Tribunal upholds deletion of disallowances under Income Tax Act, 1961

The Tribunal upheld the deletion of disallowances under section 14A of the Income Tax Act, 1961, as no exempt income was earned during the year. The claim of depreciation on the canteen building was found to be correct, supported by evidence of the building's use. Additionally, the excess claim of depreciation on electrical fittings/installation was allowed as integral parts of plant and machinery. The Revenue's appeal was dismissed, with the Tribunal affirming the lower authorities' decisions.

---

---

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961
2. Incorrect claim of depreciation on canteen building
3. Excess claim of depreciation on electrical fittings/installation

Analysis:

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961
The Revenue challenged the deletion of disallowance of Rs. 1,39,58,000 under section 14A. The Ld. CIT(A) deleted the addition as no exempt income was earned during the year, citing the decision in Cheminvest Ltd Vs. CIT. The Tribunal upheld the deletion, emphasizing that no disallowance could be made under section 14A if no exempt income was received or receivable during the relevant year.

Issue 2: Incorrect claim of depreciation on canteen building
The Revenue disputed the deletion of disallowance of Rs. 5,83,812 on account of depreciation on the canteen building. The Ld. CIT(A) found that the canteen building was put to use during the year based on evidence provided by the assessee. The Tribunal upheld the decision, noting that the running expenses paid to an unrelated party supported the claim of the building being in use, and no infirmity was found in the Ld. CIT(A)'s order.

Issue 3: Excess claim of depreciation on electrical fittings/installation
The Revenue challenged the deletion of disallowance of Rs. 11,89,519 on the excess claim of depreciation on electrical items. The Ld. CIT(A) determined that the items were integral parts of plant and machinery, eligible for depreciation at 15%. The Tribunal upheld the decision, stating that the items were essential for the functioning of machinery and thus qualified for depreciation at the higher rate.

The general grounds raised by the Revenue were dismissed as they were covered by specific issues addressed. The appeal of the Revenue was ultimately dismissed by the Tribunal, and the decision was pronounced on 16th March 2018.

---