The ACIT, Circle-1(1)(1), Ahmedabad V. Apraava Energy Pvt. Ltd. (Formerly CLP India Pvt. Ltd.), Ahmedabad

ITA 233/AHD/2022

AI Insights

The case involves the Assistant Commissioner of Income Tax (Revenue) appealing against the order of the CIT(A), which had deleted certain disallowances made by the Assessing Officer under Section 14A read with Rule 8D and Section 115JB of the Income Tax Act, 1961, as well as a disallowance of excess claim of depreciation. The assessee, Apraava Energy Pvt. Ltd., engaged in the generation and sale of electricity, had filed its return declaring a substantial income, which was subjected to scrutiny. The Assessing Officer made disallowances citing non-suo motu disallowance of exempt income and excess depreciation claimed on vehicles. The CIT(A) partly allowed the assessee's appeal, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129312 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 07-06-2022
• Other Referred Cases: Ahmedabad Tribunal in assessee's own case for A.Y. 2016-17
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Depreciation; Earning of tax free income; Rule 8D; Set aside
• Section: 142(1); 14A; 115JB

Judgement Text

ITA No.233/Ahd/2022 A.Y. 2017-18 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.233/Ahd/2022 Assessment Year: 2017-18 Asstt. Commissioner of Income Tax, vs. Apraava Energy Pvt. Ltd., Circle 1(1)(1), Ahmedabad. (Formerly CLP India Pvt. Ltd.), 6 th Floor, Chanakya Building, Off. Ashram Road, Ahmedabad – 380 009. [PAN – AAACG 7999 P] (Appellant) (Respondent) Assessee by : Shri Biren Shah, A.R. Respondent by : Shri Vijay Kumar Jaiswal, CIT DR Date of hearing : 10.05.2023 Date of pronouncement : 26.05.2023 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER : This appeal is filed by the Revenue against order dated 20.04.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18. 2. The Revenue has raised the following grounds of appeal :- “1. Whether the CIT(A) has erred in law and on facts in deleting the disallowance of Rs.41,58,85,034/- under Section 14A read with rule 8D of the IT Act made while computing income under normal provisions of the Act. 2. Whether the CIT(A) has erred in law and on facts in deleting the disallowance of Rs.41,58,85,034/- under section 14A read with rule 8D of the IT Act made to income computed under section 115JB of the Act. 3. Whether the CIT(A) has erred in law and on facts in deleting the disallowance of excess claim of depreciation of Rs.1,37,35,510/- without appreciating facts brought by the A.O. 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. ITA No.233/Ahd/2022 A.Y. 2017-18 Page 2 of 5 5) It is, therefore, prayed that the order of the ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” 3. The assessee company is engaged in the generation and sale of electricity. The return of income was filed on 21.11.2017 declaring total income of Rs.3,39,00,76,230/-. The case was selected for scrutiny and notice under Section 143(2) of the Income Tax Act, 1961 dated 17.08.2018 was issued to the assessee. Notice-cum-questionnaire under Section 142(1) of the Act dated 04.02.2019 was issued to the assessee. The assessee filed its submissions and details from time to time. The Assessing Officer observed that the assessee has earned exemption income of Rs.1,33,223/- income which does not form part of total income. Therefore, the Assessing Officer held that the provisions of Section 14A of the Act gets attracted as the assessee has not made any suo motu disallowance in this regard. The Assessing Officer made disallowance of Rs.41,58,85,034/-. The Assessing Officer further observed that on the verification of the depreciation chart forming part of Form 3CD, the assessee claimed depreciation of Rs.1,79,58,809/- at 33.40% on self propelled vehicle. The Assessing Officer held that vehicle used for hire depreciation to that extent is more quickly than normal vehicle and hence deprecation is allowable on hired vehicle is high compared to other vehicles. The Assessing Officer made disallowance of Rs.1,37,35,510/- as relates to depreciation on motor vehicle. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A) and the CIT(A) partly allowed the appeal of the assessee. 5. As regards ground nos.1 & 2, the Ld. DR submitted that as relates to ground nos.1 & 2, the CIT(A) was not justifiable in deleting the disallowance of Rs.41,58,85,034/- under Section 14A read with Rule 8D made while computing income under normal provisions of the Act and computing the said income under Section 115JB of the Act. The Ld. DR submitted that the Assessing Officer has rightly observed that the assessee has not made any suo motu disallowance and, therefore, Section 14A of the Act is attracted. 