2012 (9) TMI 132 - HC - Income Tax

Disallowance of depreciation on car parking at Ansal Plaza - absence of registered title in favour - Held that - As decided in Mysore Minerals Ltd. Versus CIT 1999 (9) TMI 1 - SUPREME COURT that the intention of the Legislature in enacting section 32 would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession - in favour of assessee. Addition on payment towards an unrecognized Provident Fund Trust - ITAT deleted the addition - Held that - A reading of the letter dated 25.08.1976 would indicate that apparently no express approval by the Provident Fund Commissioner to the scheme formulated by the assessee had been actually taken into account by the income tax authorities at the relevant time but in 12 successive assessments, the authorities accepted its position that the scheme was a recognized one - As the tax implication in the present case is far below the prescribed limit of Rs. 10 Lakh as the demand or disallowance itself was Rs. 9,08,359/- and the tax payable on that would be roughly around 1/3rd of the said amount the Court is of the opinion that no interference is called for the appeal is consequently dismissed.

Summary

Issues:
1. Claim for depreciation of building and car parking at Ansal Plaza in absence of registered title.
2. Deletion of addition of Rs. 9,08,359 towards an unrecognized Provident Fund Trust under Section 2(38) of the Income Tax Act.

Analysis:
1. The appellant, a public limited company, derived income from trading and sugar products. The Assessing Officer (AO) disallowed depreciation for car parking due to lack of registered ownership. The AO also disallowed Rs. 9,08,359 contribution to an unrecognized Provident Fund Trust. The CIT (A) partly allowed the matter. Both parties appealed to the ITAT, which ruled in favor of the assessee. The Revenue challenged two questions before the High Court.

2. Regarding the first issue, the Supreme Court precedent in Mysore Minerals case was cited, supporting the assessee's claim for depreciation on car parking. The Court ruled against the Revenue and in favor of the assessee based on this precedent.

3. Concerning the second issue of the provident fund contribution, the assessee relied on a 1976 letter regarding recognition under Section 2(38) of the Income Tax Act. The letter indicated that no further recognition was needed. The Tribunal and previous assessments accepted this letter as recognition. However, the Court noted that for deduction benefits, the scheme must conform to specific requirements, including approval by the Provident Fund Commissioner. The Court found that the authorities did not critically analyze the recognition aspect, and the Commissioner assumed the 1976 letter itself amounted to recognition. Despite the tax implication being below the limit, the Court dismissed the appeal, highlighting the need for further examination in subsequent years.

4. The Court acknowledged the need for a detailed review in the future but concluded that no interference was warranted in the current appeal. The dismissal was based on the lack of critical analysis by the authorities regarding the recognition of the Provident Fund Trust.