TaxTMI 
TaxTMI 
2018 (4) TMI 391
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.... Mumbai (hereinafter called "the tribunal") in ITA no. 923/Mum/2016 for AY 2011-12, read as under:- " 1. On the facts and circumstances of the case, the learned CIT (A) erred in affirming the decision of the Assessing Officer in disallowing depreciation @ 70% on the cost of civil construction completely ignoring the fact that the civil construction is integral part of windmill and is eligible for higher rate of depreciation @ 80%. 2. On the facts and circumstances of the case, the learned CIT (A) erred in affirming the decision of the Assessing Officer in applying rule 8D for making disallowance of Rs. 9,30,874/- u/s 14A of the Income Tax Act, 1961. 3. On the facts and circumstances of the case, the learned CIT (A) erred in affirming the decision of the Assessing Officer in disallowing other income of Rs. 9,51,184/- for deduction u/s 10B and taxing it separately. 4. The appellant craves leave to add to, alter, to delete from or substantiate the above ground of appeal." 3. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 319/Mum/....
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....wer Ltd. 221 CTR 435(Bom), and contended that the presumption will apply that the assessee has invested its own funds for making investments from where earning of an exempt income has arisen and no separate disallowance of expenditure u/s 14A is warranted. The AO however invoked provisions of Section 14A of the 1961 Act r.w.r. 8D of the 1962 Rules and made disallowances as under: "DISALLOWABLE EXPENDITURE (as per Rule 8) (Amount in Rs.} (i) Expenditure directly attributable to exempt income: ---- (ii) Interest not directly attributable to exempt income: Interest X Average value of investment attributable to exempt income Average of Total Assets appearing in Balance Sheet 45,17,817 x 11,54,83,730 / 147,60,95,782 Rs.3,53,455 (iii) 0.5% of average value of investments (11,54,83,730/-X 0.5%) Rs.5,77,419 Aggregate of expenditure disallowable : Rs.9,30,874 Thus, the disallowance u/s 14A r.w. Rule 8D came to Rs. 9,30,874/- which was added to the income of the assessee by the AO vide assessment order dated 14-03-2014 passed u/s. 143(3) of the 1961 Act. Disallowance of depreciation on civil c....
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....The AO observed that in preceding years i.e. AY 2006-07 to AY 2010-11, the claim of the assessee was already disallowed by the AO w.r.t. depreciation claim @70% of civil construction related to windmill . The assessee however submitted that windmill is a custom made machine which is erected at a site which has a very good wind velocity, the final structure of machine is very heavy and need to be supported by solid foundation of concrete and iron, so as to withstand strong winds and weight of Plant & Machinery itself. The assessee submitted that an internal road is essential for connecting electrical apparatus of the windmill to the grid of the electricity board and the entire civil and electrical work is an integral part of Plant and Machinery. It was submitted that wind mills cannot be run without erection and installation which involves civil and electrical construction. The assessee also relied upon decision of the ITAT Ahmadabad in the case of ACIT v. Parry Engineering & Electronics P. Ltd. in ITA No. 3317/Ahd/2011, wherein the tribunal has held as under:- "The depredation is allowable on renewable energy device which also includes windmill. The depreciation at the rat....
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....he claim of deduction under section 80IA . The assessee duly submitted audited accounts of the wind will along with audit report u/s. 10CCB . The AO observed that notional depreciation, which the assessee had claimed on the said wind mill before claiming deduction u/s. 80IA in first year i.e. AY 2010-11 had not been adjusted with the previous year profit of the wind mill before claiming deduction u/s. 80IA . The AO also observed that the AO had already disallowed claim of deduction u/s. 80IA for AY 2010-11. The assessee submitted that in the preceding year i.e. AY 2010-11 the said claim was disallowed by the AO by stating that the unabsorbed depreciation of the windmill which has been set-off with other business incomes in previous years should first notionally be reduced from profit of windmill before computing quantum of profit eligible for deduction u/s. 80IA. The assessee submitted that deduction u/s. 80IA is available for any ten consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. . Once the assessee has opted for the first year of relief then it contin....
