TaxTMI 
TaxTMI 
2015 (12) TMI 1680
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....he case borne on the record, the Appellate Tribunal was right in law in holding that the liability accrued against the assessee-appellant company during the relevant previous year ended on 31.3.1988 in respect of cess and cess surcharge levied on it an amount of Rs. 238.25 lakhs (approx.) under the Madras Panchayats Act, 1958, in respect of certain minerals raised by it as raw materials for its industrial unit had ceased to exist during the relevant previous year?" 3. Thereafter, on 23rd November, 2015, the Court also framed the following question of law for consideration:- "Whether the Appellant Assessee is entitled to investment allowance under Section 32A(1) of the Act in the sum of Rs. 67,17,352/- for AY 1988-89?" 4. The Assessee is a public company having its registered office at Dalmiapuram in the State of Tamil Nadu. The Assessee is, inter alia, engaged in the business of manufacturing cement at its unit at Dalmiapuram; Dead Burnt Magnesite in its unit at Salem; electronic items in its unit at Ballabhgarh; and iron ore lumps in its unit at Hospet. In addition, the Assessee is also engaged in the business of running a travel agency. Question No.1: Admissibility of claim f....
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....egulation and Development) Act, 1957. The Madras High Court repelled the said challenge and held that the cess levied under Section 115 of the Madras Panchayats Act, 1958 was in the nature of tax on land and, thus, within the legislative competence of the State Legislature. Aggrieved by the decision of the Madras High Court, the Assessee as well as other persons approached the Supreme Court by filing special leave petitions and writ petitions. These petitions were allowed by a Constitution Bench of the Supreme Court in India Cement Ltd. v. State of Tamil Nadu: (1991) 188 ITR 690 (SC). The Supreme Court held that the "impugned legislation in its pith and substance levied a tax on royalty and not tax on land" and, therefore, was beyond the competence of the State Legislature. The Court held that Section 9 of the Mines and Minerals (Regulation and Development) Act, 1957 covered the legislative field and, therefore, the State legislature was denuded of its competence under entry 23 of List II of the Seventh Schedule to the Constitution of India to exact the levy in question. The aforesaid decision was rendered on 25th October, 1989. In the meanwhile - prior to the aforesaid decision - ....
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.... order. The CIT(A) held that since the levy of cess and cess surcharge had been held to be unconstitutional, no liability as claimed by the Assessee was in existence at the time of making the assessment. Consequently, no deduction on that account was permissible. 5.6 Aggrieved by the decision of the CIT(A), the Assessee preferred an appeal before the ITAT. The Assessee, inter alia, contended that the decision of the Supreme Court in India Cement (supra) would not affect the liability accrued during the relevant previous year as the Supreme Court had struck down the levy of cess and cess surcharge 'prospectively'. The ITAT did not accept the Assessee's contention and held that the use of the word 'prospectively' in the decision of the Supreme Court was in the context of undue enrichment so that the State is not liable to refund the cess and cess surcharge collected. The ITAT was of the view that the observations of the Supreme Court regarding prospectively striking down the levy would not affect the Assessee as the Assessee had not paid the cess and cess surcharge. The ITAT also concurred with the AO as well as the CIT(A) that the Assessee could have filed a revised return withdraw....
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....e 'cess' or any other statutory duty. He pointed out that clause (a) of Section 43B of the Act was substituted by the Finance Act, 1988 and the clause as substituted expressly included "tax, duty, cess or fee". He submitted that this statutory amendment was clarificatory in nature and, thus, notwithstanding the said amendment a deduction on account of liability to pay 'cess' or 'cess surcharge' would be admissible only in the year in which the cess or cess surcharge was paid. Reasoning and Conclusion 8. Having heard the rival contentions, we may, at the outset, point out that the scope of controversy in the present case is restricted. The question whether Section 43B of the Act is applicable is covered in favour of the Assessee by a decision of this Court in M/s Dalmia Cements (Bharat) Ltd. v. Commissioner of Income Tax, Delhi-IV : (2013) 357 ITR 419 (Delhi), whereby it was held that the provisions of Section 43B(a) would not be applicable to 'cess' and 'cess surcharge' prior to AY 1989-90 as the amended clause (a) of Section 43B of the Act came into force only with effect from 1st April, 1989. The question whether the Assessee can claim a deduction on account of a statutory levy....
