2013 (5) TMI 942 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) on processing charges paid to SBI.
2. Disallowance u/s 40(a)(ia) on clearing house charges.
3. Deduction u/s 36(1)(viia) for Bari Brahmana Branch.
4. Depreciation on wooden partitions.
5. Disallowance u/s 40(a)(ia) on interest paid to Jammu Development Authority.

Summary:

1. Disallowance u/s 40(a)(ia) on processing charges paid to SBI:
The AO disallowed Rs. 87,67,358/- u/s 40(a)(ia) for non-deduction of tax at source u/s 194J on processing charges paid to SBI. The CIT(A) deleted the disallowance, stating that processing charges are integral to interest and no tax was required to be deducted. The Tribunal concurred, noting that processing charges are part of interest as defined in section 2(28A) and thus, provisions of section 194A and 194J are not attracted. Ground No.1 of the Revenue was dismissed.

2. Disallowance u/s 40(a)(ia) on clearing house charges:
The AO disallowed Rs. 12,89,857/- u/s 40(a)(ia) for non-deduction of tax on MICR charges. The CIT(A) deleted the disallowance, stating that MICR clearing is done by machines without human intervention, following the Supreme Court decision in CIT vs. Bharti Cellular Ltd. The Tribunal upheld this view, confirming that no tax is required to be deducted on MICR charges. Ground No.2 of the Revenue was dismissed.

3. Deduction u/s 36(1)(viia) for Bari Brahmana Branch:
The AO disallowed the deduction u/s 36(1)(viia) for the Bari Brahmana Branch, stating it is not a rural branch due to its population. The CIT(A) allowed the deduction, noting the branch is located in village Kartholi with a population of 314. The Tribunal upheld this, referencing a similar decision by the ITAT Amritsar Bench. Ground No.3 of the Revenue was dismissed.

4. Depreciation on wooden partitions:
The AO allowed 10% depreciation instead of 100% on wooden partitions. The CIT(A) allowed 100% depreciation, considering them temporary structures in rented premises. The Tribunal agreed, noting that wooden partitions in leased premises are not enduring in nature and thus, 100% depreciation is justified. Ground No.4 of the Revenue was dismissed.

5. Disallowance u/s 40(a)(ia) on interest paid to Jammu Development Authority:
The AO disallowed Rs. 2,58,25,857/- u/s 40(a)(ia) for non-deduction of tax on interest paid to Jammu Development Authority. The CIT(A) allowed the claim, following the ITAT Delhi Bench decision in a similar case. The Tribunal upheld this, confirming that Jammu Development Authority is exempt from TDS under section 194A(3)(iii)(f). Ground No.5 of the Revenue was dismissed.

Conclusion:
The appeal filed by the Revenue in ITA No.206(Asr)/2013 was dismissed. Order pronounced in the open court on 28th May, 2013.