2018 (6) TMI 159

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....dent fund and ESIC was made before due date of filing of return of income under section 43B. 2. The learned CIT (A) erred on the facts and circumstances of the case and in law in not allowing actual payment of business expense for employees' contribution towards PF and ESIC of Rs. 26548/- under section 37. Relief claimed The said payment towards PF and ESIC be allowed as normal business expense under section 37 or section 43B. Disallowance under section 32 3. The learned CIT (A) erred on the facts and circumstances of the case and in law in confirming the disallowance of Rs. 590440/- without appreciating facts that depreciation on rented machineries were used for assessee's business, also owned by it and income of rent shown under the head Income from Business and Profession. Relief claimed Said amount towards depreciation on rented machinery owned and used by appellant and income from the same is offered for taxation under the head Income from Business and Profession, be allowed under section 32. Disallowance under section 40(a)(ia) read with section 194J 4. The learned CIT(A) erred on the fac....

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....efully considered the rival submission. I have also perused the case laws relied upon by the Ld. A.R. It is seen that the provident fund received from employees were deposited in the provident fund account beyond the due dates as prescribed in the P.F. Act. Similarly, there has been delayed payment w.r.t. ESIC. After decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation reported in 265 CTR 64 (Guj.) the factual legal position has changed. In this case Hon'ble High Court of Gujarat held that the provisions of section 43B of the Income Tax Act, 1961 ('the Act') do not apply to "employees' contribution to ESI/PF" and the deduction in respect of the same is allowable only if such contribution is deposited within the 'due date' specified in Explanation to section 36(1)(va) of the Act. While ruling in favour of the Revenue, the High Court distinguished the Apex Court ruling in Alom Extrusions and other High Court decisions, at the same time dissented from the view adopted by High Courts, which ruled in favour of the taxpayer. The Hon'ble Gujarat High Court in the said decision has held that where the emp....

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....to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act." Respectfully following the above judgment laid down by the Jurisdictional High Court, we find no infirmity in the order of Ld. CIT(A). Hence, the ground of appeal of the assessee is dismissed. 8. The second issue raised by the assessee in ground no.3 and 6 is that Ld. CIT(A) erred in confirming the disallowance of depreciation Rs. 5,90,440/- on the ground that the machineries were not used by the assessee for the purpose of its business. 9. The assessee during the year has shown rental income under the head income from Business and Profession on account of renting out of the machineries. Accordingly, the assessee claimed depreciation in its books of accounts, on the value of the machineries rented out to third party. However, the AO was of the view that machineries rented out by the assessee were not actually used by the assessee itself. Therefore, the Assessee is not entitled for depreciation. 10. Similarly, the AO....

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....pellant is not entitled to claim depreciation section 32 on the machinery given on rent. Accordingly, the addition on account of disallowance of depreciation/s 32 is confirmed. This ground of appeal is dismissed." Being aggrieved by the order of Ld. CIT(A) assessee is in second appeal before us. 13. The Ld. AR before us reiterated the submission as made before the Ld. CIT(A). On the contrary, the Ld. DR vehemently supported the order of authorities below. 14. We have heard the rival contention and perused the material available on record. The issue in the present case relates to the depreciation allowance claimed by the assessee on the machineries, which have been rented out by it. As per the lower authorities, the machineries have not been used by the assessee for the purpose of its business. Therefore, the depreciation claimed thereon cannot be allowed as deduction under the provision of Section 32 of the Act. At this juncture, we find important and relevant produce the provision of Section 32 of the Act, which reads as under: "32. (1) 89 [In respect of depreciation of- (i) buildings 90 , machinery 90 , plant or furniture, being tangible assets; ....

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....t. In view of above, we hold that the assessee is entitled to claim depreciation in respect of the machineries rented out to the third party by the assessee. Accordingly, we reverse the order of lower authorities and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 16. The third issue raised by the assessee in ground no.4, 5 and 7 is that Ld. CIT(A) erred in confirming the addition made by the AO on account of non-deduction of TDS u/s 194J r.w.s. 40(a)(ia) of the Act. The assessee during the year has claimed certain expenses under the head legal and professional fees. The details of the expenses claimed by the assessee is listed as under: Sr. No. Party Name Amount 1. Sanjiv Khurana Rs. 30,000/- 2. R. M. Modi (Account writing fees) Rs. 50,000/- 3. Nilesh B. Soni Rs. 15,000/-   Total Rs.1,05,000/-   The AO during the assessment proceedings observed that the above expenditure has been incurred by the assessee without deducting the TDS u/s 194J of the Act. Accordingly, the AO disallowed the same and added to the total income of the assessee. Aggrieved assessee pre....

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....n case payment made to Shri R. M. Modi, the Ld. AR submitted that the payment was in the nature of salary to Shri R. M. Modi and therefore the liability of TDS arises under the provision u/s 192 of the Act. Accordingly, there was no liability on the part of the assessee to deduct TDS u/s 192 of the Act as such payment did not exceed the threshold limit specified u/s 192 of the Act. 21. In case of payment to Shri Nilesh B. Soni, Ld. AR submitted that payment was made below the threshold limit as specified u/s 194J of the Act. Therefore, there is no liability on the part of the assessee for deduction of TDS u/s 194J of the Act. Ld. AR also submitted that the threshold limit has specified u/s 194J of the Act was enhanced from Rs. 20,000/- to 30,000/- w.e.f 01/07/2010. But in the instant case, the bills were raised by Shri Nilesh B. Soni on 7th July 2010. In this regard, the Ld. AR filed the copy of ledger of Nilesh B. Soni maintained by the assessee in its books of accounts, which is placed on Page 40 of the Paper book. On the other hand, Ld. DR vehemently supported the order of authorities below. 22. We have heard rival contentions and perused the material available on recor....