IN INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH C NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 88/Del./2014 Asstt. Year : 2010-11 D.C.I.T. Circle 12(1), vs. Galileo India Pvt. Ltd., New Delhi. Ground Floor, Central Wing, 124, Thapar House, Janpath, New Delhi. (PAN: AAACG3351K) (Appellant) (Respondent) Appellant by : Sh. Amrit Lal, Sr. DR Respondent by : Sh. Piyush Kaushik, Advocate Date of hearing : 08.09.2016 Date of pronouncement : 22.09.2016 ORDER Per L.P. Sahu, Accountant Member: This is appeal by Revenue against order dated 31.10.2013 of ld. CIT(A)-XV, New Delhi for assessment year 2010-11 on following grounds : 1. Whether Ld. CIT(A) was correct on facts and circumstances of case and in law in deleting addition of Rs.56,44,511/- made by AO u/s. 14A r.w.r. 8D? 2. Whether Ld. CIT(A) was correct on facts and circumstances of case and in law in deleting addition of Rs.56,86,641/- made by AO on account of disallowance of depreciation of fixed assets despite fact that assessee company has closed its business activities during 2 ITA No.88/Del./2014 concerned year in which those fixed assets were in use and therefore those assets cannot be said to put to use during concerned year as per decision of Hon ble Bombay High Court decided in favour of Revenue in case of Dineshkumar Gulabchand Agarwal vs.CIT & Anr. (Bom.) 267 ITR 768. 3. Whether Ld. CIT(A) was correct on facts and circumstances of case and in law in deleting addition of Rs.13,99,056/- made by AO on account of disallowance on account of advance & securities written off? 2. It transpires from above grounds of appeal, that Revenue has assailed impugned order of ld. CIT(A) on deletion of following three disallowances made by Assessing Officer : (i). Disallowance u/s. 14A Rs.56,44,511/- (ii). Disallowance out of depreciation claimed Rs.56,86,641/- (ii). Disallowance of advance & Securities written off Rs.13,99,056/- 3. factual matrix leading first issue is that during course of assessment proceedings, AO noticed that assessee company earned dividend income on shares at Rs.5,14,95,795/- and on mutual funds at Rs.62,55,905/- totaling to Rs.5,77,51,700/- which was claimed as exempt income. However, as per AO since no expenses were claimed to have been incurred for earning this exempt income, assessee was required to explain as to why disallowance u/s. 14A of Act be not determined as per Rule 8D of IT Rules. In response, assessee explained that out of aggregate expenses of Rs.5.57 crores claimed in profit and loss account, expenses aggregating to Rs.4.96 crores were already disallowed and added 3 ITA No.88/Del./2014 back in computation of income and therefore, no further disallowance out of balance expenses of Rs.60,77,000/- claimed against business income, is warranted u/s. 14A of Act. AO was not convinced with explanation of assessee and observed that bulk of investment of assessee was in shares and mutual funds only amounting to Rs.2,90,96,41,000/-. He, therefore, relying on decision of Special Bench of ITAT, New Delhi in case of Cheminvest Ltd. v. ITO, 317 ITR 86 and another order of ITAT in Daga Capital Pvt. Ltd. in ITA No. 8057/Mum/2003, invoked provisions of Rule 8D and worked out disallowance thereunder of amount of Rs.1,38,31,112/-. However, noticing that assessee had claimed expenses only to tune of Rs.60,77,000/-, AO disallowed such expenses in proportion of total exempt income to total taxable income and accordingly made disallowance of Rs.56,44,511/- u/s. 14A of IT Act r.w.r. 8D of IT Rules. 4. assessee carried matter in appeal before first appellate authority, who after considering elaborate submissions of assessee, deleted addition observing as under : Regarding Ground No.1 of appeal relating to disallowance under Section 14A, I find that Ld. AO was not satisfied with claim of appellant and invoked Rule 8D. However, total disallowance as per Rule 8D worked out at Rs. 1,38,31,112/-. Therefore, he disregarded computation under Rule 8D and applied thumb rule, whereby he took into account total expense claimed by appellant amounting to Rs.60.77 lakhs, 4 ITA No.88/Del./2014 and disallowed above expenses in ratio of total exempt income to total income of appellant of amount of Rs.56,44,511/-. 6.3.2 purpose of section 14A, when inserted by Finance Act, 2001, was to ensure that no expenses that are actually incurred for earning tax exempt income are claimed against taxable income. In order to avoid subjectivity in such determination and to avoid resulting litigation objective procedure was prescribed in form of Rule 8D, w.e.f. 24.3.2008. However, this procedure is to be applied only, where AO, having regard to accounts of taxpayer, is satisfied that claim of appellant is not correct. Other than this procedure, no other method is legally permissible to compute disallowance. 