TaxTMI 
TaxTMI 
2018 (10) TMI 1700
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.... the ground that generation of electricity was not in the nature of "manufacture" or "production" as intended u/s.32(1)(iia) of the Act. 3. The main grievance of the Revenue is against the deletion of addition made by the Ld CIT(A) in respect of additional depreciation of Rs. 2,73,49,248/- on account of Wind Mills commissioned and operated by the assessee on the sole ground that generation of electricity was not in the nature of manufacture or production as intended u/s.32(1)(iia) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). 4. The assessee-company is engaged in a business of exports, imports and trading activity and activity of generation of electricity through use of wind mills. U/s.115JB of the Act, assessee has shown income of Rs. 4,88,78,544/-. Ultimately, a loss of Rs. 6,44,60,126/- was assessed by the assessment order u/s.143(3) of the Act dated 23.12.2008. Subsequently, the case was reopened by issuance of notice u/s.148 on 28.03.2011 and the assessee filed its return dated 10.08.2011 declaring total loss of Rs. 6,62,05,160/-. In the re-assessment proceedings, the assessee has claimed additional depreciation of Rs. 2,73,49,248/- at 20% on wind mil....
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....of income as a part of audited report by the assessee. While allowing the claim of depreciation of the assessee, the ld. CIT(A) observed as follows: "(v)(a) I am inclined with the contention of appellant that since appellant was already under the business of production/generation of electricity which is covered under sale of goods Act 1930 i.e electricity is an article & thing, and appellant installed/commissioned windmill during previous year, its claim for additional depreciation duly supported by Form no.3AA is admissible and justified. I am inclined that ratio of Hon'ble ITAT that the govt. vide Finance Act 2012 has amended the provisions of section 32(1)(iia) to include the business of generation or generation and distribution of power is eligible for benefit u/s.32(1)(iia) although effective from 01.04.2013 but it gives impetus to the view that generation of electricity is a manufacturing process and qualified for the benefits u/s.32(10(iia). (b) I am inclined with appellant that it fulfilled all the eligible conditions for claim of additional depreciation (discussed by appellant at para 3 of written submission dated 17.2.2014). Hon'ble Gujarat High Court in the case of....
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....rai Ltd. (Supra) has committed any error in deleting the addition of Rs. 1,17,98,030/- on account of disallowance of additional depreciation of Wind Electric Generator. 4. We see no reason to interfere with the impugned judgment and order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed." 10. The relevant portion of the judgment in the case of Principal Commissioner of Incometax, Vadodara vs. Gujarat State Fertilizer & Chemicals Ltd. (supra) is as follows:- "5.1 Now so far as ground no.1 with respect to the additional depreciation under Section 32(1)(iia) read with Section 32(1)(iia) of the Act on windmill, which was allowed by the Assessing Officer is concerned, at the outset it is required to be noted that the aforesaid issue is now not res Integra and the same is concluded by the Division Bench of this Court against the revenue in view of the decision of the Division Bench of this Court in the case of Diamines & Chemicals Ltd. (Supra). The aforesaid is not disputed by Shri K.M. Parikh, learned advocate appearing on behalf of t....
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....d by the Ld. Assessing Officer that in respect of following creditors, the outstanding amount payable was constant for last three years: Sl.no. Name of creditor Amount Rs. 1. Arpit Export 751633/- 2. Karnavati Alfa International Ltd. 273778/- 3. Mahadev Trading Co. 12158935/- 4. P.K. Traders 2100000/- 5. R.Kay Trading Co. 4319342/- 6. Ronak Trading Co. 9471474/- Total 35839862/- 13.1. The assessee was asked to show cause as to why the amount of Rs. 3,58,39,862/- would not be added u/s.41(1) of the Act to the total income of the assessee upon which by and under a letter dated 11.02.2009 following was submitted by the assessee: "In this regard, we would like to submit that all these parties are suppliers from whom material has been produced at different times and amount is genuinely outstanding payable to all the parties and is genuine liability which cannot be written off as such any addition cannot be made for these liabilities in the assessment. From all these parties, the goods have been purchased in the F.Y. 2004-05 i.e A.Y. 2005-06 and in some of the parties, further transaction has taken place in last two years. We are enclosing....
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....ing for many years such unilateral interpretation by A.O. for invoking section 41(1) of the Act is not as per settled legal proposition. The appellant relied on Hon'ble Supreme Court decision in the case of Sugauli Sugar Works (P) Ltd. (supra) and Hon'ble Gujarat High Court decision in the case of Puridevi Mahendra kumar Chaudhary (supra), Bhogilal Ramjibhai Atara (supra) and Nitin Garg (supra). I am inclined with contention of appellant that in spite of the fact that such trade creditors are outstanding as such since many years now (The appellant has not submitted till date whether the same is settled or not) may be on account of bad financial position of appellant but as per the ratio of Hon'ble Gujarat High Court in the case of Bhogilal Ramjibhai Atara (supra), the same cannot be added as income by invoking section 41(1) of the Act." 15. The judgment of Bhogilal Ramjibhai Atara (2014) 43 taxmann.com 55 (Guj.) has been relied upon by the Ld. CIT(A) while allowing the appeal preferred by the assessee in deleting the addition made by the Ld. Assessing Officer. 16. At the time of hearing of the instant appeal, the Ld. DR relied upon the order passed by the Ld.AO. ....
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....in which Division Bench of this Court observed as under: ''14.As pointed out in the case of Sugauli Sugar Works (P) Ltd. (supra), vide the last five lines of the paragraph-6 of the judgment, the question whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act." (ii) In the case of CIT v. Nitin S. Garg, (2012) 208 Taxman 16 (Guj.), it was observed as under: 15. In the case before us, it is not been established that the assessee has written off the outstanding liabilities in the books of account. The Appellate Tribunal is justified in taking the view that as assessee had continued to show the admitted amounts as liabilities in its balance sheet the same cannot be treated as assess....
