TaxTMI 
TaxTMI 
2012 (11) TMI 420
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....ee company was having investment of Rs. 1,02,25,000/- in shares of Jay Infra Trade Pvt. Ltd. and Rs. 3,52,00,000/- in the shares of J.H. Kharawala Pvt. Ltd., The A.O. issued show cause notice to the assessee asking him to explain as to why the interest u/s. 36(1)(iii) should not be disallowed. The assessee contended that the investment is in Associate concerns which supply raw material as well as services and therefore, investments are for the business purposes. The contention of the assessee was not accepted by the A.O. According to the A.O. the investments were not made during the course of normal business activity. He also observed that assessee has paid interest on loan taken and he therefore concluded that interest bearing funds have been utilized for making investments. He accordingly worked out interest @ 15% on total investment and disallowed Rs. 68,13,750/-. Against the disallowance the assessee preferred appeal before the CIT (A). 5. Before CIT (A) it was submitted that the investments were made during F.Y. 2002-03 and the assessee had sufficient own funds to make the investments. The assessee submitted that J.H. Kharawala Pvt. Ltd., is main supplier of raw mater....
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....paper book, we find that the previous year figures are also available and investment in share of Jay Infra Trade Pvt. Ltd., was Rs. 2.25 lakhs and investment in share application was Rs. 48 lakhs totaling to Rs. 50.25 lakhs was made in A.Y. 2004-05 because the figure appearing against these figure for the year ending on 31-3-2004 is Nil. As regards the third investment of Rs. 352 lakhs in the shares of J.H. Kharawala Pvt. Ltd., we find that the contention of the assessee is correct because in the previous year column for the year ending 31-3-2003, investment of Rs. 352 lakhs is appearing. The assessee has also given a copy of Share application money for the year ending on 31-3-2003 which is available on page-1 of the paper book and we find that this investment was made by the assessee in the month of January, 2003. Now the question is as to whether at the time of making such investment of Rs. 352 lakhs in January 2003, whether any own fund was available with the assessee or not. Simply because there is no disallowance of interest in the A.Y. 2003-04, it cannot be inferred that investment is made out of own fund and not out of any interest bearing party fund. Neither the A.O. has....
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....sessee in A.Y.2004-05 which was disallowed. He accordingly disallowed the deduction u/s. 80IA for the reason0 (i) that enterprise or undertaking is not a distinct entity (ii) No separate plant and machinery owned by the enterprise or undertaking (iii) the undertaking or enterprise is not approved by the Central Government/State Government or local authority (iv) no separate books of accounts have been maintained by the undertaking or enterprise (v) exact location of the undertaking or enterprise has not been disclosed. He accordingly held that the assessee is not eligible for deduction and disallowed the claim. The assessee carried the matter before the CIT (A). 11. CIT (A) held that on identical issue in A.Y. 2004-05 and 2005-06 his predecessor had allowed the appeal of the assessee. He further held that since the facts and circumstances of the assessment year under consideration is similar to that of A.Y. 2004-05 and 2005-06 he allowed the claim of the assessee. Aggrieved by the decision of CIT (A), the Revenue is now in appeal before us. 12. At the outset the Ld. A.R. submitted that in assessee's own case for A.Y. 2004-05 and 2005-06, the co-ordinate Bench o....
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....ement that the power plant should be approved by any Government Authority. The assessee has submitted before the A.O. that section 80IA(iv) requires that there should be agreement with specific authority in respect of infrastructure facility and it is also specified that in respect of natural part, the notification of Central Govt. is essential and similarly 80IB lays down for local authority and Housing project but no such condition has been laid out for power plant. In spite of this submission of the assessee before the A. O., the A.O. did not point out any specific sub section of 80IA as per which there is a requirement of approval of the power plant by any Govt. Authority. The CIT (A) has also noted at page-7 of his order that assessee had submitted copy of approval for installation of 1250 KVA captive power plant from Chief Electrical Inspector and had filed profit and loss account for power plant and also inspection report of the Chief Electrical Inspector, Gandhinagar carried out on 11-1-2003 and account of electricity duty paid for units generated in CPP. It is further, noted by the Ld. CIT (A) that adequate time had been given to the A.O. for his comments and the A.O....
