TaxTMI 
TaxTMI 
TaxTMI 
2013 (10) TMI 1505
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....r section 143(3) of the Act dt.24.12.2009 wherein the income of the assessee was determined at Rs. 299,92,41,419 as against the returned income of Rs. 217,94,41,126 under the regular provisions of the Act by making certain additions / disallowances thereto which are as under :- Gross total income as per the assessee : Rs.410,35,84,105 Add : (1) Disallowance of provision for gratuity : Rs.5,68,29,195. (2) Disallowance of 'Exchange Loss' : Rs.38,21,630 (3) Loss on obsolescence of assets : Rs.27,000 Assessed Gross Total Income : Rs.416,42,61,930 Less : Deduction u/s.80IA : Rs.16,50,20,511 Total Income : Rs.299,92,41,419 The Assessing Officer also made certain adjustments to the book profits of Rs. 378,34,46,532 declared by the assessee thereby determining the same at Rs. 478,64,56,372 which are as under : Net profit as per Profit & Loss Account Rs.370,68,64,153 Add : Rs. i) Provision for ex-gratia. 1,68,51,550 ii) Provision for DA arrears 8,01,50,750 iii) Provision for loss / obsolescence of assets 15,20,432 iv) Provision for gratuity 5,68,29,195 v) Provision for pension 85,47,82,708 vi) Provis....
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.... Appellant's case. 2. The appellant denies itself liable to be assessed at Rs. 299,92,41,419/- as against the returned total income of Rs. 217,94,41,126/- on the facts and circumstances of the case. 3. The learned CIT[A] was not justified in law in confirming the disallowance of an amount of Rs. 38,21,630/- being loss incurred on account of foreign exchange fluctuation under the facts and circumstances of the case. 4. The learned CIT[A] was not justified in confirming the disallowance of a sum of Rs. 3,18,05,492/- [Rs. 5,68,29,195/- minus Rs. 2,50,23,703/-] under section 43B of the Act instead of allowing the entire amount of provisions for payment of gratuity of Rs. 5,68,29,195/- under the facts and circumstances of the case. 5. The learned CIT[A] was not justified in law in confirming the disallowance of a sum of Rs. 27,000/- being the loss on obsolescence of assets under the facts and circumstances of the case. 6. The learned CIT[A] was not justified in law in restricting the claim of deduction under section 80IA of the Act to the extent of Rs. 116,50,20,511/- as against the actual claim of deduction by the appellant under section 80IA of the Act of Rs. 192,41,42,979/-....
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....l, the Appellant prays that the appeal may be allowed in the interest of justice and equity." 4. The grounds raised at S.Nos.1, 2, 12 and 13 are general in nature and therefore no adjudication is called for thereon. 5.0 Loss on account of foreign exchange fluctuation. 5.1 The ground raised at S.No.3 is with regard to the disallowance of an amount of Rs. 38,21,630 being loss incurred by the assessee on account of foreign exchange fluctuation. The learned Authorised Representative submitted that the assessee had incurred loss on account of exchange fluctuation in respect of payment of interest to the bank in connection with the loan taken for setting up of diesel generating station at Yelahanka which was debited to the profit and loss account of the assessee. In this regard, the learned Authorised Representative placed reliance on the decision of the Hon'ble Apex Court in the case of CIT V Woodward Governor India (P) Ltd. Reported in 312 ITR 254. The learned Authorised Representative contended that the authorities below were not correct in holding that the loss on exchange fluctuation be capitalised and not be treated as revenue expenditure. He submitted that the exchange loss....
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....of gratuity. The learned Authorised Representative submitted that though technically the learned CIT (Appeals) had allowed the assessee's ground partly to the extent of Rs. 2,50,23,703 (i.e. Rs. 5,68,29,195 less Rs. 3,18,05,492), it was due to the assessee's alternate claim that atleast the deduction u/s.43B of the Act be allowed to the extent of actual payment of gratuity made within the due date for filing the return of income under section 139(1) of the Act. In this regard, the learned Authorised Representative drew our attention to the order dt.30.3.2012 giving effect to the CIT(A)'s order dt.11.3.2011 (a copy of which has been placed before us). In this order, the Assessing Officer states that he cannot give effect to the directions of the learned CIT (Appeals) since no order for fresh assessment can be made as per the provisions of sections 250 and 153 (2A) of the Act. 6.1.2 The learned Authorised Representative contended that since the assessee had made provision towards payment of gratuity amounting to Rs. 5,68,29,195 as per the provisions of section 40A(7)(b) of the Act on accrual basis, the Assessing Officer could not have applied the provisions of section 43B of....
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....the case of Common Wealth Trust (P) Ltd. (supra) which is squarely applicable to the assessee's case. The aforecited case (supra) also mandates that a harmonious construction of section 40A(7)(b) and 43B of the Act indicate that the legislature never intended that the provisions of section 43B of the Act override the provisions of section 40A(7)(b) of the Act. The relevant observations of the Hon'ble Kerala High Court in the case of Common Wealth Trust (P) Ltd (supra) at page 308 is extracted and reproduced hereunder : "As already noted, section 40A(7), clause (b) sub-clause (i) thereof is a special provision in regard to a claim for deduction based on a provision made for payment towards an approved gratuity fund. Going by the principles laid down by the Supreme Court in the decisions discussed above, we are of the view that there is no clear inconsistency between the two provisions, viz., section 40A(7) and section 43B. Section 40A(7) is in negative terms and section 43B is in positive terms, the effect of both these provisions is that in order to claim deduction in respect of payment to a gratuity fund there must be actual payment and that deduction cannot be allowed on th....
