2013 (3) TMI 670 - AT - Income Tax

Disallowance of depreciation in respect of a Pajero Car and six tippers - Held that - The assessee is entitled to claim depreciation on all these motor vehicles which may undeniably owned by the assessee-company and were ready for use may be on the last day of the F.Y. and therefore confirm the impugned finding of ld. CIT(A) and dismiss ground No. (1) of revenue s appeal. Addition on account of sundry balance written off - Held that - The main amount advanced to Bhardwaj Transport Corp. Mathura is shown as the opening balance in the ledger account of A.Y. 2005-06. We are convinced that all these advances are intimately connected with assessee s business and the assessee has written off these amounts in its books of accounts in terms of Section 28 of the Act as bad-debts. As a result we dismiss ground No. (2) of revenue s appeal. Non-deduction of tax at source (TDS) u/s 194J on consultancy charges - Held that - The assessee has only reimbursed the amount as per the agreement. As per the agreement entered into by this assessee with the concerned Authority it is a compulsory payment to be made as a reimbursement.On this amount obviously Section 194J is not applicable. - Decided against revenue TDS u/s 194C - purchase of sign-boards - whether this payment is towards a works-contract or not? - Held that - As per the A.O. these payments are not saved under the umbrella of Circular No. 681 dated 8.3.1994. He has also mentioned that this payment is not towards purchase of goods because the boards are made as per the specification supplied by the assessee and the entire work has been done by the payee accordingly. The ld. CIT(A) has observed that there is no evidence on record to show that these payments are not for contract for sale and are for contract for work . In our considered opinion the finding of the ld. CIT(A) is cursory and he has mainly relied on the narration on the bills but he has not gone into the real aspect of the controversy. On the other hand the A.O. has examined this issue in depth and has found that this is nothing but a works-contract between the assessee and the payee.But still we are of the opinion that this issue has not been correctly investigated into and examined by the A.O. Thus we need to restore this issue to the file of the A.O. for fresh adjudication as per law Sale of tippers - sale value reduced from WDV of the concerned block of assets and depreciation has been claimed on reduced block value in the computation - Held that - There is no dispute regarding the fact that total sale consideration has been offered in the depreciation chart while reducing the block of assets and on the balance WDV of the block depreciation was claimed as stated before the A.O. Apart from the reasoning given by ld. CIT(A) as above we are of the considered opinion that Goetz India s decision (2006 (3) TMI 75 - SUPREME Court a) debars the A.O. from giving any relied if not sought but authorizes the Tribunal to undo any injustice so done. Therefore we confirm the impugned deletion of the addition which has been made only on account of pedantic reasons. Addition u/s 40A - rejection of books - Held that - the rejection of the books of account by A.O. is not correct as he has not pinpointed any specific defect much less any material defect therein and not only has accepted the declared turnover but has also accepted the declared G.P. Rate. The ld. CIT(A) has correctly not upheld the rejection of the books. The cash expenses have been made due to the mitigating circumstances mentioned in the above-extracted submission of the ld. A.R. which according to us are justified in that situation. However neither the A.O. nor the ld. CIT(A) and even the ld. Counsel for the assessee in the written submissions throw any light on this aspect as to whether the cash expenses were not incurred in violation of section 40A(3) of the Act. This issue requires a fresh adjudication at the level of the A.O. TDS u/s 194C - assessee made entire payment before 31.03.2007 towards hiring of trucks for the shifting of plant from one place to another place - Held that - Provisions of Section 194C are not applicable in view of the Special Bench s decision in the case of Merilyn Shipping & Transports Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) wherein it has been held that provisions of section 40a(ia) of the Act are applicable only to amounts of expenditure which are payable as on 31st March of every year and it cannot be invoked to disallow expenses which have been actually paid during the previous year without deduction of TDS.

