TaxTMI 
TaxTMI 
2013 (10) TMI 1505
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.... The assessment was completed by an order under 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....
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.... 1. The Order passed by the authorities below in so far as it is against the Appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the 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 justi....
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....ion 115JB of the Act under the facts and circumstances of the case. 12. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 13. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, 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....
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.... Ground No.4 of this appeal by the assessee is in respect of the upholding of the disallowance u/s. 43B of the Act to the extent of Rs. 3,18,05,492 by the learned CIT (Appeals) as against the original disallowance of Rs. 5,68,29,195 by the A.O., being the provision made by the assessee towards payment 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. ....
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....f the Act. It is submitted that the assessee has made the provision for gratuity based on the actual valuation report. As contended by the assessee, we find that the provisions of section 40A(7)(b) of the Act is applicable to the facts of the case on hand as is the decision of the Hon'ble Kerala High Court in 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 betwee....
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.... of Rs. 27,000 on account of loss on obsolescence of assets. In this regard, the learned Authorised Representative questioned the justification of the authorities below in disallowing and sustaining the disallowance on account of loss on obsolescence of assets. The learned Authorised Representative submitted that this loss 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 c....
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.... 0 94,40,82,822 0 94,40,82,822 ADPH 0 4,236,84,910 0 42,36,84,910 Total : (101,99,57,129) 2,18,49,77,640 (75,91,22,468) 1,92,41,42,979 In this regard, the learned Authorised Representative contended that the authorities below erred in setting off the entire losses of Kadra and Kodasalli units with the profits of other eligible units and in holding that out of the seven units, 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....
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....7,640 as deduction u/s.80-IA of the Act, since the entries carry forward losses of the eligible units had already been adjusted by the authorities below in Assessment Year 2005-06 itself. It was further contended that in computing the deduction for Assessment Year 2006-07, the authorities below taking Assessment Year 2005- 06 as the base had erroneously adjusted a sum of Rs. 101,99,57,129 which had already been adjusted in earlier assessment 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 A....
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....determined after adjusting / setting off of losses etc., and if after that the gross total income of the assessee is 'NIL' then the assessee would not be entitled to deduction under Chapter VIA of the Act. The assessee, in the case on hand does not dispute this proposition of law, and the only grievances of the assessee in the present appeal is with regard to the computation of the claim of eligible deduction u/s.80-IA of the Act. 8.4.2 It is seen 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 Sync....
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....cord of the Department and are also pure questions of law. It is prayed by the learned Authorised Representative that the additional grounds be admitted and disposed off on merits for the advancement of substantial cause of justice. In this regard, the learned Authorised Representative placed reliance on the following judicial decisions :- (i) NTPC Ltd. V CIT (229 ITR 383) (SC) (ii) Gundathur Thimmappa & Sons V CIT (70 ITR 70) (Mysore) 10.2 We have heard 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....