2022 (11) TMI 1246 - AT - Income Tax

Tribunal upholds excess depreciation claim, Revenue appeal dismissed.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the excess depreciation claimed by the assessee. The Tribunal held ... Excess depreciation claimed - information received from the Investigation Wing and the inference are based on actual findings and evidence gathered during the course of survey action - to support the pricing of cost of acquisition of the assessee, the assessee had relied upon TEV study report of D.K.Jain and Co., who is an independent technical export appointed by State Bank of India and which report has been furnished to the Revenue in the past and has been consistently accepted - CIT(A) observed that as per the provisions of Section 43(1) of the Act, the actual cost means the actual cost of assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority - HELD THAT:- We find that the ld. CIT(A) had duly applied the provisions of Section 43(1) of the Act which defines actual cost. We find that the ld. CIT(A) had categorically observed that Rs.20,00,00,000/- is the actual cost of acquisition of FFS Machines for the assessee paid to M/s. Anitas Exports Pvt. Ltd. This factual finding and the application of provisions of Section 43(1) of the Act has not been challenged by the Revenue before us. Hence, there is absolutely no merit in the grounds raised by the Revenue before us. In any case, the issue in dispute is squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Karma Energy Ltd.2015 (6) TMI 216 - BOMBAY HIGH COURT] We hold that the ld. CIT(A) had correctly addressed the issue in dispute in favour of the assessee. Issues Involved:1. Excess depreciation claimed by the assessee.2. Failure of the assessee to discharge the onus of furnishing evidence to negate the findings of the Investigation Wing and the Assessing Officer.Issue-wise Detailed Analysis:1. Excess Depreciation Claimed by the Assessee:The Revenue challenged the allowance of excess depreciation amounting to Rs. 2,76,50,141/- claimed by the assessee. The Assessing Officer (AO) disallowed this excess depreciation based on information from the Investigation Wing, which indicated that M/s. Anitas Exports Pvt. Ltd. had sold FFS machines to the assessee at an inflated price. The AO determined that the machines were sold for Rs. 20 Crores, whereas the department assessed the sale value at Rs. 12,09,99,594/-. Consequently, the AO concluded that the assessee claimed excess depreciation on the inflated value of Rs. 7,90,00,406/-, resulting in a depreciation disallowance of Rs. 2,76,50,141/-.The assessee argued that the actual cost of the FFS machines was Rs. 20 Crores, supported by TEV study reports from independent technical experts and external comparables. The CIT(A) concluded that the actual cost of the machines to the assessee was Rs. 20 Crores, as defined under Section 43(1) of the Income Tax Act, and no adjustment could be made to this cost. The CIT(A) also noted that the provisions of Section 92C and Section 80(IA)10 were not applicable in this case. The CIT(A) relied on the decision of the Mumbai Tribunal in the case of ACIT vs. Karma Energy Ltd., which was affirmed by the Hon'ble Jurisdictional High Court, to delete the disallowance of depreciation.2. Failure of the Assessee to Furnish Evidence:The Revenue contended that the assessee failed to discharge its onus to furnish evidence supporting its claim and to negate the findings of the Investigation Wing and the AO. The assessee, however, provided detailed documentation, including the TEV study reports, ledger accounts, and external comparables, to justify the pricing of the FFS machines. The CIT(A) observed that the AO had not independently verified the cost of acquisition and had relied solely on the contentions of the AO of M/s. Anitas Exports Pvt. Ltd. The CIT(A) concluded that the AO's disallowance was not based on any independent application of mind or comparable cases.The Tribunal upheld the CIT(A)'s decision, noting that the Revenue had not provided any cogent evidence to challenge the factual findings and application of Section 43(1) by the CIT(A). The Tribunal also referenced the pending appeal against the reassessment order in the hands of M/s. Anitas Exports Pvt. Ltd., indicating that the decision in that case had not attained finality.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the excess depreciation claimed by the assessee. The Tribunal held that the CIT(A) had correctly applied the provisions of Section 43(1) and relied on relevant judicial precedents to address the issue in favor of the assessee. The Tribunal found no merit in the Revenue's grounds and concluded that the disallowance of depreciation was unwarranted. The order was pronounced on 30/09/2022.