6. The Ld. AR relied upon the order of the CIT(A) and further submitted that the assessee has earned exempt income of Rs.1,33,223/- and, therefore, Section 14A of the Act invoked should have been restricted to the income earned and exempt income ITA No.233/Ahd/2022 A.Y. 2017-18 Page 3 of 5 only and not to the extent of Rs.41,58,85,034/- which was total investment of the assessee having element of no exempt income at all. The Ld. AR relied upon the decision of Ahmedabad Tribunal in assessee’s own case for A.Y. 2016-17 on similar issue. 7. We have heard both the parties and perused all the relevant material available on record. In earlier A.Y. there is a finding that the assessee has not earned any exempt income but in the present A.Y. the assessee has earned exempt income to the extent of Rs.1,33,223/- and, therefore, we direct the Assessing Officer to take cognisance of the said exempt income and after verifying the same, restrict the 14A disallowance to the exempt income earned by the assessee and make the disallowance as per law. Needless to say the assessee be given opportunity of hearing by following the principles of natural justice. Ground nos.1 & 2 are partly allowed for statistical purpose. 8. As regards to ground no.3, relating to disallowance of excess claim of depreciation of Rs.1,37,35,510/-, the Ld. DR submitted that the Assessing Officer has rightly held that the vehicles for movement of goods and people are included in the block of self propelled vehicle and claim of depreciation is justified 33.40% was higher and, therefore, rightly made disallowance to that extent. 9. The Ld. AR relied upon the Tribunal’s decision in assessee’s own case for A.Y. 2016-17 (ITA No.321/Ahd/2022 and C.O. No.28/Ahd/2022, order dated 25.04.2023). The Ld. AR further submitted that the Assessing Officer allowed depreciation at 7.69% which is the rate applicable to the assets not covered under any block provided in Appendix-IA. It is well settled fact that whenever there is a specific block available, the asset should be grouped under such block and rate of depreciation is accordingly taken. In the case of assessee, the vehicles owned by the assessee are specifically covered under the block of self propelled vehicles and thus are eligible for depreciation at 33.40% being the rate provided for such block. The ld. AR further submitted that depreciation on asset let-out on hire cannot be less than that used for personal effect. When the law itself provides for depreciation on self propelled vehicle at 33.40%, the Assessing Officer cannot compare such rate with the rate on “Apparatus let on hire – Motors”. Such comparison would have been relevant if there ITA No.233/Ahd/2022 A.Y. 2017-18 Page 4 of 5 would not have been any specific block for such assets, however the assets owned by the assessee company falls under the specific block of self propelled vehicles and thus the contention of Assessing Officer is not justifiable. The Ld. AR submitted that the Assessing Officer has grossly erred in computing the depreciation on vehicles at general rate particularly when there is specific block covering such assets. 10. The Ld. DR relied upon the Assessment Order. 11. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that there is a specific Appendix-IA which covers the rates at which depreciation is admissible in respect of energy sector Company and it includes self propelled vehicles at Sl. (K) wherein the rate prescribed is 33.40%. This is coming under the Rule-5(1A) of the IT Rules 1962. The Assessing Officer has not taken cognisance of the same and accordingly given the finding on the Apendix-1 which is for motor vehicles. In the present case, the assessee has categorically kept a separate block for self propelled Vehicles as the assessee is engaged in the business of generation of and sale of electricity. The decision in earlier A.Y. taken by the Tribunal is applicable in the present A.Y. as well. Hence, ground no.3 is dismissed. 12. In the result, appeal of the Revenue is partly allowed for statistical purpose. Order pronounced in the open Court on this 26 th May, 2023. Sd/- Sd/- (ANNAPURNA GUPTA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 26 th day of May, 2023 PBN/* ITA No.233/Ahd/2022 A.Y. 2017-18 Page 5 of 5 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad