2014 (2) TMI 462 - AT - Income Tax

Tribunal Upholds AO and CIT Decisions on Depreciation, Deduction, and Addition

M/s. Bhole Baba Milk Food Industries Limited Versus Asstt. Commissioner of Income Tax, Circle 4(1), Agra

The Tribunal upheld the decisions of the A.O. and CIT(A) regarding the depreciation rates for Boilers and Trucks, disallowance of deduction under section ... Rate of depreciation on boiler and trucks used – Held that:- The CIT(A) found that in the table of rates of depreciation the energy saving devices specifically for specialized boiler and furnaces the rate of depreciation is provided @ 80% - the CIT(A) has rightly upheld the order of AO as in depreciation Appendix, the admissible depreciation on Boiler is 80% - there was no infirmity in the order of CIT(A). Depreciation on Trucks - The decision in M/s. Bhole Baba Milk Food Industries Ltd., Versus Deputy Commissioner of Income Tax Circle 4(1), Agra. & Others [2012 (12) TMI 189 - ITAT, AGRA] followed - the benefit of 40 per cent. depreciation allowance was admissible only for vehicles used for business of hire in view of the provisions of Entry No.III(ii)E(1-A) of Part I of Appendix I to the Income-tax Rules, 1962, and since the assessee used the vehicles for its own business of transporting its goods only 30 per cent. depreciation was allowable. Disallowance of deduction u/s 80IB of the Act – Duty drawback – Held that:- The decision in Liberty India vs. CIT [2009 (8) TMI 63 - SUPREME COURT] followed – duty drawback, rebate etc. should not be treated as adjustment (credited) to cost of purchase or manufacture of goods – Decided against Assessee. Deletion made u/s 14A of the Act – Held that:- The decision in Bhole Baba Milk Food Industries Ltd., Versus Dy. Commissioner of Income Tax [2012 (7) TMI 365 - ITAT, AGRA] followed - Rule 8D can be applicable only where disallowance of interest on borrowed capital warrant for expenses out of such borrowed capital with the amount relating to investment in shares and search and not ascertainable - the disallowance of interest is not warranted under the circumstances - there is no question of invoking Rule 8D of the Rules - the assessee was having sufficient own interest free fund to cover the investment made in shares – thus, no disallowance can be made under section 14A of the Act – there was no infirmity in the order of CIT(A) - Order of CIT(A) on the issue is confirmed – Decided against Revenue. Issues:1. Claim of higher rate of depreciation on Boilers and Trucks.2. Disallowance of deduction under section 80IB of the Act on account of duty drawback.3. Deletion of addition made under section 14A of the Income Tax Act, 1961.Analysis:1. Claim of higher rate of depreciation on Boilers and Trucks:The assessee filed appeals against the orders passed by the ld. CIT(A)-II, Agra for the A.Ys. 2006-07 & 2009-10 regarding depreciation on Boilers and Trucks. The A.O. disallowed the claim of 100% depreciation on Boilers and restricted it to 80%. The CIT(A) upheld the A.O.'s decision based on the rates of depreciation provided in the Appendix. The Tribunal found that the CIT(A) correctly confirmed the A.O.'s order as the admissible depreciation rate for Boilers was indeed 80%. Similarly, the A.O. restricted the depreciation on Trucks to 15%, which was also upheld by the CIT(A) following a previous order. The Tribunal, in line with the CIT(A) decision, confirmed the orders regarding both Boilers and Trucks for the respective assessment years.2. Disallowance of deduction under section 80IB of the Act on account of duty drawback:The A.O. disallowed the deduction under section 80IB of the Act on account of duty drawback, a decision that was upheld by the CIT(A) citing a judgment of the Apex Court. The Tribunal found that the CIT(A) correctly followed the Apex Court's judgment, resulting in the rejection of the second ground raised by the assessee for both the assessment years.3. Deletion of addition made under section 14A of the Income Tax Act, 1961:In the appeal filed by the Revenue, the main ground was the deletion of the addition made under section 14A of the Income Tax Act, 1961. The A.O.'s addition was deleted by the CIT(A) based on precedents set in the assessee's own cases by the I.T.A.T. The Tribunal observed that the CIT(A) followed the I.T.A.T.'s orders in the assessee's previous cases, leading to the deletion of the addition under section 14A. The Tribunal confirmed the CIT(A)'s decision, dismissing the appeal filed by the Revenue.In conclusion, the Tribunal dismissed all the appeals, upholding the decisions made by the A.O. and the CIT(A) on the issues of depreciation rates for Boilers and Trucks, disallowance of deduction under section 80IB, and deletion of addition under section 14A of the Income Tax Act, 1961.