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....to his creditor. In the present case, admittedly there in no declaration by the assessee that it does not intend to honour its liabilities nor is there any discharge of the debt. In the aforesaid premises, as no event had taken place in the year under consideration to indicate remission or cessation of the liabilities in question, the provisions of section 41(1) of the Act could not have been invoked. The reasoning adopted by the Tribunal while holding that section 41(1) would not be applicable to the facts of the present case is in line with the principles enunciated in the above decision. The Tribunal, therefore, committed no legal error so as to give rise to any question of law warranting interference by this court." The Hon'ble Gujarat High Court held that "We are in agreement with the view of the Tribunal. Section 41(1) of the Act as discussed in the above three decisions would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessment year under co....
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....llowance on account of setting off STCG against depreciation. 2) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 20,95,000/- made u/s.68 of the Act. 3) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabd has erred in law and on facts in deleting the disallowance of claim of Rs. 5,49,74,891/- made on account of bad debt written off. 4) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 47,60,000/- made on account of cash deposit. 21. The first ground relates to the disallowance on account of set off of Short Term Capital Gain (STCG) against unabsorbed depreciation for AY 2006-07. The assesseecompany filed its return of income for AY 2008-09 on 30.09.2009 declaring total income of Rs.NIL after setting off of the brought forward business losses and unabsorbed depreciation. The income/loss under various heads are as follows: Sl.No. Heads of Income Income / Loss (In Rs.) 1. Income from house property 1849899/- 2. Income from business and profession (Including depreciation) (- 9384638/- 3. Income from STG u/s.5....
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....ws: "3.1. Loss incurred on account of unabsorbed depreciation is a loss under the head "Business and Profession". Under section 72, carried forward business losses can only be set off against business income and not against any other head of income. The assessee has wrongly and in violation of the Income tax Act set off the unabsorbed depreciation of the Assessment Year 2006-07 against STCG u/s.50 of the Income tax Act. The irregular and illegal set off of STCG u/s.50 against brought forward unabsorbed depreciation is therefore denied to the assessee and the STCG of Rs. 8371764/- is charged to tax. 3.2. Without prejudice to the fact that the irregular set off of unabsorbed depreciation has been denied to the assessee, full effect to the brought forward business losses and unabsorbed depreciation had been given in the order u/s.143(3) for the Assessment Year 2007-08 wherein the whole carried forward business losses and unabsorbed depreciation had been set off against the assessed income. Therefore the claim of set off of unabsorbed depreciation is disallowed to the assessee on this ground also. As the assessee has furnished inaccurate particulars of income penalty proceedings ....
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....hort term capital gain u/s 50 of the Act. Further as discussed in initial para, after various appeal order for A.Y. 06-07& A.Y. 07- 08. there is unabsorbed depreciation for A.Y. 06-07 of Rs. 3,46,65,017/- which can be and has to be given benefit of set off from income of A.Y. 08-09. The A.O. is directed to verify such figure after giving appeal effect for those year and allow the set off of such unabsorbed depreciation determined from the income first from business & profession and if still such unabsorbed depreciation remained then as per provision of section 71 of the Act, from income under other head including short term capital gain. The appellant gets relief accordingly but for the amount as worked out for unabsorbed depreciation for A.Y. 06-07 after appeal effect for A.Y. 06-07 & A.Y. 07-08. This ground is therefore partly allowed." 26. Respectfully following the judgment passed by the Hon'ble Apex Court which decided the issue of the present case relating to setting off STCG against brought forward unabsorbed depreciation in favour of the assessee, we find no justification to interfere with the order passed by the Ld. CIT(A) and dismiss this ground of appeal preferred by t....
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....been pointed out by the Ld. CIT(A) and deleted the addition accordingly. We thus do not find any infirmity in the order of the Ld. CIT(A). The ground of appeal preferred by the Revenue is therefore disallowed by us. 30. Ground No.3: The revenue has challenged the deletion of disallowance of claim of Rs. 5,49,74,891/- made on account of bad debt written off. The assessee has incurred an expenditure of Rs. 5,49,74,891/- on selling and other expenses which in fact was bad debt written off. In reply to the show-cause, the assessee submitted that the bad debts details written off during the year are genuine bad debts. He further added that amount has become irrecoverable by passage of time and in spite of legal and other recovery action taken by the company against all the parties the amount has become irrecoverable. The matter was duly discussed in the Board meetings before written off. However, such explanation was not accepted by the Ld. Assessing Officer and he thus added the entire amount to the income of the assessee on the premise that written off of debt as irrecoverable has to be based upon a bona fide belief of the assessee and not merely a convenient belief. According to hi....
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....mation Return/ITS, the assessee has deposited cash aggregating to Rs. 47,60,000/- in the Kalupur Commercial Co.op.Bank Ltd. The entire amount was added by the Ld. Assessing Officer which was subsequently deleted by the Ld.CIT(A) and hence the appeal before us by Revenue. 36. We have heard the Respective parties and perused the relevant material available on records. We find at the time of hearing of the appeal, the Ld.DR relied upon the order passed by the Ld. Assessing Officer and the Ld.AR prays for confirmation of the order passed by the Ld. CIT(A). In reply to a show-cause proposing addition of such amount made by the Ld. Assessing Officer the assessee replied as follows: I".... All the cash deposits in the respective banks have been made out of the cash balances available with the company in hand as on that day. The source of this cash deposits is either from the cash in hand or from the withdrawal from other banks. This being a genuine cash deposits deposited in various banks on various dates out of the cash available with the company in cash books and source of that cash balance is also clearly reflected in the cash book became totality is genuine transaction and hen....