ACIT Vs JITF Waterways Ltd (ITAT Delhi)
In this case the Revenue challenged the order of CIT(A) deleting additions made by AO in the assessment of JITF Waterways Ltd., a public limited company engaged in development, maintenance & operation of barrages, jetties, ports, terminals & waterways for cargo & passenger transport.
For AY 2015-16, Assessee had filed its return declaring a huge business loss along with TDS credit. The case was selected for scrutiny & AO framed assessment u/s 143(3) on 29.12.2017 making major additions, namely, Rs.14.70 crore by way of an ad hoc disallowance of 50% of various expenses, & Rs.20.49 crore on account of alleged excess purchase value of vessels.
On appeal, CIT(A) deleted these additions after detailed examination. It was held that AO had mechanically resorted to ad hoc disallowance merely because of fall in revenue, without doubting genuineness of expenses or appreciating that most of them were fixed expenses. Further, the increase in repair & maintenance was explained by acquisition of two additional vessels, raising the total fleet from three to five. CIT(A) also accepted that the fall in revenue was due to competition & slump in shipping industry. Accordingly, the disallowance was deleted.
With regard to the addition of Rs.20.49 crore, it was noted that Assessee had acquired two vessels from its 100% Singapore subsidiary at USD 1,35,82,476, whereas AO adopted the purchase price at an earlier date to allege inflation. CIT(A) held that in view of Explanation (6) to s.43(1), the actual cost to be considered in the hands of the Assessee was the carrying value in the books of the subsidiary as on the date of transfer, i.e. USD 1,35,46,018. Accordingly, only differential depreciation of Rs.4,48,113 was disallowed, while the major addition was deleted.
