2013 (12) TMI 1657 - AT - Income Tax

Deduction u/s. 80IB - Appellant did not file audit report under section 80IB along with the return of income - Such audit report was filed during the course of assessment proceeding - Appellant fulfils all other conditions required for claim under section 80IB. - HELD THAT - It is fact that the assessee did not furnish audit report along with return but produced before the A.O. at the time of assessment as Hon ble Gujarat High Court has held that it is a sufficient compliance of the Section if the assessee furnished the audit report before the A.O. at the time of assessment. Thus claim of 80IB cannot be denied. Decision in favor of assessee. Business of running a multiplex theatre - Depreciation on electrical fittings allowed at higher rate - The A.O. observed that depreciation on electric fittings is admissible @ 15% but assessee has claimed depreciation @ 25%. Appellant claimed that these are in the nature of plant which is essential for carrying on the business activity. - HELD THAT - It is undisputed that electrical items are fitted with projector and other film exhibition systems. Without electrical items the projector as well as exhibition systems cannot be run. Thus the assessee is entitled to higher rate @ 25%. - Decided in favor of assessee. Addition u/s. 40(a)(ia) on account of late payment of TDS- The assessee capitalized the various expenses but claimed depreciation at 2, 86, 448/- in the P L account. TDS on capitalised item paid on 30.05.2005 as against due date of 07.12.2004 - Appellant submitted that the entire TDS was paid on May 30 2005 which is much before the due date of filing return. As per retrospective amendment by finance act 2008 the expense is allowable if TDS for the month of March is paid before due date of filing return. TDS in this case is prior to March 2005 and therefore amended provisions will not apply to the appellant - HELD THAT -. Depreciation cannot be disallowed under section 40 (a) (ia) of IT act since it talks of expenditure by way of interest commission brokerages fees for professional services. The assessee did not claim any expenditure under these heads. Therefore provision of Section 40(a)(ia) is not applicable. Decided in favor of assessee.

Summary

Issues involved:
The issues involved in this case are:
1. Allowance of deduction u/s.80IB
2. Disallowance of depreciation on electrical fittings
3. Addition u/s.40(a)(ia) on account of late payment of TDS

Allowance of deduction u/s.80IB:
The Revenue appealed against the CIT(A)'s decision to allow the assessee's claim u/s.80IB amounting to Rs. 6,95,585. The A.O. had disallowed the deduction as the audit report was not filed along with the return, which is mandatory. The CIT(A) allowed the appeal stating that filing the audit report during assessment proceedings was sufficient compliance. The ITAT upheld the CIT(A)'s decision, citing the Gujarat High Court's ruling and confirmed the allowance of deduction u/s.80IB.

Disallowance of depreciation on electrical fittings:
The second issue pertained to the disallowance of depreciation on electrical fittings amounting to Rs. 2,97,038. The A.O. allowed depreciation at 15% instead of the claimed 25%. The CIT(A) overturned this decision, considering the nature of the business and the essentiality of the electrical fittings for film exhibition. The ITAT agreed with the CIT(A), stating that the fittings were integral to the plant and machinery, thus justifying the higher depreciation rate of 25%.

Addition u/s.40(a)(ia) on account of late payment of TDS:
The final issue was the addition of Rs. 2,86,448 u/s.40(a)(ia) due to late payment of TDS. The A.O. disallowed depreciation on capitalized expenses for late TDS payment. The CIT(A) allowed the appeal, emphasizing that the TDS was paid before the due date of filing the return. The ITAT concurred, stating that depreciation cannot be denied based on TDS payment timing, as depreciation is calculated on the written down value of assets. The appeal of the Revenue was dismissed.

This judgment highlights the importance of compliance with statutory requirements, the interpretation of tax laws, and the significance of timely payments in tax matters.