TaxTMI 
TaxTMI 
2017 (3) TMI 817
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Revenue. The Revenue has filed condonation petition in this regard stating the reasons that the delay is occurred due to huge pendency of work-load and additional charges. Ld. AR for assessee submitted that considering delay he should not be having any objection to the Bench if considering the delay of condonation. This, in our considered opinion, on the facts and circumstances of the case, i.e., in this case deserves to be considered and same is condoned. First we take up assessee's grounds of appeal in ITA No.786/Kol/2013. 3. The issue raised by assessee in ground number 1,2,3 and 4 is that ld CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs. 17,15,98,000.00 under the provisions of section 14A of the Act. 4. Briefly, the facts are that the assessee in the present case is a Limited Company and engaged in the manufacturing business of rising of ore, manufacturing of nitrogen gas and ferro alloys, trading of iron ore and ferro alloys, generation of electricity (wind power Mill) & railway siding for captive use. The assessee in the year under consideration has earned dividend income of Rs. 7.10 crores which was claimed as exempted under sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffect from assessment year 2008-09 which requires the disallowance in a particular manner where the AO is not satisfied with the correctness of the claim made by the assessee after having regard to the books of accounts. In such a situation it is mandatory to invoke the provisions of rule 8D of income tax rules 1962. The investment has been made out of the fund used in the common kitty. There is no documentary evidence showing that the investment has been made out of the exclusive fund of the assessee and no borrowed fund has been used. Besides the interest expenses the assessee has incurred various indirect expenses which are required to be disallowed in terms of the provisions of rule 8D read with section 14A of the Act. The decisions of the management for making the investment are very complex in nature. They require day to day market information, research of the information, analysis of market trend, the appropriate time for investment and its duration etc. Therefore the claim of the assessee that no expenditure was incurred as the dividend was received directly in the bank account is not tenable. In view of above, the ld. CIT(A) has confirmed the order of AO by obs....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the disallowance for the year under consideration should be limited to 1% only. The ld AR in support of assessee's claim drew our attention on page 61 of the paper book where the details of the disallowances made in the earlier years were placed. The ld AR also drew our attention on page 16 of the paper book where the details of the disallowances offered by the assessee for Rs. 5,97,043.00 was placed and demonstrated that no defect in the aforesaid disallowances was pointed out by the lower authorities. The ld AR in support of his claim has also relied in the following orders. "Decisions relied: 1) DCIT vs. REI Agro Ltd. (ITAT Kolkata) ITA No.1811/Kol/2012 (pg 1 to 12) 2) CIT vs. REI Agro Ltd. (Calcutta High Court) ITAT No.161 of 2013 (pg 13 & 14) 3) ACIT vs. Amitabh Sonthalia (ITAT Kolkata) ITA No.1750/Kol/2010 & ITA No. 1181/Kol/2011 (pg 15 to 20) 4) Joint Investments ((P) Ltd. vs. CIT (Delhi High Court) IA No.117 of 2015 (pg 21 to 23) Alternatively the ld AR also claimed that the disallowances u/s 14A of the Act should be worked out in respect of those investments which have yielded tax free dividend income during the year under consideration. For this proposi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hares which have yielded dividend income in the year under consideration. Since this issue raised by the ld. counsel for the assessee as an alternative contention is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of REI Agro Ltd. v. Dy. CIT [2013] 35 taxmann.com 404/144 ITD 141 (Kol.), we direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. The alternative contention of the ld. counsel for the assessee is accordingly accepted. Thus, the issue raised by the assessee in its appeal is partly allowed. 8. Next issue raised by the assessee in ground No.4, 5 & 6 is that Ld. CIT(A) erred in directing the AO to reduce the compensation received from the actual cost of the plant & machinery and thereafter allowing depreciation thereon though the receipt is capital in nature & consequently not chargeable to tax. 9. The assessee in the year under consideration has received compensation from M/s Suzlon Energy Ltd. (SEL for short) amounting to Rs.1928.18 lakh. The compensation was received by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tfall in production of electricity has been held to be revenue in nature visa- vis the claim of the appellant to be capital in nature. 51. The Explanation 10 to section 43 has specifically provided without any exception that any reimbursement by any person by whatever named called and the cost relatable to such reimbursement shall not be included in the actual cost of the asset to the assessee. Therefore, it is held that although the receipt is revenue in nature but it is also reimbursement to the appellant hence the provisions of Explanation 10 to section 43 overrides the nature of receipts and it has to be accounted as per these provisions. The appellant has also taken it as an alternate plea. In the facts and circumstances it is held that this receipt of Rs. 19,28,18,00/- as compensation for shortfall in production of electricity is reimbursement as per the provisions of Explanation 10 to section 43. In this case, the seller i.e. SEL has reimbursed Rs. 19,28,18,00/- and as per the provision of Explanation to section 43 this amount will be deducted from the cost of the machinery. The cost will be reduced in the year of receipt since it has crystallised during the current year ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) has erred din allowing deduction of the compensation amount from the cost of asset as depreciation since guarantee to pay compensation on account of shortfall in production tantamount to reimbursement of loss of revenue to the assessee and nowhere it is connected to the cost of asset directly or indirectly." 11. The ld. AR before us submitted that the compensation was not received by the assessee from the normal business activities but as a result of nonperformance of the machineries and therefore the same cannot be held as income of the assessee, consequently not liable to tax. On the other hand, the ld. DR before us submitted that the assessee never made the claim in the return of income and for such claim no return was revised. The ld. DR also submitted that the intention of SEL was to save the assessee from the incurrence of the loss due to non-performance of the machineries. Therefore the same should be held as revenue receipt. 12. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present ground of appeal is to ascertain whether the compensation received by the assessee from the machine supplier on a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce the running loss of the assessee and that too in the course of the business. Thus the impugned compensation has direct nexus with the business of the assessee. In our considered view the facts of the case i.e. CIT Vs. Saurashtra Cement Limited reported in 325 ITR 422 are different from the present case. The relevant facts of the case are enumerated below. "13. We have considered the matter in the light of the aforenoted broad principle. It is clear from clause No. 6 of the agreement dt. 1st Sept., 1967, extracted above, that the liquidated damages were to be calculated at 0.5 per cent of the price of the respective machinery and equipment to which the items were delivered late, for each month of delay in delivery completion, without proof of the actual damages the assessee would have suffered on account of the delay. The delay in supply could be of the whole plant or a part thereof but the determination of damages was not based upon the calculation made in respect of loss of profit on account of supply of a particular part of the plant. It is evident that the damages to the assessee was directly and intimately linked with the procurement of a capital asset i.e. the cement pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nery does not arise. Hence the ground of appeal of the revenue is allowed and that of assessee's ground is dismissed. 13. Coming to other issue raised by Revenue in ground No. 1 & 2. The issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition of Rs.17,60,404/- on the basis of additional evidence. 14. The assessee in its profit and loss account has debited prior period expense for Rs.3,86,365/- in the year under consideration. The assessee also failed to justify whether the expenses were crystallized in the year under consideration. Therefore, the Assessing Officer disallowed the same and added to the total income of assessee. 15. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Before Ld. CIT(A) assessee submitted that out of total income prior period of expense of Rs.3,86,365/- a sum of Rs.17,60,404/- was crystallized in the year under consideration as detailed under:- "(i) Rent for the months of January, 2007 to March, 2007, for which the claim had been made by the concerned landlord on 19/07/2007 (out of Rs. 3,24,000 for the six months' period from January, 2007 to June, 2007) Rs. 1,62,000 (ii) Maintenance Charges for Jan....