TaxTMI 
TaxTMI 
2020 (1) TMI 15
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....ed its return of income showing a loss of Rs. 54,53,847/-. Thereafter, the return was revised declaring a loss of Rs. 41,89,49,543/-. The assessment was completed u/s 143(3) of the Act at the revised loss of Rs. 41,89,49,543/-. 2.1 Thereafter, on scrutiny of assessment records it was seen that the assessee company was engaged in managing operations of ground power unit and pre-conditioned air unit at Indira Gandhi International Airport, New Delhi. It was further seen that in the original return of income, the assessee had claimed depreciation on Ground Power Unit (GPU) and Pre Conditioned Air Unit (PCA) at normal rate of depreciation i.e. 15% for plant and machinery. However, in the revised return of income, the assessee had claimed 100% depreciation on these two items. In the original return, the depreciation claimed was Rs. 7,30,02,697/- whereas in the revised return it was in the Rs. 486,498,393/-. It was further seen that during the year the assessee has debited finance expense of Rs. 43,046,771/- to its profit and loss account. It was the observation of the Ld. Pr. CIT that although the assessee company was incorporated in 2007, it has not commenced its business until it....
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.... of the revenue. The assessment order dated 11.12.2013 was set aside and the AO was directed to reframe the assessment order in accordance with the directions given in the impugned order after making the required verification. 2.4 The assessee is now in appeal against this order passed u/s 263 of the Act. 3.0 The Ld. AR submitted that the AO had made due inquiry during the course of assessment proceedings with respect to the claim of depreciation. He drew our attention to the submissions of the assessee dated 26th September, 2013 which were given in response to query No. 1 of the questionnaire along with the notice issued u/s 142 (1) of the Act. It was submitted that similarly, in query No. 8 of the questionnaire, the AO had asked the details of additions made to and sale of fixed assets along with copies of bills/evidences of transactions above Rs. 1 lac and the exact date of the assets being put to use for business purpose was also asked. It was submitted that these queries were duly responded to by the assessee and further a certificate issued by M/s. M. Choudhary & Associates, Chartered Engineers certifying that the GPU and PCA units were pollution controlling equipment a....
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....inquiry and not a case of 'no inquiry' and, therefore, Explanation 2 to section 263 could not have been invoked. 3.2 With respect to the issue relating to the interest expense, it was submitted that during the year assessee had paid finance charges to DIAL and IDBI and based on the period for which the loan has been taken, the assessee had suo moto capitalised the interest pertaining to the period prior to the commencement of business. It was also submitted that in this regard detailed inquires had been made by the AO during the course of the assessment proceedings and our attention was drawn to submissions of the assessee before the AO vide dated 26th September, 2013 wherein the details of finance expenses had been given. It was submitted that it was factually incorrect on the part of the Ld. Pr. CIT to have held that the prior period interest had not been capitalised. In light of the above submissions it was prayed that the order passed u/s 263 of the Act be quashed. 4.0 In response, the Ld. CIT (DR) submitted that in view of the newly inserted Explanation 2 to section 263 w.e.f. 1.6.2015, an assessment order would be subject to revision if it is passed without making inqui....
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....issued by the AO and the responses submitted by the assessee. However, we note that there is no specific query raised by the AO with respect to the assessee's claim of depreciation @ 100%. The AO has simply asked for details pertaining to fixed assets. No specific query has been raised by the AO as to why the ground power unit and the preconditioned air unit fell in the category of air pollution control equipment eligible for depreciation @ 100%. The assessee has also relied on a certificate of from Chartered Engineers wherein it has been stated that these two equipments fall under the category of air pollution control equipment. This certificate is placed at page 63 of the assessee's paper book. However, why and how this certificate was filed before the AO is not clear because no specific query has emanated from the AO in this regard. We also note that section 32 provides for depreciation at the enhanced rate of 100% on air pollution control equipment. However at serial No. 3 (viii) of part A (III) of New Appendix I of Rule 5 of the Income Tax Rules, 1962 air pollution control equipments have been defined as being - (a) Electrostatic precipitation systems (b) Fel....