2015 (1) TMI 650 - AT - Income Tax

Addition invoking the provisions of section 40(a)(i) - fee for technical services - Held that - The insistence of the Revenue to say that the amount has been paid in this year and therefore it is covered within the prescription of section 40(a)(i) of the Act is quite otiose to the requirements of section 40(a)(i) of the Act. There is no dispute to the proposition that the said payment has not been claimed as a revenue expenditure while computing the income chargeable under the head Profits and gains of business or profession in this year and therefore the same would not fall for consideration in section 40(a)(i) of the Act. Thus do not find any justification to uphold the addition of ₹ 2,78,20,447/- made by the lower authorities by invoking section 40(a)(i) of the Act. The order of the CIT(A) is set-aside and the Assessing Officer is directed to delete the addition of ₹ 2,78,20,447/- . - Decided in favour of assessee. Depreciation disallowed in respect of Honda Motor Car @50% - Held that - The vehicle in respect of which assessee seeks to claim depreciation @ 50% is a light motor vehicle and therefore the claim for enhanced rate of depreciation is on a sound footing. Ostensibly, the provisions of the Depreciation Table annexed as Appendix-I to the Rules clearly apply and therefore the lower authorities were not justified in denying assessee s claim for allowance of depreciation @ 50% on the vehicle in question, subject to the fulfillment of other conditions. Thus set-aside the order of the CIT(A) and direct the Assessing Officer to re-compute the depreciation allowable on the impugned vehicle as per aforesaid direction and in accordance with law. - Decided in favour of assessee for statistical purposes. Deduction u/s.80IB - date of completion of construction of the housing project - Held that - No reason to interfere with the ultimate conclusion of the CIT(A) in allowing assessee s claim for deduction u/s.80IB(10) of the Act amounting to ₹ 23,87,480/- as CIT(A) has called for information u/s.133(6) of the Act from the PMC and its response did not reveal any objection on the part of the PMC that the construction was not complete with respect to the sanctioned plans. Therefore, factually speaking, there is no controversion to the assertions of the assessee that it s project was otherwise complete as per the sanctioned plans within the stipulated date. As a consequence, the order of the CIT(A) is hereby affirmed and Revenue fails in its appeal. - Decided against revenue.

Issues Involved:

1. Addition of Rs. 2,78,20,447/- under section 40(a)(i) of the Income-tax Act, 1961.
2. Denial of allowance of depreciation on Honda Motor Car @ 50%.
3. Deduction under section 80IB(10) of the Income-tax Act, 1961.

Detailed Analysis:

1. Addition of Rs. 2,78,20,447/- under section 40(a)(i) of the Income-tax Act, 1961:

The primary issue in the assessee's appeal was the addition of Rs. 2,78,20,447/- made by the income-tax authorities under section 40(a)(i) of the Act. The Assessing Officer had concluded that payments made to a non-resident concern, M/s. Arthur Gensler and Associates, were in the nature of fees for technical services and were liable for deduction at source. Since the assessee did not deduct the requisite tax at source, the Assessing Officer invoked section 40(a)(i) and added the amount to the returned income. The CIT(A) affirmed this addition.

The assessee raised a preliminary objection, arguing that section 40(a)(i) was not applicable as the payment was capitalized in the capital work-in-progress and not claimed as a deduction in computing the income chargeable under the head "profits and gains of business or profession." This argument was supported by the Punjab & Haryana High Court's decision in CIT Vs. Mark Auto Industries Limited, which held that no expenditure could be disallowed under section 40(a)(i) if it was capitalized and not claimed as revenue expenditure.

The Tribunal found merit in the assessee's argument, noting that the payment was not debited to the Profit and Loss Account and thus did not fall within the purview of section 40(a)(i). Consequently, the addition of Rs. 2,78,20,447/- was deleted.

2. Denial of allowance of depreciation on Honda Motor Car @ 50%:

The second issue was the denial of depreciation on Honda Motor Car at the enhanced rate of 50%. The assessee claimed depreciation at 50% on the ground that the car was a 'light motor vehicle' and thus covered under the CBDT Notification No.10/2009, which allowed enhanced depreciation on new commercial vehicles acquired and put to use within a specified period.

The Assessing Officer allowed depreciation at the normal rate of 15%, arguing that the enhanced rate applied only to trucks and heavy vehicles, not motor cars. The CIT(A) upheld this view.

The Tribunal, however, noted that the Depreciation Table in the Income Tax Rules, 1962, classified 'light motor vehicles' under the category eligible for enhanced depreciation. Therefore, the claim for 50% depreciation was found to be justified, and the Assessing Officer was directed to re-compute the depreciation accordingly.

3. Deduction under section 80IB(10) of the Income-tax Act, 1961:

The Revenue's cross-appeal involved the deduction claimed by the assessee under section 80IB(10) for a housing project named 'Emerald City' at Baner, Pune. The Assessing Officer disallowed the deduction, stating that the project did not meet the completion requirements as no completion certificate was issued by the local authority (PMC) by the stipulated date.

The CIT(A) allowed the deduction, noting that the assessee had applied for the completion certificate well before the deadline and had complied with all necessary formalities. The CIT(A) also referenced the Pune Bench Tribunal's decision in Satish Bora and Associates, which supported the concept of deemed completion if the local authority did not issue objections or refusals within a specified period.

The Tribunal upheld the CIT(A)'s decision, agreeing that the project was deemed complete based on the absence of objections from the PMC. This approach was consistent with the Pune Bench Tribunal's decision and the Gujarat High Court's judgment in CIT vs. Tarnetar Corporation, which allowed for substantial compliance with statutory requirements.

Conclusion:

The Tribunal allowed the assessee's appeal, deleting the addition under section 40(a)(i) and directing the re-computation of depreciation at 50%. The Revenue's appeal was dismissed, affirming the CIT(A)'s decision to allow the deduction under section 80IB(10). The order was pronounced in the open Court on 31st December, 2014.

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