2022 (5) TMI 949 - AT - Income Tax

Tribunal Decision: Tax Disallowances Upheld, Additional Depreciation Allowed, Railway Siding Depreciation Remanded

DCIT, Circle-17 (2), New Delhi Versus Nalwa Steel And Power Ltd. And (Vice-Versa)

DCIT, Circle-17 (2), New Delhi Versus Nalwa Steel And Power Ltd. And (Vice-Versa) - TMI Issues Involved:1. Deletion of disallowance of Rs. 5,38,95,043/- on account of excess deduction claimed under Section 80IA(8) of the Income-Tax Act, 1961.2. Deletion of addition of Rs. 69,89,846/- on account of disallowance of depreciation while calculating Book Profit under Section 115JB of the Income-Tax Act, 1961.3. Disallowance of Rs. 9,46,866/- on account of additional depreciation under Section 32(1)(iia) of the Income-Tax Act, 1961.4. Non-enhancement of the rate of depreciation from 10% to 15% in respect of purchase of railway sidings.Detailed Analysis:1. Deletion of Disallowance on Account of Excess Deduction Claimed under Section 80IA(8):The Revenue challenged the deletion of the disallowance of Rs. 5,38,95,043/- claimed under Section 80IA(8). The Departmental Representative argued that the CIT(A) erred in deleting the disallowance without considering the facts recorded by the AO. However, the assessee’s counsel contended that this issue was recurring and had been decided in favor of the assessee in previous years by both the Tribunal and the Hon'ble Delhi High Court. The Tribunal noted that similar issues had been resolved in favor of the assessee in past years, including decisions by the Delhi ITAT and the Hon'ble Delhi High Court. Consequently, the Tribunal dismissed Ground No. 1 of the Revenue, upholding the CIT(A)'s order.2. Deletion of Addition on Account of Disallowance of Depreciation while Calculating Book Profit under Section 115JB:The Revenue also contested the deletion of the addition of Rs. 69,89,846/- on account of disallowance of depreciation while calculating Book Profit under Section 115JB. The Departmental Representative supported the AO’s findings, while the assessee’s counsel argued that the issue had been consistently decided in favor of the assessee, citing the Supreme Court judgment in Apollo Tyres and previous Tribunal decisions. The Tribunal, referencing the consistent rulings in favor of the assessee, upheld the CIT(A)'s order and dismissed Ground No. 2 of the Revenue.3. Disallowance of Additional Depreciation under Section 32(1)(iia):The assessee appealed against the disallowance of Rs. 9,46,866/- on account of additional depreciation under Section 32(1)(iia). The CIT(A) had upheld the AO's action, but the assessee argued that similar issues had been decided in their favor in previous years. The Tribunal reviewed past decisions, including those by the Co-ordinate Bench and other Tribunal rulings, which had consistently held that the generation of power qualified as the manufacture of an article or thing, thus entitling the assessee to additional depreciation. The Tribunal allowed the assessee’s grounds of appeal, reversing the disallowance.4. Non-enhancement of Depreciation Rate for Railway Sidings:The assessee also contested the non-enhancement of the depreciation rate from 10% to 15% for railway sidings. The assessee argued that the railway sidings were used for business purposes and should be classified as 'plant and machinery' rather than 'factory building'. The AO had not addressed this issue during the assessment. The Tribunal, acknowledging the omission, remanded the issue back to the AO for fresh consideration and directed the AO to verify the records and pass an appropriate order after providing an opportunity for the assessee to be heard.Conclusion:The Tribunal dismissed the Revenue's appeal (ITA No. 5548/Del/2017) and allowed the assessee's appeal (ITA No. 4941/Del/2017) for statistical purposes, remanding the issue of the depreciation rate for railway sidings back to the AO for further examination. The order was pronounced in the open court on 18th May, 2022.