TaxTMI 
TaxTMI 
2011 (6) TMI 900
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....d on facts and circumstances of the case and in law in holding that irrecoverable amount of Rs. 3,93,303/- in the nature of security deposits and other deposits are revenue in nature.. (2) That ld. CIT(A.) erred on facts and circumstances of the case and in law in allowing assessee's claim of disallowance of Rs. 1,02,700/- under section 14A of the Act without following the provisions of Rule 8D. (3) That ld. CIT(A.) erred on facts and circumstances of the case and in law in holding that the assessee is entitled for deduction of 100 per cent of the profit of the power undertaking at Bhadrachalam when the concerned undertaking commenced operation in FY 1997-98. (4) That ld. CIT(A.) erred on facts and circumstance of the case and in law in holding that income of Rs. 65,55,048/- from sale of Clonal Plants, coconut and Sugarcane, etc. is in the nature of agricultural income and accordingly, the same is exempted. 2. The assessee vide letter dated 14.09.2010 has also taken an additional ground, which is as under :- "That on the facts and circumstances of the case the ld. CIT(Appeals) may please be directed to reexamine the ground on disallowance of proportionate manag....
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....ter dated 29.06.2010, which contains the break-up of the amount aggregating Rs. 9,00,111/- and the nature of activities undertaken by the Clubs/ Association to whom the assessee made subscriptions. We consider it prudent to state the said details, filed by the assessee, which is as under :- Sums paid towards employees welfare activities disallowed under section. 40A(9) Particulars Nature of payment Amount (in Rs.) Nature of activities undertaken by the clubs/ association ITC Staff Club Subscription 344,716 ITC Staff Club (At Chennai) was formed with the objective of providing recreational facilities to its members who are employees of the Company posted at Tiruvottityur, Chennai Tribeni Tissues Cooperative Stores Ltd. Subscription 25,800 The employees of Tribeni factory of the Company had created a cooperative stores to assist members in obtaining their requirements at reasonable rates and within proximity of the factory Tribeni Tissues Recreation Club Subscription 137,000 This club was formed for the exclusive use of employees (including managers) to foster cordial social relations amongst the employees of the Tribeni factory & keep ....
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....11 Ld. AR submitted that in the preceding assessment years, viz. assessment years 2002-03 and 2003-04, ITAT vide its order dated 18.06.2009 in ITA Nos. 245 & 246/Kol./2008 restored the matter to ld. CIT(Appeals) with a direction to decide the issue afresh as per law as the assessee failed to give details and no reasons were given by the authorities below. Ld. AR submitted that in the assessment year under consideration, the assessee filed all the details of the contributions made by it and the contributions were made to Schools and Workmen' Organization for their welfare activities due to business expediency. Ld. AR submitted that ITAT, Kolkata Bench in the case of Chloride Industries Limited (supra) has held that Staff Recreation Club and Staff Club were a part and parcel of the organization itself and they were given money by way of subsidy and accordingly following its earlier decision in the case of DCIT -vs.- A.P.E. Belliss India Limited in I.T.A. Nos. 527 to 537/Cal./1989 held that in such kind of contribution/ expenditure, provisions of section 40A(9) are not applicable and the claim is allowable under section 37(1) of the Act. 7. On the other hand,....
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....ra) and also the fact that the assessee has given the break-up of the expenses incurred/ reimbursed, as mentioned hereinabove, we are of the considered view that the provisions of section 40A(9) of the Act are not attracted for a sum of Rs. 8,74,311/- and the said expenditure is allowable under section 37(1) of the Act. Therefore, we allow Ground of appeal taken by the assessee in part by restricting the disallowance to Rs. 25,800/- and by deleting the sum of Rs. 8,74,311/- out of Rs. 9,00,111/-. 9. As mentioned hereinabove that the assessee has also taken the additional ground. 10. Relevant facts are that the Assessing Officer observed that the assessee earned exempted income of Rs. 142,85,05,284/- from investment in tax-free Bonds and Dividend. The assessee submitted at the time of assessment proceedings, the expenditure of Rs. 1,02,700/- attributable to earning exempted income. Assessing Officer stated that the figure given by assessee is highly unrealistic. Assessing Officer disallowed the proportionate management expenses amounting to Rs. 4,91,32,442/- under section 14A of the Act. The assessee filed appeal before the first appellate authority. However, at the time of he....
