TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 1027
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.... the WDV in the books of the transferor namely Steel Authority of India (SAIL) instead of the cost at which the assessee had acquired the above assets on the basis of valuation by MECON. 3. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal." The grounds of appeal in ITA No.4673/Del/2010 read as under:- "1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation on the power plants as per the cost of acquisition of the assets less depreciation which was actually allowed till the Assessment Year 2001-02, in terms of the provisions of Section 32 r.w.s. 43 of the IT Act, 1961. 2. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in ignoring the fact that the provisions of Section 47(iv) r.w.s. 43 and Explanation 3 to Section 43(1) of the I.T. Act, 1961 and the cost of the power plants acquired by the appellant were taken at the WDV in the books of the transferor namely Steel Authority of India (SAIL) instead of the cost at which the assessee had acquired the above assets on the basis of valuation by M....
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.... Limited. The agreement was entered into between SAIL and NTPC regarding the ownership, management and power purchase agreement etc. which were subsequently approved by the Board of Directors. Consequent upon the approval by the Board of Directors of the assessee company, the shareholders agreement was executed on 16.3.2001. The transfer of shares from SAIL to NTPC was completed on 22.3.2001 by Stock Holding Corporation of India Limited which is also public sector undertaking. The assessee company claimed the depreciation in the assessment year 2001-02 of the value of the power plants at which they were acquired by the assessee. The depreciation was denied by the Assessing Officer on the basis that this company was a wholly owned company of SAIL and that the provisions of section 47(iv) of the Income-tax Act were attracted. The fact that the SAIL admitted that the capital gain tax on the slump sale in terms of section 50B of the Income-tax Act of these two captive power plants was ignored. The assessee has claimed that firstly, it was not 100% owned subsidiary of SAIL and, secondly, the capital gain tax has been admitted by the transferor. 5. At the time of hearing, the lea....
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....s been mentioned about the incorporation of 100% wholly on subsidiary of SAIL. Therefore, on this contention of the assessee, the case of the assessee is covered u/s 47(iv) of the Act and therefore the transfer of captive power plant cannot be treated as transfer to the assessee company. As regards the actual cost of the transferred capital assets to the transferee company i.e. the assessee, it shall be the same as would have been if the transferor had continued to hold capital assets for the purpose of its business. Therefore the second contention of the assessee with regard to slump sale u/s 50B will not help the assessee in view of explanation 6 to section 43 and section 47(iv) of the Act. 7. As regards the third contention of the assessee that it became a joint venture company with equal shares of SAIL and NTPC and therefore the assessee company is not wholly owned subsidiary as at 31.03.2001. The views of the ld. CIT (A) in this regard are that a change in the constitution of the company i.e. in the shareholding before the close of the relevant period will not make the application of the above provisions ineffective as the relevant date for consideration is the date of....
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....g concern - Assessee claimed depreciation on fixed assets and for that purpose had taken WDV of fixed assets at Rs.130.52 crore-Assessee ceased to be wholly owned subsidiary of transferor-company 'EG' on 30.09.1994, but Assessing Officer rejected this fact on ground that subsequent events would not have any material change with respect to changing of cost of acquisition of capital assets acquired from holding company-Assessing Officer held that assessee satisfied all conditions laid down in section 47(iv), read with explanation 6 to section 43(1) and, accordingly, took WDV of assets in books of 'EG' at Rs.203.89 crore as cost of acquisition of assets by assessee for computation of depreciation - Whether since assessee-company ceased to be a subsidiary of transferorcompany, provisions of section 47(iv) would not apply and, therefore, transaction was to be treated as transfer- Held, yes-Whether cost for which assessee had acquired asset should be cost of acquisition for purpose of computation of depreciation and, therefore, assessee was entitled to depreciation on cost of assets as Rs.130.52 crore-Held, yes." 8. The arguments advanced by the ld. Counsel for the assessee befor....