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....us year ended on 31st March, 1988 would have to be assessed on the basis of income and expenses that had accrued in that period. As pointed out earlier, the liability on account of cess and cess surcharge as claimed by the Assessee had accrued. The fact that it was extinguished by virtue of a judgment delivered in a subsequent period would have to be accounted for in the financial year 1989-90, that is, the previous year in which the judgment in India Cement (supra) was delivered. 10. The AO has held that "had the assessments been completed before the decision of the Supreme Court, the Assessee could not have revised the return and his action for applying the provisions of Section 41(1) in AY 1990-91 would have been justified". This conclusion, in our view, is palpably erroneous. It is at once seen that following such principle would introduce arbitrariness in determining the income chargeable to tax in a particular year as it would be contingent on the date of making the assessment. The income of a relevant year has to be determined on the basis of the accounting principles and in accordance with the provisions of the Act. The computation of income chargeable to tax in a given as....
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....sive in the matter. The assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduction of the sum of Rs. 1,49,776/- being the amount of sales tax which it was liable under the law to pay during the relevant accounting year. It may be added that the liability remained intact even after the assessee had taken appeals to higher authorities or Courts which failed. The appeal is consequently allowed and the judgment of the High Court is set aside. The question which was referred is answered in favour of the assessee and against the Revenue. The assessee will be entitled to costs in this Court and in the High Court." 12. Thus, whether the Assessee could withdraw its claim by filing a revised return is wholly extraneous to the issue whether the deduction claimed by the Assessee was admissible under the provisions of the Act. 13. In view of the aforesaid, the first question is answered in the negative, that is, in favour of the Assessee and against the Revenue. Question No.2: Admissibility of Investment Allowance of Rs. 67,17,352/- under Section 32A of the Act. 14. The second question projected by the Assessee relates to the admissibility of de....
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....er Software for Sequencing, interlocking, etc. are not ready. It is not advisable to run the coal mill without such interlocking." 15.4 The AO referred to various decisions in CIT v. Saraspur Mills Ltd.: (1959) 36 ITR 580 (Bom.), CIT v. Indian Turpentine and Rosin Co.: (1970) 75 ITR 533 (All.), CIT v. Sri Rama Vilas Service (Pvt.) Ltd.: (1960) 38 ITR 25 (Mad.) and CIT v. Saurashtra Wire-Healds Manufacturing Co. P. Ltd.: (1968) 67 ITR 524 (Guj.) for interpretation of the word 'installed' and he concluded that the word 'installed' "refers to a stage when the asset is ready for use". He further held that the plant and machinery in question formed a part of the coal mill plant and was not ready for use without installation of the other plant and machinery, which was admittedly installed after 31st March, 1987. The AO noted that the part of the coal mill costing Rs. 2,68,65,409/- (in respect of which deduction of investment allowance was claimed) and other machinery costing Rs. 2,11,24,780/- were commissioned together on 14th August, 1987. He also observed that the production from the entire plant was recorded on one sheet and inferred that this indicated that the plant and machinery,....
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....ndicated that the machineries in question had not been installed prior to 31st March, 1987. He further contested the claim of the Assessee that the plant and machinery were ready for use as on 26th March, 1987. He pointed out that the letter of M/s KHD Humboldt, Switzerland, which was relied upon by the Assessee, also indicated that a part of the plant and machinery was yet to be installed. He further contended that a careful reading of the said letter would indicate that M/s Humboldt, Switzerland had certified that the plant could be started by taking the coal mill gases to the precalcinator by bypassing the ESP. He pointed out that as on 26th March, 1987 the precalcinator had also not been installed, therefore, even if ESP was bypassed the mill plant could not be brought to use. He submitted that even the necessary computer software for sequencing and inter-locking the different machines necessary for the purposes of running the coal mill in coordination with other units of the plant had not been acquired. In the circumstances, he submitted that the finding of the AO could not be faulted. 18. We must note, at the outset, that there is no dispute between the parties with respect ....