6.3.3 I find that Ld. AO has actually not applied prescribed method under Rule 8D but has used thumb rule of his choice. Further, while rejecting claim of appellant, Ld AO failed to appreciate that appellant had suo moto disallowed amount of Rs 4.96 crores out of total expenses of Rs 5.57 crores, i.e., almost 89% of total expenses, by attributing same not for earning taxable business income. No cogent findings were given by Ld AO as to how this claim of appellant with regard balance amount of Rs 60.77 lakhs was incorrect, having regard to accounts of appellant. Ld. AO did not examine claim of appellant that total personnel and administrative expense of Rs.10,70,000/- were in respect of thin strength of employees, who were working for providing IT enabled BPO services and were not involved in activity of making investment in shares/mutual funds. I also find that while making disallowance u/s 14A in respect of such balance expenses, Ld. AO disregarded fact that he had also disallowed individual expenses embedded in claim of Rs 60.77 lakhs separately, as under: Particulars (in Rs.) Amount 1. Disallowance out of Depreciation allowance 56,86,641 2. Disallowance of rental expenses 8,23,166 3. Disallowance of bad debts 2,66,243 4. Disallowance of advances and security deposits 13,99,056 written of 6.3.4 On careful consideration, I hold that action of Ld. AO in attributing balance expenses over and above 89% of expenses already added back by appellant, towards activity of earning dividend 5 ITA No.88/Del./2014 income from investment made in shares/mutual funds was without any cogent ground. Moreover, for assessment year 2008-09 onwards disallowance u/s 14A could be made only by invoking prescribed method of Rule 8D only. No other subjective thumb Rule and estimation is possible where Ld. AO is not satisfied with claim of appellant. In case of appellant, it is evident that appellant had already disallowed 89% of its total expense debited in P&L account and added back to same to total income. Regarding balance expense, Ld. AO has not specifically identified any expense that could have been attributable to earning of dividend income. Under circumstances, keeping in view decision of Hon'ble Delhi High Court in case of Maxopp Investments Limited Vs. CIT (Supra), provisions of Rule 8D could not have been invoked in case of appellant. In view of same, action of Ld. AO of making disallowance of balance expense of Rs.60.77 lakhs u/s 14A was not justified in view of applicable law in matter. In view of same, addition on this ground is deleted. Accordingly, this ground of appeal is allowed in favour of appellant. 5. During course of hearing, ld. DR relying upon assessment order, submitted that ld. CIT(A) was not justified in deleting addition made by AO u/s. 14A of Act read with Rule 8D of Income-tax Rules after relying upon decision of Special Bench of Tribunal. It was submitted that ld. CIT(A) has not given any good reasons to discard findings reached by Assessing Officer for making disallowance. He accordingly, urged for allowance of appeal. 6. In his rival submissions, ld. AR of assessee placed before us written synopsis, stating on this issue as follows: 6 ITA No.88/Del./2014 It is matter of fact and record that assessee vide its computation of income (page 7 PB) has already suo moto offered to tax around 89% of total expenses as debited in profit & loss account. Out of total expenses of Rs. 55,687,000 as debited in profit & loss account assessee has already offered to tax expenses of Rs. 49,611,000 as per said computation. Only bare minimum remaining expenses of 11% amounting to Rs. 6,077,000 which are in any case required to be incurred for running corporate identity of company have been claimed. This fact has been undisputed by AO. In response to query raised by AO on disallowance of further expenses u/s 14A it was submitted vide submission dated 29/10/12 before AO (reproduced at internal page 2 of AO order) that out of total expenses incurred assessee has already suo moto offered to tax huge amount comprising of 89% of total expenses debited as per profit & loss account & therefore any further disallowance of expenses u/s 14A would be highly unwarranted on facts and circumstances of case. 1.2 AO s decision: In spite of above position AO proceeded to disallow remaining expenses of 11% amounting to Rs. 6,077,000 u/s 14A on presumptive basis i.e. in proportion of exempt income to total income resulting in further disallowance of Rs. 5,644,511 out of total remaining expenses claimed of Rs. 6,077,000. As result of this action on part of AO almost all expenses debited as per profit and loss account stood disallowed after considering suo moto disallowance by assessee, supra. AO in making disallowance u/s 14A in aforesaid manner just failed to record mandatory satisfaction as provided u/s 14A(2) of Act requiring AO to record his satisfaction on correctness of claim made by assessee having regard to accounts of assessee. AO just failed to objectively record any satisfaction in its order as to how voluntary disallowance of expenses by assessee (to magnitude of 89% on facts of present case) will not be sufficient for purpose of section 14A. Further AO also failed to record satisfaction / give any finding as to how much of remaining small expenses of 11% claimed (Rs. 6,077,000) have been actually incurred for purpose of earning exempt income and only on presumptive / estimate basis he disallowed substantial part out of remaining 11% expenses. 