Tribunal rules on revenue appeals, denies additional depreciation, upholds arm's length price deletion, and dismisses education cess disallowance.

The Tribunal dismissed the Revenue's appeals seeking to revise the Assessing Officer's denial of the assessee's additional depreciation claims for the assessment years 2007-08 and 2008-09. It also upheld the deletion of the arm's length price adjudication for a corporate guarantee and directed the provision for leave encashment disallowance issue to be kept pending until the apex court's final decision. Additionally, the Tribunal deleted the education cess disallowance, resulting in the dismissal of the Revenue's appeals and partial allowance of the assessee's cross-objection.

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Issues Involved:
1. Additional Depreciation Claim
2. Corporate Guarantee as an International Transaction
3. Provision for Leave Encashment Disallowance
4. Education Cess Disallowance

Issue-wise Detailed Analysis:

1. Additional Depreciation Claim:
The Revenue's appeals for the assessment years 2007-08 and 2008-09 sought to revise the Assessing Officer's action declining the assessee's additional depreciation claims of Rs. 10,37,81,969/- and Rs. 58,89,93,448/-, respectively. The CIT(A) allowed these claims, stating that the Act does not specify the period in which additional depreciation should be allowed and that the benefit should be available in subsequent years as well. The CIT(A) relied on various judicial precedents, including the jurisdictional Tribunal's decision in DCIT vs. Gloster Jute Mills Limited, which held that additional depreciation is not restricted to the initial year of installation. The Tribunal upheld the CIT(A)'s findings, noting that the statutory provision does not impose a restriction that additional depreciation will be allowed only in one year or on the written down value. The Tribunal dismissed the Revenue's appeals on this issue.

2. Corporate Guarantee as an International Transaction:
For the assessment year 2008-09, the Revenue contended that the CIT(A) erred in deleting the assessee's corporate guarantee's arm's length price adjudication of Rs. 2,35,40,061/-. The Revenue argued that a corporate guarantee amounts to an international transaction as per section 92B Explanation inserted by the Finance Act 2012. However, the Tribunal found no merit in the Revenue's grievance, citing various judicial precedents that held a corporate guarantee is not an international transaction under section 92B of the Act. The Tribunal dismissed the Revenue's appeal on this issue.

3. Provision for Leave Encashment Disallowance:
The assessee's cross-objection for the assessment years 2007-08 and 2008-09 included a provision for leave encashment disallowance of Rs. 1,40,24,677/- under section 43B(f) of the Act. Both lower authorities treated it as a contingent liability. The Tribunal noted that the jurisdictional high court's decision in Exide Industries Ltd. vs. UOI had quashed the statutory provision as ultra vires, and the apex court's SLP on this matter was still pending. Therefore, the Tribunal directed the Assessing Officer to keep this issue in abeyance pending the final decision from the apex court, accepting this ground for statistical purposes.

4. Education Cess Disallowance:
The assessee's cross-objection also sought to delete the education cess disallowance of Rs. 1,93,40,697/- made under section 40(a)(ii) of the Act. The Tribunal referred to the Rajasthan high court's decision in Chambal Fertilizers Ltd. vs. DCIT, which considered a CBDT circular stating that the expression "tax" does not include cess. Following this precedent, the Tribunal deleted the impugned educational cess disallowance, allowing this ground in the assessee's favor.

Conclusion:
The Tribunal dismissed the Revenue's appeals (ITA No.472 & 474/Kol/2018), dismissed the assessee's former cross-objection (CO.64/Kol/2018) as infructuous, and partly allowed the latter cross-objection (CO.66/Kol/2018) in the terms discussed above. The order was pronounced in the open court on 22.11.2019.

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