Summary

Issues Involved:
1. Disallowance of depreciation.
2. Deletion of addition on account of sundry balance written off.
3. Deletion of addition under Section 40(a)(ia) for non-deduction of TDS on consultancy charges.
4. Deletion of addition under Section 40(a)(ia) for non-deduction of TDS on expenses incurred on sign boards.
5. Allowance of claim regarding profit on sale of tippers.
6. Disallowance of cash expenses and rejection of books of account under Section 145(3).
7. Addition under Section 40(a)(ia) for non-deduction of TDS on plant shifting charges.
8. Exclusion of FDR interest income for deduction under Section 80IA(4).

Detailed Analysis:

1. Disallowance of Depreciation:
The revenue challenged the deletion of disallowance of depreciation on a Pajero car and six tippers. The assessee claimed depreciation under Section 32 of the Income Tax Act, 1961, arguing that the vehicles were ready for use, fulfilling the 'user' condition of Section 32. The CIT(A) allowed the claim, and the Tribunal upheld this decision, citing various precedents that support the allowance of depreciation if the asset is ready for use, even if not actually used.

2. Deletion of Addition on Account of Sundry Balance Written Off:
The revenue's appeal against the deletion of Rs. 4,21,929/- added as sundry balance written off was dismissed. The assessee argued these were business advances written off as bad debts. The CIT(A) allowed the claim, and the Tribunal upheld this decision, referencing multiple precedents that support the write-off of business advances as bad debts.

3. Deletion of Addition Under Section 40(a)(ia) for Non-deduction of TDS on Consultancy Charges:
The revenue's appeal against the deletion of additions for non-deduction of TDS on consultancy charges was dismissed. The CIT(A) found that TDS had been deducted in the year of payment for one amount and that another amount was a reimbursement not subject to TDS under Section 194J. The Tribunal upheld this decision, finding no infirmity in the CIT(A)'s findings.

4. Deletion of Addition Under Section 40(a)(ia) for Non-deduction of TDS on Expenses Incurred on Sign Boards:
The CIT(A) deleted the addition of Rs. 1,30,82,379/- made under Section 40(a)(ia) for non-deduction of TDS on expenses incurred on sign boards, treating the transaction as a contract for sale rather than a works contract. The Tribunal found the CIT(A)'s finding cursory and restored the issue to the Assessing Officer (A.O.) for fresh adjudication, directing a thorough examination of whether the transaction was a works contract or a sale.

5. Allowance of Claim Regarding Profit on Sale of Tippers:
The CIT(A) allowed the assessee's claim to reduce the profit from the sale of tippers from taxable income, even though it was not claimed in the Return of Income (ROI). The Tribunal upheld this decision, referencing precedents that allow such claims to be entertained even if not claimed in the ROI, provided they are legitimate.

6. Disallowance of Cash Expenses and Rejection of Books of Account Under Section 145(3):
The A.O. disallowed 10% of cash expenses, rejecting the books of account. The CIT(A) reduced the disallowance to 5%, not upholding the rejection of books. The Tribunal set aside this issue for fresh adjudication by the A.O., emphasizing the need to examine whether the cash expenses violated Section 40A(3).

7. Addition Under Section 40(a)(ia) for Non-deduction of TDS on Plant Shifting Charges:
The CIT(A) deleted the addition of Rs. 1,98,000/- and Rs. 3,31,564/- under Section 40(a)(ia) for non-deduction of TDS on plant shifting charges. The Tribunal upheld this decision, referencing the Special Bench decision in Merilyn Shipping & Transports Vs. ACIT, which held that Section 40(a)(ia) applies only to amounts payable as of March 31 and not to amounts actually paid during the year.

8. Exclusion of FDR Interest Income for Deduction Under Section 80IA(4):
The assessee's ground regarding the exclusion of FDR interest income for deduction under Section 80IA(4) was not pressed during the hearing and was dismissed as not pressed.

Conclusion:
The appeals resulted in a mixed outcome, with some issues being dismissed, some upheld, and others remanded for fresh adjudication. The Tribunal's detailed analysis ensured that each issue was thoroughly examined, maintaining adherence to legal precedents and statutory provisions.