ITAT upholds depreciation claim and TDS decision, dismisses Revenue's appeal on Section 147 proceedings.

The ITAT dismissed the Revenue's appeal, upholding the deletion of disallowance of depreciation and the Ld. CIT(A)'s decision on the TDS issue. The challenge to the validity of proceedings under Section 147 was not addressed as it became moot. The ITAT allowed the full depreciation claim, reducing the determined loss by the disallowed amount.

---

---

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS.
2. Validity of proceedings initiated under Section 147.
3. Disallowance of depreciation claimed by the assessee.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for non-deduction of TDS:

The Revenue appealed against the Ld. CIT(A)'s decision to delete the disallowance of Rs. 1,07,14,603 under Section 40(a)(ia) on the grounds that the TDS remittance was made before the due date of filing the return of income. The assessee, a company engaged in newspaper publishing, had not deducted tax at source on payments for rent, transport charges, and rent on education centers and district offices. The A.O. disallowed these expenses under Section 40(a)(ia). The Ld. CIT(A) deleted the disallowance, relying on the ITAT Vizag Special Bench decision in the case of Merlyn Shipping and Transport and the Hon'ble A.P. High Court decision in CIT vs. Janapriya Engineers Syndicate. The ITAT upheld the Ld. CIT(A)'s order, noting that the expenditure was paid during the relevant previous year and nothing remained payable at the year-end, thus dismissing the Revenue's appeal.

2. Validity of proceedings initiated under Section 147:

The assessee challenged the legality of the reassessment proceedings initiated under Section 147. The A.O. reopened the assessment based on audit scrutiny, which revealed that the assessee claimed depreciation on plant and machinery and electrical equipment at 15%, despite commencing business on 22.10.2007. The A.O. issued a notice under Section 148, but the assessee did not respond, leading to an ex-parte assessment under Section 144. The ITAT did not adjudicate on this issue as it became academic due to the decision on the merits of the depreciation claim.

3. Disallowance of depreciation claimed by the assessee:

The A.O. disallowed Rs. 38,43,674 of depreciation, arguing that the assets were not used for more than 180 days as the business commenced on 22.10.2007. The Ld. CIT(A) upheld this view, but the ITAT disagreed. The ITAT noted that the assets were acquired in the previous year and were part of the opening WDV. The term "used for the purpose of business" includes passive use, and the assets were ready for use before 22.10.2007. The ITAT cited various High Court decisions supporting this broader interpretation. Thus, the ITAT allowed the full depreciation claim, deleting the disallowance and reducing the loss determined by the amount of the disallowed depreciation.

Conclusion:

The ITAT dismissed the Revenue's appeal and partly allowed the assessee's appeal, deleting the disallowance of depreciation and upholding the Ld. CIT(A)'s order regarding the TDS issue. The legal challenge to the reassessment proceedings was not adjudicated due to its academic nature following the decision on the merits.

Order Pronounced:

Order pronounced in the open Court on 24.06.2015.

---