Tribunal overturns disallowance of Depreciation & service tax addition

The Tribunal ruled in favor of the assessee, overturning the disallowance of Depreciation on Buildings and the addition of unpaid service tax liability under section 43-B of the Act. The Tribunal held that the Assessing Officer cannot alter the Written Down Value based on a valuation report prepared for a different purpose and clarified that section 43B applies only when a deduction is claimed, leading to the deletion of the disallowances made by the AO and upheld by the CIT(A).

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Issues:
1. Disallowance of Depreciation on Buildings
2. Addition of unpaid service tax liability under section 43-B of the Act

Issue 1: Disallowance of Depreciation on Buildings:
The assessee appealed against the disallowance of Depreciation on Buildings amounting to Rs.3,19,208/-. The Assessing Officer (AO) contended that the opening WDV should have been adopted at Rs.3,48,00,000/- based on a valuation report, not at Rs.3,57,47,371/- as per the books of accounts. The AO recalculated the allowable depreciation resulting in disallowance of Rs.3,19,208/-. The CIT(A) upheld the AO's decision due to lack of evidence from the assessee. However, the Tribunal ruled in favor of the assessee, stating that the AO cannot alter the WDV based on a valuation report prepared for a different purpose. The Tribunal directed the deletion of the disallowance.

Issue 2: Addition of unpaid service tax liability under section 43-B of the Act:
The AO added Rs.29,00,637/- as unpaid service tax liability under section 43-B since it was not paid but shown in the balance sheet. The CIT(A) confirmed this addition. However, the Tribunal disagreed, citing precedents where non-claiming of deduction by the assessee led to no disallowance under section 43B. The Tribunal referenced judgments from various High Courts and held that section 43B applies only when a deduction is claimed. Consequently, the disallowance made by the AO and upheld by the CIT(A) was directed to be deleted.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning both the disallowance of Depreciation on Buildings and the addition of unpaid service tax liability under section 43-B of the Act. The judgments emphasized the importance of following the provisions of the Income Tax Act and clarified the application of section 43B regarding deductions and disallowances.

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