2015 (7) TMI 1117 - AT - Income Tax

Deduction claimed u/s 80JJAA - CIT(A) allowed the claim - Held that - As going by the plain language of the provision of section 80JJAA of the Act, it cannot be interpreted that for availing deduction under the said section on account of additional wages paid to new regular workmen employed for three assessment years commencing from the assessment year relevant to the previous year in which such employment is provided such workmen should continue in the employment for all the three years. The only condition provided under the explanation being the regular workmen that the workmen should be employed for not less than 300 days during the previous year. Therefore, the expression additional wages paid to new workmen employed by the assessee in the previous year is the criteria to be fulfilled and to be tested in the first year of the claim of deduction and once deduction is allowable in the first year then, 30% of such additional wages is allowable as deduction in each of the subsequent two years. As we have already discussed in the facts emerging from the record, the AO has not disputed the completion of 300 days of employment by these new regular workmen employed by the assessee during the earlier two years and therefore, once the said condition is satisfied, the condition of continuity in employment does not emanate from the provisions of section 80JJAA of the Act. Accordingly, we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. Depreciation claimed on the assets purchased - w.d.v. in the books of the seller is a tangible material before the AO on the basis on which the AO has determined the actual cost of the asset to the assessee - Held that - Where the assessee acquired an asset which was used by other person for the purpose of business or profession and in such a case if, the AO is satisfied that the main purpose of transfer of the asset directly or indirectly was the reduction of liability to income tax than the actual cost to the assessee shall be the amount which is determined by the AO having regard to all the circumstances of the case. In the case in hand, the AO did not undertake any exercise of examination of the valuation report produced by the assessee or to determine the actual cost of the assets to the assessee. The AO has simply adopted the w.d.v. of the assets in the books of the seller being the actual cost to the assessee and consequently, restricted the claim of depreciation. When the assesee has submitted the valuation report of an expert than without having conducting a proper enquiry and examination to substitute experts opinion, the AO is not justified to brush aside the valuation produced by the assessee. Accordingly, we set aside the orders of the authorities below qua this issue and remit the matter to the record of the AO to decide this issue afresh in the light of various decisions, as relied upon by the assessee

Summary

Issues Involved:
1. Deduction under Section 80JJAA of the Income Tax Act for additional wages paid to new workmen.
2. Disallowance of depreciation claimed on assets purchased from a sister concern under Explanation 3 to Section 43(1) of the Income Tax Act.

Detailed Analysis:

Issue 1: Deduction under Section 80JJAA
The primary issue revolves around the deduction claimed by the assessee under Section 80JJAA for additional wages paid to new workmen. The assessee claimed a deduction of Rs. 53,10,703 while the Auditor's report in Form 10DA certified a deduction of Rs. 26,37,638. The Assessing Officer (AO) restricted the deduction to Rs. 26,37,638, arguing that only wages paid during the relevant previous year should be considered, not wages paid in preceding years. The AO noted that the new workmen employed in the preceding two years had ceased to be workmen during the current year, thus disqualifying the additional wages paid in those years for deduction.

The assessee contended that under Section 80JJAA, the deduction is available for three years, including the year of employment, and relied on the decision of the ITAT in the case of ACIT Vs M/s Texas Instruments Pvt. Ltd. The CIT(A) accepted the assessee's claim, holding that the deduction should be allowed for wages paid to workmen who were employed in previous years and continued to be employed for 300 days.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the plain language of Section 80JJAA does not require the new workmen to continue employment for all three years. The only condition is that the workmen should be employed for at least 300 days in the previous year. Thus, once the condition is satisfied in the first year, the deduction is allowable for the subsequent two years.

Issue 2: Disallowance of Depreciation on Assets Purchased from Sister Concern
The second issue pertains to the depreciation claimed by the assessee on assets purchased from its sister concern, M/s Trigen Apparels Pvt. Ltd. The AO invoked Explanation 3 to Section 43(1) and adopted the written down value (WDV) in the seller's books as the actual cost, disallowing depreciation on the difference of Rs. 55,57,222. The CIT(A) upheld the AO's decision.

The assessee argued that the valuation of the assets was based on a professional valuation report and that the AO did not contradict this valuation. The Tribunal noted that the AO had not undertaken any examination of the valuation report or determined the actual cost of the assets to the assessee. The AO simply adopted the WDV in the seller's books without proper enquiry.

The Tribunal set aside the orders of the authorities below and remitted the matter back to the AO for fresh consideration, directing the AO to conduct a proper enquiry and examination of the valuation report.

Conclusion:
The appeals of the revenue were dismissed, and the cross-objection by the assessee was allowed for statistical purposes. The Tribunal emphasized the need for a strict interpretation of fiscal statutes and proper examination of valuation reports in determining the actual cost of assets for depreciation claims.