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....authorities below. We have also considered the cases cited by ld. A.R. in support of his submission. Considering the facts of the case that the Assessing Officer made proportionate disallowance while considering the exempted income of the assessee in the assessment year under consideration for the purpose of section 14A of the Income Tax Act, he did not consider Rule 8D of the Income Tax Rule. We agree with ld. AR that Rule 8D is not applicable to the assessment year under consideration. It is also a fact that the assessee did not press for this ground before ld. CIT(Appeals) and admitted the disallowance made by the Assessing Officer. Therefore, the plea taken by ld. A.R. that the assessee did not dispute this ground because of Rule 8D and the decision of Special Bench, ITAT, Mumbai in the case of Daga Capital Management Pvt. Ltd. has no substance. There is no such submission of the assessee before ld. CIT(Appeals) that the assessee did not to want agitate the matter in view of the decision of ITAT, Special Bench, Mumbai. It is observed that the assessee, for the reasons best known to him, accepted the disallowance made by the Assessing Officer under section 14A of the Income Tax ....
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.... 3,17,520/- was given as security deposit for leased godown at Chennai in 1995 and 1999. There was a dispute on fixation of rent since January, 2001. The rent was hiked to Rs. 38,580/-, but the assesseecompany disputed the same and continued to pay old rent. Ultimately, the lessor compromised and the assessee-company vacated those godowns in 2004-05. The security deposit was not returned to which assessee-company agreed to. Ld. AR further submitted that the sum of Rs. 50,000/- was given as deposit for a residential flat at Kolkata. The employee handed over the key to landlord while vacating the premises and the landlord did not return the security deposit on the ground that he had acute financial problems. He submitted that the case was filed but landlord was no longer traceable, hence, the amount was written off. Ld. AR submitted that written off amount aggregating Rs. 3,93,303/- was deposited as security deposits in the ordinary course of business and the said amount has been written off in the assessment year under consideration considering the material aspect as well as the time and cost involved in such recovery. Ld. AR submitted that ld. CIT(Appeals) has rightly deleted the s....
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....halam' commenced its operation on 18.07.1997, i.e. in financial year 1997-98. The assessee stated that till financial year 2000-01, i.e. assessment year 2001-02 the said Power Undertaking belonged to another Company, viz. ITC Bhadrachalam Paperboards Limited (hereinafter to be referred as ITCBPL). ITCBPL never claimed any deduction under section 80IA in view of recurring losses. The assessee stated that in assessment year 2002-03, ITCBPL merged with the assessee-company and thereafter the merged Company having a positive gross total income, started claiming the deduction under section 80IA of the Act in respect of the said Power Undertaking. The assessee claimed that the deduction for the first time was claimed in respect of the said Power Undertaking in assessment year 2002-03. 22. At the relevant period, i.e. when the assessee-Undertaking commenced its operation on 18.07.1997, section 80IA provided that the assessee could claim deduction @ 100% for first five assessment years and at the rate of 30% for next five assessment years. However, by the Finance Act, 2001 w.e.f. 1st April, 2002, provisions of section 80IA were amended and as per said amendment if an Undertaking is set ....
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....T(Appeals) is at pages 18 to 20 of the impugned order, which is as under :- "In this ground the appellant is disputing the AO's action in limiting deduction under sec. 80IA of the Income Tax Act in respect of its power generation unit at Bhadrachalam to @ 30% of profits of the said unit instead of @ 100% claimed by it. The appellant's case is that the deduction in respect of the said unit was first claimed in the assessment year 2002-03 and was in accordance with the extant provisions of sec. 80IA of the Income Tax Act as applicable to that assessment year. Therefore, as per its contention, the claim for assessment year 2005- 2006 is the fourth year. The AO has denied the appellant's claim on the ground that the unit commenced operation in the financial year relevant to assessment year 1998-1999 and as per the provisions of sec. 80IA(2)(iv)(b) of the Income Tax Act prevailing in that assessment year the appellant was entitled to claim deduction @ 100% for first five assessment years and @ 30% for next five assessment years, the deduction being permissible for 10 consecutive assessment years. It is to be mentioned that sec. 80IA of the Income Tax Act was amended by the Fina....
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.... in further appeal before the Tribunal. 24 At the time of hearing, ld. D.R. relied on the order of Assessing Officer. However, ld. A.R. of the assessee made his submissions on the lines of the submissions made before ld. CIT(Appeals). He further submitted that a similar issue was considered by ITAT, Ahmedabad Bench in respect of providing cellular services in the case of ACIT -vs.- Vodafone Essar Gujarat Limited (2010) 38 SOT 51. He submitted that in the said case, the Tribunal held that the assessee could not be denied benefit of the amended provisions once it fulfilled the conditions stipulated in the relevant provisions and the substituted provisions of section 80IA would apply to the assessee. In the said case, the assessee commenced its commercial operation on 24.01.1997, i.e. in assessment year 1997-98 but did not claim deduction under section 80IA from assessment years 1997-98 to 1999-2000. The question arose as to whether the preamended provisions of section 80IA of the Act, i.e. the provisions, which were in existence, when the assessee commenced production would be applicable or the amended provisions of section 80IA of the Act applicable with effect from 1st April, 20....
