2012 (12) TMI 1046 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of excess depreciation claimed on windmill and evacuation charges.
2. Deletion of addition u/s 40(a)(ia) on account of commission paid without TDS.
3. Deletion of disallowance of expenditure u/s 40(a)(ia).
4. Deletion of disallowance of depreciation on DG set and cooling towers.

Summary:

Issue 1: Deletion of Disallowance of Excess Depreciation on Windmill and Evacuation Charges
The Revenue appealed against the deletion of disallowance of excess depreciation of Rs. 13,66,440/- claimed on windmill and Rs. 20,20,000/- on evacuation charges for A.Y. 2008-09. The assessee claimed depreciation at 80% on various components of the windmill, which the A.O. reduced to 15% for certain items. The CIT(A) allowed the assessee's claim, and the Tribunal upheld this decision, referencing the Jodhpur Bench's decision in K.K. Enterprises, Udaipur Vs. DCIT, confirming that foundation and electrical items are integral parts of the windmill and eligible for 80% depreciation. The Tribunal also upheld the CIT(A)'s decision on evacuation charges, stating they are essential for the windmill's operation and thus eligible for 80% depreciation.

Issue 2: Deletion of Addition u/s 40(a)(ia) on Account of Commission Paid Without TDS
For A.Y. 2005-06, the Revenue contested the deletion of Rs. 1,92,584/- added u/s 40(a)(ia) due to delayed TDS deposit on commission paid. The CIT(A) deleted the addition, and the Tribunal upheld this, referencing the Calcutta High Court's decision in CIT Vs. Virgin Creations, which allows expenditure if TDS is deducted before the end of the previous year and paid before the return filing due date.

Issue 3: Deletion of Disallowance of Expenditure u/s 40(a)(ia)
The Revenue appealed against the deletion of Rs. 46,49,403/- disallowed u/s 40(a)(ia) for non-deduction of TDS on clearing and forwarding charges. The CIT(A) deleted the addition, and the Tribunal upheld this, citing CBDT Circular No. 723, which exempts payments to shipping agents of non-resident ship owners from TDS under sections 194C and 195. The Tribunal also referenced various decisions supporting that reimbursement of expenses does not attract TDS.

Issue 4: Deletion of Disallowance of Depreciation on DG Set and Cooling Towers
For A.Y. 2005-06 and 2006-07, the Revenue contested the deletion of disallowance of depreciation on DG set and cooling towers, which the A.O. restricted to 25% instead of 80%. The CIT(A) allowed 80% depreciation, and the Tribunal upheld this, agreeing that the DG set and cooling towers are integral parts of the furnace and eligible for 80% depreciation.

Conclusion:
The Tribunal dismissed all three appeals of the Revenue, upholding the CIT(A)'s decisions on all issues. The order was pronounced on 14.12.2012.