ACIT,Circle-1(2), Surat V. M/s Aura Exports, Surat

ITA 712/SRT/2018

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1680 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 02-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Business income; Depreciation; Competent authority; Set aside
• Section: 10AA; 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.700/SRT/2018 (AY 2013-14) (Hearing in Virtual Court) The Assistant Commissioner of Income Tax, Circle-1(3), Surat. Vs Shree Parshwanath Exports, Unit No.375, Plot NO.241, Special Economic Zone, Sachin, Surat – 394230. PAN: ABZFS 9658 J Appellant/ Revenue Respondent/ Assessee ITA No.709/SRT/2018 (AY 2013-14) The Assistant Commissioner of Income Tax, Circle-1(2), Surat. Vs Shiv Krishna Exports, Unit No.166, Plot No.266, Surat Special Economic Zone, Sachin, Surat. PAN: ABVFS 3111 L Appellant/ Revenue Respondent/ Assessee ITA No.712/SRT/2018 (AY 2013-14) The Assistant Commissioner of Income Tax, Circle-1(2), Surat. Vs Aura Exports, A-610, Diamond Word, Mini Bazar, Varachha, Surat. PAN: AAUFA 5694 C Appellant/ Revenue Respondent/ Assessee Assessee by Shri Sanjay Chouksi – AR Revenue by Mrs. Anupama Singla – Sr.DR Date of hearing 13/01/2022 Date of pronouncement 04/02/2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These three appeals by the Revenue are directed against the separate order of ld.Commissioner of Income Tax(Appeal) against different assessees all appeals relates to assessment year (AY) A.Y. 2013-14. In all appeals, the ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 2 Revenue has raised certain common grounds of appeal, certain facts in all appeals are common, therefore, all three appeals were clubbed, heard and are adjudicated by a consolidated order. For appreciation of facts, facts in ITA No.700/SRT/2018 in Shri Parshwanath Exports is treated as lead case. The Revenue has raised the following grounds of appeal in ITA No.700/SRT/2018 as under: “1. Whether on the facts and Circumstances of the case and in law, the CIT(A) has erred in allowing the claim u/s. 10AA of the Act despite of the fact that the assessee has not engaged in any export business activities during the year and has not made any export during the year under consideration ? 2. Whether on the facts and Circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim u/s. 10AA of the Act despite of the fact that the assessee has filed application to the DGDC, Surat SEZ Sachin to close its SEZ unit on 23.05.2012 (A.Y. 2013-14) - thereby clearly indicating that no business was undertaken by the assessee during the year under consideration? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim u/s. 10AA of the Act despite of the fact that the assessee has followed the mercantile system of accounting and offered the relevant income when it accrued in earlier year and not when it was received - thus, the assessee has already taken the benefit of se. 10AA deduction during the year of accrual i.e. the preceding year and further claim of deduction is claim of double deduction on the same transaction, without any real exports ? 4. Whether on the facts and circumstance of the case and in Law, the Ld. CIT(A) has failed to ignore the dictum led down by the Jurisdictional High Court in the case of CIT v. Amba Impex [2007] 164 TAXMAN 344 (GUJ.) that amount is received in a year subsequent to the year of export by way of exchange rate difference is relatable to the original exports made ? 5. Whether on the facts and circumstance of the case and in Law, the Ld. CIT(A) has failed to ignore the dictum led down by the Jurisdictional High Court in the case of CIT v. Mahavir Plantations (P.) Ltd [2015] 53 taxmann.com 528 (Kerala) that where assessee, an exporter, was following mercantile system of accounting, gain on account of foreign exchange difference on outstanding export bills would accrue to assessee when it became entitled to receive sale consideration in foreign exchange irrespective of time of receipt ? ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 3 6. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. 7. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 2. Brief facts as extracted from the order of the lower authorities are that the assesseeis a firm is engaged in the business of export and import of polished diamonds and manufacturing and export of diamond studded jewellery. For the year under consideration, the assessee while filing the return of income shown Nil income. During scrutiny assessment, the Assessing Officer(AO) noted that Profit and Loss Account of the assessee for the impugned order does not reveal sales of diamond studded jewellery nor any export of cut and polished diamonds. However, the assessee has claimed export exchange difference gain of Rs.8.59 crore. On further perusal, the AO noted that the assessee claimed direct expenses on account of import exchange difference of Rs.5.7 crore and thereby shown gross profit at Rs.2.82 crore on exchange rate fluctuation. In the computation of income, the assessee claimed deduction under section 10AA of the Act of Rs.2.68 crore and depreciation of Rs.2.39 lakhs, thus, the total of Rs.2.70 crore and offered Nil income. The assessee calculated total income under section 115JC at Rs.2.68 crore and paid minimumalternative tax thereon. In view of the fact