2018 (6) TMI 415

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....ring milk products, such as pasteurized milk, butter, ghee, milk powder, butter milk etc. These milk products are marketed to the Gujarat Co-operative Milk Marketing Federation Ltd., Anand under the brand name of AMUL. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed deduction under section 80P(2)(d) of the Act amounting to Rs. 2,15,52,068/-. The AO directed the assessee to explain as to why expenses attributable to earning of interest income and dividend income, which were claimed as exempt under section 80P(2)(d), should not be disallowed under section 14A of the Income Tax Act. In response to the query of AO, the assessee filed a letter dated 10.9.2014. Such letter has been reproduced by the AO, which reads as under: "In connection with the assessment proceedings going in our case , we are in receipt of your letter dated 20-08-2014 asking us furnish further information/ details in connection with the above assessment year. As desired by your goodself, we submit herewith the various information and/or explanations called for by your goodself in seriatim as under: 1. Your good self has requested to show cause as to why interest inc....

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....r dividends from its investment with any other co-operative society then whole of such income is deductible u/s. SOP. In present case interest income of Rs. 95,04,068/- and dividend income of Rs. 1,19,98,000/- has been earned out of the investment made with other co-operative societies. Hence same are eligible for deduction u/s.80P(2)(d). iii) To prove the direct nexus of the investment made in the cooperative sector is out of non-interest bearing funds, we would like to submit that as per the Balance Sheet as on 31/03/2012 the own funds available are amounting to Rs. 88.62crores[Rs.35.19 crores Capital, Rs. 53.43 crores of Reserves and Surplus] The investments by way of fixed deposits with Co-operative Banks and Societies as on 31/3/2012 are Rs. 35.93crores(Rs.25 crores Fixed deposit+ Rs. 3.01 crores call deposits^ Rs. 7.92 crores investment in Co-operative society shares). Thus, since interest free funds were more than the investments made in such deposits with Co-operative banks no reduction should be made from the deduction claimed u/s 80P(2)(d) by the assessee Union. In this regards, we rely on the Supreme Court decision in the case of Munjal Sales C....

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.... 80P(2)(d) of the Act. For buttressing his contentions, he relied upon the decision of the Hon'ble jurisdictional High Court in the case of State Bank of India Vs. CIT 389, ITR 578. 7. We have duly considered rival contentions and gone through the record. As far as reliance of the ld.DR on the judgment of the Hon'ble Gujarat High Court in the case of State Bank of India (supra) is concerned, the facts are quite distinguishable. In the present case, the assessee has not derived interest from nationalized banks, rather it has earned from investment made with other cooperative societies. The assessee has earned dividend income on investment made with other cooperative societies. 8. The next question arose, whether the claim made under section 80P(2)(d) could be disallowed to the assessee on reasoning given by the ld.AO ? In the show cause, the ld.AO sought to disallow the deduction on the strength of section 14A of the Act, which contemplates that expenditure attributable to earning of exempt income will not be allowed as deduction to the assessee. The AO himself thereafter examined the issue with that angle. He ought to have identified the expenditure attributable of earning of....

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....ance of additional depreciation of Rs. 33,80,446/-. It is pertinent to mention that the assessee has claimed additional depreciation on milk canes. The ld.AO has disallowed the claim of the assessee on the ground that such canes were used for transporting the milk from village to plant, and therefore, does not form part of plant & machinery. The ld.CIT(A) deleted the disallowance by observing that the AO himself treated milk cans as plant and allowed depreciation at the rate of 15%. In other words, he has allowed the depreciation at normal rates and refused to allow additional depreciation. According to the ld.CIT(A) expression "plant" has been defined in section 43(3) which reads asunder: Section 43(3) : "Plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession (but does not include tea bushes or livestock or buildings or furniture and fittings) 10. After considering the above definition, the ld.CIT(A) has deleted the disallowance. 11. With the assistance of the ld.representatives, we have gone through the record carefully. A perusal of the order of the ld.CIT(A) would indicate that there....

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....ent in setting up a new industrial unit or for expanding the installed capacity of existing units by at least 25 % thereafter these provisions were amended by the Finance (No.2) Act of 2004 w.e.f. 1.4.2005 and provided that in the case of any machinery or plant which has been acquired after the 31st day of march, 2005 by an assessee engaged in the business of manufacture of production of any article or thing a further sum equal 15 % of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) of section 33(1). This additional allowance u/s 32(1) (iia) is made available as certain percentage of actual cost of new machinery and plant acquired and installed. This provision has been directed to the setting up new industrial undertaking making or for expansion of the industrial undertaking by way of making more investment in capital goods. Thus, these are incentives aimed to boost new investments in setting up and expanding the units. The proviso to section 32(1) (iia) restricts the benefits in respect of following- 'Provided that no deduction shall be allowed in respect of_ (A) Any machinery or plant which, before its installation by the assesses was us....