Income Tax Appellate Tribunal - Mumbai
Asst Cit Cir 4, Thane vs Shri Swastiik Homeland Agencies (P) ... on 14 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "E", MUMBAI
BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No. 679/Mum/2014 (Assessment Year- 2009-010)
ACIT Circle-4, Swastik Home Land Agencies (P)
"A" Room No.2, 6th Floor, Ltd. Fun Fiesta Multiplex,
Ashar IT Park, WIE, Vs. Sri Prastha Complex, Nallasopara
Road No.16Z, Thane. (W), Thane.
PAN: AAJCS4373E
(Appellant) (Respondent)
Revenue by : Dr. A.K. Nayak (DR)
Assessee by : None
Date of hearing : 14.06.2017
Date of Pronouncement : 14 .06.2017
Order Under Section 254(1) of Income Tax Act
PER PAWAN SINGH, JUDICIAL MEMBER:
1. This appeal by Revenue u/s. 253 of the Income-tax Act (the Act) is directed against the order of ld. Commissioner of Income Tax (Appeals)-II [the CIT(A)], Thane dated 05.12.2013 for the Assessment Year 2009-10. The Revenue has raised the following Grounds of appeal:
1. On the facts & in the circumstances of the case and in the law, the Hon.CIT(A)-II, Thane, erred in allowing the depreciation u/s 40a(ia) on the ground that the tax need not be deducted by the assessee on contractual payments which have been capitalized as fixed asset, even though assessee's authorized representative vide letter dated 08/12/2009, had submitted during the asstt proceedings for AY 2007-08 as under:-
"Furthermore, as the building construction contract consists of material of Rs 2,75,01,415/- and labour charges of Rs 1,74,98,585/-, the tax at source is deductible only on labour charges of Rs 1,74,98,585/- only and if your goodselves wish to disallow depreciation on building contract the same should ITA No.679/M/2014- Swastik Home Land Agencies (P) Ltd. be restricted to only Rs 17,49,859/- and not Rs 45,00,000/- "During the year under consideration i.e AY 2009-10, the AO has disallowed Rs 36,45,000/-.
The assessee has not produced any contract agreement, Sec 194 has cast a responsibility upon specified persons making payments to a resident contractor to deduct tax at source from payments made to such contractor in pursuance of a contract of work at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or issue of cheque or draft or by any other mode whichever is earlier at the specified rates. Section 194 does not specify that such tax deduction is not warranted in the case of payments to contractor for work involving building of capital asset. In other words, the section applies to all payments including payments on account of capital expenditure.
2. The appellant prays that the order passed by the learned Commissioner of Income Tax (A)-II, Thane may be vacated and that of Assessing Officer be restored.
2. Brief facts of the case are that the assessee is a Private Limited Company and engaged in the business of Multiplex Cinema Theatre and other allied activities filed return of income for relevant assessment year on 25.09.2009 declaring income of Rs. 72,41,410/-. The assessment was completed on 19.12.2011 u/s 143(3) of the Act. The Assessing Officer (AO) while framing the assessment order besides the other addition and disallowance made the addition on account of disallowance of depreciation of Rs. 36,45,000/-. On appeal before the ld. CIT(A), the addition was deleted. Thus, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.
3. None appeared on behalf of assessee despite repeated calls. We have heard the ld.
Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. DR for the Revenue supported the order of AO. The ld. DR for the Revenue further argued that the order of ld. CIT(A) may be set- aside and that of AO may be restored. It was further argued that assessee- 2 ITA No.679/M/2014- Swastik Home Land Agencies (P) Ltd. company made a payment of Rs. 4.5 Crore to its sister concern during the AY 2007-08 and no tax was deducted. Hence, the AO invoke the provision of section 40(a)(ia) and disallowed the depreciation claimed on the asset generated through contractual payment to its sister concern.
4. We have considered the submission of DR for the Revenue and have gone through the order of authorities below. The AO disallowed the depreciation holding that section 194C of the Act does not differentiate between Capital Expenditure and Revenue Expenditure. The AO further held that section 40 start with nonobstacle clause viz notwithstanding anything contrary to section 30 to 36, the following amount shall not be deducted in......". The AO also held that the stand of the assessee that they have not claimed the expenditure in P&L A/c and not disallowable is not acceptable. The depreciation is nothing but benefit given to a right of a Capital Expenditure offered in a period of time and disallowed the depreciation. The ld.CIT(A) after considering the contention of the assessee passed the following order;
"4. I have carefully considered the facts on record and submission of the ld. A.R. I find that the provisions of section 40(a)(ia) are specifically meant for disallowance of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or payment to the contractor or sub-contractors for carrying out any work on 'which tax has not been deducted and there is no mention of the depreciation. This issue has been also considered by the Hon'ble ITAT, in the case of SMS Demag (P) Ltd. Vs. DCIT, 132 TTJ 498 (Del) wherein it has been held that the depreciation cannot be disallowed u/s. 40(a)(ia) on the ground that at the time of payment for capital asset, the tax was not deducted. In view of these facts and also legal position, I also take a view that the depreciation cannot be disallowed u/s. 40(a)(ia) on the ground that the tax was not deducted by the appellant on contractual payments which have been capitalized as fixed asset. Thus, appellant succeeds in respect of Ground No. 1A. Since the Ground No. 1A has 3 ITA No.679/M/2014- Swastik Home Land Agencies (P) Ltd. been allowed, Grounds No. 1B & 1C become infructuous and hence, the same are not required to be adjudicated."
4.1 Since the facts are identical in this year also, I following my appellate order in the case of appellant company in A.Y. 2007-08 as reproduced above, hold that the depreciation cannot be disallowed u/s. 40(a)(ia) on the ground that at the time of making payment for capital asset, tax was not deducted. Accordingly, the A.O. is directed to delete the disallowance of depreciation at Rs. 36,45,000/-."
5. We have seen that the ld. CIT(A) passed the order considering his order for earlier year order i.e. in AY 2007-08 and allowed the depreciation to the assessee. We find that the issue raised in the present appeal is in fact covered in favour of assessee and against the Revenue in its own case as well as by the decision of Delhi Tribunal in SMS Demag (P) Ltd Vs DCIT (supra) . Thus, we do not find any illegality or infirmity in the order passed by ld. CIT(A). Hence, the ground of appeal raised by Revenue is dismissed.
6. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 15th day of June 2017.
Sd/- Sd/-
(P.K. BANSAL) (PAWAN SINGH)
VICE-PRESIDENT JUDICIAL MEMBER
Mumbai; Dated 15/06/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT BY ORDER,
5. DR, ITAT, Mumbai
6. Guard file.
स या पत त //True Copy/
(Asstt.Registrar)
ITAT, Mumbai
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