2011 (5) TMI 651 - AT - Income Tax

Under statement of income difference in amount received, bills issued and TDS certificates- difference was on account of service tax/ taxes & duties included in bills dis-allowance of depreciation on basis of date of asset put to use - Held that - Bills issued by the assessee were inclusive of service tax. Element of service tax cannot be treated as income of the assessee. In another instance also difference was on account of charges of taxes and duties. In respect of depreciation on machines it is observed that once a Government Authority inspecting the equipment certifies the date of power supply to the equipments and after inspection has permitted energisation of the equipment then it has to be accepted that the equipments were put to use at least on the date when Government Authority has issued the certificate. Since no material has been brought on record to show that findings of fact recorded by CIT (A) are contrary to the facts existing on record. In absence of any such material, the grounds of the revenue are dismissed.

Summary

Issues Involved:

1. Deletion of addition on account of understatement of income (Rs. 3,31,145/-).
2. Deletion of addition on account of understatement of income (Rs. 2,36,066/-).
3. Deletion of addition on account of wrong claim of depreciation (Rs. 82,07,445/-).
4. Non-allowance of depreciation on HB-8 Boring Machine.
5. Allowance of depreciation on capital expenditure (Rs. 2,68,984/-).

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Understatement of Income (Rs. 3,31,145/-):

The Assessing Officer (AO) added Rs. 3,31,145/- to the income of the assessee based on a discrepancy between the TDS certificates and the total amount received from OCL India Ltd. The CIT (A) found that the difference was due to service tax, which was collected from the customer and paid to the government, and thus could not be treated as income. The Tribunal upheld the CIT (A)'s decision, stating that service tax is not part of the assessee's income and dismissed this ground of the revenue.

2. Deletion of Addition on Account of Understatement of Income (Rs. 2,36,066/-):

The AO added Rs. 2,36,066/- due to a discrepancy between the sales figures reported in the audit report and the ledger account. The CIT (A) accepted the assessee's explanation that the difference was due to taxes and duties, which should not be treated as income. The Tribunal found no contrary evidence and upheld the CIT (A)'s decision, dismissing this ground of the revenue.

3. Deletion of Addition on Account of Wrong Claim of Depreciation (Rs. 82,07,445/-):

The AO disallowed the depreciation claim of Rs. 82,07,445/- on various assets, questioning their actual use before the completion of the factory building. The CIT (A) allowed depreciation on certain assets based on the Electrical Inspector's certification of their energization but disallowed it for the HB-8 Boring Machine. The Tribunal upheld the CIT (A)'s decision, finding no evidence contrary to the CIT (A)'s findings, and dismissed this ground of the revenue.

4. Non-Allowance of Depreciation on HB-8 Boring Machine:

The CIT (A) disallowed depreciation on the HB-8 Boring Machine, as there was no evidence of its use before 31.3.2005. The Tribunal found no proof from the assessee regarding the use of the HB-8 Machine during the relevant period and upheld the CIT (A)'s decision, dismissing the assessee's cross objection.

5. Allowance of Depreciation on Capital Expenditure (Rs. 2,68,984/-):

The AO treated certain repair expenditures as capital in nature and added Rs. 2,68,984/- to the income. The CIT (A) directed the AO to allow depreciation on this amount, considering it as part of fixed assets. The Tribunal found no infirmity in the CIT (A)'s order and upheld the decision, dismissing this ground of the revenue.

Conclusion:

The Tribunal dismissed both the revenue's appeal and the assessee's cross objection, upholding the CIT (A)'s decisions on all contested issues. The order was pronounced in the Open Court on 09.05.2011.