2013 (1) TMI 20 - AT - Income Tax

Tribunal grants deduction under Section 80IA, dismisses Revenue's appeal. Electricity expenses adjusted to Rs. 3600.

The Tribunal partly allowed the assessee's appeal regarding the deduction under Section 80IA, directing the AO to consider electricity expenses as Rs. ... Deduction u/s 80IB – Computation of income - Assessee engaged in the business of manufacturing and sale of abrasive and refractory products - Expenditure related to electricity for working out deduction u/s 80IA – Assessee has filed the working relating to allocation of electricity charges attributable to Dry Vibration Cement (DVC) Plant Rs. 7,94,075/- as against the allocation of power consumption expenses worked out by the A.O. Rs. 8,15,360/ - Held that:- A.O. after considering the assessee’s submission, without pointing out any defect in the working given by the assessee to show that power cost computed by the assessee Rs. 3600/- in round figure is less than the actual cost of electricity pertaining to DVC plant. Disallowance made by the A.O. in this regard and partly sustained by the CIT(A) is not sustainable in law and accordingly we direct the A.O. to consider cost of power Rs. 3600/- only pertaining to DVC plant and work out the deduction u/s 80IA. In favour of assessee Issues Involved:1. Deduction under Section 80IA of the Income Tax Act, 1961.2. Disallowance under Section 14A of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Deduction under Section 80IA of the Income Tax Act, 1961:The assessee company, engaged in manufacturing and sale of abrasive and refractory products, filed a return declaring an income of Rs. 14,10,87,170/-. The assessment was completed at Rs. 16,16,55,953/- with a partial disallowance of deduction under Section 80IA for the DVC Plant. The claim was reduced from Rs. 16,60,364/- to Rs. 14,15,755/-. On appeal, the CIT(A) partly allowed the claim. The Tribunal, in a previous order, restored the matter to the AO for reconsideration of the electricity expenses allocable to the DVC plant.Upon reassessment, the AO upheld the disallowance, stating that the assessee did not provide new material. The CIT(A) directed the AO to consider Rs. 7,94,075/- as the electricity expenditure for the DVC plant. The assessee appealed, arguing that similar claims were accepted in preceding and subsequent years without disallowance. The Tribunal noted that the AO did not find any defect in the assessee's working of electricity expenses, which was Rs. 3600/-. The Tribunal directed the AO to accept the assessee's claim and work out the deduction under Section 80IA accordingly.2. Disallowance under Section 14A of the Income Tax Act, 1961:The assessee contested the allocation of interest of Rs. 76,66,624/- and the disallowance of Rs. 15,08,703/- for computing disallowance under Section 14A read with Rule 8D(2)(iii). The Revenue also appealed against the CIT(A)'s rejection of AO's working of expenses under Section 14A as per Rule 8D.The Tribunal noted that the jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. decided that Rule 8D is applicable only from AY 2008-09 onwards. The Tribunal observed that the High Court had restored the matter to the AO to decide in accordance with the law laid down in Godrej Boyce. The AO, in compliance, held that 5% of dividend income is a reasonable disallowance towards expenses incurred to earn dividend income. Since neither party objected, the Tribunal found the grounds raised by both the assessee and Revenue to be infructuous.Conclusion:The assessee's appeal was partly allowed regarding the deduction under Section 80IA, directing the AO to consider the electricity expenses as Rs. 3600/-. The grounds related to Section 14A disallowance were dismissed as infructuous. The Revenue's appeal was dismissed.