2016 (8) TMI 1392 - AT - Income Tax

Deduction u/s.80IB - assessee fails to file the return of income before the due date specified in section 139(1) - provisions of section 80AC applicability - Held that - As carefully perused the orders of the authorities below. The undisputed fact is that the return of income for the year under consideration was not furnished on or before the due date as per the provisions of Section 139(1) of the Act. In our considered opinion, provisions of Section 80AC of the Act squarely apply on the facts of the case in hand. We set aside the findings of the ld. CIT(A) and restore that of the A.O. Addition made on account of delay in the deposit of Employee s contribution - Held that - We find that the ld. CIT(A) has deleted the addition following the decisions of Hon ble High Court of Delhi by holding that if Employee s contribution is deposited before the due date of filing of the return of the same is allowable. On identical issue, the Hon ble Jurisdictional High Court has decided the matter against the Assessee and in favour of the Revenue in the case of CIT vs. Gujarat State Road Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT . With our utmost respect to the Hon ble High Court of Delhi, we are governed by the Hon ble High Court of Gujarat, therefore, respectfully following the decision of the Hon ble Jurisdictional High Court (supra), we set aside the findings of the ld. CIT(A) and restore that of the A.O. Ground no. 3 is accordingly allowed. Claim of depreciation @ 15% - Held that - We find that the CIT(A) has allowed the claim by holding that electric fittings are eligible to depreciation as plant and machinery. For this proposition, we find that the ld. CIT(A) has followed the decision of the Hon ble High Court of Rajasthan in the case of RG Ispat Ltd. 2003 (9) TMI 5 - RAJASTHAN HIGH COURT and also the decision of the Tribunal in the case of Ahmedabad Benches in the case of Marwar Hotels Ltd. 2015 (11) TMI 1194 - ITAT AHMEDABAD .

Issues Involved:
1. Deduction under Section 80IB and applicability of Section 80AC.
2. Similarity between Section 10B and Section 80IB deductions.
3. Treatment of delayed Employee’s contribution to ESIC.
4. Depreciation rate on electrical installations.

Detailed Analysis:

1. Deduction under Section 80IB and Applicability of Section 80AC:
The primary issue was whether the deduction under Section 80IB is allowable if the return of income is not filed before the due date specified under Section 139(1). The Assessing Officer (A.O.) disallowed the deduction of ?73,09,275/- claimed under Section 80IB because the return was filed on 31.03.2010, well past the due date of 30.09.2008. The CIT(A) allowed the deduction, interpreting Section 80AC as directory rather than mandatory, drawing support from the ITAT decision in Dhir Global Industrial Pvt. Ltd. However, the Tribunal, referencing the Special Bench decision in Saffire Garments and the Co-ordinate Bench decision in Lakshmi Energy & Foods Ltd., concluded that the provisions of Section 80AC are mandatory. Thus, the Tribunal set aside the CIT(A)'s decision and restored the A.O.'s findings, disallowing the deduction due to the late filing of the return.

2. Similarity Between Section 10B and Section 80IB Deductions:
The CIT(A) had drawn a similarity between deductions under Section 10B and Section 80IB, following the ITAT order in ACIT v/s. Dhir Global Industrial Pvt. Ltd. The Tribunal, however, distinguished this case by emphasizing that the decisions relied upon by the CIT(A) pertained to the filing of the audit report during assessment proceedings and not to the delay in filing the return of income. The Tribunal upheld that Section 80AC explicitly mandates the timely filing of returns for deductions under Section 80IB, thereby rejecting the CIT(A)'s analogy with Section 10B.

3. Treatment of Delayed Employee’s Contribution to ESIC:
The A.O. added ?44,070/- to the income, treating the delayed Employee’s contribution to ESIC as deemed income under Section 2(24)(x). The CIT(A) directed the A.O. to allow the deduction if the contributions were paid before the due date of filing the return, following the Delhi High Court's decision. However, the Tribunal, governed by the Gujarat High Court's decision in CIT vs. Gujarat State Road Corporation, held that such contributions must be paid within the due date specified under the relevant Act. Therefore, the Tribunal set aside the CIT(A)'s decision and restored the A.O.'s addition.

4. Depreciation Rate on Electrical Installations:
The A.O. disallowed the higher depreciation rate of 15% on electrical fittings, allowing only 10%. The CIT(A) allowed the higher rate, treating electrical fittings as part of plant and machinery, based on the Rajasthan High Court's decision in RG Ispat Ltd. and the ITAT's decision in Marwar Hotels Ltd. The Tribunal upheld the CIT(A)'s decision, referencing its own prior decision in the assessee's case for A.Y. 2005-06, confirming that electrical items integral to the operation of projectors and exhibition systems qualify for higher depreciation.

Conclusion:
The Tribunal's judgment partly allowed the Revenue's appeal, specifically disallowing the Section 80IB deduction due to late filing and the delayed ESIC contributions, while upholding the CIT(A)'s decision on the higher depreciation rate for electrical installations. The decision emphasized the mandatory nature of Section 80AC for timely return filings to claim deductions under Section 80IB.

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