2018 (12) TMI 1460 - AT - Income Tax

Additional depreciation on Plant & Machinery - assessee engaged in the business of mining - manufacturing activity - Held that - In the instant case the assessee is engaged in the business of mining of Manganese ore & Iron ore and mining is constructed as a manufacturing activity. Respectfully following the decision of CIT v. Sesa Goa Ltd 2004 (11) TMI 14 - SUPREME COURT , case of CIT v/s G.S. Atwal &. Co 2001 (2) TMI 32 - CALCUTTA HIGH COURT and Integrated Coal Mining Ltd. vis DCIT 2015 (12) TMI 1326 - ITAT KOLKATA I held that the appellant is engaged in the business of mining which amounts to manufacturing and hence entitled for additional depreciation u/s 32(1) (iia) of the I.T.Act. - decided in favour of assessee Depreciation on land & site development - Order of CIT(A) in remanding the issue to the file of AO for its verification - Held that - According to CIT(A), the assessee is entitled to depreciation @ 10% by holding the building as contemplated in Appendix I of Income Tax Rules including roads, bridges, culverts, wells and tubewells. The CIT(A) placed reliance in the case of Gwalior Rayon Silk Manufacturing Co. Ltd. 1992 (4) TMI 3 - SUPREME COURT which held that roads constructed by the assessee in factory premises forms of part of building. The CIT(A) further placed reliance in the case of HMT Ltd. 1992 (7) TMI 58 - KARNATAKA HIGH COURT which held that roads, walls and fences are regarded as part of building. Therefore, taking into consideration the law laid down we find no infirmity in the order of the CIT(A) in holding that the assessee is entitled to claim depreciation on land and site development expenditure. Therefore, we find no infirmity in the order of CIT(A) in remanding the issue to the file of AO for its verification. MAT - addition made on account of expenditure in earning exempt income u/s 115JB - Held that - As decided in assessee s own case admittedly, there was no income earned during the year under consideration from the aforesaid investment. It is a settled law that no disallowance shall be warranted under the provision of Sec. 14A r.w. Rule 8D if there is under the year consideration. - decided in favour of assessee Expenses incurred on club entrance fees and subscriptions - allowable busniss expenditure - Held that - AR did not bring on record any evidences before us atleast to show that the said expenditure incurred by the assessee for the purpose of development of its business. Therefore, in the absence of any evidence, we set aside the order of CIT(A) and uphold the view of the AO in making the said addition - decided in favour of revenue Disallowance u/s 14A with Rule 8D will not apply where no exempt income is received or receivable during the relevant previous year - Held that - e CIT(A) taking into consideration the submissions of the assessee and found satisfied that the assessee did not earn any exempt income during the year under consideration. Therefore, placing reliance on the decision of REI Agro Ltd. 2013 (9) TMI 156 - ITAT KOLKATA held that when there is no tax free income, no disallowance could be made. Therefore, we find no infirmity in the order of CIT(A) and it is justified. - decided in favour of assessee Addition on delayed payment of employees contribution towards PF & ESI by invoking provision of section 43B - Held that - It is noted from the impugned order that CIT(A) found satisfied that the employee s contribution was relating to PF & ESI was deposited before due date of filing of return of income. Therefore, we find no infirmity in the order of CIT(A) in deleting addition - decided against revenue

Issues Involved:
1. Additional depreciation on Plant & Machinery.
2. Admission of new evidence under Rule 46A of Income Tax Rules, 1962.
3. Depreciation on Land & Site Development Expenses.
4. Expenditure in earning exempt income under Section 115JB.
5. Disallowance of expenses incurred on club entrance fees and subscriptions.
6. Disallowance under Section 14A with Rule 8D.
7. Delayed payment of employees' contribution towards PF & ESI.

Issue-wise Detailed Analysis:

1. Additional Depreciation on Plant & Machinery:
The appellant Revenue contested the CIT(A)'s decision to allow additional depreciation on mining equipment. The AO had disallowed the claim, arguing that mining is not a manufacturing activity. However, the CIT(A) referenced the Supreme Court's ruling in CIT v. Sesa Goa Ltd., which held that mining activities fall under "production" and thus qualify for additional depreciation. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

2. Admission of New Evidence under Rule 46A:
For AY 2012-13, the Revenue challenged the CIT(A)'s alleged admission of new evidence. However, no evidence was presented to support this claim. The Tribunal found no substance in this ground and dismissed it.

3. Depreciation on Land & Site Development Expenses:
The CIT(A) directed the AO to verify the depreciation claim on land and site development expenses, which were capitalized under "Land & Site Development Expenses" but should have been under "Building." The Tribunal found no fault in the CIT(A)'s order, which relied on precedents like CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd., and upheld the CIT(A)'s decision.

4. Expenditure in Earning Exempt Income under Section 115JB:
The CIT(A) relied on a previous Tribunal decision in the assessee's case, which upheld the deletion of an addition made under Section 14A of the Act. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's ground.

5. Disallowance of Expenses Incurred on Club Entrance Fees and Subscriptions:
The CIT(A) allowed the deduction of club expenses, arguing they were for business promotion. However, the Tribunal found no evidence supporting this claim and reversed the CIT(A)'s decision, upholding the AO's disallowance.

6. Disallowance under Section 14A with Rule 8D:
The CIT(A) found that the assessee had not earned any exempt income during the relevant year and thus, no disallowance under Section 14A could be made. The Tribunal upheld this decision, citing the case of REI Agro Ltd.

7. Delayed Payment of Employees' Contribution towards PF & ESI:
The CIT(A) noted that the contributions were deposited before the due date for filing the return of income and thus should not be disallowed. The Tribunal upheld this view, dismissing the Revenue's ground.

Conclusion:
The Tribunal dismissed four of the Revenue's appeals (ITA No.2150, 2151, 2152 & 2154/Kol/2017) and partly allowed one (ITA No.2153/Kol/2017), mainly upholding the CIT(A)'s decisions except for the club expenses, where the Tribunal sided with the AO.

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