2015 (1) TMI 1361 - AT - Income Tax

Tribunal decision on provisions, disallowance, interest, and deduction upheld with recalculations

The Tribunal allowed the assessee's appeal on the disallowance of provision for Leave Encashment, directing a fresh adjudication based on legal ... Disallowance of provision for Leave Encashment - Held that:- As decided in assessee's own case restored the matter to the file of AC with a direction to adjudicate the same as per decision of Hon'ble apex Court in the case of Exide Industries Ltd (2008 (9) TMI 921 - SUPREME COURT) Addition u/s 14A - disallowance on account of interest - Held that:- As observed that assessee’s investment in shares and securities from which assessee has earned tax free income is much less than the share capital and reserve and surplus. Therefore, the contention of the assessee is required to be accepted and it is held that no disallowance on account of interest was called for. Accordingly, addition of ₹ 2,69,620/- is deleted and disallowance is sustained only for a sum of ₹ 2,00,484/-. This ground is partly allowed. Deduction on account of provisions of warranty - Held that:- The deduction claimed by the assessee on account of the provisions for warranty is concerned, that is fully covered in favour of the assessee and against the revenue by the judgment of the Hon’ble Supreme Court in the case of Rotork Controls (P) Ltd (2009 (5) TMI 16 - SUPREME COURT OF INDIA) Additional depreciation on Fan & Air Conditioners - claim disallowed by the Assessing Officer for the reason that they are not related to manufacturing activities - Held that:- The finding of the fact by the CIT (A) is that the Fans and Air Conditioners on which disallowance has been made are installed in the factory premises and these findings are not dislodged by the Revenue. In this view of the situtation, we see no infirmity in the deletion of disallowance and we decline to interfere - Decided in favour of the assessee Issues:1. Disallowance of provision for Leave Encashment2. Disallowance u/s 14A r.w.r. 8D3. Levy of Interest4. Allowance of deduction claimed on account of provisions of warranty5. Deletion of disallowance of additional depreciationIssue 1: Disallowance of provision for Leave EncashmentThe appeal was against the CIT (A)'s order confirming the disallowance of a provision for leave encashment under section 43B(f) of the Income Tax Act. The Tribunal referred to previous decisions and observations regarding similar cases, including the decision in the case of Universal Medicare Pvt. Ltd. vs. ACIT. The Tribunal set aside the orders of the authorities below and directed the matter to be adjudicated afresh as per the decision of the Hon'ble apex Court in the case of Exide Industries Ltd. The Tribunal allowed the assessee's appeal on this ground for statistical purposes.Issue 2: Disallowance u/s 14A r.w.r. 8DThe assessee contested the disallowance u/s 14A, specifically on account of interest. The Tribunal noted that the assessee's own funds exceeded the investment in tax-free income sources, leading to the deletion of the disallowance on account of interest. However, a partial disallowance of &8377; 2,00,484/- was sustained. The Tribunal directed the Assessing Officer to recalculate the interest as per the law after giving effect to this order.Issue 3: Levy of InterestThe Tribunal addressed the issue of levy of interest u/s 234B and 234C of the Act, and directed the Assessing Officer to recalculate the interest in accordance with the law after the decisions on other grounds were made.Issue 4: Allowance of deduction claimed on account of provisions of warrantyThe Revenue's appeal challenged the allowance of deduction claimed by the assessee on account of provisions of warranty. The Tribunal dismissed this ground as it was covered by earlier orders of the Tribunal and the Hon'ble High Court, citing judgments in favor of the assessee.Issue 5: Deletion of disallowance of additional depreciationThe Revenue's appeal also contested the deletion of disallowance of additional depreciation. The Tribunal upheld the CIT (A)'s decision, noting that the assets in question were used in the manufacturing plant of the assessee. The Tribunal declined to interfere with the deletion of disallowance, and the appeal of the Revenue was dismissed.In conclusion, the Tribunal addressed various issues related to disallowances, levies, deductions, and depreciation, providing detailed analyses and referencing relevant legal precedents and judgments to arrive at its decisions.