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.... arose on account of renovation of the Inspection Bungalow at Ganeshgudi Hydro Generating System which was debited in the books of the assessee as obsolescence of assets. It is submitted that in such a huge organization, as that of the assessee, such losses on obsolescence of assets is very common and therefore pleaded that the assessee's claim be allowed. 7.2 Per contra, the learned Departmental Representative supported the orders of the authorities below. 7.3 We have heard the rival contentions and perused and carefully considered the material on record. The Assessing Officer has not allowed the assessee's claim for deduction of the loss on obsolescence of assets under section 37(1) of the Act, holding it to be capital in nature. Before us, the learned Authorised Representative was unable to bring on record any cogent evidence to substantiate its claim and controvert the finding of the assessing authority. In this view of the matter, we dismiss Ground No.5 raised by the assessee. 8.0 Deduction u/s.80-IA of the Act. 8.1.1 GroundNo.6 raised by the assessee challenges the action of the authorities below in restricting the deduction u/s.80-IA of the Act to Rs. 1,16,50,20,....
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....ts, the assessee had profits in five units and losses in two units. It is contended by the learned Authorised Representative that, the view of the authorities below that the assessee has claimed deduction u/s.80-IA of the Act in respect of only the profits of five units and has ignored the losses of other two units to the tune of Rs. 75,91,23,468, is an incorrect appreciation of the provisions of the statute and method prescribed therein for computing the eligible deduction u/s.80-IA of the Act. The learned Authorised Representative further submitted that the judicial decisions relied on by the learned CIT (Appeals) are not applicable to the facts of the case on hand and are rather with regard to the computation of the gross total income of a business; which has also been followed by the assessee while arriving at its own gross total income. 8.1.3 The learned Authorised Representative submits that the A.O. and learned CIT (Appeals) had totally misguided themselves in respect of the core issue of computation of the eligible deduction u/s.80-IA of the Act. In support of the proposition put forth, that in case there is a loss in a unit / undertaking, then it will not be set off again....
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....nt years, thereby leading to adjustment / set off of the same losses twice. 8.1.6 The learned Authorised Representative submitted that the ratio of the decisions cited and the principles involved therein are all applicable to the facts of the case on hand. Further, the learned Authorised Representative submitted that for the purposes of computing the gross total income, the losses of other units are to be taken into account, but for the purposes of calculating the deduction u/s.80-IA of the Act of an eligible industrial undertaking, the loss sustained in another unit cannot be considered and only the profit should be taken into account as if it is the only source of income of that eligible unit / undertaking. In view of the above, the learned Authorised Representative submitted that, the carry forward of losses of other eligible units in the case on hand, i.e. the unadjusted brought forward losses of Kadra, Kodasalli and BRBCPH units amounting to Rs. 75,91,22,468 should not be considered for the purposes of calculating the deduction u/s.80-IA of the Act for the other eligible undertakings. In keeping with the arguments put forth above, the learned Authorised Representative prayed ....
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....n from the aforesaid judicial pronouncements relied on by the learned Authorised Representative that it is clear that for the purpose of computation of gross total income, the losses of other units are to be taken into account. However for the purposes of calculating the deduction of an eligible unit / undertaking u/s.80-IA of the Act, the loss sustained in another unit / undertaking cannot be taken into account and it is only the profit that shall be taken into account as if it was the only source of income of that unit. In the case on hand, we find from the computation of total income that the assessee has a gross total income of Rs. 410,35,84,105 which is para materia with the decision of the Hon'ble Apex Court in the case of Synco Industries Ltd (299 ITR 444). In view of the fact that there is positive gross total income, the assessee is eligible to claim deduction u/s.80-IA of the Act. For this purpose, the assessee has to compute the claim of deduction of each eligible unit / undertaking, as if it is the only source of income from such eligible undertaking and without any setting off of unadjusted brought forward losses of other eligible undertakings. We find from the rec....
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....ard both parties and carefully perused the additional grounds raised by the assessee. We find that the additional grounds raised are purely legal in nature and prima facie would not involve the investigation of facts other than those on the records of revenue. In this view of the matter, and in the interest of equity and justice, the additional grounds by the assessee and listed at S. Nos.8 to 13 of the concise grounds of appeal are admitted for adjudication. These grounds will now be disposed hereunder in seriatim. 11.1 Ground Nos.8 and 9 raised by the assessee is in respect of the very applicability of the provisions of section 115JB of the Act, to the assessee, since the assessee being an electric company, the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 are not applicable. In this regard, the learned Authorised Representative submitted that the newly inserted Explanation 3 to section 115JB(2) of the Act (Inserted by Finance Act, 2012 w.e.f. 1.4.2013) is very clear that the provisions of section 115JB of the Act is not applicable to companies engaged in the generation of power prior to 1.4.2013. This means that the assessee being in the business of g....