITA No330 of 2012, dt.23.7.14) of the Hon’ble Bombay High Court and Joint Investments Pvt. Ltd (ITA 117/2015 ,25/2/15) of Hon’ble Delhi High Court.He stated that the assessee had sufficient own fund to make the investment and stated that investment was constant for last three years .
2.4.We have heard the rival submissions and perused the material on record. We find that interest free funds available to assessee were more than the investment made by assessee during the year, that borrowed funds were not used for earning exempt income, that FAA had given categorical finding of fact that assessee had sufficient own funds for making investment.Therefore, respectfully following the cases relied upon by assessee,we hold that the order of the FAA does not suffer from any legal infirmity.Confirming his order Ground No.1 is decided against the AO.
3.Second ground of appeal pertains to depreciation.Representatives of both the sides agreed that the issue stands allowed by the order of the Tribunal for the AY.s. 2007-08 & 2008
09. (ITA.s/5263,6151 & 5716/M/2011 dt.6.3.2013).We find that the issue has been deliberated and decided by the Tribunal in the above appeals as under:
7141/M/14 Gannon Dunkerley “10. Ground No. 2 relates to the claim of additional depreciation at Rs.1,53,19,184/-. This issue finds place at para-7 on page-10 of the order the ld. CIT(A) and at page-5 of the assessment order.
During the course of the assessment proceedings, the AO found that the assessee has claimed additional depreciation of Rs.1,53,19,184/- on plant and machinery u/s. 32(2) of the Act. The AO was of the opinion that since the assessee is engaged in construction and Civil Engineering therefore it is not engaged in the business of manufacture or production of any article or thing therefore sought explanation from the assessee to justify its claim of additional depreciation.
The assessee filed a detailed reply giving details of various items purchased and installed under the head plant and machinery. It was explained to the AO that the assessee was granted benefit u/s. 80HH and Sec; 80-I of the Act therefore the issue relating to the activities of the assessee are settled and decided in favour of the assessee, However the AO was of the opinion that the Hon'ble Supreme Court in two decisions namely CIT Vs N.C. Buddharaj '& Co 204 ITR 412 and Builder Association of India Vs Union of India 209 ITR 877 has held that construction of building, bridges or quarters etc. cannot be construed to mean manufacture or production of any article or thing.The AO following the observations of the Hon'ble Supreme Court disallowed the claim of additional depreciation of Rs. 1,53,19,184/-.
The assessee agitated this matter before the Ld.CIT(A) and explained that the issue has been settled in favour of the assessee by the decision of the Tribunal in assessee's own case in for assessments 1979-80,1984-85 and 1985-86. It was pointed out that the department has accepted the decision of the Tribunal except for A.Y. 1988-89 wherein the department in Income tax Appeal No. 287 of 2002, ITA No. 2123/M/1992 referred the question to the Hon'ble Jurisdictional High Court of Bombay. Thd assessee drew attention of the ld.CIT(A) to the decision of the Hon'ble Jurisdictional High Court and pointed out that Hon'ble High Court has decided the issue in favour of the assessee .
13.1 After considering the facts and submissions of the assessee, the ld. CIT(A) was convinced that the claim of the assessee is well settled in favour of the assessee by the decision of the Tribunal and the Jurisdictional High Court . The ld.CIT(A) also observed that while deciding the issue in favour of the assessee, the Tribunal has considered the decision of the Hon'ble Supreme Court relied upon by the 7141/M/14 Gannon Dunkerley A.O. The ld.CIT(A) concluded that the assessee company’s business activity to the extent of 15% amounts to manufacturing activities and therefore eligible for deduction of additional depreciation.
Aggrieved by this findings of the Ld. CIT(A) Revenue is before us.
The Ld. Departmental Representative strongly submitted that the assessee is not engaged in production or manufacture of any article or thing therefore it is not eligible for additional depreciation. In alternative, the Ld. DR submitted that since the Ld. CIT(A) himself has pointed 01 that only 15% of the activity of the assessee can be construed as manufacturing activity, therefore, the claim of depreciation should be restricted to only 15%.
Rebutting the arguments of the Ld. DR, the Ld. Counsel for the assessee pleaded that it is well settled that rule of consistency should be followed. For this proposition, the Ld. Counsel relied upon the decision of the Hon'ble Supreme Court in the case of Radhasoamy Satsang Vs CIT 193 ITR 321.
It is the say of the Counsel that once this issue has been decided in favour of the assessee in assessee's own case by the Tribunal and the Jurisdictional High Court, the same view should be taken for the year under consideration.
We have heard the rival submissions and perused the orders of the orders of the lower authorities and the material evidence brought on record. It is not in dispute that in assessee's own case in earlier years this issue has travelled upto Jurisdictional High Court, The Ld. CIT(A) has rightly followed the decision of the Tribunal and the decision of the Jurisdictional 'High Court in.assessee's own case.
Therefore, rule of consistency says that the same view should be taken when no new facts have been brought on record and the law being the same. The alternative plea of the Ld. DR that the claim should be restricted to 15% is not acceptable because there is no provision in the Act to restrict the allowance proportionately, when even if the asset is used for a limited period of time , full depreciation is allowed, except as provided u/s. 38(2) of the Act where any building, machinery, plant or furniture is not exclusively used for.the purposes of the business or profession, the deduction under sub-clause (ii) of clause (a) and clause (c) of Sec. 30, clauses (i) and (ii) of Sec. 31 and clause (ii) of sub-section (1) of Sec. 32 shall be restricted to a fair proportionate part thereof which the AO may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession. If the legislative intent was to allow proportionate depreciation , it could have provided similar restriction for the claim of depreciation while inserting
7141/M/14 Gannon Dunkerley the claim of additional depreciation as provided u/s. 32(1)(iia) of the Act and therefore in the light of the provisions of Sec. 32[1 ] (iia), there is no mandate of law to restrict the allowance of depreciation proportionately, Considering all the facts in, the light of the provisions of Sec. 32(i)(iia) vis-a-vis 38(2). and also considering the decision of the Tribunal and the decision .of Hon'ble Jurisdictional High Court in assessee own case, we have no hesitation in confirming the findings of the ld.CIT(A). Ground No. 2 of the Revenue accordingly dismissed. Respectfully following the order of the Tribunal Ground No.2 is decided against the AO.