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2022 (3) TMI 28 - AT - Income TaxNature of expenses - Disallowance of repairs maintenance expenses - revenue or capital expenses - HELD THAT - Since the assessee itself is accepting that 23 items found in the list are capital in nature the addition of above said items are confirmed. With regard to remaining 32 items we are of the view that they require verification at the end of the AO in the light of decisions relied upon by the assessee. Accordingly we restore this issue to the file of AO for examining the claim of assessee with regard to the 32 items found in the list. Claim of depreciation on the amount held to be capital in nature which was disallowed from repairs maintenance expenditure. Since this claim of the assessee is in accordance with law we restore this issue to the file of the A.O. with a direction to allow depreciation thereon in accordance with law. Disallowance of claim for deduction u/s 80G - contributions made under CSR scheme - HELD THAT - We direct the A.O. to allow deduction u/s 80G of the Act in respect of contributions made under CSR scheme after examining the claim of the assessee that the said payments are eligible for deduction u/s 80G. Claim for deduction of Education Cess including secondary higher education Cess on income tax as deduction while computing the total income - HELD THAT - Following the above said decision of Kolkata bench of Tribunal in the case of Kanoria Chemicals Industries Ltd 2021 (10) TMI 1153 - ITAT KOLKATA we hold that payment of education cess including secondary and higher education cess is not allowable as deduction. Accordingly we reject this ground of the assessee.
Issues Involved:
1. Addition on account of transfer pricing adjustment 2. Disallowance of part of repairs and maintenance expenses treating it as capital in nature 3. Disallowance of deduction under section 80G of the Income-tax Act, 1961 4. Alternative claim to allow depreciation on amount disallowed from repairs and maintenance expenses 5. Claim for deduction of Education Cess Issue-wise Detailed Analysis: 1. Addition on account of transfer pricing adjustment: The assessee sought permission to withdraw all grounds relating to transfer pricing adjustment due to a bilateral Advance Pricing Agreement (APA) covering the assessment years 2014-15 and 2015-16, which dissolved the transfer pricing adjustment for the year under consideration. The tribunal allowed the withdrawal and dismissed these grounds as not pressed. 2. Disallowance of part of repairs and maintenance expenses treating it as capital in nature: The assessee initially claimed ?3.68 crores as repairs and maintenance expenses. The A.O. disallowed 50% of this amount, treating it as capital in nature due to lack of details. Upon furnishing details before the DRP, the A.O. accepted ?2.28 crores as revenue in nature and reported ?1.40 crores as capital in nature. The DRP further examined and confirmed ?75,24,807/- as capital in nature. The tribunal noted that the assessee accepted 23 items as capital in nature and required verification for the remaining 32 items. The tribunal restored this issue to the A.O. for further examination. 3. Disallowance of deduction under section 80G of the Income-tax Act, 1961: The assessee claimed a deduction of ?21,36,801/- under section 80G for CSR-related expenses. The A.O. disallowed ?15,20,000/- of this claim, considering CSR expenses as non-eligible for deduction under section 37(1). The tribunal referred to a coordinate bench decision in Allegis Services India Pvt. Ltd., which allowed CSR expenses as deductible under section 80G. The tribunal directed the A.O. to allow the deduction after verifying the eligibility of the payments under section 80G. 4. Alternative claim to allow depreciation on amount disallowed from repairs and maintenance expenses: The tribunal restored this issue to the A.O. with a direction to allow depreciation on the disallowed amount in accordance with the law. 5. Claim for deduction of Education Cess: The tribunal referred to the Kolkata Bench decision in Kanoria Chemicals & Industries Ltd., which held that education cess is an additional surcharge on income tax and not allowable as a deduction. The tribunal followed this decision and rejected the assessee's claim for deduction of education cess. Conclusion: The appeal filed by the assessee was partly allowed for statistical purposes. The tribunal allowed the withdrawal of grounds related to transfer pricing adjustment, restored the issue of repairs and maintenance expenses for further examination, directed the A.O. to allow the deduction under section 80G after verification, and rejected the claim for deduction of education cess. The order was pronounced in the open court on 23rd February 2022.
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