that there was no production in the manufacturing activities during the year, the AO asked ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 4 the assessee to submit justification for claim of deduction under section 10AA of the Act. The assessee filed its reply dated 10.03.2016 and furnished necessary details along with submission in justification under section 10AA of the Act. 3. In reply, the assessee contended that assessee firm was incorporated in the year 2011 with the object of carrying business of diamond and diamond studded jewellery. The assessee received letter of allotment from Diamond and Gem Development Corporation Ltd., Special Economic Zone[SEZ], Sachin vide letter dated 14.09.2011. The assessee applied for letter of approval for manufacturing and trading unit no.375 and Plot No.241 as on 07.10.2011. The assessee firm was granted permission to start the business in the said SEZ vide letter dated 13.10.2011. The assessee firm commenced export and import and manufacturing of studded jewellery activities on 10.12.2011. The assessee mainly in the manufacturing of diamond studded jewellery. It imported cut and polished diamond while it purchase 24 carat gold from domestic market. 24 carat gold is first converted to 18 carat gold and then prepaid jewellery. The jewellery is exported as per the requirement of the customer. The assessee firm employed 15 to 20 employees for manufacturing activities. As the firm is in the line of Solitaire diamond. The assessee submitted document of import, copy of bills of entry approved ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 5 by Customs Authority, copy of Insurance, copy of Air wage bills of last year. The assessee claimed that all the payments from the customers were received in the F.Y. 2012-13 and all the payments to suppliers have been made in that year. The assessee specifically stated that they have gained income from exchange difference, on which they paid Minimum Alternative Tax (MAT) at prescribed rate. The assessee further explained that foreign exchange gain is directly referable to the article and things exported by assessee and the same is in the same nature as sale proceeds and eligible for exemption under section 10AA of the Act. The assessee also relied upon certain case laws. 4. The explanation furnished by assessee was not accepted by the AO. The AO held that exchange rate difference is not earned on account of export of goods or services during the year. Benefit of newly established undertaking in SEZ Unit is available to all assessee’s on export of all articles and certain things on fulfilment of certain conditions. The assessee has not exported any goods or article or rendered any services from SEZ Unit in Surat. Thus, the exchange rate difference gain earned during the year cannot be treated as export within the meaning definition as export from SEZ Unit. The AO referred the decision of Hon’ble Gujarat High Court in case of CIT Vs Amba Impex 282 ITR 144 (Guj) abnd recorded that in the said case the Court has ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 6 examined the situation where the exchange difference does not relate to export made during the Financial Year, but related to the export of earlier years, relief should be considered in the relevant year of export, i.e. in the year in which export was invoiced by the assessee. In the present case, exchange difference does not arise and relates to export made during the Financial Year, rather which relates to export made in the Financial Year. The AO further recorded that the assessee has given application to DGCP, Surat, SEZ, Sachin, vide application dated 23.05.2012, for closed down of unit, meaning thereby that assessee has not operated during the relevant financial year. This fact is evident from the Profit and Loss Account for the year under consideration, where o sales/export of goods or article has been shown. The assessee has already accounted for exchange gain and loss on foreign exchange for the year 2012-13 on account of export and import made during the year till 31.03.2012 and claimed deduction thereupon. As the assessee has no export turnover, the eligible profit under section would be Nil, accordingly, the AO disallowed the deduction under section 10AA of the Act of Rs.2.68 crore. 5. Aggrieved by the action of AO, the assessee filed appeal before the ld. CIT(A), the assessee filed detailed written submission as recorded in para-5 of his order. In the written submission, the assessee contended that during ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 7 the course of business the assessee is required to made purchase from their supplier on due basis and sale to their customer on due basis i.e. on term of 90 days to 120 days or so. Therefore, there is always difference on rate of exchange at the time of purchase or sale and at the time of payments. They have creditors and debtors outstanding addition year end of 31.03.2012, the assessee earned exchange difference of Rs.2.68 Crore on which they have paid minimum alternative tax [MAT] of Rs. 55,04,820/- at the time of filing of return. During the year under consideration, the income form exchange rate difference represented the exchange during the year under consideration, the income from exchange rate difference as on 31 st March of the previous