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....aim of deduction u/s. 80IA was disallowed by the AO vide assessment order dated 14-03-2014 passed by the AO u/s 143(3) of the 1961 Act. The AO observed that assessee vide its written submission has stated that similar issue in AY 2010-11 is decided by learned CIT-A in favour of the assessee but the said appellate order of the learned CIT-A was not accepted by the department and Revenue has preferred an appeal before the ITAT. Exemption u/s. 10B: 8. The AO observed that assessee has claimed an amount of Rs. 4,83,46,432/- as exemption u/s. 10B on the profit of the Nilakottai Unit. The assessee had filed separate audited Balance Sheet & Profit and Loss account of the unit along with auditors certificate in form no. 56G. This is the 9th consecutive year of the claim of exemption u/s. 10B. The assessee submitted that the said unit located at Nilakottai is an export oriented unit duly registered with appropriate authority and the claim for exemption u/s 10B was allowed by learned CIT-A for AY 2010-11. It was submitted that Revenue has not preferred any appeal against the said order of learned CIT(A) and the matter has reached finality. The AO allowed the claim of the assessee bu....
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....d here under:- (i) Expenditure directly attributable to exempt income (ii) Interest not directly attributable to exempt income Interest X average value of investment attributable to exempt income Average of total assets appearing in Balance sheet Rs. 45,17,817/- X Rs. 11,54,83730/- / 1,47,60,95,782/- Rs. 3,53,455/- (iii) 0.5% of average value of Investments (Rs. 11,54,83,730/- X 0.5%) Rs. 5,77,419/- Rs. 9,30,874/- The assessee submitted before learned CIT-A that the assessee received dividend income of Rs. 68,71,376/- and an amount of Rs. 18.66 crores has been shown as investment in „HDFC Cash Management Fund‟ . The assessee has its own funds to the tune of Rs. 50.51 crores (share capital and reserves) and it was submitted that out of its own/mixed funds, the assessee had made investment in mutual funds from time to time and owned funds were used for making investments and hence no separate disallowance u/s. 14A is warranted. The assessee relied upon the decision of Hon‟ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (supra) and submitte....
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.... prospective effect from AY 2007-08. This decision cannot therefore provide support to the appellant's case. The jurisdictional Bombay High Court has held in Godrej & Boyce Mfg. Co. Ltd. vs. CIT 234 CTR 1 that rule 8D is applicable for and from A.Y.2008-09. The relevant statute that was applicable from the AY 2008-09, 2009-10 & 2010-11 show that section 14A(2) & 14A(3) read with Rule 8D have to be invoked by the assessing officer. The action of the assessing Officer is thus upheld on this account." Thus, the learned CIT(A) by following the decision of his predecessor for AY 2006-07 to 2010-11, dismissed the appeal of the assessee by upholding the disallowance made by the AO u/s 14A, vide appellate orders dated 30.11.2015. 11. With respect to disallowance u/s 80IA of set off depreciation of earlier years on notional basis which was already set off against income from other businesses of the assessee, the assessee submitted before learned CIT-A that this claim was allowed in the appellate proceedings for the assessment year 2010-11 by learned CIT-A in assessee‟s favour. The learned CIT-A by following the decision of his predecessor in the case of the assessee for AY 2....
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.... record including cited case laws. Although, we are conscious of the fact that the cross appeals should be heard together, yet it is also a fact that as of today, no appeal by revenue is pending before the Tribunal. Further, the revenue is not in appeal for AY 2006-2007 and hence there is no bar in any manner to adjudicate the issue for AY 2006-2007. It is also noted that the appeals of the assessee were initially filed at Pune Benches but subsequently transferred to Mumbai Benches as per the assessee's request letter dated 11/06/2013. The Hon'ble President's order dated 26/03/2014 permitted / directed the registry to transfer the appeals of the assessee to Mumbai Benches. Therefore, we are of the view that the same could be disposed off independently particularly in view of the fact that the same are pending since a long time and ample time has already been granted to the revenue to recall the orders of the Pune Tribunal dismissing the appeal of the revenue. 6. On merits, the basic facts are not in dispute. The only dispute is whether the assessee was entitled for higher depreciation on civil construction used for installation of windmills or not? The factual ....
