2018 (6) TMI 1662 - AT - Income Tax

Tribunal decision: Assessee's appeal partly allowed, Revenue's appeal dismissed. Key issues: interest on govt dues, depreciation, expenses.

National Aluminium Company Limited Versus Asst. CIT, Corporate Circle1 (2), Bhubaneswar

National Aluminium Company Limited Versus Asst. CIT, Corporate Circle1 (2), Bhubaneswar - TMI Issues Involved:1. Disallowance under 'Peripheral Development Expenses'2. Disallowance of Interest on disputed Govt. duty (Electricity Duty and water charges)3. Disallowance of claim of Additional Depreciation u/s.32(i)(iia) of the Act4. Disallowance u/s. 14A5. Treatment of Short-term Capital Gains and Long-term Capital Gains as 'Income from Business'6. Non-deduction of credit amount under Provision for Leave Encashment disallowed in past assessment years u/s.43B(f) of the Act7. Disallowance of the loss on account of revaluation of non-moving stores and sparesDetailed Analysis:1. Disallowance under 'Peripheral Development Expenses'The assessee claimed peripheral development expenses of Rs. 22,32,20,569/-, which the AO disallowed, stating they were not incurred wholly and exclusively for business purposes. The CIT(A) restricted the disallowance to Rs. 1,81,73,621/-. The Tribunal found that similar expenses were allowed in previous years and remitted the issue back to the AO to verify the nature of the expenditure and decide on merits.2. Disallowance of Interest on disputed Govt. duty (Electricity Duty and water charges)The AO disallowed Rs. 168,47,54,889/- debited by the assessee for interest on disputed government dues, stating the matter was pending before higher authorities. The CIT(A) confirmed this. The Tribunal, referencing earlier decisions in the assessee's favor, directed the AO to allow the claim, noting that the interest liability is statutory and charged on an accrual basis.3. Disallowance of claim of Additional Depreciation u/s.32(i)(iia) of the ActThe AO disallowed additional depreciation of Rs. 30,93,207/- due to the absence of acquisition dates for individual machinery parts. The CIT(A) confirmed this. The Tribunal, following earlier decisions, remitted the matter to the AO for reconsideration, directing verification of the acquisition and installation dates.4. Disallowance u/s. 14AThe AO applied Rule 8D to disallow Rs. 5,19,29,172/- under Section 14A, stating the assessee's suo-moto disallowance was insufficient. The CIT(A) confirmed this. The Tribunal found the AO did not comply with the mandatory requirement of recording dissatisfaction with the assessee's claim and remitted the issue back to the AO for re-examination and verification.5. Treatment of Short-term Capital Gains and Long-term Capital Gains as 'Income from Business'The AO treated the assessee's capital gains as business income, which the CIT(A) affirmed. The Tribunal, referencing a similar issue in the assessee's favor in earlier years, directed the AO to treat the income as capital gains, noting the investments were held for earning income, not trading.6. Non-deduction of credit amount under Provision for Leave Encashment disallowed in past assessment years u/s.43B(f) of the ActThe AO disallowed the provision for leave encashment, which the CIT(A) confirmed. The Tribunal, following earlier decisions, remitted the issue back to the AO to examine and allow the claim.7. Disallowance of the loss on account of revaluation of non-moving stores and sparesThe CIT(A) deleted the AO's disallowance of Rs. 8,68,70,728/- for the loss on revaluation of non-moving stores and spares. The Tribunal, referencing earlier decisions in the assessee's favor, dismissed the Revenue's appeal on this ground.Conclusion:The Tribunal partly allowed the assessee's appeal for statistical purposes, remitting several issues back to the AO for re-examination and verification. The Revenue's appeal was dismissed, and the assessee's cross-objection was deemed infructuous.