2016 (10) TMI 841 - AT - Income Tax

Tribunal overturns disallowances, provides TDS credit rectification direction.

Ramu S Deora Versus Assistant Commissioner of income tax, range 12 (3),

The tribunal allowed the appeal, overturning the disallowances of additional depreciation and under section 14 A. The direction for rectifying the TDS ... Depreciation allowability - operational connectivity to the article or thing - AO disallowed the depreciation holding that clause (iia) of section 32(1) is applicable only on the new plant and machinery acquired by the assessee and engaged in the business of manufacture or production - Held that:- The Hon’ble Madras High Court in VTM Ltd (2009 (9) TMI 35 - MADRAS HIGH COURT ) in almost of identical facts held that the provision does not restrict that the new plant and machinery should have any operational connectivity to the article or thing that was already manufactured by the assessee. Also in Hi Tech Arai ltd (2009 (9) TMI 60 - MADRAS HIGH COURT ) held that sec 32(1) (iia) does not state that the setting up of a new machinery or plant, which was acquired and installed, should have any operational connectivity to the article or thing that was already being manufactured by the assessee. It could be said that setting up of a windmill will not for within the expression setting up of a new machinery or plant. Thus, we respectfully following the decisions of Madras High Court allowed the depreciation claimed by the assessee. In the result this ground of appeal raised by the assessee in the present appeal is allowed. Disallowance under section 14 A - Held that:- During the course of assessment proceeding the assessee submitted that amount of ₹ 4,21,908/-can be taken for disallowance under section 14 A. The voluntary disallowance was not accepted by AO, and AO worked out the disallowance as per the procedure prescribed in Rule 8D (2)(iii) of ₹ 35,32,795/-and added to the total income of assessee. The coordinate bench of this tribunal in assessee’s own case, restricted the disallowance under section 14A at ₹ 10,000/- only as referred above. Thus, keeping in view the order of the Tribunal for AY 2009-10 the disallowance made by AO for ₹ 35,32,795/- under section 14A is deleted. In the year under consideration the exempt income of assessee consist of income from the tax free bonds of ₹ 2,24,91,102/-, dividend income of ₹ 1,47,24,682/-, interest on PPF ₹ 2,28,190/- and LTCG of ₹ 2,93,35,787/-. Major investments were made in earlier years and exempt income is from Government securities. The payments of interest of tax free bonds were credited by way of ECS. Before the lower authority the assessee offered disallowance under section 14A of ₹ 4,21,908/- which was not accepted. This fact is an additional fact in the year under consideration. No such fact is discernable from the order of Tribunal for AY 2009-10. Thus we accept the voluntarily disallowance of ₹ 421,908/- offered by assessee u/s 14A of the Act, before the authorities below. We order accordingly.- Decided in favour of assessee Issues:1. Disallowance of additional depreciation claimed on Wind Mill2. Disallowance under section 14 A3. Short credit of TDSAnalysis:1. Disallowance of Additional Depreciation:The appeal challenged the disallowance of additional depreciation claimed on a windmill project. The assessee argued that the windmill installation qualified for additional depreciation under section 32(1)(iia) as it was engaged in power generation. The Revenue contended that the benefit was only for businesses directly involved in power generation. The tribunal noted that the assessee was not restricted from claiming depreciation due to other business activities. Relying on precedents, the tribunal allowed the depreciation, emphasizing that operational connectivity to existing operations was not a requirement.2. Disallowance under Section 14 A:The appeal contested the disallowance under section 14 A. The assessee cited a previous Tribunal decision in their favor for a similar issue in a prior assessment year. The tribunal reviewed the facts and upheld the assessee's argument, limiting the disallowance to a nominal amount based on the accounts and claims presented. The disallowance for the current year was deleted, considering the exempt income sources and voluntary disallowance offered by the assessee.3. Short Credit of TDS:The third ground addressed the short credit of TDS. The assessee had filed for rectification of the TDS credit with the Assessing Officer under section 154. The tribunal directed the AO to verify the TDS evidence and make necessary corrections as per law. The ground was allowed for statistical purposes.In conclusion, the tribunal allowed the appeal, overturning the disallowances of additional depreciation and under section 14 A. The direction for rectifying the TDS credit issue was also provided. The decision was announced on 14th September 2016 by the tribunal.