year and the actual realisation of export proceeds and the same for import payments. Such proceeds were received/paid during the previous year, the same has accrued only on that period. As per Accounting Standard (AS)-11, mandatory items, namely cash, receivable, payables etc., should be reported at the closing rate i.e. the rate of exchange prevailing at the balance sheet date. The assessee adopted the closing rate while reporting the figure of sundry debtors for immediately preceding year. It was submitted that when export proceeds are received after exports are made, it is not possible in every case to realised 100% of the amount before the end to relevant year, especially when expenses are made at the fag-end of the year. It effect ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 8 remissions. Rule 115 of the Income Tax Rules has no bearing on the computation of deduction under section 10AA of the Act. The assessee relied on the decision of Hon’ble Gujarat High Court in Hindustan Trading Corporation vs. CIT 160 ITR 15 (GUJ) wherein it was held that such receipts arising out of foreign exchange rate fluctuation was revenue receipt. So far as allowability of income from exchange rate is a part and parcel of export only. Mere change in the accounting year does not change the nature of income. In many cases, when export is made at the fag-end of accounting year, it may not be possible to realise the sale proceeds of such export before the end of the year. The assessee also relied upon the decision of CIT vs. Priyanka Gems and other 367 ITR 575 (Guj). 6. The ld.CIT(A) after considering the assessment order and the submission of assessee held that that the AO made disallowance on the ground that no business was carried out by the assessee, therefore, not entitled for deduction under section 10AA of the Act. The AO treated the said income from other sources. The ld.CIT(A) recorded that it was contended before him that during the course of business there is time limit of 90 to 120 days for realisation of payment. The assessee was having creditors and debtor’s outstanding addition was end on 31.03.2012. The assessee earned income from foreign exchange of Rs.2.68 crore upon which MAT of Rs.55,04,820/- ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 9 was paid. The ld.CIT(A) on perusal of details noted that the AO made addition without giving any opportunity to explain the fact. The exchange rate difference represented the exchange rate difference as on 31 st March of financial year 2012-13 and the date of actual realisation of export proceed and the same was applicable for the import payments. When export proceeds are received after the export are made, it is not possible to realise 100% of the bill amount before the end of relevant year when the export should made at the fag-end of the year and that the assessee also relied on the decision of Hindustan Trading Corporation vs. CIT (supra). The ld.CIT(A) on appreciation of fact held that issue of receipt arising out of foreign exchange has been decided by the Jurisdictional High Court in Hindustan Trading Corporation (supra) and Priyanka Gems (supra) wherein the Hon’ble High Court held that foreign exchange gain arising out of fluctuation in rate of foreign exchange cannot be divested from export business of assessee. It was also held that mere change in accounting year can have no real impact on nature of receipt. The ld.CIT(A) by relying upon the aforesaid two decision held that exchange rate difference is related to the export business, hence, the addition made by the AO in treating the income from exchange fluctuation rate not allowable deduction was reversed and the assessee was held to be eligible for deduction under section 10AA of the Act. Aggrieved ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 10 by the order of ld.CIT(A), the Revenue has filed present appeal before this Tribunal. 7. We have heard the submission of ld. Senior Departmental Representative (ld. Sr. DR) for the Revenue and the ld. Authorised Representative (ld.AR) for the assessee. We have also gone through the order of Lower Authorities carefully. The ld.Sr.DR for the Revenue submits that AO correctly disallowed the claim under section 10AA of the Act on finding the fact that assessee has not carried out any business activity during the year under consideration. During the assessment, the assessee failed to establish exchange rate difference earned on account export of goods from SEZ Unit. Since no business activity was carried out during the year, the AO disallowed the deduction under section 10AA of the Act. The decision of Priyanka Gems has been challenged by Revenue of Hon’ble Supreme Court. The ld.Sr.DR submits that he fully supports the order of AO. 8. On the other hand, the ld.AR of the assessee submits that grounds of appeal raised by the Revenue are fully covered by the decisions of Jurisdictional High Court in Hindustan Trading Corporation (supra) and Priyanka Gems (supra). The ld.AR for the assessee invited our attention on Sub-section (3) of Section 176 wherein the assessee is required to give a notice for discontinuation of business and would submit that as per Sub-section (3A) of ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 11 section 176, where any business is discontinued in any year, any sum received