2025 (7) TMI 1031 - AT - Income Tax

Additional depreciation claimed u/s. 32(1)(iia) - Grant of 50% additional depreciation in respect of machinery installed for less than 180 days in the previous year - HELD THAT - We note that the issue is squarely covered by the decisions M/S AZTEC AUTO PVT. LTD. 2020 (9) TMI 541 - MADRAS HIGH COURT and Brakes India Ltd. 2017 (4) TMI 511 - MADRAS HIGH COURT and hence we do not find any infirmity in the order of the CIT(A). Respectfully following the decisions supra we confirm the order of the CIT(A) in deleting the disallowance of 50% of additional depreciation claimed by the assessee in respect of machinery installed for less than 180 days in the previous year and dismiss the ground of appeal raised by the Revenue. Depreciation of brand value - In the present facts and circumstances of the case following the decision of the CIT(A) for the earlier assessment years we do not find any infirmity in the order of the Ld.CIT(A) in deleting the disallowance of depreciation on brand value and hence we are inclined to confirm the order of the Ld.CIT(A) by dismissing the ground of appeal raised by the Revenue. TDS u/s 195 - Disallowance of payment of commission on export u/s. 40(a)(i) - HELD THAT - As decided in own case commission which has been paid to the parties / persons outside India is not taxable in India as agreement for payment of commission clearly shows that foreign agents rendered agency services in abroad and do not have any Permanent Establishment (PE) in India and hence not taxable in India u/s. 9(1)(i) of the Act. Disallowance of deduction of 80G in respect to expenditure claimed under CSR - We find that an identical issue has been considered in the case of M/s. Source Hov India Private Limited 2024 (12) TMI 1522 - ITAT CHENNAI wherein it has been held that CSR expenditure made to eligible donee apart from Swachh Bharat Kosh and Clean Ganga Fund would be eligible to claim the deduction under Section 80G of the Act. Deduction u/s. 80G would be available to the assessee.

Summary

ISSUES:

• Whether additional depreciation under Section 32(1)(iia) can be claimed for the balance amount in the subsequent assessment year for machinery installed for less than 180 days in the previous year.
• Whether depreciation can be allowed on brand value categorized as intangible assets.
• Whether disallowance of export commission under Section 40(a)(ia) for non-deduction of TDS is justified when commission is paid to overseas agents and services are rendered outside India.
• Whether deduction under Section 80G is allowable for Corporate Social Responsibility (CSR) expenditure made to eligible donees.

RULINGS / HOLDINGS:

• On additional depreciation under Section 32(1)(iia), the Court held that the proviso restricting depreciation to 50% for assets used less than 180 days "would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year," confirming the allowance of carried forward additional depreciation.
• Depreciation on brand value was allowed, as the assessee had consistently claimed it in earlier assessment years and the Revenue had not appealed against earlier favorable orders; thus, the disallowance was deleted.
• Regarding export commission disallowance under Section 40(a)(ia), the Court found that since the overseas agents rendered services outside India and had no Permanent Establishment (PE) in India, the commission payments were not taxable in India and hence not liable for TDS deduction; the disallowance was deleted.
• Deduction under Section 80G was held allowable for CSR expenditure made to eligible donees, excluding amounts spent pursuant to CSR under Section 135(5) of the Companies Act to Swachh Bharat Kosh and Clean Ganga Fund; the deduction was confirmed.

RATIONALE:

• The Court applied the statutory provisions of the Income Tax Act, 1961, specifically Sections 32(1)(iia), 40(a)(ia), and 80G, along with relevant provisos and judicial precedents.
• In interpreting Section 32(1)(iia), the Court relied on the purposive construction principle and precedent from the Supreme Court emphasizing the beneficial nature of additional depreciation to encourage industrialization, allowing the balance depreciation in the subsequent year.
• For depreciation on intangible assets like brand value, the Court followed the principle of consistency and previous appellate decisions where the Revenue did not challenge the allowance, supporting the claim.
• The Court relied on jurisdictional High Court and Tribunal decisions holding that commission paid to non-resident overseas agents without PE in India is not taxable under Section 9(1)(i), and thus TDS under Section 40(a)(ia) is not applicable.
• Regarding CSR expenditure deduction under Section 80G, the Court referred to amendments introduced by the Finance Act, 2015, and prior Tribunal rulings clarifying that donations to eligible donees (other than specified funds under CSR) qualify for deduction, aligning with legislative intent to encourage socio-economic development.