Tribunal upholds CIT(A)'s decisions on depreciation & deduction. Appeal dismissed for low tax effect.

The Tribunal dismissed all appeals filed by the Revenue. The Tribunal upheld the CIT(A)'s decisions regarding the disallowance of depreciation on Quarry Land & Development and the deduction under section 80HHC. Additionally, the appeal for the Assessment Year 2002-03 was dismissed due to low tax effect, falling below the revised monetary limit for filing appeals by the Revenue. The Tribunal considered the circular retrospectively, leading to the dismissal of the appeal.

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Issues Involved:
1. Disallowance of depreciation on Quarry Land & Development.
2. Disallowance of deduction under section 80HHC of the Income Tax Act, 1961.
3. Appeal maintainability due to low tax effect.

Issue-wise Detailed Analysis:

1. Depreciation on Quarry Land & Development:
The Revenue challenged the deletion of disallowance of depreciation on Quarry Land & Development amounting to Rs. 29,42,646/-. The Assessing Officer (AO) disallowed the depreciation based on the Tax Auditor's report, which stated that the creation of a block of assets did not conform to section 2(11) of the Income Tax Act, 1961. The AO held that the assessee was not entitled to claim depreciation on Quarry Land & Development. The CIT(A) deleted this addition, observing that the depreciation should be allowed as per the appropriate block of assets and applicable depreciation rates under the Income Tax Rules. The CIT(A) noted that the Tax Auditor's remark was about the presentation of assets, not the eligibility for depreciation. The Tribunal upheld the CIT(A)'s order, confirming that the method adopted by the assessee for computing depreciation was appropriate, considering the nature of the business. Thus, the Revenue's appeal on this ground was dismissed.

2. Deduction under Section 80HHC:
The Revenue contested the deletion of disallowance of deduction under section 80HHC. The AO disallowed the deduction, arguing that the assessee did not reduce the interest income while computing the profit for section 80HHC. The CIT(A) held that the Explanation (baa) to section 80HHC implies "Net of interest" and directed the AO to consider the net interest (interest received minus interest paid) for computing the deduction. The Tribunal agreed with the CIT(A), noting that judicial pronouncements support the view that "interest" in Explanation (baa) connotes "net interest" and not "gross interest." Therefore, the Tribunal confirmed the CIT(A)'s order, dismissing the Revenue's appeal on this ground.

3. Appeal Maintainability Due to Low Tax Effect:
The Revenue's appeal for the Assessment Year 2002-03 was dismissed due to low tax effect. The tax effect involved was less than Rs. 10,00,000/-, the revised monetary limit for filing appeals by the Revenue before the Tribunal, as per CBDT Circular No. 21/2015 dated 10th December 2015. The Tribunal treated the appeal as withdrawn/not pressed based on this circular, which applies retrospectively to pending appeals.

Conclusion:
All appeals filed by the Revenue were dismissed. The Tribunal upheld the CIT(A)'s orders regarding the depreciation on Quarry Land & Development and the deduction under section 80HHC. The appeal for the Assessment Year 2002-03 was dismissed due to low tax effect. The order was pronounced in the open court on 26/04/2017.

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