Tribunal Rules for Assessee on Various Issues; Revenue Appeals Mostly Dismissed

National Fertilizers Ltd. Versus DCIT Cricle-17 (2) New Delhi And ACIT Cirlce-17 (2), New Delhi Versus National Fertilizers Ltd.

National Fertilizers Ltd. Versus DCIT Cricle-17 (2) New Delhi And ACIT Cirlce-17 (2), New Delhi Versus National Fertilizers Ltd. - TMI Issues Involved:
1. Addition on account of interest accrued on advances.
2. Disallowance of demurrage and wharfage charges.
3. Disallowance on account of write-off value of slow-moving stores and spares.
4. Disallowance of repairs and maintenance expenses.
5. Disallowance of depreciation on UPS and other computer peripherals.
6. Disallowance of expenses under section 14A.
7. Disallowance of additional depreciation.
8. Disallowance of bank guarantee commission.
9. Disallowance of CSR expenditure.
10. Addition on account of interest income on deposits.
11. Disallowance of other expenses written off.
12. Disallowance of income short booked.

Detailed Analysis:

1. Addition on Account of Interest Accrued on Advances:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest, arguing that the assessee was following the mercantile system of accounting and had the right to charge simple interest as per an arbitration award. The Tribunal dismissed this ground, noting that the issue was covered by the jurisdictional High Court's decision in the assessee's favor for earlier assessment years. It was held that since no part of the principal amount could be recovered, there was no 'real income' to be taxed.

2. Disallowance of Demurrage and Wharfage Charges:
The Revenue argued that the CIT(A) wrongly deleted the disallowance of Rs. 2,59,00,000/- by ignoring the provisions of the Railway Act and Section 37(1) of the Income Tax Act. The Tribunal dismissed this ground, referencing the jurisdictional High Court's decision that such charges were not in the nature of a penalty and were deductible under Section 37(1).

3. Disallowance on Account of Write-off Value of Slow-Moving Stores and Spares:
The Revenue contended that the CIT(A) erred in deleting the disallowance of Rs. 3,91,00,000/- for slow-moving stores and spares, arguing that the assessee adopted an accounting standard beneficial to it. The Tribunal dismissed this ground, upholding the High Court's view that the valuation was based on an engineering expert's assessment and was bona fide.

4. Disallowance of Repairs and Maintenance Expenses:
The Revenue challenged the deletion of Rs. 41,47,983/- on account of repair and maintenance expenses. The Tribunal upheld the CIT(A)'s decision, noting that the disallowance was made on an ad-hoc basis without proper justification.

5. Disallowance of Depreciation on UPS and Other Computer Peripherals:
The Revenue argued that the CIT(A) wrongly allowed depreciation at 60% on UPS, treating it as an integral part of computers. The Tribunal dismissed this ground, citing previous Tribunal decisions and a High Court ruling that UPS is an integral part of the computer system.

6. Disallowance of Expenses under Section 14A:
The Revenue contended that the CIT(A) wrongly deleted the disallowance under Section 14A, arguing that the allowability of expenditure is not conditional upon earning income. The Tribunal dismissed this ground, noting that no exempt income was earned during the year, referencing the Delhi High Court's decision in Cheminvest Limited and the Supreme Court's affirmation in PCIT v. Oil Industries Development Board.

7. Disallowance of Additional Depreciation:
The Revenue argued that the CIT(A) wrongly deleted the disallowance of Rs. 6,45,673/- on account of additional depreciation, stating that the provisions were applicable from 01.04.2013. The Tribunal dismissed this ground, referencing the Delhi High Court's decision that generation of power qualifies for additional depreciation and the Finance Act, 2012's amendment applies from 01.04.2013.

8. Disallowance of Bank Guarantee Commission:
The assessee's appeal against the disallowance of Rs. 7,29,769/- for bank guarantee commission was allowed. The Tribunal held that bank guarantee commissions are banking services not subject to TDS under Section 194H, referencing the Bombay High Court's decision and CBDT Notification No. 56/2012.

9. Disallowance of CSR Expenditure:
The assessee's appeal against the disallowance of Rs. 76,00,000/- for CSR expenditure was allowed. The Tribunal noted that CSR expenditure incurred in compliance with the Companies Act, 2013, and related rules was a statutory obligation and that the amendment to Section 37(1) applies prospectively from AY 2015-16.

10. Addition on Account of Interest Income on Deposits:
The Revenue's appeal on this ground was dismissed, with the Tribunal noting that the issue was identical to the accrued interest on advances, and no distinguishing facts were presented.

11. Disallowance of Other Expenses Written Off:
The Tribunal did not find any specific discussion on this issue in the provided text, implying that it was not a significant point of contention.

12. Disallowance of Income Short Booked:
Similarly, there was no specific discussion on this issue, suggesting it was not a major point of dispute.

Conclusion:
The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals, providing detailed reasoning for each issue based on previous judicial decisions and relevant legal provisions. The judgments consistently favored the assessee, particularly where the issues had been previously adjudicated by higher courts.