Appeal Dismissed for AY 2013-14: Section 14A Disallowance & Depreciation Revision Upheld

The tribunal dismissed the appeal for AY 2013-14, upholding the disallowance under Section 14A read with Rule 8D(2)(iii) and the revision of the written down value of assets for depreciation purposes. The decision aligned with past judicial rulings and the principle of consistency, referencing relevant case law and rejecting the assessee's arguments.

---

---

Issues Involved:
1. Disallowance under Section 14A of the Income-tax Act.
2. Depreciation claim discrepancy.

Detailed Analysis:

Issue 1: Disallowance under Section 14A of the Income-tax Act

The first issue concerns the disallowance of expenditure incurred in relation to earning exempt income by invoking the provisions of Section 14A of the Income-tax Act, 1961, read with Rule 8D(2)(iii) of the Income-tax Rules, 1962. The assessee received Rs. 25,56,845 as dividend income, claimed as exempt under Section 10(34) of the Act. The assessee had offered Rs. 35,158 as disallowance under Section 14A. However, the Assessing Officer (AO) made a total disallowance of Rs. 10,96,588, which included disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii). The CIT(A) deleted the addition of Rs. 9,49,286 made by the AO under Rule 8D(2)(ii) but upheld the disallowance of Rs. 1,82,460 under Rule 8D(2)(iii).

The matter reached the tribunal, where the assessee's counsel submitted that the issue was previously decided against the assessee by the Mumbai tribunal for AY 2012-13. The tribunal, following the precedent, upheld the disallowance under Rule 8D(2)(iii), maintaining consistency with earlier decisions. The tribunal also referenced the Supreme Court's decision in Maxopp Investment Limited v. CIT, which rejected the dominant purpose theory for invoking Section 14A, thus negating the assessee's argument that the shares were held as strategic investments.

Issue 2: Depreciation Claim Discrepancy

The second issue pertains to the depreciation claim. The assessee did not claim depreciation for its three divisions prior to AY 2002-03. The AO revised the written down value of the assets by considering the depreciation that would have been allowable under the Act, leading to an addition of Rs. 8,38,581. The CIT(A) dismissed the assessee's appeal, citing the Bombay High Court's judgment in the assessee's own case for AYs 2008-09, 2009-10, and 2010-11, which was in favor of the revenue.

The tribunal noted that the issue was previously decided against the assessee for AY 2012-13, following the Supreme Court's decision in Plastiblends India Ltd. v. Additional CIT. The tribunal upheld the CIT(A)'s order, maintaining consistency with previous rulings and the Supreme Court's decision that the quantum of deduction under Section 80-IA is not dependent on the assessee claiming or not claiming depreciation.

Conclusion:

The tribunal dismissed the appeal of the assessee for AY 2013-14, upholding the disallowance under Section 14A read with Rule 8D(2)(iii) and the revision of the written down value of assets for depreciation purposes, in line with previous judicial decisions and the principle of consistency. The order was pronounced in the open court on 30.01.2019.

---