2017 (12) TMI 1157 - AT - Income Tax

Tribunal Upholds CIT-A's Decisions for Assessee on Depreciation and Provident Fund

The Tribunal upheld the CIT-A's decisions in favor of the assessee on both issues. The assessee was granted 30% depreciation on motor cars used for ... Allowance of depreciation @ 30% on written down value of motor cars - Held that:- We find that the assessee is engaged in the business of transportation of cash and valuables belonging to the third parties, for which it uses motor lorries customized as armoured vehicles. The security vans are customized, used for transportation of cash and valuables on hire and, therefore, we find the ratio of the decision of Calcutta High Court in the case of Agarwal Finance [2009 (1) TMI 504 - Calcutta High Court ] is applicable and the depreciation is allowable at higher rate. The CIT-A was justified in directing the AO and in allowing @ 30 depreciation as claimed by the assessee - Decided against revenue Addition u/s. 2(24) r.w.s 36(1)(va) towards employees’ contribution to PF belatedly - Held that:- In the present case, the CIT-A found satisfied with the submissions of the assessee that the impugned amounts were paid before filing return of income. Therefore, respectfully following the decision of the Hon’ble High Court of Calcutta in the case of Vijay Shree Ltd [2011 (9) TMI 30 - CALCUTTA HIGH COURT], we hold that the Assessee is entitled to claim deduction as per 1st proviso to Section 43B of the Act and the order of the CIT-A is justified and needs no interference. Therefore, the employees’ contribution to PF can be paid before the due date of filing of return of income. We find no infirmity in the impugned order of the CIT-A and it was justified. - Decided against revenue Issues Involved:1. Allowance of depreciation at 30% on written down value of motor cars.2. Deletion of addition made towards employees' contribution to Provident Fund (PF) under Section 2(24) read with Section 36(1)(va) of the Income Tax Act.Issue-wise Detailed Analysis:1. Allowance of Depreciation at 30% on Written Down Value of Motor Cars:The first issue pertains to whether the assessee is entitled to claim depreciation at 30% on the written down value (WDV) of motor cars used for commercial purposes. The Assessing Officer (AO) restricted the depreciation to 15%, adding Rs. 18,22,744 to the total income of the assessee. The assessee argued that motor buses, motor lorries, and motor taxis used in a business running on hire are entitled to 30% depreciation as per Schedule III, Part A of the New Appendix under Rule 5 of the Income Tax Rules, 1962.The CIT-A, after considering relevant case laws, including the decisions in Magma Fincorp Ltd Vs. ACIT, CIT Vs. Brinks Arya (I) P. Ltd, and Union of India & Ors. Vs. Kamlakshi Finance Corporation, directed the AO to apply the 30% depreciation rate. The CIT-A found that the assessee's use of motor lorries customized as armoured/security vans for the business of transporting cash and valuables qualifies for the higher depreciation rate.The Tribunal, upon reviewing the case law and the records, upheld the CIT-A's decision. It noted that the assessee's business of running motor lorries on hire for transporting valuables aligns with the precedent set by the Calcutta High Court in Agarwal Finance. Thus, the Tribunal dismissed the revenue's appeal on this ground, affirming the 30% depreciation rate.2. Deletion of Addition Made Towards Employees' Contribution to Provident Fund:The second issue involves the deletion of an addition of Rs. 86,28,073 made by the AO under Section 2(24) read with Section 36(1)(va) of the Income Tax Act, related to employees' contribution to the Provident Fund. The AO added this amount to the total income of the assessee, citing late deposit beyond the due date specified under the Act, relying on the Gujarat High Court's decision in CIT-II Vs. Gujarat State Road Transport Corporation (GSRTC).The CIT-A, however, directed the AO to delete the addition, holding that the amounts were deposited before the due date of filing the return of income under Section 139(1). The CIT-A's decision was based on various case laws, including the Supreme Court's rulings in Vinay Cement Ltd and Alom Extrusions Ltd, which established that contributions deposited before the return filing date are deductible.The Tribunal, after hearing the arguments and reviewing the records, supported the CIT-A's decision. It referenced the Supreme Court's interpretation that the amendment to the first proviso to Section 43B by the Finance Act, 2003, is curative and retrospective from April 1, 1988. The Tribunal noted that the Calcutta High Court in Vijay Shree Ltd upheld this view, allowing deductions for contributions deposited before the return filing date. Consequently, the Tribunal found no infirmity in the CIT-A's order and dismissed the revenue's appeal on this ground as well.Conclusion:The Tribunal dismissed the revenue's appeal, upholding the CIT-A's decisions on both issues. The assessee was entitled to claim 30% depreciation on motor cars used for commercial purposes and to deduct employees' contributions to the Provident Fund deposited before the due date of filing the return of income. The order was pronounced in the open court on December 6, 2017.