2015 (5) TMI 682 - AT - Income Tax

Deduction under section 80-IA - traffic signals and foot overbridges - Held that - The Revenue can see the pre-requisite condition for allowance of deduction to an enterprise or an undertaking in the very first year the initial year of claim of deduction. In the present case before us, the assessee claimed deduction under section 80-IA of the Act in the assessment year 2004-05, i.e., that was the initial assessment year and in that year the matter regarding the claim of deduction has become final for the reason that the hon ble Calcutta High Court has confirmed the allowance of deduction and the Revenue has not carried the matter before the hon ble Supreme Court. Whereas the Revenue has referred to the decision of hon ble Karnataka High Court in the case of CIT v. Skyline Advertising P. Ltd. 2015 (5) TMI 669 - KARNATAKA HIGH COURT but that cannot be considered as precedent because the jurisdictional High Court has taken a view in favour of the assessee and that also in the assessee s own case. That means the initial assessment year i.e., 2004-05, once the claim of deduction in respect to pre-requisite conditions for allowance of deduction has been satisfied, the same cannot be questioned in future years unless and until the Revenue disturbs the initial assessment year . Similar are the facts in the case of sister concerns of the assessee, i.e., Selvel Transit Advertising Pvt. Ltd. In term of the above -Decided in favour of assesse. Depreciation on LED video display board - whether same be treated as temporary structure as held by CIT(A) in allowing the claim - Held that - LED video display boards are temporary structures and they cannot be equated with plant and machinery for the reason that these structures are displayed outside in temporary locations and on land taken on lease for a temporary period. Once you dismantle these temporary structures, it will reduce its value to almost nil and it cannot be used second time or third time and life span of LED video display boards is also not more than 6 months to 1 year. The land is neither owned by the assessee nor it is held by the assessee on lease basis. The structures put on such land, whatever in nature, are purely temporary structures. Even sometimes, these structures are not taken by the assessee for reuse again. When such structures are put on land not belonging to the assessee, the expenditure is held to be the nature of revenue in view of the judgment of the hon ble Supreme Court in the case of CIT v. Madras Auto Service P. Ltd. 1998 (8) TMI 1 - SUPREME Court . In view of the above, we confirm the order of the Commissioner of Income-tax (Appeals) - Decided against revenue. Depreciation on intangible assets - CIT(A) in allowing the claim - Held that - The assessee has acquired commercial rights and used by it during the relevant year for the purposes of its business. In term of the above, we are of the view that the Commissioner of Income-tax (Appeals) has rightly allowed the claim of depreciation and we confirm the same.- Decided against revenue. Disallowance of expenditure on prior period expenses - CIT(A) allowed the claim - Held that - The assessee has produced complete details before the Commissioner of Income-tax (Appeals) in respect to expenses debited in the profit and loss account, on receipt of bills in the respective assessment years. Hence, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) and even otherwise the issue is covered by the decision of the Income-tax Appellate Tribunal in the assessee s own case in earlier years. - Decided against revenue. Disallowance of delayed deposit of employees contribution towards provident fund - CIT(A) allowed the claim - Held that - Once the issue is decided by the hon ble jurisdictional High Court in the case of Vijay Shree Ltd. 2011 (9) TMI 30 - CALCUTTA HIGH COURT , wherein it is held that the provident fund and employees State insurance are paid on or before the due date of filing of return under section 139(1) of the Act, deduction in respect to the amount on which provident fund and employees State insurance is so paid, is allowable. In the present case the assessee has paid the provident fund deducted on account of employees contribution before due date of filing of return under section 139(1) of the Act by the assessee and the details are available in the written submission of the assessee, hence, we dismiss this ground of appeal of the Revenue. - Decided against revenue. Addition on account of bogus purchase - CIT(A) allowed the claim - Held that - The assessee furnished proofs to substantiate the purchases made from M/s. Vijay Industrial Corporation, i.e., his permanent account number, sales tax registration, voter ID card and identity of Shri S. K. Mohta. But the Assessing Officer got enquired through his Inspector and Inspector could not locate the address given by the party in its bills. However, the copy of Inspector s report was not provided to the assessee. But the assessee again on December 29, 2008, submitted copy of trade licence issued by KMC to M/s. Vijay Industrial Corporation, copy of electricity bill in the name of proprietor Shri S. K. Mohta for the month of November 2008, copy of driving licence in the name of proprietor Shri S. K. Mohta and the copy of voter ID card of Shri S. K. Mohta. However, the Assessing Officer ignored all these documents which were produced before him on December 29, 2008 and he passed the assessment order on December 30, 2008 making the addition of ₹ 16,75,875 treating the purchases as bogus purchases. The assessee again produced the same evidences before the Commissioner of Income-tax (Appeals) and even now before us and argued that all the necessary evidences with regard to existence of the party at the given address was produced, and hence, the Assessing Officer was not correct in making the observation that the purchases made by the assessee from M/s. Vijay Industrial Corporation were bogus purchases - Decided against revenue. Invoking the provisions of section 115JB - adding back the provision for diminution in value of investment for computing book profit under section 115JB - Held that - Commissioner of Income-tax (Appeals) has confirmed the action of the Assessing Officer for the simple reason that Explanation 1 of section 115JB(2) clause (i) was inserted by the Finance (No. 2) Act, 2009 with effect from April 1, 2001 retrospectively in respect to provision for diminution in the value of investment is to be included while computing income under section 115JB of the Act. At the outset, learned counsel for the assessee very fairly conceded that yes there is retrospective amendment by inserting clause (i) in Explanation 1 of section 115JB(2) of the Act by the Finance (No. 2) Act, 2009 with effect from April 1, 2001, the provision for diminution in the value of investment is not allowable while computing income under section 115JB of the Act - Decided against assesse. Short deduction of TDS by invoking the provisions of section 40(a)(ia) - CIT(A) allowed the claim - Held that - The assessee is deducting TDS qua these payments under section 194C of the Act and the Assessing Officer making assessment under section 143(3) of the Act for the relevant assessment years 2003-04, 2004-05 and 2005-06 before survey and subsequent to survey also in the assessment years 2006-07, 2007-08 and 2008-09 the position was accepted by the Assessing Officer as it is. All the assessments were completed under section 143(3) of the Act. No disallowance of these expenses was made all through. But in this year and in subsequent in the assessment year 2010-11 this disallowance was made. Thus we accept the contention of the assessee s counsel as regards to consistency that once on similar facts the Revenue has accepted the payments as contractual payments now they cannot deviate - Decided in favour of assesse. Disallowance u/s 14A - Held that - Respectfully following the coordinate bench decision in the case of Garware Wall Ropes Ltd. 2015 (2) TMI 628 - ITAT MUMBAI we are also of the view that where the primary object of investment is for holding controlling stake in group concerns and not for earning an income out of that investment, then the provisions of section 14A cannot be invoked. Accordingly, we direct the Assessing Officer to recompute the disallowance under section 14A of the Act read with rule 8D of the Income-tax Rules, 1962 qua the non-related parties. Accordingly, the proportionate disallowance will be made - Decided partly in favour of assesse.

