Binding precedent bars repeat disallowance; exempt income disallowance confined to exempt income and requires recorded dissatisfaction.

The note addresses three tax issues: (i) the Tribunal applied binding precedent and the consistency principle to delete a large disallowance for captive power plant expenses where facts matched prior accepted years, resulting in relief for the assessee; (ii) disallowance attributable to exempt income was confined to the quantum of exempt income, and the prescribed computational method cannot be invoked unless the officer records objective dissatisfaction after examining accounts, so a larger AO disallowance was restricted; (iii) technical service fees were held wholly and exclusively for business based on contemporaneous invoices and records, leading to deletion of that addition.

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Issues: (i) Whether the disallowance of power and fuel expenses of Rs. 18,33,27,280/- under general business head can be sustained; (ii) Whether disallowance under the provision limiting expenditure attributable to exempt income (section 14A read with prescribed computation) is correctly computed and whether invocation of the prescribed method without required satisfaction is permissible; (iii) Whether fees for technical services of Rs. 26,79,000/- paid to a service provider are allowable as business expenditure under the general business deduction provision.

Issue (i): Whether the disallowance of power and fuel expenses of Rs. 18,33,27,280/- made by the Assessing Officer can be sustained.

Analysis: The Tribunal examined prior decisions in the assessee's own case for earlier assessment years where identical disallowances on account of captive power plant expenses were considered and deleted. The factual position in the present year was found to be identical to those earlier years, including prior acceptance of the expenditure by authorities in multiple assessment years and absence of fresh material to justify a change of opinion. The Tribunal applied the binding effect of its earlier orders in the assessee's own case and the consistency principle.

Conclusion: The disallowance of Rs. 18,33,27,280/- is deleted in favour of the assessee.

Issue (ii): Whether the disallowance under the provision for expenditure relatable to exempt income (and its computation under the prescribed method) was correctly made and whether the prescribed computation could be applied without the Assessing Officer recording the requisite satisfaction.

Analysis: The Tribunal observed that the Assessing Officer had computed a larger disallowance but the CIT(A) restricted the disallowance to the amount of exempt income earned in the year, relying on jurisdictional High Court precedent. The Tribunal also examined the requirement that the prescribed method of computation may be applied only after the Assessing Officer has examined accounts and recorded objective dissatisfaction, and noted that the amendment relied upon by the Assessing Officer is prospective and not applicable to the year under consideration. The Tribunal found reliance on the administrative circular to be misplaced where it conflicts with statutory interpretation and binding judicial precedent.

Conclusion: The disallowance under the said provision is limited to the exempt income of Rs. 18,52,306/- and the Assessing Officer's larger disallowance is not sustainable; the application of the prescribed computation without recording required satisfaction is impermissible for the year under consideration, favouring the assessee.

Issue (iii): Whether fees for technical inspection services of Rs. 26,79,000/- paid to the service provider are allowable as business expenditure under the general deduction provision.

Analysis: The Tribunal reviewed documentary evidence (invoices, bank payment proofs, TDS records, ledger confirmations, vendor identity and service descriptions) demonstrating that the services were mandatory for operation, class compliance and insurance of the assessee's rigs and were incurred wholly and exclusively for business. The Tribunal further considered that similar technical service payments had been accepted in earlier years and that the Assessing Officer had not produced specific contradictory material to displace the assessee's evidentiary showing.

Conclusion: The addition of Rs. 26,79,000/- is deleted in favour of the assessee.

Final Conclusion: Following the Tribunal's earlier binding decisions in the assessee's own case and on the merits of the documentary and legal submissions, the appeals filed by the assessee are allowed and the cross-appeals filed by the Revenue are dismissed, resulting in deletion or appropriate restriction of the impugned additions.

Ratio Decidendi: Where identical factual and legal issues have been decided in the assessee's own case, subsequent disallowances cannot be sustained absent fresh material; disallowance attributable to exempt income is confined to the amount of exempt income for the year and the prescribed computational method may not be applied without the Assessing Officer first recording objective dissatisfaction after examination of accounts.

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