7 ITA No.88/Del./2014 1.3 Decision of CIT(A): CIT (A) rendered clear finding on issue after considering entire facts and circumstances and legal position. CIT(A) at outset vide para 6.3.2 of its order records that aggregate of various disallowances made by AO has resulted in disallowance of Rs. 1,38,17,613 which is much higher than actual expenses of Rs. 6,077,000 only as claimed by assessee resulting in serious anomaly in approach of AO. CIT(A) thereafter records that as per mandatory requirement of law i.e. section 14A(2) AO can proceed to make disallowance u/s 14A only where AO having regard to accounts of assessee is satisfied that claim of assessee is not correct. Importantly CIT(A) vide para 6.3.3 of its order records that AO while rejecting claim of assessee failed to appreciate that assessee had suo moto disallowed almost 89% of total expenses. CIT(A) records that no cogent findings have been given by AO as to how claim of assessee with regard balance amount of expenses of Rs. 60.77 lacs is incorrect having regard to accounts of appellant. Importantly CIT(A) also records that AO did not examine claim of appellant that total personnel and administrative expenses of Rs. 1,070,000 were in respect of thin strength of employees who were working for IT enabled BOP services and were not involved in activity of making investment in shares / mutual funds. CIT(A) also notes that vide para 6.3.3 of its order that AO has already disallowed individual expenses embedded in claim of Rs. 60.77 lacs resulting double addition in hands of assessee. CIT(A) thereafter concludes while observing, interalia, at para 6.3.4 of its order that AO had made disallowance u/s 14A without giving any cogent reasons and without considering fact that assessee had already offered to tax 89% of expenses on suo moto basis & without specifically identifying any expenses out of remaining 11% expenses which could be identified towards earning of dividend income. CIT(A) relies upon mandate of Jurisdictional High Court in case of Maxopp Investment Ltd. Vs CIT 347 ITR 272 (Del.) requiring AO to record 8 ITA No.88/Del./2014 appropriate satisfaction having regard to accounts of assessee before proceeding to make any disallowance u/s 14A. Assessee s submissions: It is respectfully submitted that there is serious fallacy in decision & approach of AO in proceeding to make further disallowance of Rs. 5,644,511 u/s 14A over and above suo moto addition by asssessee of 89% of its expenses debited to profit & loss account. anomaly which is resulting from this is that almost entire expenses debited to profit and loss account have been disallowed. In fact it is also pertinent to submit that CIT(A) precisely records vide para 6.3.2 of its order that aggregate of various disallowances made by AO has resulted in disallowance of Rs. 1,38,17,613 which is much higher than actual expenses of Rs. 6,077,000 only as claimed by assessee resulting in serious anomaly in approach of AO. It would be important to quote here specific provisions of sub section (2) of section 14A as under: 2) Assessing Officer shall determine amount of expenditure incurred in relation to such income which does not form part of total income under this Act in accordance with such method as may be prescribed, if Assessing Officer, having regard to accounts of assessee, is not satisfied with correctness of claim of assessee in respect of such expenditure in relation to income which does not form part of total income under this Act . Thus, necessary condition prescribed for AO to make addition u/s 14A is to firstly record satisfaction as to how voluntary disallowance made by assessee (to magnitude of 89% on facts of present case) will not be sufficient for purpose of section 14A. Further on facts of present case AO also failed to record satisfaction / give any finding as to how much of remaining small expenses of 11% claimed (Rs. 6,077,000) have been actually incurred for purpose of earning exempt income and only on presumptive / estimate basis he disallowed substantial part out of remaining 11% expenses. cumulative effect of this is that entire expenses as per profit & loss account have been disallowed in fact disallowance has been much