TaxTMI 
TaxTMI 
TaxTMI 
2015 (2) TMI 979
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....; "The assessee has claimed deduction under section 80-IA of the Income-tax Act, 1961 on account of the income generated from the electricity it distributed which in turn it received from the Kerala State Electricity Board. On an enquiry the authorised representative submitted that the assessee-company has acquired with effect from April 1, 2005, certain tea estates at Munnar, as a going concern, including erstwhile Devikulam Estate from July 1, 2005, from Tata Global Beverages Limited (The Tata Tea Ltd.-lessor) by lease of land and sale/transfer of other assets, including building and machineries and liabilities to the aforesaid estate. The abovementioned plant and machinery includes the plant and machinery for which it claim the deduction under section 80-IA and which is using for distribution and transmission of electricity. The erstwhile Tata Tea Ltd. has been using for this plant and machinery for long time. It is noted that as a windfall gain the assessee-company received the above plant and machinery and claimed to have renovated and modernised the transmission line and claimed deduction un....
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....ese circumstances, according to the Commissioner of Income-tax (Appeals), the business of the assessee became an old business and therefore, the assessee does not fulfil all the conditions of being a "new industrial undertaking" as laid down in section 80-IA(3) of the Act. As it is formed by reconstruction of business already in existence, and as Tata Tea Ltd. has established the said plant and machinery for transmission and distribution of electricity long back, the learned Commissioner of Income-tax (Appeals) held that the assessee is not eligible for deduction under section 80-IA. According to the Commissioner of Income-tax (Appeals) the machinery and plant used by the assessee was previously used by Tata Tea Ltd. and the plant and machinery being part of the business of Tata Tea Ltd. which has been splitted up and acquired by the assessee, hence, on this ground also the assessee is not eligible for deduction under section 80-IA. 4. According to the Commissioner of Income-tax (Appeals) if the assessee's claim under section 80-IA(4)(iv)(c) is considered, the requirement for being eligible for such benefit is to "substantially renovate and modernise" the existing network of t....
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....)(b), the assessee is entitled for deduction under section 80-IA(4)(iv)(c) of the Income-tax Act. According to him the lower authorities have totally misinterpreted the above provisions to deny deduction under section 80-IA(4)(iv)(c) of the Income-tax Act. Further, he submitted that the assessee has complied with all the requirements of the above section to entitle for deduction under section 80-IA(4)(iv)(c) of the Income-tax Act. The learned authorised representative further drew our attention to the auditor's certificate dated January 20, 2010 stating that the undertaking relating to distribution of electricity business was taken over by the assessee from Tata Tea Limited with effect from July 1, 2007 (paper book Nos. 13 to 27) and specifically with reference to cost towards renovation incurred by the assessee which is as follows : assessment year 2008-09 Rs. 50.31 lakhs assessment year 2009-10 Rs. 41.32 lakhs (approx.) 6. On the other hand, the learned Departmental representative submitted that a plain reading of sub-section (4), clause (b) makes it clear that deduction under section 80-IA will be available under clause (iv) to an undertaking which fulfils all t....
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....l 1, 2004. It was also noted by the learned Departmental representative that the assessee-company does not have any existing transmission or distribution lines to calculate the book value. It was also noticed by the learned Departmental representative that as on April 1, 2004 the said plant and machinery was in the books of account of Tata Tea Ltd. as the same was acquired by the assessee- company only on April 1, 2005 and the assessee cannot go to the extent of calculating the book value of the plant and machinery lying in some other companies books of account and fixed assets, and later on renovates by adding 50 per cent. more value to it and claim deduction under section 80-IA. According to the Departmental representative the section 80-IA(4)(iv)(c) is intended for the companies who are engaged in the relevant business and who have existing network of transmission and distribution lines and hence, the assessee-company is not eligible for deduction under section 80-IA on this ground. 9. The learned Departmental representative submitted that the assessee- company has acquired certain tea estate as a going concern from Tata Tea Ltd. by lease of land and sale/transfer of other asse....
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....s to be rejected and the deduction claimed to be added back to the total income. 13. He also relied on the order of the Commissioner of Income-tax (Appeals). 14. We have heard both parties and perused the record. In this case, the claim of the assessee is under section 80-IA(4)(iv) of the Income-tax Act. Section 80-IA(4)(iv) reads as follows : "(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being herein after referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business for ten consecutive assessment years. Sub-section (4) has six clauses (i) to (vi), each of which describes the types of undertaking or enterprise which is eligible to claim the deduction under this section, i.e. the nature of the 'eligible business'. In the assessee's case....
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....e Income-tax Act. This fact shows that the assessee was in the business of tea plantation and the plant and machinery was acquired by the assessee-company with effect from April 1, 2005. It is to be noted that the assessee-company had acquired certain tea estates as a going concern from Tata Tea Ltd. including plant and machinery used for transmission and distribution of electricity. As such, it cannot be said that the assessee has undertaken substantial renovation and modernisation of transmission and distribution lines as stipulated under section 80-IA(4)(iv)(c) of the Income-tax Act. We accept the submission of learned Departmental representative that the provisions of section 80-IA(4)(iv)(c) of the Income-tax Act are meant to encourage modernisation and upgradation of plant and machinery in power sector within a specified period in order to ensure wider network and prevention of transmission loses. This objective is sought to be achieved by prescribing a criterion of increase in the book value of the transmission or distribution lines, which are treated as plant and machinery by the electricity supply company, compared to the book value as on April 1, 2004. We are, therefore of....
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.... as an amount paid towards gratuity. Since this amount has been adjusted from the gratuity fund during the year, and included under loans and advances, the Commissioner of Income-tax (Appeals) held that the same was not an allowable expenditure under section 43B and for this reason only, even the auditors did not certify this amount as gratuity paid and hence the Assessing Officer was right in law in disallowing the same. According to the learned Commissioner of Income-tax (Appeals), this amount has been offered for disallowance in the assessment year 2009-10 when this amount was written off in the books of account, whereas given the method of accounting, the same was disallowable in the assessment year 2008-09. Accordingly, the Commissioner of Income-tax (Appeals) confirmed the addition of Rs. 72,15,856 made by the Assessing Officer. 18. The Commissioner of Income-tax (Appeals) also observed that since this disallowance is sustained in this assessment year 2008-09, the assessee would get the relief of this amount in the assessment year 2009-10, where the same amount has been disallowed to avoid double addition of the same amount. 19. The Commissioner of Income-tax (Appeals) furt....
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....contingent liability observing as following : The assessee-company has made a provision for dearness allowance after the notification of minimum wages for plantation workers by the Government of Kerala dated February 18, 2006. The said order was challenged by the Association of Planters of Kerala in the hon'ble High Court of Kerala and the High Court stayed the order till final disposal of the case. "It is noted that the liability will be crystallised only after the disposal of the case and hence the liability is unascertained and hence treated as contingent liability not admissible as expenditure and hence the contentions of the authorised representative is rejected and disallowed the amount." 24. The learned authorised representative submitted that the provision of Rs. 2.93 crores was made towards frozen dearness allowance for the workers. Since almost the entire labour work force were engaged in the tea operations of the company, the entire provision was charged to tea income. This amount included Rs. 51,66,192 relat....