after discontinuance shall be deemed to be the income of recipient and charged to the tax, accordingly in the year of receipt. If such sum would have been included in the total income of the person who carried on the business and such sum been received before such discontinuance. The ld.AR submits that assessee earned foreign exchange gain on the receivable which is eligible for deduction under section 10AA in accordance with the provisions section 173(3A) of the Act. 9. We have considered the rival submission of both the parties and have gone through the orders of authorities carefully. We have seen that the revenue has raised multiple grounds of appeal, however, in our considered view the solitary ground of appeal raised by the revenue relates to deduction under section 10AA earned on foreign exchange fluctuation as business income or income from other sources. The AO treated the amount of Rs.2.68 crore as income from ‘other sources’ by disallowing deduction under section 10AA of the Act by taking view that exchange rate difference is not earned on account of export of goods or services during the year and that the assessee has not exported any goods or article or rendered any services from SEZ Unit in Surat, thus, the exchange rate difference gain earned during the year cannot be treated as export within the meaning definition as export from ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 12 SEZ Unit. The assessee has not carried out any business activity during the relevant financial year. The AO referred the decision of Hon’ble Gujarat High Court in case of CIT vs. Amba Impex 282 ITR 144 (Guj). We find that before the ld.CIT(A), the assessee filed details written submissions on perusal of those explanation and submission, the ld.CIT(A) held the AO made disallowance on the ground that no business was carried out by the assessee, therefore, not entitled for deduction under section 10AA of the Act. The AO treated the said income from other sources. The ld. CIT(A) recorded that it was contended before him that during the course of business there is time limit of 90 to 120 days for realisation of payment. The assessee was having creditors and debtor’s outstanding as on 31.03.2012. The assessee earned income from foreign exchange of Rs.2.68 crore upon which MAT of Rs.55,04,820/- was paid. The ld.CIT(A) on perusal of details noted that the AO made addition without giving any opportunity to explain the fact. The exchange rate difference represented the exchange rate difference as on 3 1st March of financial year 2012-13 and the date of actual realisation of export proceed and the same was applicable for the import payments. When export proceeds are received after the export are made, it is not possible to realise 100% of the bill amount before the end of relevant year when the export should made at the fag-end of the year and that the assessee ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 13 also relied on the decision of Hindustan Trading Corporation vs. CIT (supra). The ld. CIT(A) on appreciation of fact held that issue of receipt arising out of foreign exchange has been decided by the Jurisdictional High Court in Hindustan Trading Corporation (supra) and Priyanka Gems (supra) wherein the Hon’ble High Court held that foreign exchange gain arising out of fluctuation in rate of foreign exchange cannot be divested from export business of assessee. It was also held that mere change in accounting year can have no real impact on nature of receipt. The ld.CIT(A) by relying upon the aforesaid decision held that exchange rate difference is related to the export business, hence, the addition made by the AO in treating the income from exchange fluctuation rate not allowable deduction was reversed and the assessee was held to be eligible for deduction under section 10AA of the Act. We also find merit in the submissions of the ld AR for the assessee that as per sub-section (3A) of section 176, where any business is discontinued in any year, any sum received after discontinuance shall be deemed to be the income of recipient and charged to the tax, accordingly in the year of receipt. 10. We find that in fact this ground of appeal is covered against the Revenue by the decision of Priyanka Gems (supra). The decision of Hon’ble High Court in Priyanka Gems is subsequent to the decision in Amba Impex. In Priyanka Gems the Hon’ble Gujarat Court after considering the decisions of various ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 14 other High Courts held that the foreign exchange gain arising out of the fluctuation in the rate of foreign exchange cannot be divested from the export business of the assessee. Once export is made, due to variety of reasons, the remission of the export sale consideration may not be made immediately. Under the accounting principles, therefore, the assessee, on the basis of accrual, would record sale consideration at the prevailing exchange rate on the quoted price for the exported goods in the foreign currency rates. It was further held that Mere change in the accounting year can have no real impact on the nature of the receipt. The conclusion of the Assessing Officer that since the year during which such sale proceeds were received by the assessee export was not made, would not in any manner change the situation. The assessee being engaged in the business of export and having made the export, mere fact of the remittance being made after 31st of March of the year when export was made, would not change the situation insofar as, relation of such income to the assessee's export business is concerned. 