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.... earned on temporarily deposits made out of surplus funds and on the deposits made with bank by way of margin or giving advances etc. for the purpose of expansion. Such interest earned was of Rs.331.58 lakhs. The balance/difference of interest of Rs.285.15 lakhs was not related to the expansion work which had been admitted as a normal income. The interest earned on the surplus fund and advances by way of margins or advances etc. for the purpose of expansion was adjusted to the Incidental Expenses During Construction (IEDC for short). The interest was adjusted on account of matching principle as the interest earned on deposits kept in relation to the expansion were credited to/reduced from IEDC. 10. The learned DR relied on the order of Assessing Officer and also submitted that the interest earned on the FDR is to be assessed as income from other sources in view of the decision of Hon'ble Supreme Court in the case of Tuticorin Alkalies Chemicals Fertilizers Ltd. vs. CIT 227 ITR 172 (SC). The learned DR also submitted that as per the amended provision in section 36(1)(iii) by the Finance Act, 2004, the interest paid in respect of capital borrowed for acquisition of an asset f....
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.... these incidental expenses were incurred during construction period of setting up new unit at Bhilai and whatever not related to this expansion work was claimed as revenue expenditure in the books which had been allowed. The CIT (A) granted the relief by following the judgement of Hon'ble Supreme Court in the case of Bongaigaon Refinery and Petrochemicals Ltd. vs. CIT 251 ITR 329 where the decision of Tuticorin Alkalies Chemicals and Fertilisers Ltd. vs. CIT 227 ITR 172 was also referred. We would like to state that in the decision of Bongaigaon Refinery and Petrochemicals Limited, Hon'ble Supreme Court has held as under:- "The High Court has already held that the interest income derived by the assessee during its formative period was taxable. What remains for consideration is the income which the assessee derived from house property, its guest house, charges for equipment and recoveries from the contractors on account of water and electricity supply. These items are covered by the decision in Bokaro Steel Ltd.'s case [1999] 236 ITR 315 (SC). To the extent that it relates to these items, i.e., items excluding interest, the question must be answered in the affirmative and in....
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.... 56 of the Income-tax Act. Therefore, the principle of netting cannot be adopted in the assessee's case. The Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equip (supra) has held as under:- "To summarise the conclusions: (i) In computing what the profits derived from exports for the purposes of section 80HHC(1) read with section 80HHC(3) are, the nexus test has to be applied to exclude that which does not partake of profits that can be said to have been derived from the business of exports. (ii) In the specific context of clause (baa) of the Explanation to section 80HHC, while determining the "profits of the business", the Assessing Officer has to undertake a twostep exercise in the following sequence. He has to first "compute" the profits of the business under the head "Profits and gains of business or profession." In other words, he will have to compute business profits, in terms of the Act, by applying the provisions of sections 28 to 44 thereof (iii) In arriving at the profits of the business by the above method, the Assessing Officer will exclude all such incomes which partake of the character of "income from other sources" which in any event are treated ....
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....xpenditure by way of interest) for the purpose of earning the interest on the fixed deposit, to draw an analogy from section 37, will require to be shown by the assessee for application of the netting principle. The interest earned on surplus fund parked into FDRs and on margin/advances made for expense on work can be categorized only as 'income from other sources'. Further, as per the proviso to section 36(iii), the whole of interest as the borrowed capital have to be capitlised for the period till the asset first put to use. Admittedly, the assets were not put to the use in the financial year relevant to assessment year under consideration. Hence, it has to be capitalised. Further, the deduction of interest or other expenditure under section 57 can be allowed only when it has been borrowed for the purpose of earning of such income. Here the loan was taken for expansion. Deduction u/s 57(iii) of the Income-tax Act is allowable when any expenditure not being in the nature of capital expenditure laid out or expanded wholly and exclusively for the purpose of making or earning such income. Thus, the expenditure to be deductible u/s 57(iii) must be laid out or expanded ....