Case Number: ITA 1204/DEL/2021
Appellant: ACIT, Circle- 17, New Delhi
Respondent: Bharat Hotels Ltd., New Delhi
Assessment Year: 2017-18
Case Filed on: 2021-09-23
Order Type: Final Tribunal Order
Date of Order: 2022-08-30
Pronounced on: 2022-08-30
In the Income Tax Appellate Tribunal, Delhi ‘A’ Bench, New Delhi, the case of Bharat Hotels Ltd. (the respondent) versus the ACIT, Circle-17, New Delhi (the appellant) involved appeals regarding the disallowance of depreciation and additions under Section 14A of the Income Tax Act, 1961.
The tribunal addressed four separate appeals, including ITA No. 1203/DEL/2021 for the assessment year 2014-15, ITA No. 4432/DEL/2019 for the assessment year 2015-16, ITA No. 8963/DEL/2019 for the assessment year 2016-17, and ITA No. 1204/DEL/2021 for the assessment year 2017-18.
The common grievance across these appeals was the deletion of additions made by the Assessing Officer (AO) on account of disallowance under Section 14A of the Income Tax Act, 1961. Additionally, in ITA No. 1203/DEL/2021 and ITA No. 1204/DEL/2021, the issue of disallowance of depreciation related to the World Trade Centre (WTC) and World Trade Tower (WTT) was raised.
During the assessment years in question, Bharat Hotels Ltd. did not earn any exempt income. This fact was undisputed. The Hon’ble Jurisdictional High Court of Delhi, in the case of Caraf Builders & Constructions (P) Ltd., had held that if no exempt income is earned, no disallowance shall be made under Section 14A of the Income Tax Act, read with Rule 8D of the Income Tax Rules. This precedent was binding, and the tribunal followed it to dismiss the common ground of appeal regarding Section 14A disallowance.
Regarding the disallowance of depreciation for the WTC and WTT, the AO’s rationale was that the buildings vested with the New Delhi Municipal Council (NDMC) and the appellant only enjoyed occupancy rights. However, the tribunal noted that similar disallowances were made in earlier assessment years and were deleted by the first appellate authority. The Hon’ble High Court of Delhi, in the case of Bharat Hotels Ltd. for earlier assessment years, had ruled in favor of the assessee, allowing the depreciation claims. The tribunal, respecting the precedent and absence of distinguishing facts, dismissed this ground of appeal as well.
In the final judgment pronounced on August 30, 2022, the Income Tax Appellate Tribunal, Delhi ‘A’ Bench, dismissed all four appeals filed by the Revenue. The tribunal upheld the decisions of the lower appellate authorities, aligning with the binding precedents set by the Hon’ble High Court of Delhi.
This case reaffirms the principles laid down in previous judgments, emphasizing that disallowances under Section 14A are not applicable in the absence of exempt income and supporting the right of the assessee to claim depreciation on assets even when legal ownership is vested in another entity, provided the assessee has control and uses the assets.
Tribunal Members:
Shri N.K. Billaiya, Accountant Member
Ms. Astha Chandra, Judicial Member
Date of Pronouncement: August 30, 2022
The tribunal’s order was pronounced in the open court, bringing closure to the appeals in favor of Bharat Hotels Ltd.
Depreciation Disallowance and Section 14A Additions: Bharat Hotels Ltd. vs ACIT
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