Appellant Wins Appeal, Depreciation Disallowance Deleted, Section 14A Disallowance Overturned

The ITAT Mumbai upheld the CIT(A)'s decision to delete the disallowance of depreciation, as the appellant demonstrated possession and use of the property for business. The ITAT also allowed the Cross Objection, overturning the disallowance under section 14A, as investments were made from surplus funds, not for earning exempt income.

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Issues:
1. Disallowance of depreciation in respect of property acquired by the assessee.
2. Disallowance made under section 14A.

Analysis:
1. Disallowance of Depreciation:
- The Revenue appealed against the deletion of disallowance of depreciation by the CIT(A).
- The AO disallowed depreciation as the building was not put to use during the year.
- The AR of the assessee provided various documents to support the claim of possession and use of the property.
- CIT(A) deleted the disallowance after considering all documents and explanations provided.
- CIT(A) found that the possession of the property was with the appellant firm during the relevant year.
- The AO's objections regarding possession letter and electricity bills were addressed by the appellant with supporting evidence.
- The CIT(A) concluded that the appellant was in possession of the property and used it for business purposes, justifying the depreciation claim.
- The ITAT upheld CIT(A)'s decision, stating that the appellant had proved ownership and use of the property for business, making it eligible for depreciation.

2. Disallowance under Section 14A:
- The assessee's cross objection was against the disallowance made under section 14A.
- The AO disallowed the amount under Rule 8D 2(ii) for investing interest-bearing funds for earning exempt income.
- The AR argued that surplus funds were invested to ensure regular payment of salaries to the workforce.
- The ITAT, following relevant case laws, found no merit in the disallowance as the investments were made from the assessee's surplus funds.
- The Cross Objection filed by the assessee was allowed, overturning the disallowance made under section 14A.

In conclusion, the ITAT Mumbai upheld the CIT(A)'s decision to delete the disallowance of depreciation, as the appellant had demonstrated possession and use of the property for business purposes. Additionally, the ITAT allowed the Cross Objection filed by the assessee, overturning the disallowance made under section 14A due to investments made from surplus funds.

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