more than actual 9 ITA No.88/Del./2014 expenses of Rs. 60.77 lacs claimed by assessee as pointed by CIT(A) vide para 6.2 of its order. Such approach of AO is highly unjustified on facts and circumstances of case and in law & also highly illogical. direct reliance is placed in this regard on following decisions from Jurisdictional High Court, copies submitted: i. Decision of Delhi High Court in case of CIT Vs Taikisha Engineering India Ltd. (2015) 370 ITR 338 (Del.): Held after extensively considering earlier decision in case of Maxopp Investment Ltd. Vs CIT 347 ITR 272 (Del.) that AO cannot proceed to make any disallowance u/s 14A without elucidating and explaining why voluntary disallowance made by assessee was unreasonable and unsatisfactory. It would be pertinent to note following observations of High Court vide para 20: 20. However, in present case, we need not refer to sub-rule (2) of rule 8D of Rules as conditions mentioned in sub-section (2) of section 14A of Act read with sub-rule (1) of rule 8D of Rules were not satisfied and Assessing Officer erred in invoking sub-rule (2), without elucidating and explaining why voluntary disallowance made by assessee was unreasonable and unsatisfactory. We do not find any such satisfaction recorded in present case by Assessing Officer, before he invoked sub-rule (2) of rule 8D of Rules and made re- computation. Therefore, respondent-assessee would succeed and appeals should be dismissed. ii. Decision of Delhi High Court in case of CIT Vs I.P. Support Services India (P) Ltd. (2015) 378 ITR 240 (Del.): Similarly held that approach of AO in invoking section 14A without recording his satisfaction as to why voluntary disallowance by assessee was unreasonable and unsatisfactory is not sustainable under law. iii. Decision of Delhi High Court in case of CIT Vs Zuari Investment in ITA No. 347/2016 dated 27/05/16: Held that approach of AO in invoking section 14A without recording his satisfaction as to why voluntary disallowance by assessee was unreasonable and unsatisfactory is not sustainable under law. 10 ITA No.88/Del./2014 Further decision of Special Bench of ITAT in case of Cheminvest Ltd. Vs ITO as relied upon by AO has been reversed by Jurisdictional High Court in its decision in case of Cheminvest Ltd. Vs CIT 378 ITR 33 (Del), copy submitted. Jurisdictional High Court reversing decision of ITAT Special Bench has held that section 14A will have no application in absence of exempt income. reliance is also placed on following High Court decisions, copies submitted, wherein it has been held that administrative expenses cannot be disallowed u/s 14A in absence of any finding by AO as to how much administrative expenses have been incurred to earn exempt income; such expenses cannot be disallowed on basis of presumption: i) Decision of Gujarat High Court in case of CIT Vs UTI Bank Ltd. dated 22/03/13; ii) Decision of Gujarat High Court in case of CIT Vs Torrent Power Ltd. dated 04/02/14. Conclusion: Thus, in view of foregoing facts and submissions and legal position it is submitted that AO had grossly erred in making additional disallowance of Rs. 56,44,511 u/s 14A of Act. same is highly unwarranted on facts and circumstances of case and particularly in view of fact that assessee had already suo moto offered to tax 89% of expenses as debited in profit & loss account. approach followed by AO has resulted in disallowance of expenses more than actually claimed by assessee as precisely identified by CIT(A) vide para 6.3.2 of its order being highly unwarranted situation. It is respectfully submitted that Ld. CIT(A) has given well reasoned order on issue and same does not requires any interference. 7. We have considered rival submissions and have perused entire material available on record. Before we deal with issue, it is felt necessary to reproduce relevant provisions of section 14A of Act, which read as under : 11 ITA No.88/Del./2014 14A. (1) For purposes of computing total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income which does not form part of total income under this Act. (2) Assessing Officer shall determine amount of expenditure incurred in relation to such income which does not form part of total income under this Act in accordance with such method as may be prescribed19, if Assessing Officer, having regard to accounts of assessee, is not satisfied with correctness of claim of assessee in respect of such expenditure in relation to income which does not form part of total income under this Act. (3) provisions of sub-section (2) shall also apply in relation to case where assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income under this Act : Provided that nothing contained in this section shall empower Assessing Officer either to reassess under section 147 or pass order enhancing assessment or reducing refund already made or otherwise increasing liability of assessee under section 154, for any assessment year beginning on or before 1st day of April, 2001. 