2014 (11) TMI 1212 - AT - Income Tax

Disallowance on account of belated payment of contributions towards Employees Provident Fund and ESI - HELD THAT - In the case of CIT V/s. Ghatge Patil Transport Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT after taking into consideration the provisions of S.2(24)(x) read with S.36(1)(va) and S.43B, held that even employees contribution to Provident Fund etc. is allowable as deduction, if the same is deposited before the due date of filing of the return of income for the relevant year. Respectfully following the said decision of the Hon'ble Bombay High Court, we uphold the impugned order of the learned CIT(A) allowing the deduction claimed by the assessee on account of payment of employees contribution towards Provident Fund and ESI made by the assessee, after the due dates prescribed in the respective statutes, but before the due date of filing of the return of income for the year under consideration and dismiss the appeal of the Revenue. TDS u/s 194J - Disallowace u/s 40(a)(ia) - non-deduction of tds on payment made on account of audit fee - HELD THAT - Restore this issue to the file of the Assessing Officer for the limited purpose of verifying as to whether the assessee company is treated as an assessee in default under S.201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee. If it is found on such verification that no order under S.201(1) is passed to this effect, the Assessing Officer is directed to delete the disallowance made under S.40(a)(ia) on account of audit fee. Grounds No.2 and 3 of the assessee s appeal are accordingly treated as allowed for statistical purposes. Disallowance on account of depreciation on Xerox copiers, LCD TV, colour copier and LCD screens - assessee has filed a written note explaining the usage or application of the relevant items/assets in support of its case that they form an integral part of the computer/computer systems used by the assessee - HELD THAT - Referring to note filed by the assessee explaining the usage or application of the relevant items/assets as well as the orders of the authorities below, we find that the submissions explaining the usage or application of the concerned items/assets are being made by the assessee for the first time before the Tribunal, and no such explanation was offered either before the Assessing Officer or before the learned CIT(A). We therefore, consider it fair and proper and in the interests of justice to restore this issue to the file of the Assessing Officer for deciding the same afresh, after taking into consideration the explanation offered by the assessee regarding the usage or application of the concerned items/assets in the light of the judicial pronouncements discussed above. Grounds No.4 to 7 of the assessee s appeal are accordingly treated as allowed for statistical purposes.

Summary

Issues:
1. Disallowance of contributions towards Employees Provident Fund and ESI.
2. Disallowance of audit fee under section 40(a)(ia).
3. Disallowance of depreciation on Xerox copiers, LCD TV, color copier, and LCD screens.

Issue 1 - Disallowance of contributions towards Employees Provident Fund and ESI:
The case involved cross-appeals against the Commissioner of Income-tax(Appeals) IV's order. The Revenue's appeal focused on the deletion of disallowance made by the Assessing Officer regarding belated payment of contributions towards Employees Provident Fund and ESI. The Assessing Officer treated the unremitted amounts as income under S.2(24)(x) of the Act, resulting in disallowance under S.36(va). However, the CIT(A) allowed the deduction based on timely payment before the due date of filing the return of income. The Tribunal upheld the CIT(A)'s decision, citing relevant case law and the second proviso to S.43B of the Act.

Issue 2 - Disallowance of audit fee under section 40(a)(ia):
The second issue involved disallowance of audit fee under section 40(a)(ia). The Assessing Officer disallowed the fee for failure to deduct tax at source under S.194J. The CIT(A) affirmed this disallowance, but the Tribunal noted that the second proviso to S.40(a)(ia) was retrospectively applicable from 1.4.2005. As the company was not treated as an assessee in default under S.201(1), the disallowance was directed to be deleted after verification by the Assessing Officer.

Issue 3 - Disallowance of depreciation on assets:
The final issue concerned the disallowance of depreciation on Xerox copiers, LCD TV, color copier, and LCD screens. The Assessing Officer allowed depreciation at a lower rate, considering these assets as office equipment rather than computers. The CIT(A) upheld this decision, relying on a Special Bench ruling. However, the Tribunal emphasized a liberal interpretation of the term "computer" and directed the Assessing Officer to reevaluate the assets' eligibility for higher depreciation based on their integral role in the computer system, considering the company's usage and application of the assets.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal for statistical purposes, providing detailed analysis and legal interpretations for each issue addressed in the judgment.