Appeal partially allowed: Depreciation upheld, Section 14A disallowance reversed.

The Tribunal partly allowed the appeal, upholding the Assessing Officer's decisions on depreciation and TDS credit but allowing the appeal on the disallowance under Section 14A. The order was pronounced on 4th May 2018.

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Issues Involved:
1. Depreciation on vehicles.
2. Disallowance under Section 14A read with Rule 8D.
3. Credit for TDS.

Issue-wise Detailed Analysis:

1. Depreciation on Vehicles:
- Facts: The assessee, a civil and electrical contractor, claimed depreciation on vehicles at 30% for the assessment year 2013-14. The Assessing Officer (A.O.) restricted this to 15%, as the vehicles were not used for running on hire, and disallowed the balance amount of Rs. 13,07,021/-.
- Assessee’s Argument: The assessee argued that once vehicles are included in the block of assets for 30% depreciation, they should continue to receive this rate irrespective of usage. The assessee cited cases like CIT(A) Vs. Oswal Agro Mills and CIT(A) Vs. Yamaha Motor India Limited to support this.
- Revenue’s Argument: The Revenue contended that the vehicles were used for the assessee’s business, not for hire, making the eligible depreciation rate 15%. The Revenue relied on the decision of the High Court of Kerala in N.D. Joseph Vs. CIT.
- Tribunal’s Findings: The Tribunal held that higher depreciation at 30% is only allowable if vehicles are used for running on hire. Since the assessee failed to provide evidence of such use, the Tribunal upheld the A.O.’s decision to restrict depreciation to 15%. The Tribunal dismissed the assessee’s appeal on this ground.

2. Disallowance under Section 14A read with Rule 8D:
- Facts: The A.O. disallowed Rs. 23,61,223/- under Section 14A read with Rule 8D, as the assessee had made investments of Rs. 15.45 crores but did not disallow any expenditure related to exempt income.
- Assessee’s Argument: The assessee argued that no disallowance is necessary if no exempt income is earned. The assessee relied on the Tribunal’s decision in D. Veerabhadra Reddy (HUF) Vs. JCIT and the Madras High Court’s judgment in Redington India Limited Vs. Additional CIT.
- Tribunal’s Findings: The Tribunal noted that the assessee did not earn any exempt income during the relevant year. Citing similar cases, the Tribunal held that no disallowance under Section 14A is warranted in the absence of exempt income. The Tribunal set aside the CIT(A)’s order on this issue and allowed the assessee’s appeal.

3. Credit for TDS:
- Facts: The assessee received advances of Rs. 30.76 crores with TDS deducted on the entire amount. The A.O. allowed TDS credit only to the extent of income admitted in Form 26AS, disallowing the balance.
- Tribunal’s Findings: The Tribunal upheld the CIT(A)’s decision, stating that TDS credit is allowed only on the income admitted as per Section 199 read with Rule 37BA. However, the Tribunal directed the A.O. to allow the credit for TDS in subsequent years as and when the income is admitted, allowing this ground for statistical purposes.

General Grounds:
- Ground Nos. 4 & 5: These were general in nature and did not require specific adjudication.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, upholding the A.O.’s decisions on depreciation and TDS credit, while allowing the appeal on the disallowance under Section 14A. The order was pronounced in the open court on 4th May 2018.

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