Tribunal Supports Assessee on Expense Disallowance, Upholds Reduced Depreciation Rate for Non-Hire Vehicles.

The tribunal ruled in favor of the assessee regarding the disallowance of expenses under Section 14A of the Income-tax Act, setting aside the lower authorities' decisions. However, it upheld the disallowance of the claimed 30% depreciation on the canter, agreeing with the lower authorities that the 15% rate was appropriate as the vehicles were not used for hire.

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Issues involved:
The judgment involves two main issues:
1. Disallowance of expenses u/s 14A of the Income-tax Act.
2. Disallowance of depreciation on canter used for supply of goods to customers.

Issue 1: Disallowance of expenses u/s 14A of the Income-tax Act:
The appeal challenged the disallowance of expenses amounting to INR 60,53,665 u/s 14A of the Act, despite the assessee having earned exempt income of INR 11,138 during the AY 2017-18 and having voluntarily disallowed expenses to the extent of the exempt income. The counsel argued that as the exempt income had already been offered for tax, no further disallowance was warranted. Citing the precedent of Cheminvest Ltd. vs. CIT, it was contended that disallowance u/s 14A should be limited to the exempt income earned. The tribunal, following the precedent, set aside the orders of the lower authorities, ruling in favor of the assessee.

Issue 2: Disallowance of depreciation on canter:
The second issue pertained to the disallowance of depreciation on canter used for transporting goods to customers. The Assessing Officer disallowed excess depreciation claimed by the assessee, arguing that the vehicles were not used for running them on hire, thus allowing depreciation at 15% instead of the claimed 30%. The assessee contended that the canter was specifically designed for transporting auto components to Maruti Suzuki India Ltd., its primary buyer. Despite the appeal, the CIT (A) upheld the addition, reasoning that the higher rate of depreciation at 30% applied only when vehicles were used for hire. As the canters were not hired out but used for the assessee's business, no hire income was shown, leading to the affirmation of the disallowance. The tribunal concurred with the lower authorities, upholding the disallowance of depreciation at 30%.

In conclusion, the appeal related to the disallowance of expenses u/s 14A was partly allowed, while the appeal concerning the disallowance of depreciation on the canter was dismissed. The tribunal affirmed the decisions of the lower authorities on both issues.

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