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2018 (6) TMI 159 - AT - Income TaxDisallowance of payment for employees contribution towards PF and ESIC after the due date - Held that - Following the judgment of Jurisdictional High Court in case of COMMISSIONER OF INCOME TAX II VERSUS GUJARAT STATE ROAD TRANSPORT CORPORATION 2014 (1) TMI 502 - GUJARAT HIGH COURT as held sums were not credited by the respective assessee to the employees accounts in the relevant fund or funds on or before the due date as per the Explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act - Decided against the assessee. Disallowance of depreciation - whether the rented out machinery is used for the business purpose - Held that - The use of capital asset by the assessee being owner is not mandatory but use of business purpose - since assessee has offered rental income from the machinery under the head business or provisions therefore he is entitled to claim depreciation corresponding to the rental income derived from the letting out of machinery u/s 32 - Decided in favor of assessee. Disallowance u/s 194J for non deduction of TDS - expenses under the head legal and professional fees - Held that - The case of the assessee falls after the enhancement of threshold limit - where the payments exceeds limit of 30, 000/- TDS is required to be deducted - in case Shri Sanjiv Khurana assessee is not in default - in case of R. M. Modi there is lack of documentary evidence thus case is remitted back to the file of the AO - decided for statistical purpose.
Issues Involved:
1. Disallowance under section 36(1)(va) r.w.s. 43B & section 37. 2. Disallowance under section 32. 3. Disallowance under section 40(a)(ia) read with section 194J. 4. Non-consideration of an argument by the CIT(A). Issue-wise Detailed Analysis: 1. Disallowance under section 36(1)(va) r.w.s. 43B & section 37: The first issue concerns the disallowance of ?26,548/- for employees' contribution towards PF and ESIC, which was deposited after the due date. The assessee argued that the payment was made before the due date of filing the return under section 43B. However, the AO disallowed the amount, and the CIT(A) upheld this disallowance, citing the Hon'ble Gujarat High Court decision in CIT Vs. Gujarat State Road Transport Corporation, which held that the provisions of section 43B do not apply to employees' contributions to PF and ESIC. The Tribunal, following the jurisdictional High Court's decision, dismissed the assessee's appeal on this ground. 2. Disallowance under section 32: The second issue pertains to the disallowance of ?5,90,440/- claimed as depreciation on rented machinery. The AO disallowed the claim, stating that the machinery was not used by the assessee for its business. The CIT(A) upheld this disallowance, arguing that the machinery was not utilized by the assessee and renting out machinery was not part of the assessee's business. The Tribunal, however, reversed this decision, citing the Supreme Court's judgment in ICDS Ltd. vs. CIT, which held that the owner of an asset used in the course of business is entitled to claim depreciation. The Tribunal directed the AO to delete the addition, allowing the assessee's appeal on this ground. 3. Disallowance under section 40(a)(ia) read with section 194J: The third issue involves the disallowance of certain expenses due to non-deduction of TDS under section 194J. The AO disallowed ?80,000/- and ?25,000/- paid as legal and professional fees. The CIT(A) upheld the disallowance. The Tribunal examined the payments to three parties: - Sanjiv Khurana: The Tribunal noted that the payment of ?30,000/- was below the threshold limit post-01/07/2010, and thus, no TDS was required. Additionally, evidence was provided that the recipient had included the amount in their income tax return. The Tribunal held the assessee was not in default for non-deduction of TDS. - R. M. Modi: The Tribunal found no evidence of an employer-employee relationship but noted the recipient had included the amount in their income tax return. The Tribunal remitted the issue back to the AO to verify this claim. - Nilesh B. Soni: The payment of ?25,000/- was below the threshold limit, and thus, no TDS was required. The Tribunal held the assessee was not in default for non-deduction of TDS. The Tribunal partly allowed the assessee's appeal for statistical purposes. 4. Non-consideration of an argument by the CIT(A): The fourth issue raised by the assessee was that the CIT(A) did not consider submissions regarding the allowance of depreciation under section 32 and compliance with section 40(a)(ia) r.w.s. 201(1). The Tribunal addressed these issues in their detailed analysis of the respective grounds and provided directions accordingly. Conclusion: The Tribunal dismissed the appeal concerning the disallowance under section 36(1)(va) r.w.s. 43B, allowed the appeal regarding depreciation under section 32, and partly allowed the appeal related to disallowance under section 40(a)(ia) read with section 194J, remitting part of the issue back to the AO for verification. The overall appeal was partly allowed for statistical purposes.
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