TaxTMI 
TaxTMI 
2017 (11) TMI 1067
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....CIT (A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT (A) has erred in law in deleting the disallowance of Rs. 9,71,73,724/- made by AO on account of disallowance u/s 14A read with Rule 8D of the Income Tax Act. 3. On the facts and circumstances of the case the Ld. CIT (A) has erred in law in deleting the addition of Rs. 13,03,519/- out of total addition of Rs. 33,03,519/- made by AO on account of disallowance of depreciation and car running expenses. 4. On the facts and circumstances of the case the Ld. CIT (A) has erred in law in deleting the addition of Rs. 7,75,338/- out of total addition of Rs. 18,80,396/- made by AO on account of bad debts written off." Whereas in the cross objection, the assessee has raised following grounds:- 1. That the order u/s 153A of the Act dated 29.3.2014 passed by the Ld. A.O. is bad on facts and in law. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in not considering that the additions were made u/s 153A despite the fact that there was no incriminating document found during the course of search. 3. That the Ld. CIT(A) has erred in sustaining the di....
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....old that the disallowance u/s 14A read with Rule 8D for sums amounting to Rs. 9,71,73,724/- cannot be sustained and is directed to be deleted. 6. So far as the issue raised in ground No. 3, i.e., deletion of addition of Rs. 13,03,519/- out of total addition of Rs. 33,03,519/- on account of disallowance of depreciation and car running expenses, the brief facts are that during the course of search, certain cars were found from the residence of Shri Suresh Nanda as well as Shri Sanjeev Nanda, who were though not the Director in the company but directly and indirectly had control in the assessee company. Accordingly, the A.O. issued show cause notice as to why the depreciation claimed in respect of these cars should not be disallowed. The details of the cars have been given in para 6 of the assessment order. The assessee in response to show cause notice submitted that, the Claridges Hotel was undergoing extensive renovation of its hotel and there were severe constraint of parking space and pending such renovation, these cars were temporarily parked at the residence of Shri Suresh Nanda who resides nearby at 4, Prithviraj Road and both being non-resident mostly stayed abroad and theref....
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....river salaries etc. In the absence of details a lump sum amount of Rs. 20 lacs is considered as expense related to these cars for their running in addition to depreciation claimed. Therefore, depreciation claimed by the company on these cars was disallowed and expense of Rs. 20 lacs is being added to the total income of the assessee. The Penalty proceedings u/s 271(1)(c) are being initiated separately. (Disallowance of Rs. 33,03,519/-)" 8. After hearing both the parties and on the perusal of the relevant finding given in the impugned order, we find that so far as this disallowance of depreciation is concerned there is no dispute that these cars are assets of the assessee company which have been shown as part of the fixed assets in the balance sheet. Most of the cars are appearing as WDV in the schedule of fixed assets and depreciation has been claimed at Rs. 13,03,519/-. Once the cars are owned by the assessee company and is found to part of fixed assets then, ostensibly depreciation has to be allowed. The assessee before the AO as well as before the Ld. CIT (A) has categorically submitted that since renovation work was carried out at hotel premises, therefore, these cars were ....
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.... best efforts by the assessee, order could not be executed nor could the amount be recovered. Hence, the assessee has written off the said sum. So far as the issue of allowing of bad debt amounting to Rs. 7,75,338/-, we do not find any infirmity in the order of Ld. CIT(A), because the amount written off as bad debt has been admitted to be offered to tax in the earlier years and it has been written off from the books of accounts in this year and hence, the conditions as laid down u/s 36(2) read with section 36(1)(vii) stands satisfied and therefore, the bad debt written off has to be allowed as deduction. Accordingly ground No. 4 raised by the revenue is dismissed. 11. In the result appeal of the revenue is dismissed. 12. In ground No. 3 and 4 of assessee's cross objection, the assessee has raised the issue of disallowance of bad debt of Rs. 11,05,058/- and adhoc disallowance of Rs. 20 lacs made by the AO on account of running and maintenance of cars. So far as the issue of disallowance of bad debt is concerned, as noted above, the assessee has given a trade advance of Rs. 11,05,058/- to M/s. Pasio Industries (S) Pte Ltd for supply of raw material, cooking items etc. However the s....
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....es on merits, therefore, the legal ground raised vide ground Nos. 1 and 2 in the cross objection have become purely academic and the same are not being adjudicated and are treated as infructuous. 15. Now we take up the revenue's appeal as well as cross appeal of the assessee for assessment year 2010-11, wherein the following grounds have been raised:- 1. "The order of Ld. CIT (A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs. 2,42,26,220/- made by A.O. on account of disallowance u/s 14A read with Rule 8D of the Income Tax Act. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs. 12,54,115/- out of total addition of Rs. 32,54,115/- made by A.O. on account of disallowance of depreciation and car running expenses." 16. So far as the disallowance made u/s 14A, herein in this year also it is an admitted fact that no exempt income has been earned by the assessee and this fact has been noted by the A.O. in para 5.1 of the assessment order so. However in this year, the assessee has suomoto disallowed sum of Rs. 2,78,38,017/- whi....
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....and the same has rightly been deleted by the Ld. CIT (A). Thus ground no. 3 raised by the revenue is dismissed. 19. Now coming to the cross objection filed by the assessee, so far as the issue raised in ground No. 3, again admittedly it is similar to the ground raised by the assessee in Cross Objection for assessment year 2009-10 and therefore, in view of the finding therein, we hold that no addition on adhoc basis can be made in respect of running and maintenance of the cars. 20. Lastly, so far as disallowance of depreciation of Rs. 1,75,048/- as raised in ground no. 4 of Cross Objection claimed on gym equipments installed in the premises of Managing Director, the assessee's case before the A.O. as well as Ld. CIT(A) has been that as per the corporate policy the provision of fitness centre has been done for purposes to ensure employees to stay fit and healthy and in any case it can be treated as perquisite in hands of Managing Director but cannot be disallowed in the hands of the assessee company and in support reliance was placed on various decisions. The AO and Ld. CIT (A) have disallowed the depreciation on the ground that though ownership belongs to the assessee but installa....