Tribunal Upholds Additional Depreciation Claim & Disallows Disallowances

The Tribunal dismissed the Revenue's appeals concerning the claim of additional depreciation under section 80IA for windmills, upholding the CIT(A)'s decision. It also allowed the assessee's appeals regarding the disallowance of interest expenditure under section 14A read with rule 8D(2)(ii) and the disallowance of expenses related to consignment sales. The Tribunal held that the additional depreciation was allowable as per relevant High Court decisions and that the disallowances made by the Assessing Officer were not sustainable based on the evidence presented. Judgments were delivered on November 21, 2014, in Chennai.

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Issues Involved:
1. Claim of additional depreciation u/s 80IA for windmills.
2. Disallowance u/s 14A r.w.r 8D(2)(ii) for interest expenditure.
3. Disallowance of consignment sales.

Issue 1: Claim of Additional Depreciation u/s 80IA for Windmills:
- The main issue in this case was the allowance of additional depreciation u/s 80IA for windmills. The Revenue contended that each windmill should not be treated as a separate unit for granting additional depreciation benefit. The Assessing Officer disallowed the additional depreciation, stating that the windmill's power generation did not qualify as manufacturing or production of an article or thing. However, the CIT(A) allowed the additional depreciation based on the decisions of the jurisdictional High Court of Madras, which held that the setting up of a new machinery or plant did not require operational connectivity to the existing business. The Tribunal affirmed the CIT(A)'s decision, rejecting the Revenue's appeal.

Issue 2: Disallowance u/s 14A r.w.r 8D(2)(ii) for Interest Expenditure:
- The Assessing Officer disallowed an amount under rule 8D(2)(ii) for interest expenditure, alleging diversion of interest-bearing funds for investments. However, the Tribunal found that the Assessing Officer's findings were contrary to the evidence presented by the assessee, which detailed the interest accounts. The Tribunal held that the disallowance was not sustainable, and the assessee's appeal against the disallowance was allowed.

Issue 3: Disallowance of Consignment Sales:
- The assessee challenged the disallowance of expenses related to consignment sales. The authorities had observed that the assessee had contested non-deductibility of TDS in previous years. However, the Tribunal disagreed with this reasoning, noting that the TDS had been duly deducted in the relevant year. The Tribunal allowed the assessee's appeal, stating that pursuing appeals in earlier years did not bar the assessee from claiming the payments as expenditure.

In conclusion, the Tribunal dismissed the Revenue's appeals related to additional depreciation and upheld the CIT(A)'s decisions. The Tribunal also allowed the assessee's appeals regarding disallowance of interest expenditure and consignment sales. The judgments were pronounced on November 21, 2014, in Chennai.

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