2013 (10) TMI 603 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Disallowance of PF dues - Held that - It is found from the assessment record that the return of income was filed by the assessee on 31-10-2007 and it is not in dispute that the TDS was deposited in the Government account on 7-6-2007. That being the fact of the matter, as per the amended provisions of section 40(a(ia) of the Act, the same is to be allowable - payments of PF have been made well before filing of the return - Decided in favour of assessee. Nature and effect of amendment to Section 43B payment of contribution to provident fund - the amendment is made applicable from the assessment year 2004-05 - held that amendment is retrospective - the contribution has been paid prior to the filing of the return. The Supreme Court decision in Vinay Cement Ltd. s in which the the benefit extended to assessee squarely covers the issue and the assessee is entitled to the benefit under section 43B of the Income-tax Act amendment retrospective in nature. - deduction allowed. Professional fee expenditure - whether related to business - development of new product - Services of Dr. Dilip Sanvordekar have been utilized for the purposes of assessee s business. It is also not in dispute that the payments made by the assessee are genuine. As per the record, it is seen that and which has also been accepted by the A.O. that the services of Dr. Dilip Sanvordekar, Consultant have been utilized for some projects which are part of assessee s running business. Valuation of stock - addition on account of cenvat credit - Held that - The A.O. gave a finding that the opening stock for the year under consideration stands increased by the said amount. According to the A.O., after giving credit for the said increase, the net addition on account of unutilized Cenvat credit amounts to Rs. 24,05,558/-. Since the A.O. has himself given a categorical finding in the assessment order which is identical to the directions given by the ld. CIT(A), we do not find any reason why the Revenue has shown its grievance on this account. The A.O. is directed to follow his finding given in the assessment order and restrict the disallowance to Rs. 24,05,558/-.

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Disallowance on account of Provident Fund (PF) dues.
3. Rejection of the claim of enhanced depreciation.
4. Addition of unutilized Cenvat credit to the value of inventory.
5. Disallowance of professional fees as capital expenditure.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961:
The assessee challenged the disallowance of Rs. 46,429/- under Section 40(a)(ia) for not paying TDS within the prescribed due date. The Assessing Officer (A.O.) observed that TDS was deducted on 31-01-2007 and paid on 07-06-2007, beyond the due date. The CIT(A) confirmed the disallowance. However, the Tribunal found that the TDS was deposited before the due date of filing the return, as per the amended provisions of Section 40(a)(ia), and directed the A.O. to allow the claim of Rs. 46,429/-.

2. Disallowance on account of Provident Fund (PF) dues:
The A.O. disallowed Rs. 3,79,249/- for late deposit of employees' contribution to PF. The CIT(A) allowed the claim for July 2006 but confirmed the disallowance for Goa arrears due to lack of details. The Tribunal, referencing the Delhi High Court's decision in P M Electronics Ltd., found that the payments were made before filing the return and directed the A.O. to allow the deduction of Rs. 3,79,249/-.

3. Rejection of the claim of enhanced depreciation:
The A.O. restricted the depreciation claim to Rs. 2,14,37,050/- from Rs. 2,19,12,091/- due to discrepancies in the statement of total income and Form No. 3CD. The CIT(A) directed the A.O. to verify the revised return and allow further depreciation if justified. The Tribunal restored the issue to the A.O. for verification and directed the assessee to provide proper details, allowing the ground for statistical purposes.

4. Addition of unutilized Cenvat credit to the value of inventory:
The A.O. added Rs. 55,83,968/- of unutilized Cenvat credit to the income, which the CIT(A) directed to be adjusted by reducing the opening balance. The Tribunal upheld the CIT(A)'s direction, noting the A.O.'s own findings in the assessment order, and restricted the disallowance to Rs. 24,05,558/-.

5. Disallowance of professional fees as capital expenditure:
The A.O. disallowed Rs. 7,30,500/- paid to Dr. Dilip Sanvordekar, treating it as capital expenditure for services related to new projects. The CIT(A) found the services were for the assessee's business and allowed the deduction. The Tribunal confirmed the CIT(A)'s findings, noting the services were for ongoing business activities and the payments were genuine.

Conclusion:
The Tribunal allowed the assessee's appeal partly for statistical purposes and dismissed the Revenue's appeal. The orders were pronounced in the open court on 29th May, 2013.