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....epreciation of 80 per cent on renewable energy devises including windmill and any specially designed devise, which runs on windmill. The civil structure and the electric fitting, equipments are part and parcel of the windmill and cannot be separated from the same. The assessees claim for higher depreciation on such investment was, therefore, rightly allowed." Similar conclusions have been drawn in the other judicial pronouncements including that of cited judgment of Hon'ble Delhi High Court relied upon by the assessee. Therefore, respectfully following the same and on the facts and circumstances of the case, we find that the assessee was entitled for higher rate of depreciation on civil construction. Hence by deleting the impugned additions, we allow the assessee's appeal for all the years. The revenue is at liberty to take recourse to law on the basis of its outcome of miscellaneous application filed before the Pune Benches." The Ld. DR fairly agreed that the above issue is covered in favour of the assessee by decision of the tribunal in assessee‟s own case . After hearing both the parties and Respectfully following the decision of the tribunal in assesse....
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....cision of Hon‟ble Karnataka High Court in the case of CIT v. Hewlett Packard Global Soft Limited in ITA no. 812/2007 vide orders dated 30-10-2007 reported in 2017(11) TMI 205. It was submitted that the Hon‟ble Karnataka High Court has considered the said income from interest to be integral part of income from export business and it was pleaded that the same should be allowed. The Ld. DR on the other hand submitted that these are investments in FDR‟s and miscellaneous income which are taxable under the head income from other sources which has no direct nexus with export business and cannot be termed as income derived from exports and hence no exemption u/s 10B can be granted to the assessee . Heard both the parties and perused the material on record including cited case laws. We are of the considered view that the AO has not examined the direct nexus between the interest income as well miscellaneous income and export income derived by the assessee from eligible industrial undertaking of the assessee on which deduction u/s 10B is available which requires examination of the facts, hence keeping in view ratio of decision of Hon‟ble Supreme Court in the case of I....
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.... On such Deposit, the assessee earned interest. Under the said circumstances, the High Court held, following the judgment of this Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579/ 104 Taxman 204, that the interest received by the assessee was on deposit made by it in the Banks; that such deposit was the source of income; and that, the mere fact that the deposit was made for obtaining Letter of Credit which Letter was, in turn, used for the purpose of business undertaking did not establish a direct nexus between the interest and industrial undertaking. Thus, the judgment of the Madras High Court in Menon Impex (P.) Ltd. (supra) was based on the examination of the transaction in detail which exercise has not been undertaken in the present case. For the above reasons, we set aside the impugned judgment and remit the cases to the Income Tax Appellate Tribunal ['ITAT', for short] for deciding the matter afresh after examining the transaction in question, as done by the Madras High Court in the case of Menon Impex (P.) Ltd. (supra). 5. Needless to state that ITAT will give an opportunity to the assessee to produce relevant documents in support of th....
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....initial assessment year of the assessee's unit is 2009-10, though it started functioning from the year 2005-06. The losses of the years 2005-06 to 2008-09 were absorbed during the relevant years and no losses were carried forward. The only question of debate before the Tribunal was whether the profit earned during the Assessment Year 2009-10 would be entitled for deduction under Section 80IA(5) of the Act without deducting the losses, which were absorbed in the earlier years. 8. The said issue is no longer res-integra in view of the judgment of the Madras High Court in the case of Velayudhaswamy Spiining Mills P. Ltd. & Sudan Spinning Mills (P) Ltd. (supra), the Court observed as under: " From a reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from ....