2015 (11) TMI 987 - AT - Income Tax

Tribunal decision: relief granted on depreciation and Section 80HHC, disallowance of stamp fees upheld, sundry credit balance dismissed

The Tribunal partly allowed the appeal, granting relief on the depreciation claim and the Section 80HHC deduction. The disallowance of stamp fees for the ... Depreciation on Plant & Machinery, Furniture & fixtures, Office equipments - addition made during the year between as per block of assets as per companies Act and block of asset as per Income Tax Rules - Held that:- We have observed that assessee has claimed depreciation on furniture & fixture of ₹ 67,98,208/- in distillery & chemical division and furniture & fixture of ₹ 40,65,104 in sugar division and has claimed lower depreciation while merging the office equipment into furniture & fixture an no prejudice is caused to the Revenue and hence the claim of assessee is hereby allowed. - Decided in favour of assessee. Disallowance of amount paid as stamp fees for the agreement pertaining to the Co- Gen project in respect of the agreement entered into for US grant/aid - Held that:- We are of the considered view that the expenditure was incurred by the assessee towards the stamp fee is a capital expenditure which inextricably linked to the capital subsidy of ₹ 167.30 lacs and thus we find no reasons to interfere with the orders of authorities below and the same is hereby affirmed. - Decided against assessee. Additional sugar cane price assessee claimed on the basis of purchase of sugar cane - Held that:- We hold that assessee is following the mercantile system of accounting. Assessee is entitled for the claim of expense on Revenue/trading account on crystallization of the law. In the said amount in assessment year 2005-06 although it might pertain to assessment year 2002-03. Hence assessee will be entitled for the said claim for the assessment year 2005-06 subject to verification on merits by authorities below about the bonafide and genuineness of the claim. The authorities below are also directed to verify that the assessee's claim is allowed not more than once. The assessee has claimed that this amount in assessment year 2002-03, 2004-05, 2005-06 and 2006-07. Subject to above verification additional claim should be allowed only in assessment year 2005-06 subject to verification and checking by the authorities below and hence the claim of assessee for impugned year is rejected. - Decided in favour of assessee by way of remand. Deduction u/s 80HHC - Held that:- A decided in case of Ajanta Pharma Ltd. Vs. CIT [2010 (9) TMI 8 - SUPREME COURT] If the dichotomy between 'eligibility' of profit and 'deductibility' of profit is not kept in mind then section 115JB will cease to be a self-contained code. In section 115JB, as in section 115JA, it has been clearly stated that the relief will be computed under section 80HHC(3)/(3A), subject to the conditions under subsections (4) and (4A) of that section. The conditions are only that the relief should be certified by the Chartered Accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in clause (iv) of Explanation to section 115JB [Subject to the conditions specified in sub-sections (4) and (4A) of that section] to obliterate the difference between 'eligibility' and 'deductibility' of profits as contended on behalf of the Department. - Decided in favour of assessee. Issues Involved:1. Depreciation claim on Plant & Machinery, Furniture & Fixtures, and Office Equipment.2. Disallowance of stamp fees for the Co-Gen project agreement.3. Charging under Section 41 for sundry credit balance written off.4. Additional sugar cane price claim.5. Deduction claim under Section 80HHC.Detailed Analysis:1. Depreciation Claim on Plant & Machinery, Furniture & Fixtures, and Office Equipment:The assessee challenged the disallowance of Rs. 4,70,784 on depreciation for certain assets. The Assessing Officer (AO) noted discrepancies between the fixed assets as per the Companies Act and the Income Tax Rules. The AO disallowed the depreciation due to unexplained differences in plant & machinery and furniture & fixtures. The CIT(A) upheld this disallowance. However, upon appeal, the Tribunal observed that the assessee had correctly claimed lower depreciation under the Income Tax Act, causing no prejudice to the Revenue. Thus, the Tribunal allowed the assessee's claim.2. Disallowance of Stamp Fees for the Co-Gen Project Agreement:The AO disallowed Rs. 4,00,200 paid as stamp fees, treating it as capital expenditure linked to a capital subsidy. The CIT(A) supported this view. The assessee argued that the expense was for business purposes and should be allowed as a revenue expense, citing relevant case law. The Tribunal, however, agreed with the lower authorities, affirming that the stamp fee was a capital expenditure intrinsically linked to the capital subsidy.3. Charging Under Section 41 for Sundry Credit Balance Written Off:The assessee did not press this ground of appeal regarding the charge of Rs. 19,37,524 under Section 41 for sundry credit balances written off. Consequently, this ground was dismissed as not pressed.4. Additional Sugar Cane Price Claim:The assessee claimed an additional sugar cane price of Rs. 1,14,59,037 based on a settlement with the Cane Growers Association. The AO and CIT(A) disallowed the claim, stating it crystallized in the assessment year 2005-06. The Tribunal held that the claim should be allowed in the assessment year 2005-06, subject to verification that it is not allowed more than once across different assessment years.5. Deduction Claim Under Section 80HHC:The assessee's claim for deduction under Section 80HHC was initially disallowed based on the CIT vs. Ajanta Pharma case. However, the Tribunal followed the Supreme Court's decision in Ajanta Pharma Ltd. vs. CIT, which clarified that the deduction should be computed as per Section 80HHC(3)/(3A) and subject to conditions under sub-sections (4) and (4A). The Tribunal decided this issue in favor of the assessee.Additional Ground:The assessee raised an additional ground regarding the taxation of Rs. 19,37,534 under Section 28(iv), which was not pressed during the hearing and thus dismissed.Conclusion:The appeal was partly allowed, with the Tribunal granting relief on the depreciation claim and the Section 80HHC deduction, while disallowing the stamp fee claim and addressing the additional sugar cane price in the appropriate assessment year.