2011 (11) TMI 745 - AT - Income Tax

Disallowance of depreciation on office building addition on account of foreign traveling expenditure addition on account of foreign traveling expenditure addition on account of unregistered Provident Fund Trust disallowance u/s 14A disallowance towards interest on late payment of TDS.

Summary

Issues Involved:
1. Disallowance of depreciation on office building.
2. Disallowance of foreign traveling expenditure.
3. Disallowance of contribution to an unregistered Provident Fund Trust.
4. Disallowance under Section 14A of the Income Tax Act.
5. Disallowance of interest on late payment of TDS.

Issue-wise Analysis:

1. Disallowance of Depreciation on Office Building:
The Assessing Officer (AO) disallowed the depreciation claim of Rs. 32,73,220/- on the office building because the conveyance deed for the leasehold property had not been executed in favor of the assessee. The CIT(A) allowed the claim, referencing the Supreme Court decision in Mysore Minerals, which held that depreciation is allowable if the property is used for business purposes and the assessee exercises dominion over it, irrespective of formal title registration. The Tribunal upheld the CIT(A)'s decision, following its previous order for A.Y. 2004-05, confirming that the assessee is entitled to depreciation as the property was used for business and taxes were paid in the assessee's name.

2. Disallowance of Foreign Traveling Expenditure:
The AO disallowed Rs. 10,25,151/- for foreign travel expenses related to attending meetings of the Global Alliance for Sugar Trade & Reform & Liberalization, as similar expenses were disallowed in previous years. The CIT(A) allowed the claim, noting that the expenses were for business purposes, supported by the Tribunal's decision in A.Y. 2003-04. The Tribunal upheld the CIT(A)'s order, affirming that the expenses were indeed for business purposes and the department had accepted similar claims in previous years.

3. Disallowance of Contribution to Unregistered Provident Fund Trust:
The AO disallowed Rs. 9,08,359/- contributed to an unrecognized Provident Fund. The CIT(A) deleted the disallowance, following the Tribunal's decision in A.Y. 2003-04, which interpreted Section 36(1)(iv) and Section 2(38) of the Income Tax Act to mean that contributions to a fund recognized under the Provident Fund Act, 1952, are allowable. The Tribunal upheld the CIT(A)'s decision, confirming that the contribution to the recognized Provident Fund is deductible.

4. Disallowance under Section 14A of the Income Tax Act:
The AO disallowed Rs. 10,00,000/- under Section 14A, attributing expenses to earning exempt income. The CIT(A) reduced the disallowance to Rs. 6,49,336/-, based on a detailed allocation of administrative expenses and salaries related to earning exempt income. The Tribunal found the CIT(A)'s working reasonable and upheld the disallowance of Rs. 6,49,336/-, rejecting both the revenue's and the assessee's appeals on this issue.

5. Disallowance of Interest on Late Payment of TDS:
The CIT(A) disallowed Rs. 2,431/- for interest on late payment of TDS, and the Tribunal upheld this decision, as interest on TDS is not allowable as an expenditure while computing income.

Conclusion:
The Tribunal dismissed both the revenue's and the assessee's appeals, upholding the CIT(A)'s decisions on all issues. The judgment emphasized adherence to precedent and reasonable allocation of expenses related to exempt income. The decision was pronounced in the open court on 15th November 2011.