8. plain reading of provisions of section 14A(2)/ (3)suggests that disallowance under this section can be made only if Assessing Officer is satisfied that amount claimed by assessee to have been incurred for earning exempt income is not correct. Furthermore, such satisfaction is to be arrived at with reference to account books of assessee. In instant case, it is undisputed fact that out of total expenses of Rs. 5,56,87,000/- as debited in profit & loss account assessee has already offered substantial expenses of Rs. 4,96,11,000/- (representing to 89% of total expenditure) to tax in computation of income filed in relation to earning of exempt income. perusal of assessment order nowhere reveals that Assessing Officer has returned any finding that he is not satisfied with correctness of 12 ITA No.88/Del./2014 expenditure claimed and offered for taxation in relation to exempt income. We further observe that AO did not at all consider assessee s submissions and straightway proceeded to work out disallowance as per Rule 8D. There is complete lack of finding by AO that he is not satisfied with expenditure suo moto offered by assessee in computation of income for disallowance u/s. 14A. For this proposition, we stand fortified by decision of jurisdictional High Court in case of Maxopp Investment Ltd., 347 ITR 272 (Del) wherein Hon ble Court has laid down following principle of law : requirement of Assessing Officer embarking upon determination of amount of expenditure incurred in relation to exempt income would be triggered only if Assessing officer returns finding that he is not satisfied with correctness of claim of assessee in respect of such expenditure. Therefore, condition precedent for Assessing Officer entering upon determination of amount of expenditure incurred in relation to exempt income is that Assessing officer must record that he is not satisfied with correctness of claim of assessee in respect of such expenditure. 9. Similar view has been taken by coordinate bench of Delhi Tribunal in case of Crown Corporation Pvt. Ltd. vs. ACIT vide order dated 27.06.2016, whereby similar issue has been decided in favour of assessee after following decision of Hon ble Delhi High Court in case of Maxopp Investment Ltd. (supra). Therefore, for want of statutory satisfaction recorded by AO, AO was not justified in resorting to provisions of 13 ITA No.88/Del./2014 section 14A or Rule 8D of Act. This view also gets support from following decisions relied on by assessee : (i). CIT vs. Taikisha Engineering India Ltd., 370 ITR 338 (Del.) (ii). CIT vs. I.P. Support Services India (P) Ltd., 378 ITR 240 (Del.) (iii). CIT vs. Zuari Investment in ITA No. 347/216 dated 27.05.16 (copy placed on record). 10. Assessing Officer has relied on decision of Special Bench of ITAT in Chemnivest Ltd. vs. ITO (supra) which stands reversed by Hon ble jurisdictional High Court in said case as reported in 378 ITR 33 (Del.) 11. We further find considerable force in contention of Sh. Piyush Kaushik, ld. Counsel for assessee that once assessee had offered 89% of total expenditure for disallowance in computation of income, it was imperative on Assessing Officer first to show as to how suo motu disallowance offered by assessee in computation of income is incorrect and to record satisfaction as regards incorrectness of assessee s claim. If same is not done, AO cannot resort to re-computation of disallowance as per section 14A read with Rule 8D. 12. On examination of record, we also find no material on record to discard finding of ld. CIT(A) that AO has failed to find out as to how 14 ITA No.88/Del./2014 balance expenditure of Rs.60.77 lacs claimed by assessee was incorrect or had any nexus with earning of exempt income. AO also did not examine stand of assessee that administrative expenses of Rs.10,70,000/- were in respect of thin strength of employees who were working for providing IT enabled BPO Services and were not involved in activity of making investment in shares or mutual funds. We also find substance in observation of ld. CIT(A) that AO has disregarded fact that he had also disallowed individual expenses embedded in claim of Rs.60.77 lakhs separately, such as disallowance of depreciation of Rs.56,86,641/-, disallowance of rental expenses Rs.8,23,166, disallowance of bad debts Rs.2,66,243 and disallowance of advances and security deposits written off Rs.13,99,056/-. In view of what has been discussed above, we do not find any justification to interfere with order of ld. CIT(A) on this count. Accordingly, ground No. 1 of Revenue is liable to be dismissed. 