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....ssee and as such the initial assessment year in the case of the assessee for claiming deduction under section 80IA was assessment year 2002-03, which would be available for next ten years i.e. upto assessment year 2011-12. He submitted that the order of ld. CIT(Appeals) should be confirmed. 26. We have carefully considered the orders of the authorities below and the submissions of ld. representatives of the parties. We have also gone through the order of ITAT, Ahmedabad Bench in the case of Vodafone Essar Gujarat Limited (supra). We observe that the issue involved in the appeal before us and the issue involved in the appeal before the ITAT, Ahmedabad Bench is identical save and except the fact that in the case of appeal of ITAT, Ahmedabad Bench, the Undertaking was providing telecommunication services and whereas in the case before us it is a Power Undertaking. There is no dispute to the fact that the Undertaking providing telecommunication services and/ or Power Undertaking both are Infrastructure Undertakings as per Explanation to sub-section (4) of section 80IA of the Act. There is no dispute to the fact that the assessee-company fulfills all the requisite conditions as laid ....
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....tuted provisions was available only to those undertakings which were granted a license after 1.4.1995 and could not start operations until 1.4.2002. We are of the option that such an restrictive interpretation does not emerge from the amended provisions. The ld. CIT(A.) was also not justified in concluding that the assessee having exercised option in the period relevant to the assessment year 1997-98 [even though there was no such provision of exercising option and the assessee could not claim any such deduction in view of loss], provisions of section 80-IA of the Act substituted from the assessment year 2002-03 would not apply". We observe that ITAT, Ahmedabad Bench also considered the CBDT Circular No. 14 of 2001, which was issued explaining the purpose of amendment under section 80IA of the Act, which reads as under :- "The fiscal benefit available has been further relaxed and such undertakings (read undertaking engaged in the generation or generation and distribution of power) shall now be entitled to a ten year tax holiday in place of the existing two tier tax benefit. The tenyear tax holiday can be availed of consecutively in the block of initial fifteen years. The a....
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....essee's claim. The relevant part of the order of ld. CIT(Appeals) reads as under :- "In this ground, the appellant is disputing the AO's action in not allowing exemption under sec. 10(1) of the Income Tax Act on income claimed by it to be agricultural income. The AO's contention is that the appellant is engaged in agro business which incorporated by technological research and its products, the outcome of such activity, which makes it ineligible the claimed exemption under sec. 10(1) of the Income Tax Act for income from sale of such products. In course of its submission before me has relied on the decision in the case of Raja Benoy Kumar Sahas Roy [32 ITR 466 (1957) (SC)], wherein the Hon'ble Supreme Court defined term agriculture. It has also relied on other jducial decisions which have incorporated in its submission mentioned above as also CBDT's Circular No. 1 of 2009 dated 27.03.2009. These have been perused. I find the case of the appellant is covered by these decisions as also CBDT's Circular mentioned above. It cannot be denied that the appellant is carrying out basic operations on land and whether subsequent operations are carried out in continuation of such basic ....
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....basic operations in land once for identifying the mother clone and thereafter to cultivate clonal saplings fit for market. The activities undertaken in both the stages require human labour and skill in preparing the land fit for plantation of the seeds and raising the saplings. Learned Authorized Representative further placed reliance on the decision of the Hon'ble Madras High Court in the case of CIT -vs.- Soundarya Nursery [241 ITR 530] and submitted that the Hon'ble High Court held that income from sale of plants and seedlings grown in nurseries is agricultural income. He submitted that similar view has also taken by the Hon'ble Uttarakhand High Court in the case of CIT -vs.- Green Gold Tree Farmers (P) Ltd. (2008) 167 Taxman 151 and also by Hon'ble ITAT, Delhi Bench in the case of Mrs. Aruna Jain -vs.- DCIT (2008) 21 SOT 218. He submitted that the amendment made by the Finance Act, 2008 is retrospective as it was inserted with a view to settle the controversies that had arisen by Judicial Authorities and referred CBDT Circular No. 1 of 2009 dated 27.03.2009. He submitted that the explanation is retrospective as the same are inserted to secure deficiencies arising out of the ....
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....eedlings grown in nurseries is agricultural income, which reads as under :- "All the products of the land which have some utility either for some consumption or for trade or commerce if they are based on land would be agricultural products. If the plants sold in pots were the result of basic operations on the land expending human skill and labour thereon and if after performance of the basic operations on land the resultant product grown or such part thereof was suitable for being nurtured in a pot with water or by placing them in the green house or in share or after performing several operations such as weeking, watering, manuring, etc., and are made ready for sale, all these operations are agricultural operations and the plants are products of agriculture. The assessee was carrying on business of a nursery and various types of fruit plants, flower plants, vegetable plants and seedling were grown. The assessee's activities were to prepare seedlings on scientific basis, grow plants on prepared beds and after several operations carried out on the land, viz. cutting gootying and inarching, they were transplanted in suitable containers including pots and kept in the green ....