11. In view of the aforesaid discussion we do not find any illegality to interfere in the order passed by the ld.CIT(A), which we affirm. 12. So far as the decision in CIT vs. Amba Impex 282 ITR 144 (Guj) is concerned relied by AO, we find that the said case was restored back to the Tribunal to examine the facts in view of specific provision of Section ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 15 80HHC(2). It was held that as per sub-section (2) of section 80HHC of the Act, sale proceeds of goods or merchandise exported out of India and received in convertible foreign exchange become entitled to the deduction subject to fulfilment of other requisite conditions. Clause (a) of sub-section (2) of section 80HHC of the Act provides that such sale proceeds have to be received in convertible foreign exchange within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. It was held that plain reading of the provision makes it clear that once the competent authority has extended the time, in a case where it is necessary, or, where the sale proceeds have been received within a period of six months from the end of the previous year, such sale proceeds are directly relatable to the exports made and no further inquiry is necessary. 13. In view of the aforesaid discussion we do not find any illegality to interfere in the order passed by the ld.CIT(A), which we affirm. In the result, the grounds of appeal raised by the revenue are dismissed. 14. In the result, the grounds of appeals raised by the revenue is dismissed. ITA No.709/SRT/2018 for the A.Y. 2013-14: 15. The Revenue raised following grounds of appeal: “1. Whether on the facts and Circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance made by the Assessing Officer claimed u/s. ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 16 10AA of the Act ? The AO has rightly pointed out that deduction u/s. 10AA is allowable on business income and not on income from other sources. 2. Whether on the facts and Circumstances of the case and in law, the CIT(A) has justified by not appreciating the fact that by not providing interest and remuneration to the partners, the firm has claimed higher profits leading to higher claim of deduction u/s. 10AA of the Act and thus, devoiding the revenue from due amount of tax ? 3. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has justified in deleting the addition made on account of disallowance of salary expense of Rs. 1,20,000/- and depreciation expenses of Rs. 1,61,131/- by not appreciating the facts that no business activity was carried out by the assessee during the year and therefore there is no base of claim of assessee which are business related expenditures ? 4. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 16. We find that facts related with the ground No.1 & 2 of appeal are also similar as of in grounds of appeal raised in ITA No.700/SRT/2018, facts of the claim under section 10AA is also similar, the AO disallowed the claim on the same ground, the ld CITA) allowed the relief on the same ground. Considering the facts that we have dismissed the similar grounds of appeal raised by the Revenue is dismissed in ITA No. 700/SRT/2018. Therefore, with the same direction, the Ground No.1 and 2 raised in the present appeal, by the Revenue are dismissed. ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 17 17. Ground No.3 relates to deleting the addition on account of disallowance of salary expenses and depreciation expenses. 18. Facts related with the grounds of appeal under consideration are that during the scrutiny assessment, the AO noted that the assessee has claimed salary expenses of Rs.1,20,000/- in depreciation of Rs.1,61,131/-. The AO further noted that there is no purchase and sale during the year and income from foreign exchange gain is shown in the computation of income. The assessee has not shown any other income in the profit and loss account as there is no business activity during the year; therefore, there was no requirement for incurring any expenditure on account of salary. Further, the assessee has not used any machinery for the purpose of business. And according to AO, depreciation can only be claimed when machinery is used for business. On the basis of aforesaid observation, the AO issued show cause notice to the assessee on 22.02.2016. The AO recorded that the assessee filed its reply. In the reply, the assessee explained that though there is no sale or purchase during the year, however, the banking transactions and other office works are continuously undertaken by staff during the year. So far as deprecation on fixed assets is concerned, the assessee contended that it is irrelevant where machinery is used or not the assessee is eligible for depreciation, when the machinery was ready to use. The assessee relied upon the decision ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 18 of Hon’ble Punjab and Haryana High Court in CIT Vs Pepsu Transport Corporation (253 ITR 303 P & H). Reply of assessee was not accepted by the AO. The AO held that the assessee