2014 (11) TMI 768 - AT - Income Tax

Belated payment of contributions towards EPF and ESI deleted Held that - Following the decision in CIT V/s. Ghatge Patil Transport Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT wherein after taking into consideration the provisions of S.2(24)(x) read with S.36(1)(va) and S.43B, held that even employees contribution to Provident Fund etc. is allowable as deduction, if it is deposited before the due date of filing of the return of income for the relevant year - the order of the CIT(A) is upheld allowing the deduction claimed by the assessee on account of payment of employees contribution towards Provident Fund and ESI made by the assessee, after the due dates prescribed in the respective statutes, but before the due date of filing of the return of income for the year Decided against revenue. Disallowance u/s 40(a)(ia) Audit fee paid Laibility to deduct tax u/s 194J - Held that - The assessee has contended that the assessee company has not been treated as the assessee in default u/s 201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee and therefore, no disallowance can be made on account of audit fee, as per the second proviso to S.40(a)(ia) thus, the matter is remitted back to the AO for verification as to whether the assessee company is treated as an assessee in default under S.201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee Decided in favour of assessee. Depreciation on Xerox copiers, LCD TV, colour copier and LCD screens Held that - As held in Asstt. CIT V/s. Amadeus India (P) Ltd. 2001 (1) TMI 918 - ITAT DELHI - the term computer should be interpreted liberally, broadly and in consonance with the intent of the legislation and working of the entire system as a whole - if any assets are found to be integral parts of the computer or computer system, the same are entitled for depreciation at higher rate, as applicable to the computer It depends on the facts of each case as to whether a particular item or asset forms integral part of the computer or computer system and this issue is required to be decided after taking into consideration the exact usage or application for such items or assets keeping in view the nature of the business of the assessee as well as the functions to which the said assets/items are put to use - The submissions explaining the usage or application of the concerned items/assets are being made by the assessee for the first time before the Tribunal, and no such explanation was offered either before the AO or before the CIT(A) thus, the matter is to be remitted back to the AO for fresh adjudication Decided in favour of assessee.

Summary

Issues:
1. Disallowance of contributions towards Employees Provident Fund and ESI.
2. Disallowance of audit fee under section 40(a)(ia).
3. Disallowance of depreciation on Xerox copiers, LCD TV, color copier, and LCD screens.

Issue 1: Disallowance of Contributions towards Employees Provident Fund and ESI
The case involved two cross-appeals, one by the assessee and the other by the Revenue, against the order of the Commissioner of Income-tax(Appeals). The Revenue's appeal focused on the deletion of disallowance made by the Assessing Officer regarding belated payment of contributions towards Employees Provident Fund and ESI. The Assessing Officer treated the unremitted contributions as income under S.2(24)(x) and disallowed them under S.36(va) of the Act. However, the CIT(A) allowed the deduction based on the timely payment before the due date of filing the return of income. The Tribunal upheld the CIT(A)'s decision, citing relevant case law and statutory provisions, including S.43B and the second proviso thereto, emphasizing the importance of timely payment for claiming deductions.

Issue 2: Disallowance of Audit Fee under Section 40(a)(ia)
The assessee's appeal included grounds related to the disallowance of an audit fee under section 40(a)(ia) of the Act. The Assessing Officer disallowed the amount due to the failure of the assessee to deduct tax at source under S.194J. The CIT(A) upheld the disallowance. However, the Tribunal noted that the second proviso to S.40(a)(ia), inserted by the Finance Act, 2012, was retrospectively applicable from 1.4.2005. As the assessee was not treated as an assessee in default under S.201(1), the Tribunal directed the issue to be verified by the Assessing Officer, with instructions to delete the disallowance if no default was found.

Issue 3: Disallowance of Depreciation on Assets
The appeal also addressed the disallowance of depreciation on Xerox copiers, LCD TV, color copier, and LCD screens. The Assessing Officer disallowed the claim for higher depreciation rates, treating the assets as office equipment instead of computers. The CIT(A) confirmed the disallowance based on the nature of the assets. The Tribunal, considering various precedents, emphasized the interpretation of the term 'computer' and 'computer system' in the context of depreciation claims. It noted the need to determine if the assets were integral parts of a computer system to qualify for higher depreciation rates. As the assessee provided explanations regarding asset usage for the first time before the Tribunal, the issue was remanded to the Assessing Officer for fresh consideration, taking into account the explanations and relevant judicial pronouncements.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal for statistical purposes, addressing each issue comprehensively and providing detailed analysis based on legal provisions and case law.