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2025 (3) TMI 718 - AT - Income TaxDisallowance of interest on GST and GST late filing fees - whether expenses claimed by the assessee are penal in nature therefore no allowable u/s 37? - HELD THAT - In the case of Mahalakshmi Sugar Mills Co 1980 (4) TMI 1 - SUPREME COURT the Hon ble Supreme Court held that interest paid to Government for delay in payment of cess cannot be described as a penalty paid for an infringement of law. Following this decision of Central Stores (P.) Ltd 1984 (2) TMI 20 - RAJASTHAN HIGH COURT held that interest paid on account of the delay in remitting to the Government sales tax is permissible deduction. Thus we are of the considered view that Ld. CIT(Appeals) has correctly held that the above interest on GST and GST late filing fee was not towards violation of any law and hence is allowable as a deduction under section 37 of the Act. Decided in favour of assessee. Higher depreciation claimed by the assessee or plant and machinery @30% instead of 15% - HELD THAT - As in the assessee s own case in which this issue was decided in favour of the assessee wherein held orders passed by the authorities below which had not been able to be controverted by DR that the assessee engaged in the activities of excavation of over burden mining of minerals transportation of such excavated over burden material excavation of minerals transportation of minerals from mines to Pit head and transportation of minerals from Pit head to Lignite handling system/power plant where the motor lorries used for the transportation of goods on hire. The condition under the zone of consideration for claiming higher rate of depreciation at 30% on dumpers and tippers have been fulfilled by the assessee and therefore having regard to the entire aspect of the matter i.e. the business activities of the assessee qua the claim of the assessee particularly when the fact of composite contract awarded to the assessee of mining and transportation has not been able to be controverted by the DR. We do not find any reason to interfere with the order passed by the Ld. CIT(A) in granting relief by deleting the addition made by the Ld. AO by restricting the depreciation at 15% against the claim of depreciation at 30% on the dumpers and tippers used by the assessee. The same is found to be just and proper and therefore upheld. - Decided against revenue. Higher depreciation claimed by the assessee on plant and machinery (dumper/tipper) @40% instead of 15% - CIT(A) deleted addition - HELD THAT - We observe that for this purpose the assessee has placed reliance on notification number GSR 679 (E) dated 20-09-2019 which allows for higher rate of depreciation @45% (later revised downwards to 40% by Ld. CIT(Appeals) since the assessee had opted for being taxed u/s 115BAA of the Act) on block of assets consisting of motor buses motor lorries and taxis used in the business of running them on hire. The assessing officer on the basis of reasoning given in ground number 2 above restricted the claim of depreciation to 15% whereas Ld. CIT(Appeals) allowed the appeal of the assessee on this issue. On going through the facts of the instant case we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference. Reopening of assessment u/s 147 - addition u/s 69C as unexplained expenditure - allegation of cash receipt of loan and cash payment of interest - addition is an unsigned Excel sheet recovered from the premises of a third party - HELD THAT - Apart from the unsigned excel sheet recovered from third party premises there is no corroborative evidence to sustain the addition in the hands of the assessee. Accordingly we hereby allow the assessee s appeal on merits.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are as follows:
ISSUE-WISE DETAILED ANALYSIS 1. Disallowance of Interest on GST and GST Late Filing Fees Relevant Legal Framework and Precedents: The relevant legal framework involves Section 37 of the Income Tax Act, which allows deductions for expenditures not in the nature of capital expenditure or personal expenses, incurred wholly and exclusively for business purposes. The judgment references the Supreme Court's decision in Mahalakshmi Sugar Mills Co. vs. Commissioner of Income-tax, which held that interest for delayed payment of cess is compensatory and not penal. Court's Interpretation and Reasoning: The Court agreed with the Ld. CIT(A)'s finding that the interest on GST and late filing fees were compensatory, not penal, and thus deductible under Section 37. Key Evidence and Findings: The Department failed to present evidence showing that the interest and fees were for legal infractions. Application of Law to Facts: The Court applied the precedent set by the Supreme Court, affirming that the expenditures were compensatory. Treatment of Competing Arguments: The Department's argument that the expenditures were penal was not supported by evidence. Conclusions: The Court upheld the Ld. CIT(A)'s decision, dismissing the Department's appeal on this ground. 2. Higher Depreciation on Plant and Machinery and Dumpers/Tippers Relevant Legal Framework and Precedents: The issue revolves around the interpretation of depreciation rates under the Income Tax Act. The Court considered past Tribunal decisions in similar cases involving the assessee. Court's Interpretation and Reasoning: The Court noted that the assessee's business involved transportation integral to mining contracts, justifying higher depreciation rates. Key Evidence and Findings: The Ld. CIT(A) and Tribunal had previously ruled in favor of the assessee for similar claims in earlier years. Application of Law to Facts: The Court found that the business activities justified the claimed depreciation rates. Treatment of Competing Arguments: The Department's argument that the business did not involve hiring vehicles was countered by evidence of transportation activities. Conclusions: The Court dismissed the Department's appeal, affirming the Ld. CIT(A)'s decision to allow higher depreciation. 3. Validity of Section 147 Invocation and Addition under Section 69C Relevant Legal Framework and Precedents: The legal framework involves Section 147 for reopening assessments and Section 69C for unexplained expenditures. The Court referenced precedents on the necessity of corroborative evidence. Court's Interpretation and Reasoning: The Court found the addition under Section 69C unsustainable due to lack of corroborative evidence beyond an unsigned Excel sheet. Key Evidence and Findings: The unsigned Excel sheet from a third party was the sole basis for the addition, lacking corroborative evidence. Application of Law to Facts: The Court applied principles from past cases, emphasizing the need for corroborative evidence. Treatment of Competing Arguments: The Department's reliance on the Excel sheet was insufficient, as the assessee was not allowed to cross-examine the source. Conclusions: The Court allowed the assessee's appeal, dismissing the addition under Section 69C. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "The interest paid under section 3(3) of the 1956 Act cannot be described as a penalty paid for an infringement of the law." Core Principles Established: Expenditures that are compensatory in nature and integral to business activities are deductible under Section 37. Higher depreciation rates are justified when transportation is a significant part of business activities. Final Determinations on Each Issue: The Court dismissed the Department's appeals regarding GST interest and fees, and depreciation claims, while allowing the assessee's appeal against the Section 69C addition.
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