declared income from foreign exchange different and there was no requirement for expenditure of salary. Further, the machinery was not used by the assessee for business activity. The submission of assessee that staff was doing work continuously. The AO held that there was no purchase and sale for other activities, no workers are required to be made at the business premises, hence, the salary expenses are not allowable. The AO accordingly disallowed the salary and depreciation expenses of Rs.1,20,000/- and Rs.1,61,131/- respectively. As recorded above that before the ld.CIT(A), the assessee submitted detailed submissions and submitted that though no sales and purchase was made during the year, but the banking transaction and other office works were carried out regularly. The ld.CIT(A) on considering the submissions and perusal of other details held that disallowance by AO is erroneous as the office of assessee was operating the assessee received payment pertaining to earlier periods. The machinery was also in the state of readiness and accordingly the disallowance is made in a correct way. The ld.CIT(A), accordingly deleted both the additions. Aggrieved by the deleting the additions, the Revenue has filed present appeal before this Tribunal. ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 19 19. We have heard the submission of ld.Sr.DR for the Revenue and ld.AR for the assessee. The ld. DR for the Revenue submits that there was no business activity during the year, the AO disallowed salary, expenses of deprecation, the ld.Sr.DR supported that the order of AO. 20. On the other hand, the ld.AR of the assessee submits that the assessee under operation and received payments of earlier year. The machinery was ready to use. The ld CIT(A) on appreciations of facts granted relief to the assessee. 21. We have considered the submission of both the parties. We find that the AO disallowed the claim of salary and depreciation by taking view that no business was carried out or there is no sale or purchase by the assessee. The ld.CIT(A)allowed the relief to the assessee by taking view that the disallowance of expenses made by the AO is erroneous as office of the assessee operating and received payment of earlier years. Further, the machinery was ready to use and therefore disallowance was made incorrectly. In our view there is no infirmity in the order passed by ld CIT(A), which we affirm. No contrary fact is shown to us, nor any contrary law is brought to our notice, thus, the ground No. 3 raised by the revenue is dismissed. In the result, Grounds No.3 of the Revenue is dismissed. 22. In the result, appeal of the Revenue is dismissed. ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 20 ITA No.712/SRT/2018 for the A.Y. 2013-14: 23. The Revenue has raised following grounds of appeal: “1.Whether on the facts and Circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance made by the Assessing Officer claimed u/s. 10AA of the Act ? The AO has rightly pointed out that deduction u/s. 10AA is allowable on business income and not on income from other sources. 2. Whether on the facts and Circumstances of the case and in law, the CIT(A) has justified by not appreciating the fact that by not providing interest and remuneration to the partners, the firm has claimed higher profits leading to higher claim of deduction u/s. 10AA of the Act and thus, devoiding the revenue from due amount of tax ? 3. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition made on account of disallowance of salary expense of Rs. 1,10,000/- and depreciation expenses of Rs. 2,37,752/- by not appreciating the facts that no business activity was carried out by the assessee during the year and therefore there is no base of claim of assessee which are business related expenditures ? 4. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. 24. We find that Ground No.1 and 2 which relates to deduction under section 10AA of the Act are similar to the grounds of appeal raised in ITA No.700/SRT/2018 (supra). We further find that the fact related to the ground under consideration is almost similar. The AO made addition by taking similar view, further the ld. CIT(A) deleted the addition in a similar way. Therefore, with similar observation the Ground No. 1 & 2 of appeal raised by the Revenue in the present appeal is dismissed with similar observation. ITA No.700, 709 & 712/SRT/2018 (AY 2013-14) 21 25. Ground No.3 relates to deleting the disallowance of salary and depreciation. We find that this ground is similar to the ground No.3 in ITA No.709/SRT/2018, which we have dismissed with detailed discussion. We find that the fact related to the ground under consideration is almost similar as of in ITA No. 709/SRT/2018. The AO made addition by taking similar view and the ld.CIT(A) deleted the addition in a similar way. Therefore, the Ground No.3 raised by the Revenue is dismissed. 26. In the result, appeal of the Revenue is dismissed. 27. Copy of this order be placed in each of the appeals files. Order announced on 04 th February, 2022 in open court and result was placed on notice board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat Dated: 04/02/2022 /SGR* Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT By order 5. DR // TRUE COPY // 6. Guard File Sr. Pvt. Secretary, ITAT, Surat / / TRUE COPY / /