2015 (8) TMI 11 - AT - Income Tax

Disallowance u/s 40(a) - CIT(A) deleted disallowance - Held that - The issue under consideration is squarely covered in favour of the assessee as relying on the case of ADIT, International Taxation vs. Express Drilling Systems LLC. .. and M/s. S.K.Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT wherein held that Section 40(a)(ia) refers only to the duty to deduct tax and pay to government account there is nothing in the said section to treat the assessee as defaulter where there is a shortfall in deduction. And if there is any shortfall due to any difference of opinion the assessee can be declared to be an assessee in default u/s. 201 but no disallowance u/s 40(a)(ia) is allowed - Decided in favour of assessee. Disallowance on account of depreciation - CIT(A) deleted disallowance - Held that - It is noticed in the case of CIT vs. Ceramics & Industries Ltd. (2011 (1) TMI 26 - DELHI HIGH COURT ) held that UPS is a part of the computer peripherals & accessories and accordingly depreciated @ 60%. Since the identical issue has been decided by the Hon ble Jurisdictional High Court in the aforesaid referred to case by holding that the assessee is entitled to higher rate of depreciation @ 60% and the Ld. CIT has followed the ratio laid down by the Hon ble Jurisdictional High Court, therefore, we do not see any merit in the appeal of the department on this issue.- Decided in favour of assessee.

Summary

Issues:
1. Deletion of disallowance under Section 40(a)(ia) of the Income Tax Act.
2. Deletion of disallowance on account of depreciation.

Analysis:

Issue 1: Deletion of disallowance under Section 40(a)(ia) of the Income Tax Act:
The first issue in this case pertains to the deletion of disallowance of Rs. 2,16,000 made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act. The AO disallowed the amount as the assessee had not deducted TDS on Generator hire charges and vehicle hire charges. However, the assessee argued that the shortfall in deduction should not lead to disallowance under Section 40(a)(ia) and cited relevant case laws to support their contention. The Ld. CIT(A) deleted the addition, emphasizing that if there is a shortfall in deduction, the assessee can be declared as an assessee in default under Section 201 of the Act, and no disallowance should be made under Section 40(a)(ia). The Tribunal upheld the CIT(A)'s decision, citing consistency in previous orders and relevant case laws, including the judgment of the Hon'ble Kolkata High Court. The Tribunal concluded that there was no infirmity in the CIT(A)'s order on this issue.

Issue 2: Deletion of disallowance on account of depreciation:
The second issue revolves around the deletion of disallowance of Rs. 15,83,875 made by the AO on account of depreciation claimed by the assessee on the purchase of Printers, scanners, and UPS. The AO disallowed the amount as the assessee claimed depreciation at a higher rate than allowable. The assessee contended that these items are integral parts of a computer system and should be considered as part of the computer for depreciation purposes. The Ld. CIT(A) allowed the claim of the assessee, relying on precedents and judgments that upheld higher depreciation rates for computer peripherals and accessories. The Tribunal noted that the Hon'ble Jurisdictional High Court had held UPS to be part of computer peripherals and accessories depreciable at 60%. Since the Ld. CIT(A) followed the High Court's ratio, the Tribunal dismissed the department's appeal on this issue.

In conclusion, the Tribunal upheld the decisions of the Ld. CIT(A) on both issues, emphasizing the application of relevant legal principles and precedents in determining the allowability of expenses and depreciation under the Income Tax Act.