2021 (5) TMI 821 - AT - Income Tax

Disallowance of depreciation - CIT- deleted the addition - Revenue's sole substantive argument that the CIT(A) has admitted the additional evidence in violation of Rule 46A of the Income Tax Rules - HELD THAT - We do not find any such admission of additional evidence under the sub-rule (1) to (3) - even if it is taken as an instance of assessee having filed its detailed documents pertaining to the corresponding assets forming subject matter of the depreciation claim, the same appears to be under the clause-4 of Rule 46A only wherein the CIT(A) is entitled to act on its own as well where it can direct the assessee for production of any such document. We make it clear in addition to all this that the assessee's clinching fact supporting the acquisition of the corresponding fixed assets qua its depreciation claim has nowhere been challenged on merits. We thus affirm the CIT(A)'s findings on this first issue. Disallowance of employees provident fund's delayed payment - Addition u/s 2(24)(x) r.w.s. 36(1)(va) r.w.s.43B - CIT-A deleted the addition on the ground that the necessary compliance had been made before the due date of filing of the return - HELD THAT - We find no merit in the Revenue's instant arguments as well since the Explanatory Memorandum to Finance Bill, 2021 has clarified to the effect that the employees' provident funds payment issue comes u/s. 36(1)(va) of the Act only but the same is applicable from 01-04-2021 than having any retrospective effect. We hold in view of all these facts that the CIT(A) has rightly deleted the impugned employees provident fund disallowance made by the AO. Addition u/s 40(a)(ia) disallowance - assessee's failure to deduct TDS - HELD THAT - It is an admitted fact that no TDS had been deducted at the assessee's behest. CIT(A)'s detailed discussion on this tribunal's Special Bench decision in the case of Merilyn Shipping and Transport Ltd. 2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) holding that the impugned disallowance applies only in case of expenses remaining payable as on 31st March of the relevant previous year than those already paid. This reasoning no more holds the ground in view of the Palam Gas Service Vs. CIT 2017 (5) TMI 242 - SUPREME COURT , settling the law that the impugned statutory provision applies both in case of paid as well as payable expenses. We thus reverse the CIT(A)'s conclusion deleting the impugned disallowance on legality aspect. The legislature has itself incorporated Section 40(a)(ia) second proviso in the Act inserted vide Finance Act, 2012 w.e.f. 01-04-2013 that the main provision itself does not apply in case the assessee is not an assessee in default u/s. 201(1) 1st proviso of this Act. Hon'ble Delhi high court's decision in CIT Vs. Ansal Landmark Townships Pvt. Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT holds that the same is a curative proviso having retrospective effect. There is hardly any dispute that the said amended proviso; to be read in light of Section 201(1) first proviso, stipulates that the impugned statutory provision does not apply in case the assessee concerned is not the assessee in default for having not deducted TDS qua the corresponding expenditure payments. We thus, restore the instant issue back to the Assessing Officer to be examined afresh in light of Section 40(a)(ia) second proviso r.w.s. 201(1) first proviso in accordance with law. The assessee is directed to file all the necessary details to be followed by three effective opportunities of hearing. Disallowance of section 80G - CIT- A deleted the addition - HELD THAT - Since there is no indication that CIT(A) having admitted additional evidence under Rule 46A(1-3) of the Income Tax Rules. This fourth substantive ground is also rejected therefore.

Summary

Issues:
- Disallowance of depreciation
- Disallowance of employee's provident fund payment
- Disallowance of TDS on interest
- Disallowance of donations

Disallowance of Depreciation:
The Revenue appealed against the CIT(A)'s order deleting the disallowance of depreciation without giving the assessing officer an opportunity to examine additional evidence. The CIT(A) justified the deletion based on the appellant's substantiated claim. The tribunal found no violation of Rule 46A and upheld the CIT(A)'s decision, noting that the appellant's evidence supporting the depreciation claim was unchallenged. Hence, the tribunal affirmed the CIT(A)'s findings on this issue.

Disallowance of Employee's Provident Fund Payment:
The Revenue contended that the CIT(A) wrongly deleted the disallowance of employees' provident fund payment, arguing that the deposit should have been made before the due date prescribed by the statute. However, the tribunal disagreed, citing the Finance Bill's clarification that the issue falls under Section 36(1)(va) and not Section 43B, with prospective application from 01-04-2021. Consequently, the tribunal upheld the CIT(A)'s decision to delete the disallowance.

Disallowance of TDS on Interest:
The Revenue challenged the CIT(A)'s deletion of the disallowance of TDS on interest, citing non-deduction of TDS by the assessee. The tribunal referred to relevant case law and statutory provisions to conclude that the disallowance applies to both paid and payable expenses. Additionally, the tribunal noted the retrospective effect of the second proviso to Section 40(a)(ia) inserted in the Finance Act, 2012. Consequently, the tribunal reversed the CIT(A)'s decision and remanded the issue to the Assessing Officer for fresh examination in light of the statutory provisions.

Disallowance of Donations:
The Revenue sought to revive the disallowance of donations, alleging a violation of Rule 46A(3) due to the admission of additional evidence. However, the tribunal found no evidence of such admission and rejected this ground, consistent with its decisions on previous substantive issues. As a result, the tribunal treated the Revenue's appeal as partly allowed for statistical purposes.

This detailed analysis of the judgment covers the various issues raised by the Revenue and the tribunal's reasoning behind upholding or reversing the CIT(A)'s decisions on each issue.