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Income Tax Appellate Tribunal, MUMBAI “D” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. (Assessment Year:2007-08) Dolphin Marine Enterprises P. Ltd. 275, STC Building, Reay Road, Mumbai – 400 010 Appellant Vs. ACIT 6(2), Mumbai Respondent PAN: AAACD1804E अपीलाथ� क� ओर से /By Appellant :Ms. Tasneem Varawala, A.R. ��यथ� क� ओर से/By Respondent :Shri Anil Kumar Dhondia, D.R. सुनवाई क� तार�ख/Date of Hearing : 06.10.2015 घोषणा क� तार�ख/Date of Pronouncement : 28.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-12, Mumbai, dated 06.08.2012 for A.Y. 2007-08 on following grounds: “1. On the facts and in the circumstances of the case, the A.Y. 07-08 [Dolphin Marine Enterprises P. Ltd. vs. ACIT] Page 2
Ld. CIT (Appeals) was not justified in directing the AO to disallow 5% of the claimed exempt income u/s 14A and to delete only the balance amount of disallowance.
2. On the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in upholding the view of the AO in disallowing deduction of Rs.1,000/- u/s80G.
On the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in upholding the view of the AO in taking the date of registration as the date on which the asset “TIL Stacker” is put to use and thereby disallowing depreciation of Rs.7,13,956/- thereon.
On the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in upholding the interest of Rs.11,116/- charged by the AO under section 234C.”
Assessee is a Private Ltd. Company. At the outset of hearing, learned Authorized Representative pointed out that she is not pressing ground no.2. So, same is dismissed as not pressed.
3. First issue as remains in assessee’s appeal is with regards to addition made by Assessing Officer by invoking provisions of Section u/s 14A of the Income Tax Act. Assessing Officer noticed that assessee has received exempt income in the year under consideration. As no expenditure had been apportioned by assessee towards earning of this income, Assessing Officer after giving opportunity to assessee held that Section u/s 14A r.w. Rule 8D was applicable in the case of assessee. Accordingly, Assessing Officer proceeded to make said disallowance by computing same under the method prescribed in Rule 8D. A.Y. 07-08 [Dolphin Marine Enterprises P. Ltd. vs. ACIT] Page 3 3.1 Matter was carried before the First Appellate Authority, wherein addition made by Assessing Officer was disputed by way of statement of fact inter alia stating that Rule 8D was applicable only for A.Y. 2008-09 and that there was no expenditure attributable to earning of exempt income. In this background, CIT(A) observed that assessee has exempt income and has not apportioned any expenses against the same. It is impossible to accept the fact that exempt income has been earned without incurring any expenses whether in form of investments or administration. Wherein assessee does not apportioned any expenses for earning such income provisions of Section u/s 14A comes into play and a proportionate disallowance would have to be made out of expenditure claimed in profit and loss account. Accordingly, action of Assessing Officer in invoking Section u/s 14A was found correct but provisions of Section Rule 8D was not applicable in assessment year under consideration. Therefore, the computation of disallowance made by Assessing Officer by invoking Rule 8D was not held valid. However, provisions of Section u/s 14A were held applicable in the case of assessee.
3.2 It is certain legal position that certain amount of administrative and other expenditure is definitely attributable to earning of exempt income and the same should be disallowed. In view of above, CIT(A) was justified in upholding the addition of Assessing Officer in invoking provisions of A.Y. 07-08 [Dolphin Marine Enterprises P. Ltd. vs. ACIT] Page 4 Section u/s 14A and he has rightly directed the Assessing Officer to disallow 5% of claimed exempt income u/s.14A. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same.
4. Next issue is with regards to disallowance of excess claim of depreciation. Assessing Officer has disallowed the excess claim of depreciation amounting to Rs.52,343/- related to electrical fittings and Rs.7,23,743/- related to TIL stacker machine. The issue before us is regarding depreciation on TIL stacker machine. The said machine was purchased by assessee on 31.03.2006 and were stated to be installed and put to use in July 2006. However, from the registration certificate filed, it was found that machine has been registered only on 27.11.2006. Assessing Officer held that assessee could not have used machine before this date as per law and therefore, full depreciation claimed on it cannot be allowed. According to Assessing Officer, assessee was entitled to use the asset only after 27.11.2006 i.e. the date of its registration with concerned Government authorities. He, accordingly, disallowed 50% of the same, which was confirmed by CIT(A).
4.1 Before us, learned Authorized Representative relied upon the decision of Hon’ble Bombay High Court in case of CIT vs. Dilip Singh Sardarsingh Bagga [1993] 201 ITR 995 (BOM), wherein truck was registered in the name of another person beneficially owned by assessee. Transfer not effected under the provisions of Motor Vehicles Act, does not disentitle the A.Y. 07-08 [Dolphin Marine Enterprises P. Ltd. vs. ACIT] Page 5 assessee for depreciation on the vehicle. According to us, registration is not determining point of the ownership of vehicle. Ownership of the vehicle is dependent on the purchase of the vehicle and used thereof. In case before us, it is undisputed, fact is that the assessee has purchased the machine in question on 31.03.2006 and was put to use in July 2006 and as stated above, same was registered only on 27.11.2006. So, Assessing Officer not justified in granting depreciation from the date of registration. He is directed to allow depreciation from the date of put to use i.e. July 2006. Assessing Officer is directed accordingly.
4.2 Last issue is with regards to interest u/s.234C. Same is consequential. Assessing Officer is directed accordingly.
As a result, appeal filed by assessee is partly allowed as indicated above.
Pronounced in the open Court on this the 28th day of October, 2015.