13. Adverting to next issue of disallowance of depreciation, we find that AO disallowed depreciation of Rs.56,86,641/- on furniture & fixtures, office equipments and computer items. As per AO, all above fixed assets were used by assessee for business of Data Processing and Export thereof, which as per assessee stood already ceased to exist in July, 15 ITA No.88/Del./2014 2008. He accordingly observed that business of Data processing and export was stopped in F.Y. 2008-09 and above fixed assets on which depreciation was claimed by assessee were not used for purpose of business during year under consideration. He therefore, concluded that assessee had claimed depreciation on assets which were not used for purpose of business to minimize taxable income from house property. He accordingly disallowed depreciation of Rs.56,86,641/- out of total claim of depreciation of Rs.58,08,280/-. assessee carried matter to ld. CIT(A), who after relying on decision of Hon ble Delhi High Court in case of CIT vs. Yamaha Motor India Pvt. Ltd. 328 ITR 297, deleted disallowance. 14. ld. DR relied on order of AO whereas ld. AR of assessee supported order of ld. CIT(A) stating that issue is covered by decision of jurisdictional High Court in case of CIT vs. Yamaha Motor India Pvt. Ltd. (supra) wherein decision of Bombay High Court relied on by Revenue in grounds of appeal stands considered and dissented and decision of jurisdictional High Court shall prevail over decision of other High Courts. It was also submitted by ld. AR that once asset becomes part of block of asset then it loses its individual identity and 16 ITA No.88/Del./2014 tax depreciation continues to be claimed unless entire block ceases to exist or sale value exceeds tax WDV of respective block. Further AO also failed to appreciate that in view of mandate from Jurisdictional High Court expression used for purpose of business in context with claim of depreciation u/s 32 would also include passive user i.e. kept ready for use though not actually used and with respect to discarded items it would mean that user in business is not relevant in current financial year but in earlier financial year. Reliance is further placed on following decisions : (i). Stitchwell Qualitex (RF) vs. ITO 2015-TOIL-2184-HC-Del. (ii). National Thermal Power Corpn. Ltd. vs. CIT dt. 15.10.12(copy placed) (iii). Capital Bus Service P. Ltd. vs. CIT, 123 ITR 404 (iv). CIT vs. Refrigeration and Allied Ind. Ltd., 247 ITR 12. 15. Having considered submissions of both parties, we find no substance in this ground of appeal. It is fact that assessee had computed depreciation on reduced WDV only after reducing assets sold. There is no material on record to assail finding of ld. CIT(A) that once asset becomes part of block of assets, it loses its individual identity. However, depreciation on that block of asset is continued and claimed until entire block ceases to exist. finding of ld. CIT(A) is also found supported by decision of Hon ble jurisdictional High Court in case of 17 ITA No.88/Del./2014 CIT vs. Yamaha Motor India Pvt. Ltd. (supra), wherein Hon ble Court held as under : 7. On aspect of passive user, there are two decisions of two Division Benches of this court in cases reported as CIT v. Refrigeration and Allied Industries Ltd. [2001] 247 ITR 12 (Delhi) and Capital Bus Services P. Ltd. v. CIT [1980] 123 ITR 404 (Delhi). In this view of matter, we need not refer to judgments of any other court as we are bound by earlier judgments of this court. In fact, we also agree with ratio of both decisions which hold that as long as machinery is available for use, though not actually used, it falls within expression " used for purposes of business" and assessee can claim benefit of depreciation. 8. Looking at facts from this point of view, actual user is not required as has been contended by Revenue. 9. matter can be looked at from another angle also. No doubt, expression used in section 32 is " used for purposes of business" . However, this expression has to be read harmoniously with expression " discarded" as found in sub-clause (iii) of sub-section (1). Obviously, when thing is discarded it is not used. Thus " use" and " discarding" are not in same field and cannot stand together. However, if we adopt harmonious reading of expressions " used for purposes of business" and " discarded" then it would show that " used for purposes of business" only means that assessee has used machinery for purposes of business in earlier years. It is not disputed in facts of present case, and as discussed above, that machinery in question was in fact used in previous year and depreciation was allowed on block of assets in previous years. Taking therefore realistic approach and adopting harmonious construction, we feel that expression " used for purpose of business" as found in section 32 when used with respect to discarded machinery would mean that user in business is not in relevant financial year/previous year but in earlier financial years. Any other interpretation would lead to incongruous situation because on one hand depreciation is allowed on discarded machinery after allowing, inter alia, adjustment for scrap value, yet, on other hand user would be required of discarded machinery which use is not possible because of various reasons, viz., age of machinery, or that it has become obsolete as new technology has come in and so on. We thus hold that discarded 18 ITA No.88/Del./2014 machinery may not be actually used in relevant previous year as long as it is used for purposes of business in earlier years . 