2016 (9) TMI 1338 - AT - Income Tax

Additional depreciation claimed under section 32(1)(iia) - disallowance of claim on new plant and machinery on the methodology that 50 per cent. of 20 per cent. of the new plant and machinery installed after 30th September and the rest in the ensuing year - Held that - This is a case where the assessee has purchased and installed the new plant and machinery during the preceding assessment year i.e. the assessment year 2011-12. The said new plant and machinery was purchased and installed in the preceding assessment year after September 30 2010 and therefore in the preceding assessment year the assessee was allowed 50 percent. of the additional depreciation allowable at 20 per cent. in respect of the new plant and machinery which has been put to use during the previous assessment year for less than 180 days i.e. in the preceding assessment year the assessee was allowed additional depreciation at 10 per cent. in respect of the new plant and machinery. During the impugned assessment year the assessee claimed the balance 50 per cent. of 20 per cent. i.e. 10 per cent. additional depreciation on these plant and machinery which were installed during the preceding assessment year after 30th September. There is no dispute about the working of the additional depreciation. There is no dispute that the assessee was entitled for additional depreciation in the plant and machinery acquired and installed in the preceding assessment year. In our opinion now this issue is duly covered by the decision of the hon ble Karnataka High Court in the case of CIT v. Rittal India P. Ltd. 2016 (1) TMI 81 - KARNATAKA HIGH COURT . Thus Additional depreciation being 50 per cent. of 20 per cent. of the cost of new plant and machinery installed by the assessee during the preceding assessment year after September 30 2010 as has been allowed to the assessee in the preceding assessment year i.e. the assessment year 2011-12 allowed - Decided in favour of assessee. Addition u/s 14A read with rule 8D(2)(ii) - - Held that - The provisions of section 14A(2) are explicitly clear. This provision does not empower the Assessing Officer to disallow any expenditure by just applying directly rule 8D. No contrary decision was brought to our knowledge by the learned Departmental representative as against Shri Laksyhmi Cotsyn Ltd. case 2016 (11) TMI 957 - ITAT LUCKNOW which may take a view that the Assessing Officer can compute the disallowance under rule 8D without recording the non-satisfaction about the creditworthiness of the claim of the assessee in respect of the expenditure in relation to the income which does not form part of the total income on the basis of the account of the assessee. Respectfully following the aforesaid decision we set aside the order of the Commissioner of Income-tax (Appeals) so far it relates to the sustenance of disallowance of Rs. 9, 76, 395 and confirm the order of Commissioner of Income-tax (Appeals) so far it relates to deletion of disallowance Disallowance made under section 36(1)(va) - amount not deposited the employees contribution towards PF and ESI within the prescribed due date although the payment was made before the due date of filing of the return - Held that - We noted that the said issue is duly covered by the decision of the honourable Supreme Court in the case of CIT v. Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT . Respectfully following the said decision of the honourable Supreme Court we confirm the order of the Commissioner of Income-tax (Appeals) deleting the disallowance.

Summary

Issues Involved:
1. Disallowance of additional depreciation under section 32(1)(iia).
2. Disallowance under section 14A read with rule 8D(2)(iii).
3. Disallowance under section 36(1)(va) for late deposit of employees' contribution towards PF and ESI.

Detailed Analysis:

1. Disallowance of Additional Depreciation under Section 32(1)(iia):
The assessee challenged the disallowance of Rs. 1,62,66,215 on account of additional depreciation claimed under section 32(1)(iia) for new plant and machinery installed after September 30 of the previous year. The Commissioner of Income-tax (Appeals) (CIT(A)) upheld the disallowance, interpreting that the statute did not provide for the balance 50% of allowable additional depreciation to be carried forward to the subsequent year. However, the Tribunal referred to the Karnataka High Court's decision in CIT v. Rittal India P. Ltd., which clarified that the balance 10% additional depreciation can be availed in the subsequent year if the plant and machinery were used for less than 180 days in the preceding year. Consequently, the Tribunal directed the Assessing Officer to allow the additional depreciation for the subsequent year, thus allowing the assessee's grounds 1 and 2.

2. Disallowance under Section 14A Read with Rule 8D(2)(iii):
The assessee contested the disallowance of Rs. 9,76,395 under section 14A read with rule 8D(2)(iii), arguing that no exempt income was earned during the year. The Revenue also appealed against the deletion of a Rs. 45,80,445 disallowance made under rule 8D(2)(ii). The Tribunal noted that the Assessing Officer did not record any dissatisfaction with the assessee's claim that no expenditure was incurred for earning exempt income, a prerequisite for invoking rule 8D. The Tribunal cited multiple precedents, including the decision in CIT v. Shivam Motors P. Ltd., which held that no disallowance under section 14A can be made if no exempt income is earned. Therefore, the Tribunal set aside the CIT(A)'s order sustaining the Rs. 9,76,395 disallowance and confirmed the deletion of Rs. 45,80,445, thus allowing the assessee's grounds 3 to 5 and dismissing the Revenue's grounds 1 and 2.

3. Disallowance under Section 36(1)(va) for Late Deposit of Employees' Contribution towards PF and ESI:
The Revenue appealed against the deletion of a Rs. 4,55,488 disallowance made under section 36(1)(va) for late deposit of employees' contributions towards PF and ESI. The CIT(A) deleted the disallowance, noting that the payments were made before the due date of filing the return. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in CIT v. Alom Extrusions Ltd., which allows such deductions if payments are made before the due date of filing the return. Consequently, the Tribunal dismissed the Revenue's grounds 3 and 4.

Conclusion:
The Tribunal allowed the assessee's appeal, granting additional depreciation under section 32(1)(iia) and deleting the disallowance under section 14A read with rule 8D(2)(iii). It also dismissed the Revenue's appeal, confirming the deletion of disallowances under sections 14A and 36(1)(va). The judgment was pronounced on September 21, 2016.