Assessee's appeal partially allowed on additional depreciation under section 32(1)(iia) but Pooja Festival expenses disallowed

The ITAT Raipur dismissed the assessee's appeal regarding disallowance of Pooja Festival expenses, following the precedent in M/s. Hira Ferro Alloys Ltd. and upholding the CIT(A)'s order sustaining the AO's addition. However, regarding additional depreciation on plant and machinery additions, the ITAT partially allowed the appeal, clarifying that additions to plant and machinery are eligible for additional depreciation under section 32(1)(iia) subject to prescribed conditions. Since relevant details were not provided by the assessee and no queries were raised by the department, the matter was restored to the AO for fresh adjudication in the interest of natural justice.

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Issues Involved:
1. Disallowance of charity and donation expenses.
2. Disallowance of Pooja and festival expenses.
3. Disallowance under Section 14A read with Rule 8D.
4. Disallowance for delayed payment of Employee's Contribution to Provident Fund/Employee State Insurance.
5. Disallowance under Section 40(a)(ia).
6. Disallowance of additional depreciation on plant and machinery.

Issue-wise Detailed Analysis:

1. Disallowance of Charity and Donation Expenses:
The assessee raised a ground against the disallowance of Rs. 14,001/- for charity and donation expenses. However, this ground was withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

2. Disallowance of Pooja and Festival Expenses:
The assessee contested the disallowance of Rs. 1,73,307/- for Pooja and festival expenses. The assessee's representative argued that similar expenses had been allowed as business expenditure in previous cases, such as DCIT v. Godawari Power & Ispat Ltd. and M/s. Chhattisgarh Steel & Power Ltd. However, the Tribunal noted that the jurisdictional High Court in the case of M/s. Hira Ferro Alloys Ltd. had ruled against such deductions, stating that a company cannot profess any religion and thus, Pooja expenses cannot be considered business expenditure. Following the binding precedent of the jurisdictional High Court, the Tribunal upheld the disallowance, dismissing the assessee's ground.

3. Disallowance under Section 14A read with Rule 8D:
The assessee raised a ground against the disallowance of Rs. 26,950/- under Section 14A read with Rule 8D, arguing that no expenses were incurred for earning exempt income. This ground was also withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

4. Disallowance for Delayed Payment of Employee's Contribution to Provident Fund/Employee State Insurance:
The assessee contested the disallowance of Rs. 17,356/- for delayed payment of Employee's Contribution to Provident Fund/Employee State Insurance. This ground was withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

5. Disallowance under Section 40(a)(ia):
The assessee raised a ground against the disallowance of Rs. 2,16,032/- under Section 40(a)(ia), alleging non-compliance with the provision. This ground was withdrawn during the hearing based on the letter dated 08.08.2023 from the assessee's representative. Consequently, this ground was dismissed as withdrawn.

6. Disallowance of Additional Depreciation on Plant and Machinery:
The assessee contested the disallowance of Rs. 4,06,916/- for additional depreciation on plant and machinery. The AO disallowed the claim, stating that no new plant and machinery were installed and put to use during the year. The assessee argued that additions to existing plant and machinery should be eligible for additional depreciation as per Section 32(1)(iia) of the Act. The Tribunal noted that the intent of the legislature was to encourage investment and that additions to existing plant and machinery should qualify for additional depreciation. However, the Tribunal observed that relevant details were not provided by the assessee. In the interest of natural justice, the Tribunal restored the matter to the AO for fresh adjudication, allowing the ground partly for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific grounds dismissed as withdrawn and the issue of additional depreciation remanded for fresh consideration.

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