2013 (6) TMI 75 - HC - Income Tax

Double deduction - depreciation on fixed assets - entire expenditure incurred towards purchase of fixed assets has already been claimed in entirety earlier - held that - Explanation 5 to section 32 specifically provides that the assessee shall be entitled for depreciation in spite of the fact that the assessee had claimed the deduction in respect of depreciation in computing his total income or not. - Tribunal has rightly allowed the depreciation in respect of the assets of the respondent. - Decided in favor of assessee. Payment towards pension fund when no liability of revenue nature was determined - held that - under Rule 10 of the Madhya Pradesh Krishi Upaj Mandi (State Marketing Development Fund) Rules 2000 the Krishi Upaj Mandi has to create a Reserve Fund which is a statutory liability and the aforesaid fund is to be created for the payment of pension to the members of the Board. - In view of the statutory liability of the Krishi Upaj Mandi if the Income Tax Appellate Tribunal has allowed the deduction of aforesaid contribution no fault is found. - decided in favor of assessee.

Summary

Issues:
1. Disallowance of depreciation on fixed assets.
2. Disallowance of payment towards pension fund.

Analysis:

Issue 1: Disallowance of depreciation on fixed assets
The appeal raised the question of whether the Tribunal was correct in not upholding the addition of Rs.17,94,021 as disallowance of depreciation on fixed assets, which had already been claimed as expenditure. The revenue contended that allowing depreciation would result in double deduction. However, the respondent argued that Explanation 5 to sub-section (1) of Section 32 of the Income Tax Act specifically allows depreciation regardless of previous deductions claimed. The Tribunal relied on this provision and upheld the depreciation allowance. The High Court agreed with this interpretation, emphasizing the statutory nature of the provision and dismissed the appeal, finding in favor of the respondent.

Issue 2: Disallowance of payment towards pension fund
The second issue pertained to the disallowance of Rs.8,70,614 on account of payment towards the pension fund. The revenue argued that this payment should not have been allowed as an expense. In response, the respondent contended that the contribution towards the pension fund was a statutory liability, as per Rule 10 of the Madhya Pradesh Krishi Upaj Mandi (State Marketing Development Fund) Rules, 2000. The Tribunal, citing the judgment in Krishi Upaj Mandi Samiti, Burhanpur, allowed the contribution towards the pension fund. The High Court upheld this decision, emphasizing the statutory obligation under Rule 10 and the binding nature of the Tribunal's judgment. Additionally, the interest accrued on the contribution was held taxable, further supporting the Tribunal's decision.

In conclusion, the High Court found both issues raised in the appeal to be in favor of the respondent and against the revenue. The appeal was deemed without merit and dismissed accordingly.