Summary

Issues Involved:
1. Deduction under section 80-IA of the Income-tax Act for traffic signals and foot overbridges as infrastructural facilities.
2. Allowance of depreciation on LED video display boards as temporary structures.
3. Allowance of depreciation on intangible assets.
4. Allowance of prior period expenses.
5. Disallowance under section 36(1)(va) for delayed deposit of employees' contribution towards provident fund.
6. Disallowance of bogus purchases.
7. Invocation of provisions of section 115JB for computing book profit.
8. Disallowance of depreciation on hoardings treated as temporary structures.
9. Disallowance of expenses for short deduction of TDS under section 40(a)(ia).
10. Disallowance of expenses for earning exempted income under section 14A read with rule 8D.

Detailed Analysis:

1. Deduction under section 80-IA of the Income-tax Act for traffic signals and foot overbridges:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision allowing the deduction under section 80-IA for traffic signals and foot overbridges, considering them as infrastructural facilities. The Tribunal referred to the assessee's initial assessment year 2004-05, where the deduction was allowed and confirmed by the Calcutta High Court. The Tribunal emphasized that once the deduction is granted in the initial year, it cannot be questioned in subsequent years unless the initial year's deduction is disturbed.

2. Allowance of depreciation on LED video display boards as temporary structures:
The Tribunal confirmed the Commissioner of Income-tax (Appeals)'s decision allowing 100% depreciation on LED video display boards, considering them as temporary structures. It was noted that these structures are displayed temporarily and dismantling them reduces their value significantly, making them unusable again.

3. Allowance of depreciation on intangible assets:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision allowing depreciation on intangible assets, which were rights to display advertisements on bridges obtained through an agreement with Kolkata Municipal Corporation. These rights were considered commercial rights under section 32(1)(ii) of the Act.

4. Allowance of prior period expenses:
The Tribunal confirmed the Commissioner of Income-tax (Appeals)'s decision allowing prior period expenses, relying on the assessee's own case for previous assessment years where such expenses were allowed by the Tribunal.

5. Disallowance under section 36(1)(va) for delayed deposit of employees' contribution towards provident fund:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision deleting the disallowance for delayed deposit of employees' contribution towards provident fund, citing the jurisdictional High Court's decision in the case of CIT v. Vijay Shree Ltd., which held that such contributions are deductible if paid before the due date of filing the return under section 139(1).

6. Disallowance of bogus purchases:
The Tribunal confirmed the Commissioner of Income-tax (Appeals)'s decision deleting the addition on account of bogus purchases. The assessee provided sufficient evidence to substantiate the purchases, including trade licenses, electricity bills, and payment details, which the Assessing Officer had ignored.

7. Invocation of provisions of section 115JB for computing book profit:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision confirming the addition of provision for diminution in the value of investment while computing book profit under section 115JB, citing the retrospective amendment by the Finance (No. 2) Act, 2009.

8. Disallowance of depreciation on hoardings treated as temporary structures:
The Tribunal confirmed the Commissioner of Income-tax (Appeals)'s decision allowing 100% depreciation on hoardings treated as temporary structures, relying on the Tribunal's decision in the assessee's case for the assessment year 2005-06.

9. Disallowance of expenses for short deduction of TDS under section 40(a)(ia):
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision deleting the disallowance for short deduction of TDS, citing consistency and the lack of any material change in facts. The Tribunal also referred to the Calcutta High Court's decision in CIT v. S. K Tekriwal, which held that no disallowance can be made for short deduction of TDS.

10. Disallowance of expenses for earning exempted income under section 14A read with rule 8D:
The Tribunal partly allowed the assessee's cross-objection, directing the Assessing Officer to recompute the disallowance under section 14A read with rule 8D only for investments in non-related parties. The Tribunal relied on the decision in Garware Wall Ropes Ltd., which held that section 14A cannot be invoked if the primary object of investment is holding controlling stake in group concerns.

Conclusion:
The Tribunal dismissed all the appeals of the Revenue and partly allowed the cross-objection of the assessee, confirming the decisions of the Commissioner of Income-tax (Appeals) on various issues.