2015 (12) TMI 1503 - AT - Income Tax

Disallowance of excess depreciation claimed on Wind Mill plant - CIT(A) deleted the addition - Held that - foundation of platform, erection, installation of plant and machinery, preparation of crane platform for wind mill and other civil work carried out for installation are internal part of wind mill, which have not independent use. Thus, we are of the considered view that the assessee is entitled for 80% of depreciation on composite wind mill project including other expenditure for put to use for wind mill. TDS u/s 194H - Disallowance U/s 40(a)(ia) - assessee has not deducted TDS on payment of credit card service charges - Held that - This issue has been considered by the Coordinate Bench in Gem Paradise Vs. ACIT 2012 (2) TMI 521 - ITAT JAIPUR in which it has been held that the assessee sold its goods through credit card and on presentation of bill issued against credit card, the bank makes payment to the assessee after deducting agreed fees as per terms and conditions in case of credit card. This is not a commission payment but a fees deducted by the bank. There is no such relation between the bank and the shop keeper, which establishes the relationship of a principal and commission agent. Therefore, TDS is not liable to be deducted on payment made on the basis of credit card. The other case laws referred by the assessee is also squarely applicable. - Decided in favour of assessee. Disallowance of Misc. supply expenses - CIT(A) deleted the addition - Held that - The assessee is a Five Star hotel managed professionally. There is an agreement with multinational company in sharing receipts. The ld Assessing Officer made addition by making general observation. He is not deducted any specific bill vouchers that the assessee has made cash payments for expenses or made self made vouchers. The ld DR had not controverted the findings given by the ld CIT(A), therefore, we uphold the order of the ld CIT(A).- Decided in favour of assessee.

Summary

Issues Involved:
1. Excess depreciation claimed on Wind Mill plant.
2. Disallowance under Section 40(a)(ia) on account of non-deduction of TDS from credit card commission paid to banks.
3. Disallowance of miscellaneous supply expenses.

Issue-wise Detailed Analysis:

1. Excess Depreciation Claimed on Wind Mill Plant:
The first issue pertains to the deletion of the addition of Rs. 32,74,147 made by the Assessing Officer (A.O.) on account of excess depreciation claimed by the assessee on the Wind Mill plant. The assessee, involved in running hotels, restaurants, bars, and shopping complexes, installed a wind mill at a cost of Rs. 3,66,33,382 and claimed depreciation at 80%. The A.O. observed that ancillary items connected with the installation of the wind mill should not be included under the 80% depreciation category and instead should fall under categories with lower depreciation rates, such as buildings (10%) or plant and machinery (15%).

The A.O. recalculated the depreciation and disallowed Rs. 32,74,147. However, the CIT(A) allowed the appeal, noting that similar disallowances in earlier years had been overturned by the ITAT. The ITAT upheld the CIT(A)'s decision, referencing prior cases where it was established that components like foundation work and installation costs are integral to the wind mill and thus eligible for 80% depreciation.

2. Disallowance Under Section 40(a)(ia) on Account of Non-Deduction of TDS from Credit Card Commission Paid to Banks:
The second issue involves the disallowance of Rs. 4,82,093 under Section 40(a)(ia) due to the non-deduction of TDS on credit card commission payments. The A.O. treated these payments as commission under Section 194H, requiring TDS deduction. The CIT(A) deleted the disallowance, citing an ITAT decision in the case of M/s Gems Paradise, which ruled that credit card fees deducted by banks do not constitute commission and do not necessitate TDS under Section 194H.

The ITAT upheld the CIT(A)'s decision, noting that the relationship between the bank and the shopkeeper does not establish a principal-agent relationship, and thus, TDS is not applicable on such transactions.

3. Disallowance of Miscellaneous Supply Expenses:
The third issue concerns the disallowance of Rs. 4,29,676 out of total miscellaneous supply expenses of Rs. 21,48,379, which the A.O. claimed were mostly in cash and unsupported by bills. The CIT(A) deleted the disallowance, noting that only Rs. 19,530 was incurred in cash and that similar disallowances in previous years had been overturned.

The ITAT upheld the CIT(A)'s decision, emphasizing that the assessee, a professionally managed Five Star hotel, primarily incurred expenses through cheques and supported by regular bills. The A.O.'s disallowance was based on general observations rather than specific evidence of unverifiable expenses.

Conclusion:
The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all three issues, thereby allowing the assessee's claims for depreciation, non-deduction of TDS on credit card commissions, and miscellaneous supply expenses.