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....g at page 85 and 95 of the paper book also, the same address of the power plant has been stated. In the form No.10CCB in the audit report submitted by the assessee copy of which is available on page 74 to 81 of the paper book, it has bee stated that the same address of the enterprise/undertaking claiming deduction is Ahmedabad, Gujarat. On the basis of this, it is the allegation of the A.O. that complete address of the enterprise/undertaking is not available on record. For an omission in stating complete address in the audit report claim of the assessee regarding deduction cannot be rejected particularly when the unit's address is otherwise made available to the A.O. In our considered opinion, this is a technical default and hence on the basis of this objection, the claim of the assessee cannot be rejected. 12. Now, we find that in the case of West Coast Paper Mills Ltd. vs. JCIT (supra) it was held by Bombay Bench of the Tribunal that when the assessee is generating power even from captive consumption of power, there is no fetter against deduction under section 80IA. In that case, the A.O. was directed to work out the profit on the basis of the price of the powder generated ....
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....ical purpose. Third Ground is with respect to consumption of closing stock. 16. A.O. observed that the assessee has valued closing stock of finished goods lying at factory premises without including the excise duty payable on the finished goods. The assessee submitted that as the goods were lying in the factory itself no excise duty expenditure was incurred on the same. Assessee also submitted that if the excise duty payable is included in the valuation of stock, deduction will have to be allowed to assessee in accordance with sec.43B. The amount of excise duty becomes payable only at the time of removal of the goods. Since the liability is not incurred, the same is not added to the closing stock of finished goods. This contention of the assessee was not found acceptable by the A.O. in view of the provision of the section 145A of the Act. As per A.O., as per the provisions of section 145A the valuation of inventory of closing stock of finished goods has to be arrived at after including tax, duty, cess etc. The A.O. relied on the decision of CIT vs. British Paints (India) Ltd., 188 ITR 44 (SC). A.O. thus calculated the amount of excise duty of Rs. 8,61,827/- and added to the f....
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....sessee was not accepted by the A.O. and the addition was made holding that the appellant accrued the excise liability the moment the gods were manufactured. The A.O. also cited the provisions of section 145A and the decision of the Hon'ble Apex Court in the case of CIT vs. British Paints India Ltd., 188 ITR 44. The appellant further contended that when there was no liability and when nothing was provided in the profit and loss account towards any liability, the A.O. was not correct in adding the above sum to the value of closing stock. 3.2. I have considered the arguments of the appellant addition also perused the reasoning given by the A.O. in making the above addition. I am convinced that on the facts brought on record by the appellant and as already explained to the A.O., the goods lying at the factory were just finished but no excise duty having been incurred and no provision for such liability having been debited to the profit and loss account, the reasoning given by the A.O. relying on the Hon'ble Apex Court decision is out of place. First of all, no cost by way of excise duty liability has been either incurred or debited to the Profit and loss account. Further, excise dut....
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....t. Ltd., a group company. Assessee was asked to explain as to why excessive house keeping charges not be disallowed u/s.40A(2)(a) .A.O. observed that the issue related to genuineness of service provided to Jay Infra Trade Pvt. Ltd., was examined in detail during the course of assessment proceedings, in the case of Jay Infra Trade Pvt. Ltd. for A.Y. 2003-04.In that year it was established that Jay Infra Trade Pvt. Ltd., did not have sufficient qualified manpower, fixed assets etc. and therefore, the house keeping charges received by it do not commensurate with the services provided. The house keeping charges income of Jay Infra Trade Pvt. Ltd., amounting to Rs. 6,24,725/- was considered to be genuine for providing service to other group concerns. A.O calculated the proportionate genuine house-keeping charges received from the assessee-company by Jay Infra Trade Pvt. Ltd. in the following manner:- Rs.50,00,000 x 6,24,725 = Rs. 4,10,271/-. 76,13,561 23. A.O. also observed that on identical facts in the case of assessee similar disallowance was made in A.Y. 2003-04 and 2004-05. He therefore, following the earlier year's order disallowed Rs. 45,89,729/- u/s.40A(2)(a) and add....
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....cts to controvert the finding of ITAT for A.Y. 2003-04, we following the aforesaid order of ITAT direct the deletion of the disallowance. Accordingly, this ground of the Revenue is dismissed. 30. Ground No.5 and 6 are general in nature and therefore, not adjudicated. 31. Therefore Revenue's appeal is partly allowed. 32. In the cross objection filed by the assessee the only effective ground reads as under:- " The Ld. CIT (A) ought to have allowed the software expenses disallowed by the A.O. as Revenue expenditure allowable u/s. 37 of the Act." 33. The A.O. observed that assessee had debited computer expenses of Rs. 1,17,999/- which includes software development expense, material expense and labour expense. The assessee submitted that these expenses are in the nature of expenditure for up gradation of existing software. A.O. was of the view that even if the expense was for upgradation and for purchase of customized software same resulted in enduring benefit. He held the same expenses to be of capital in nature and accordingly disallowed it. However, he disallowed 30% depreciation on the same. 34. Aggrieved with the order of A.O. the assessee went in appeal before th....