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2017 (5) TMI 1694 - AT - Income TaxAddition u/s 32(1)(iia) - depreciation claimed by the assessee relates to assets acquired in the preceding assessment year wherein the assets were used for less than 180 days and only 10% of depreciation was claimed in earlier year - AO has held that the assessee cannot claim the balance 10% of depreciation in the subsequent year as per provisions of section 32(1)(iia) - HELD THAT - In the present case the new asset acquired installed and put it in use for less than 180 days the assessee has claimed only 10% of the eligible additional depreciation in the relevant assessment year which was allowed. Since the assessee was eligible to claim 20% additional depreciation on new asset acquired the balance 10% of additional depreciation was claimed in the next year relevant to the assessment year under consideration. In similar facts and circumstances in the case of CIT v. Rittal India Private Limited 2016 (1) TMI 81 - KARNATAKA HIGH COURT wherein held intention of the legislation is absolutely clear that the assessee shall be allowed certain additional benefit which was restricted by the proviso to only half of the same being granted in one assessment year if certain condition was not fulfilled. But that in our considered view would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal has rightly held that additional depreciation allowed under Section 32(i)(iia) of the Act is a one time benefit to encourage industrialization and the provisions related to it have to be construed reasonably liberally and purposively to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal. - Decided in favour of assessee Addition of employees contribution towards PF/ESI paid belatedly - no deduction u/s 36(1)(va) - HELD THAT - In the present case the assessee had remitted the employees contribution beyond the due date for payment but within the due date for filing the return of income. As relying on M/S. INDUSTRIAL SECURITY INTELLIGENCE INDIA PVT. LTD 2015 (7) TMI 1063 - MADRAS HIGH COURT issue decided in favour of assessee. Disallowance u/s 14A r.w. Rule 8D - HELD THAT - CIT(A) has stated that against fresh investments of .13.36 crores the assessee has net operating revenue of .20.87 crores during the year and further sum of .68.47 crores in the general reserve. When the assessee got its own sufficient funds for investment the Assessing Officer cannot apply Rule 8D(2)(ii) and make the disallowance. Thus we are of the opinion that the ld. CIT(A) has rightly deleted the disallowance on account of attribution of interest. - Decided against revenue.
Issues Involved:
1. Deletion of addition made under section 32(1)(iia) of the Act on account of depreciation claimed by the assessee. 2. Deletion of addition made in respect of employees' contribution towards PF/ESI. 3. Deletion of disallowance made under section 14A r.w. Rule 8D. Issue-wise Detailed Analysis: 1. Deletion of addition made under section 32(1)(iia) of the Act on account of depreciation claimed by the assessee: The first issue revolves around the deletion of an addition of ?39,45,868/- made under section 32(1)(iia) of the Income Tax Act on account of depreciation claimed by the assessee. The Assessing Officer (AO) had observed that the assets were used for less than 180 days in the preceding assessment year, and hence only 10% of depreciation was claimed. The AO disallowed the remaining 10% depreciation claim in the subsequent year, following various decisions of the Tribunal. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to allow the additional depreciation, relying on the decision in CIT v. Rittal India Pvt. Ltd. 380 ITR 423. The Revenue, aggrieved by this decision, appealed to the Tribunal, citing the case of M.M. Forgings Ltd. v. Addl. CIT 349 ITR 673 (Mad), where the jurisdictional High Court held that if the new plant and machinery were used for less than 180 days, only 50% of the additional depreciation is allowable. The Tribunal, after considering both sides, noted that the case of M.M. Forgings Ltd. was not applicable to the present facts. Instead, it relied on the Karnataka High Court's decision in CIT v. Rittal India Pvt. Ltd., which allowed the carry forward of the remaining depreciation to the subsequent year. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground. 2. Deletion of addition made in respect of employees' contribution towards PF/ESI: The second issue pertains to the deletion of an addition of ?1,84,154/- made due to the belated payment of employees' contribution towards PF/ESI. The AO disallowed the deduction under section 36(1)(va) of the Act, as the contributions were paid late. On appeal, the CIT(A) allowed the deduction, following the jurisdictional High Court's decision in CIT v. Industrial Security & Intelligence India Pvt. Ltd. The Revenue, dissatisfied with this decision, appealed to the Tribunal. The Tribunal, after hearing both sides, noted that the contributions were remitted before the due date for filing the return of income under section 139(1) of the Act. It relied on the Supreme Court's decision in CIT v. Alom Extrusions Ltd. and the Delhi High Court's decision in CIT v. Amil Ltd., which allowed such deductions if the payments were made before the due date for filing the return. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground. 3. Deletion of disallowance made under section 14A r.w. Rule 8D: The third issue involves the deletion of a disallowance of ?1,16,48,077/- made under section 14A r.w. Rule 8D for expenditure incurred related to exempt income. The AO had disallowed the amount, invoking Rule 8D. On appeal, the CIT(A) partly allowed the assessee's claim, following the Tribunal's decision in EIH Associated Hotels Limited v. CIT. The Revenue appealed, arguing that the decision in EIH Associated Hotels Limited was pending before the High Court. The Tribunal, after reviewing the financial details, noted that the assessee's own funds were sufficient for the investments, and no borrowed capital was used. It upheld the CIT(A)'s decision to delete the disallowance under Rule 8D(2)(ii) and directed the AO to recompute the disallowance under Rule 8D(2)(iii) by excluding investments in sister and group companies and considering only those investments that generated exempt income during the year. The Tribunal dismissed the Revenue's ground, finding no infirmity in the CIT(A)'s order. Conclusion: In conclusion, the Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions on the issues of additional depreciation, employees' contribution towards PF/ESI, and disallowance under section 14A r.w. Rule 8D. The order was pronounced on May 9, 2017, in Chennai.
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