ASST CIT CIR 4, THANE vs. SRI SWASTIK HOMELAND AGENCIES P.LTD, THANE

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ITA 7487/MUM/2013Status: DisposedITAT Mumbai17 January 2017AY 2007-083 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that depreciation cannot be disallowed on the ground of non-deduction of TDS at the time of incurring capital expenditure, as Section 40(a)(ia) is not applicable to claims under Section 32.

What were the facts?

The assessee incurred capital expenditure and paid a sister concern without deducting TDS. The AO disallowed depreciation on this capitalized amount under Section 40(a)(ia). The CIT(A) deleted the disallowance following a precedent.

What were the issues?

Whether disallowance of depreciation is permissible under Section 40(a)(ia) for failure to deduct TDS on capital expenditure.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 32

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “E” Bench, Mumbai

Before: Shri B.R. Baskaran (AM)& Shri Pawan Singh (JM)

For Respondent: Shri B.S. Bist
Hearing: 17.1.2017Pronounced: 17.1.2017

O R D E R Per B.R. Baskaran (AM) :-

The Revenue has filed this appeal challenging the order dated 14.10.2013 passed by the learned CIT(A)-Thane and it relates to A.Y. 2007-08.

2.

The only issue urged in this appeal by the Revenue is whether the learned CIT(A) was justified in deleting the disallowance made u/s. 40(a)(ia) of the I.T. Act.

3.

None appeared on behalf of the assessee even though notice of hearing was sent by registered post on more than one occasion. Hence, we proceed to dispose of the appeal ex-parte, without presence of the assessee.

4.

We heard learned Departmental Representative and perused the record. The assessee is engaged in the business of running a multiplex cinema theatre at Nallasopara. The Assessing Officer noticed that the assessee has incurred capital expenditure of ` 7.79 crores during year under consideration. The 2 M/s. Sri Swastik Home Land Agencies (P) Ltd.

Assessing Officer further noticed that the assessee has given contract work to a sister concern named M/s. Shri Swastik Land Development Corporation and value of contract so given was ` 4.50 crores. The Assessing Officer noticed that the assessee did not deduct tax at source from the above said payment. Since the above said payment has been capitalized, the AO proposed to disallow depreciation on the above said amount by invoking provisions of section 40(a)(ia) of the Act. The assessee submitted that it has not claimed the above said payment as revenue expenditure and hence provisions of section 40(a)(ia) of the Act would not apply. The said explanation did not find favour with the Assessing Officer. Accordingly the Assessing Officer disallowed depreciation to the tune of ` 45 lakhs u/s 40(a)(ia) of the Act on the above said contract amount of ` 4.50 crores. The learned CIT(A), however, deleted the addition by following the decision rendered by Delhi Bench of the ITAT in the case of SMS Demag (P) Ltd. Vs. DCIT (132 TTJ 498). The Revenue is aggrieved by the said decision of the learned CIT(A).

5.

We noticed that Delhi Bench of the ITAT, in the above said case, has expressed the view that the depreciation cannot be disallowed on the ground that the assessee did not deduct tax at source at the time of incurring the capital expenditure and the provisions of section 40(a)(ia) of the Act are not applicable for the claim of deduction u/s. 32 of the Act.

6.

Since the learned CIT(A) has followed the decision rendered by the Coordinate Bench of the Delhi ITAT, referred supra, we do not find any reason to interfere with the order passed by the learned CIT(A).

7.

In the result, appeal filed by the Revenue is dismissed. Order has been pronounced in the Court on 17.1.2017.

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