16. In view of above legal position, it is clear that expression used for purpose of business would mean & imply that use of asset would be relevant in previous financial years with respect to discarded assets forming part of block. Furthermore, nature of assets in present case comprises of general items such as furniture & fixtures & office equipments which were ready for use . Such passive user is also entitled for depreciation in view of various decisions of jurisdictional High Court relied by ld. AR, noted supra. Following above decisions, and having found no contrary material, we do not find any justification to interfere with conclusion reached by ld. CIT(A) on this issue. Accordingly, ground No. 2 of Revenue is also dismissed. 17. facts relating to third and last issue are that Assessing Officer disallowed advances and security deposits written off by assessee amounting to Rs.3,80,700/- and Rs.10,18,356/- respectively. These expenditures were also considered by AO while computing proportionate disallowance u/s. 14A, which according to ld. CIT(A) amounted to double disallowance. contention of assessee had been that sum of Rs.3,80,700/- was given 19 ITA No.88/Del./2014 to M/s. Reliance Infocom for VPN connections five years back as advance and since such connections were not sanctioned nor above amount was returned to assessee, appellant decided to write off same. Similarly, sum of Rs.10,18,356/- was given to various authorities/parties for taking utility connections such as telephone, internet etc. and since assessee closed its business of Data Processing and Export and above amount was not recoverable or its recovery was fetching substantial time and inordinate cost, hence, assessee had written of same in its books of accounts. AO disallowed claim of assessee on ground that no evidence was laid on record to substantiate any effort of recovery. ld. CIT(A) deleted addition observing that in view of nature of business of assessee i.e., IT enabled services, such advances were given in course of ordinary course of business and hence, claim of written off amounts was allowable u/s. 28 of Act. 18. ld. DR relied on order of Assessing Officer whereas ld. Counsel for assessee reiterated submissions made before ld. CIT(A) as also enumerated in its written synopsis placed before us. It was also submitted that ld. AO has tried to step into shoes of businessman and impose condition that assessee should have made rigorous follow up 20 ITA No.88/Del./2014 before writing off advances/security paid, which is not legally required at all once assessee had written off same in its books of account. 19. Having considered rival submissions, we find that it is not in dispute that substantial material was placed before AO that said advances/securities were outstanding for last 5-10 years. nature of these payments, i.e., towards advances and securities for getting VPN and utility connections, as noted above, is also not doubted by Assessing Officer. In such state of affairs, if assessee decided to write off said advances/securities given in ordinary course of business, in its books of accounts, claim of assessee cannot be discarded simply because substantial evidences were not placed to prove its efforts of their recovery or that said debts became irrecoverable, by way of stepping into shoes of business. This view of ours is fortified by following decisions relied by ld. Counsel for assessee : (i). TRF Ltd. vs. CIT, 323 ITR 397 (SC) (ii). Minda HUF Ltd. vs. JCIT 285 ITR(AT) 88 (Del. Tri.) (iii). CIT vs. Modi Telecommunication Ltd. 325 ITR 291 (Del.) (iv). Madhav Marbles and Granites vs. ITAT, 362 ITR 647 (Raj.) 21 ITA No.88/Del./2014 20. In view of these decisions, and in totality of facts and circumstances, we do not find any justification to interfere with order of ld.CIT(A) on this count. Accordingly, this ground of appeal also deserves to fail. In result, appeal of Revenue is dismissed. Order pronounced in open court on 22.09.2016. Sd/- Sd/- (H.S. SIDHU) (L.P. SAHU) Judicial Member Accountant Member Dated : 22.09.2016 *aks/- Copy of order forwarded to: (1) appellant (2) respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi D.C.I.T. Circle 12(1), New Delhi v. Galileo India Pvt. Ltd