2015 (3) TMI 94 - HC - Income Tax

Assessee wins key issues in tax case before Tribunal, favorable rulings on various cost deductions

The judgment in this case favored the assessee on various issues against the revenue. The Income Tax Appellate Tribunal's order interpreting the reduction ... Sale of bagasse to sister concern - sale at lower rate in comparison to market rate - Tribunal upholding the order of CIT (A) in deletion the addition - Held that:- An agreement with the sister concern at the beginning of the accounting year at consistent rate on which bagasse was sold, throughout the year does not require any interference. Since the rates were fluctuating throughout the year and that the continuous supply of bagasse had to be maintained for producing electricity, the agreement to the sister concern at consistent rate of ₹ 10/- as against the fluctuating market rate of ₹ 7.65 to ₹ 23, the price of ₹ 10/- per qtl. was not unreasonable and thus the agreement between the assessee and M/s U.P. Straw Board Project Pvt. Ltd. was not unreasonable or unjustified. We have upheld the finding of ITAT as finding of fact. - Decided in favour of assessee. Depreciation on tubewell - Tribunal upholding the order of CIT (A), who directed to treat tubewell as a plant - whether the Tribunal was right in law in failing to allow investment under Section 32A of the Act on canteen equipment and water coolers having failed to appreciate that these items are also plant and machinery? - Held that:- So far as factory cleaning machines are concerned, the Tribunal has upheld the view of the CIT(A) and also noted that the investment allowance had been granted on such items in the earlier years. The AO's order has not discussed this issue. The reasons given by the Department for not granting investment allowance is clearly erroneous and the Tribunal was right in directing the ITO to allow investment allowance on calculators for the year 1979-80 and factory cleaning machines for the asst. yr. 1980-81. - Even if sugar mill is not water intensive industry, we cannot visualise that industry can run without water. The water drawn from tubewell may be stored in tanks. The water is essential for the purposes of various processes involved in manufacture of sugar and its byproduct such as molasses and bagasse. It cannot be said that use of water is not necessary for manufacturing of sugar. In the circumstances, we hold that the tube well including its machinery and building would be used for the purpose of business or profession would fall within the definition of word 'plant' and on which depreciation would be allowed under Section 32 (1) of the Act. - Decided in favour of the assessee Deduction being receipt on account of extra sale price realized on sale of sugar in open market out of levy quota - Tribunal alowed claim - Held that:- Question is covered by the judgment in CIT v. Ponni Sugar and Chemical Ltd., (2008 (9) TMI 14 - SUPREME COURT ) and CIT v. Kisan Sahkari Chini Mills Ltd., (2009 (5) TMI 72 - ALLAHABAD HIGH COURT) and is decided in favour of the assessee Non admissibility of depreciation on revalued of asset for the purpose of computation of income u/s. 115J - Held that:- As relying on CIT Bareilly v. Rampur Distillery and Chemicals Ltd., [2013 (1) TMI 59 - ALLAHABAD HIGH COURT] decided in favour of the assessee Issues Involved:1. Interpretation of the order of Income Tax Appellate Tribunal regarding reduction of cost of production by interest and rent.2. Justification of upholding the deletion of addition made on account of sale of bagasse at a lower rate.3. Legality of restoring the issue of interest on excess levy sugar price to the Assessing Officer.4. Legitimacy of deleting the addition made on account of Molasses reserve Fund.5. Restoration of the issue of interest on additional cane price to the Assessing Officer.6. Validity of treating a tubewell as a plant for depreciation purposes.7. Approval of deduction on extra sale price realized on the sale of sugar.8. Upholding the direction not to disturb depreciation booked in the profit and loss account.9. Computation of book profit under Section 115J of the Income Tax Act based on revised final accounts.Detailed Analysis:1. The first issue involves the interpretation of the ITAT order regarding reducing the cost of production by interest and rent. The question was decided in favor of the assessee based on a previous case law, ruling against the revenue.2. The second issue pertains to the deletion of an addition made on the sale of bagasse at a lower rate. The Tribunal upheld the deletion based on sufficient reasons, emphasizing the consistent rate agreed upon with a sister concern. The decision favored the assessee against the revenue.3. The third issue questions the restoration of the interest on excess levy sugar price to the Assessing Officer. This matter was previously decided in favor of the assessee against the revenue.4. The fourth issue involves the deletion of an addition made on account of Molasses reserve Fund. The decision was in favor of the assessee against the revenue based on previous case law.5. The fifth issue concerns the restoration of the interest on additional cane price to the Assessing Officer. This issue was decided in favor of the assessee against the revenue based on previous case law.6. The sixth issue revolves around treating a tubewell as a plant for depreciation purposes. The Tribunal allowed depreciation on the tubewell, considering it as part of the plant under Section 32(1)(i) of the Act. This decision favored the assessee against the revenue.7. The seventh issue deals with the deduction of extra sale price realized on the sale of sugar. The Tribunal upheld the deduction, citing relevant case laws, and ruled in favor of the assessee against the revenue.8. The eighth issue questions the direction not to disturb depreciation booked in the profit and loss account. This decision was in favor of the assessee against the revenue based on relevant case law.9. The ninth issue pertains to computing book profit under Section 115J of the Income Tax Act based on revised final accounts. This issue was considered consequential and was left unanswered as it was not raised by the revenue before the ITAT.In conclusion, the judgment favored the assessee in most issues against the revenue, based on legal interpretations, case laws, and relevant provisions of the Income Tax Act. The department was directed to proceed accordingly with the decisions made on each specific issue.