2019 (4) TMI 1923 - AT - Income Tax

Tribunal ruling favors assessee on various tax issues including deductions, disallowances, and remands.

Jindal Steel & Power Ltd. Versus Asstt. Commissioner of Income Tax, Hisar

Jindal Steel & Power Ltd. Versus Asstt. Commissioner of Income Tax, Hisar - TMI Issues Involved:1. Legality of the assessment order.2. Reduction of deduction under Section 80IA.3. Deduction under Section 80IB for Rail Universal Beam Mill.4. Nature of incentives/subsidies as capital receipts.5. Deduction for write-back of ESOS expenditure.6. Disallowance under Section 14A.7. Depreciation on non-functional units.8. Disallowance of employee welfare expenses under Section 40A(9).9. Disallowance of lease rent as capital expenditure.10. Disallowance of aircraft expenses.11. Disallowance of foreign travel expenses.12. Disallowance of business promotion expenses.13. Transfer pricing adjustment on interest from loans to AEs.14. Transfer pricing adjustment on corporate guarantee.15. MAT credit under Section 115JAA.16. Interest under Section 234B.17. Additional coal levy and Debenture Redemption Reserve under Section 115JB.Issue-wise Analysis:1. Legality of the Assessment Order:- The assessee claimed the assessment order was illegal and bad in law. However, this ground was dismissed as it was deemed general in nature and did not require separate adjudication.2. Reduction of Deduction under Section 80IA:- The AO reduced the deduction claimed under Section 80IA from Rs. 4,19,30,71,772 to Rs. 2,52,62,31,398, arguing that the rate at which power was supplied to SEB (Rs. 2.3336 per unit) was the market rate, not the higher rate claimed by the assessee.- The Tribunal found the issue covered in favor of the assessee by previous decisions, including those of the Hon'ble Punjab & Haryana High Court and the Bombay High Court, and set aside the reduction in deduction.3. Deduction under Section 80IB for Rail Universal Beam Mill:- The AO disallowed the deduction claimed under Section 80IB, citing the decision in Goetze India Ltd. However, the Tribunal noted that the deduction was a mere enhancement of an existing claim and that the AO should have allowed it. The issue was remanded to the AO for verification and allowance of the deduction.4. Nature of Incentives/Subsidies as Capital Receipts:- The AO treated incentives/subsidies as revenue receipts, disallowing Rs. 1,20,74,28,854. The Tribunal noted that this issue had been decided against the assessee in previous years and confirmed the AO's order.5. Deduction for Write-back of ESOS Expenditure:- The AO did not allow the deduction for the write-back of Rs. 3,92,93,000 on account of ESOS. The Tribunal directed the AO to verify whether the amount was allowed as a deduction in the year of provision and to allow the deduction accordingly.6. Disallowance under Section 14A:- The AO disallowed Rs. 21.54 crores under Section 14A, invoking Rule 8D. The Tribunal found that the AO did not record the necessary satisfaction regarding the incorrectness of the assessee's claim and restricted the disallowance to Rs. 2,65,715 as claimed by the assessee.7. Depreciation on Non-functional Units:- The AO disallowed Rs. 42 lacs on depreciation for non-functional units. The Tribunal allowed the depreciation, noting that assets kept ready for use are considered used for business purposes.8. Disallowance of Employee Welfare Expenses under Section 40A(9):- The AO disallowed Rs. 54,03,885, treating it as not related to business exigencies. The Tribunal upheld the disallowance, agreeing with the AO and the Tax Auditor's opinion.9. Disallowance of Lease Rent as Capital Expenditure:- The AO treated Rs. 1,83,93,480 as capital expenditure related to a finance lease for an aircraft. The Tribunal upheld the disallowance but directed the AO to allow depreciation on the asset's cost.10. Disallowance of Aircraft Expenses:- The AO disallowed Rs. 6,34,582, questioning the business purpose of certain expenses. The Tribunal found the expenses to be incurred out of commercial expediency and deleted the disallowance.11. Disallowance of Foreign Travel Expenses:- The AO disallowed Rs. 61,65,830, citing lack of business connection. The Tribunal remanded the issue to the AO for fresh adjudication, considering the documents provided by the assessee.12. Disallowance of Business Promotion Expenses:- The AO disallowed Rs. 77,33,850, questioning the business purpose. The Tribunal deleted part of the disallowance related to Diwali gifts and press reporters but upheld the rest.13. Transfer Pricing Adjustment on Interest from Loans to AEs:- The AO/TPO applied a 16% interest rate, leading to an adjustment of Rs. 21,06,39,195. The Tribunal remanded the issue to the AO to apply the LIBOR rate for benchmarking.14. Transfer Pricing Adjustment on Corporate Guarantee:- The AO/TPO imputed a commission rate for corporate guarantees, leading to an adjustment of Rs. 2,16,00,060. The Tribunal held that the amendment to Section 92B is prospective and deleted the addition.15. MAT Credit under Section 115JAA:- The Tribunal directed the AO to verify and allow MAT credit as per law.16. Interest under Section 234B:- The Tribunal held that charging of interest is consequential and mandatory, directing the AO to provide consequential relief.17. Additional Grounds:- The Tribunal admitted additional grounds regarding coal levy and Debenture Redemption Reserve and remanded them to the AO for adjudication.