2023 (8) TMI 1523 - AT - Income Tax

Allowable business expenditure - disallowance of Pooja Festival expenses - HELD THAT - On perusal of the findings in the case of M/s.Hira Ferro Alloys Ltd. 2009 (8) TMI 732 - CHHATTISGARH HIGH COURT which were directly on the issue in the present case, respectfully following the same, we do not find any infirmity in the order of the Ld.CIT(A) wherein the addition on Pooja Festival expenses made by the AO, was sustained. We, therefore, in concurrence with the view taken by the order of the Ld.CIT(A), uphold the same. Consequently, Ground No.2 of the assessee stands dismissed. Addition on account of additional depreciation - As per AO additional depreciation is available on new plant machinery installed and put to use during the year under consideration and not on the addition to the plant machinery - HELD THAT - Since the conditions pertaining to allowing of additional depreciation to new industrial undertakings and expansion in installed capacity were also dispensed with, it can be easily interpreted that addition to plant and machinery, subject to certain conditions under the second proviso to section 32(1)(iia) of the Act, are entitled for additional depreciation. Our interpretation is further fortified by the order of EFACEC Switchgear India P. Ld. 2022 (5) TMI 158 - ITAT DELHI where in it was the observation that tools, dies, jigs, etc., are used by the appellant for its business of manufacturing switchgear products, it is evident that moulds, dies, and tools are not independent of the plant and machinery, but are parts of the machinery. Once they are worn out, the machines cannot turn out the product to the business specifications and this has to be obtained only on a replacement of the tools or dies and moulds. Accordingly, any addition in the plant and machinery are eligible for additional depreciation but subject to satisfaction of conditions carved out in the amended section 32(1)(iia) and its provisions. In the present case, according to observations of Ld CIT(A), relevant details pertaining to additions in the plant and machinery have not been brought on records by the appellant in the claims made for additional depreciation. There is no material with respect to use of the impugned plant and machinery for the year under consideration along with relevant details. Though, it is also apparent from records that no such query was raised by the department at any stage may it be assessment stage or appellant stage, in the interest of natural justice, we are of the considered opinion that the matter should be restore back to the files of Ld AO to adjudicate the issue afresh - Appeal of the assessee is partly allowed for statistical purposes.

Issues Involved:
1. Disallowance of charity and donation expenses.
2. Disallowance of Pooja and festival expenses.
3. Disallowance under Section 14A read with Rule 8D.
4. Disallowance for delayed payment of Employee's Contribution to Provident Fund/Employee State Insurance.
5. Disallowance under Section 40(a)(ia).
6. Disallowance of additional depreciation on plant and machinery.

Issue-wise Detailed Analysis:

1. Disallowance of Charity and Donation Expenses:
The assessee raised a ground against the disallowance of Rs. 14,001/- for charity and donation expenses. However, this ground was withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

2. Disallowance of Pooja and Festival Expenses:
The assessee contested the disallowance of Rs. 1,73,307/- for Pooja and festival expenses. The assessee's representative argued that similar expenses had been allowed as business expenditure in previous cases, such as DCIT v. Godawari Power & Ispat Ltd. and M/s. Chhattisgarh Steel & Power Ltd. However, the Tribunal noted that the jurisdictional High Court in the case of M/s. Hira Ferro Alloys Ltd. had ruled against such deductions, stating that a company cannot profess any religion and thus, Pooja expenses cannot be considered business expenditure. Following the binding precedent of the jurisdictional High Court, the Tribunal upheld the disallowance, dismissing the assessee's ground.

3. Disallowance under Section 14A read with Rule 8D:
The assessee raised a ground against the disallowance of Rs. 26,950/- under Section 14A read with Rule 8D, arguing that no expenses were incurred for earning exempt income. This ground was also withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

4. Disallowance for Delayed Payment of Employee's Contribution to Provident Fund/Employee State Insurance:
The assessee contested the disallowance of Rs. 17,356/- for delayed payment of Employee's Contribution to Provident Fund/Employee State Insurance. This ground was withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

5. Disallowance under Section 40(a)(ia):
The assessee raised a ground against the disallowance of Rs. 2,16,032/- under Section 40(a)(ia), alleging non-compliance with the provision. This ground was withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

6. Disallowance of Additional Depreciation on Plant and Machinery:
The assessee contested the disallowance of Rs. 4,06,916/- for additional depreciation on plant and machinery. The AO disallowed the claim, stating that no new plant and machinery were installed and put to use during the year. The assessee argued that additions to existing plant and machinery should be eligible for additional depreciation as per Section 32(1)(iia) of the Act. The Tribunal noted that the intent of the legislature was to encourage investment and that additions to existing plant and machinery should qualify for additional depreciation. However, the Tribunal observed that relevant details were not provided by the assessee. In the interest of natural justice, the Tribunal restored the matter to the AO for fresh adjudication, allowing the ground partly for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific grounds dismissed as withdrawn and the issue of additional depreciation remanded for fresh consideration.

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