Tribunal Decision: Depreciation allowed, TDS disallowance dismissed, PF/ESI contributions confirmed, business expenses upheld.

The DCIT, Circle-6, Jaipur Versus M/s Anamika Conductors Ltd. And Vice-Versa

The DCIT, Circle-6, Jaipur Versus M/s Anamika Conductors Ltd. And Vice-Versa - Tmi Issues Involved:
1. Disallowance of depreciation claimed on windmill.
2. Disallowance under Section 40(a)(ia) of the IT Act.
3. Disallowance of employees' contribution to PF & ESI beyond the prescribed time limit.
4. Application of Section 43B vs. Section 36(1)(va) r.w.s. 2(24)(x) regarding employees' contribution to PF & ESI.
5. Disallowance under Section 14A of the IT Act.

Detailed Analysis:

1. Disallowance of Depreciation on Windmill:
The Revenue challenged the CIT(A)'s decision to allow depreciation at 80% on the entire windmill, including the building and electrical installations. The Tribunal upheld the CIT(A)'s decision, referencing previous Tribunal decisions and the Rajasthan High Court's ruling in CIT vs. Mehru Electricals & Mechanical Engg. (P) Ltd., which allowed similar depreciation claims. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal, confirming the deletion of the disallowance.

2. Disallowance under Section 40(a)(ia):
The Revenue contested the CIT(A)'s deletion of the disallowance of Rs. 27,94,439/- under Section 40(a)(ia) due to non-deduction of TDS. The Tribunal noted that the CIT(A) had remanded the matter to the AO to verify certificates from payees confirming the reporting of income and payment of taxes. The Tribunal found the CIT(A)'s approach consistent with previous Tribunal decisions and confirmed the deletion of the disallowance, dismissing the Revenue's appeal.

3. Disallowance of Employees' Contribution to PF & ESI:
The Revenue appealed against the CIT(A)'s deletion of the disallowance of Rs. 21,250/- for late deposit of employees' PF & ESI contributions. The Tribunal upheld the CIT(A)'s decision, noting that the contributions were paid before the due date for filing the return under Section 139(1). The Tribunal referenced the Rajasthan High Court's decision in CIT vs. State Bank of Bikaner & Jaipur, which supported the CIT(A)'s ruling. The Tribunal dismissed the Revenue's appeal.

4. Application of Section 43B vs. Section 36(1)(va):
The Revenue argued that employees' contributions to PF & ESI should be governed by Section 36(1)(va) r.w.s. 2(24)(x), not Section 43B. The Tribunal rejected this argument, affirming the CIT(A)'s application of Section 43B, which allows deductions if payments are made before the due date for filing the return. The Tribunal dismissed the Revenue's appeal.

5. Disallowance under Section 14A:
The Revenue contested the CIT(A)'s restriction of the disallowance under Section 14A to Rs. 2,82,352/- from Rs. 6,00,493/-. The Tribunal found that the investments were made from interest-free funds and no exempt income was received from the investments. Citing various High Court rulings, the Tribunal held that no disallowance under Section 14A was warranted in the absence of exempt income. The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection.

Additional Issue:
The assessee's cross-objection regarding the disallowance of Rs. 29,350/- for business expenses was upheld by the Tribunal. The Tribunal found no basis for the AO's adhoc disallowance of 10% of conveyance and telephone expenses and deleted the disallowance.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, confirming the CIT(A)'s order on all contested issues. The judgment was pronounced in the open court on 26/10/2017.