TaxTMI 
TaxTMI 
2019 (2) TMI 1705
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....is appeal against the said order on the following amongst other grounds: 1. The order passed by the Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, is bad in law, contrary to legal pronouncement and same be quashed. The additions/disallowances confirmed by the Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, are unwarranted and unjustified. It be held so now and same be deleted. 2. The Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, has erred in confirming Rs. 2,32,000 /- treating the same as Prior Period Expenses without appreciating the fact that the appellant has already added back the same while computing the taxable income. This addition amounts to duplication of the addition to the income. It is therefore submitted that there is no justification to confirm the addition made by the AO. It is also submitted that The Hon'ble CIT(A), Baroda has wrongly considered this ground under the MAT provision which is not the subject matter of this ground. It is therefore submitted that the directions given y Hon'ble CIT(A), Baroda is unwarranted. Without prejudice to the above it is submitted that the liability has be....
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....ufacturing and trading of chemicals and generation of power. 5. The AO during the assessment proceedings found that the assessee has claimed prior period expenses of Rs. 2.32 lacs which are not allowable as a deduction under normal provision and MAT computation of income. Accordingly, the AO disallowed the same and added to the total income of the assessee determined under normal as well as MAT computation of income. 6. Aggrieved assessee preferred an appeal to Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the prior period expenses of Rs. 2.32 lacs has already added in the computation of income prepared under normal and MAT provision of the Act. Accordingly, the assessee claimed that further disallowance/addition of prior period expenses would lead to double addition to the total income of the assessee. 7. However, the ld. CIT(A) disagreed with the contentions of the assessee and confirmed the order of the AO. 8. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. 9. The Ld. AR, before us, submitted that the amount of prior period expenses has already disallowed while computing income under the normal pro....
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....rding the claim of prior period expenses while computing book profit under section 115JB of the Act. The Ld. DR, has not advanced any argument on this aspect. Therefore, we are not inclined to concur with the view of the Ld. CIT(A). Accordingly, we reverse the order of the authorities below and direct the AO to delete the addition made by him while computing book profit u/s 115JB of the Act. Hence the ground of appeal of the assessee is partly allowed for statistical purpose, and the ground of appeal of the Revenue is dismissed. 12. The second issue raised by the assessee in the ground no. 4 is that the Ld. CIT(A) erred in directing the AO to delete the addition after verification whether there is an increase in the amount of profit on account of MODVAT credit. 13. The assessee in its balance sheet as on 31/03/2011 has shown unutilized MODVAT credit of Rs. 5,31,03,250/- only. The assessee claimed to have followed an exclusive method of accounting regarding its transaction relating to purchase and sale. Therefore, the amount of unutilized MODVAT credit was not included in the closing stock shown as on 31/03/2011. 14. However, the AO was of the view that the assessee is unde....
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....n of closing stock in comparison to the earlier years. As such the assessee is following its method of valuation of closing stock consistently. Moreover, closing stock one year becomes the opening stock of the subsequent year. Accordingly, there will not be any effect on the amount of profit declared by the assessee over a period of time. 16.2 There will also not be any impact on the profitability/ total income of the assessee. It is because if the amount of unutilized MODVAT credit is added in the value of closing stock as on 31/03/2011, then there shall also be a corresponding increase in the value of purchases and opening stock in the proportion of MODVAT credit amount. Thus the entire exercise of including the unutilized MODVAT credit in the closing stock of the assessee will be futile. 17. On the other hand Ld. DR vehemently supported the order of the authorities below. 18. We have heard the rival contentions and perused the materials available on record. The allegation of the Assessing Officer in the instant case is that the assessee while valuing the closing stock of its goods as on 31/03/2011 has not included the amount of MODVAT which is contrary to the provisions....
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....en facts & circumstances. In view of the above, we do not concur with the view of the Ld. CIT(A) and accordingly reverse the same. The AO accordingly is directed to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 19. The next issue raised by the assessee in the ground no. 5 is that ld. CIT(A) erred in confirming the order of the AO by denying deduction claimed by the assessee u/s 80IA(4) of the Act for Rs. 47,91,81,000/- 20. The assessee has claimed deduction u/s 80IA(4) of the Act for Rs. 47,91,81,000/- in respect of its power generation unit. 21. However, the AO was of the view that the assessee was not eligible for deduction in respect of its power generation unit u/s 80IA(4) of the Act for the following reasons; 1. The power generated by the assessee was shown as captive consumption. 2. Without prejudice to the above, the sale price shown by the assessee at Rs. 4.4471 per unit was on the higher side. In fact, the Gujarat State Electricity Corporation Limited was selling power at the rate of Rs. 3.04 power unit. Therefore, the AO was of the view that assessee should have taken the sale price of its power gene....
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....s held (that the AO was justified in rejecting market value of electricity captively consumed to be rate charged by DGVCL and MGVCL. The AO is directed to instead adopt market value for the electricity units actually sold by the appellant to be the actual rate and for electricity units captively consumed to be average rate of purchase of power by GUVNL during FY 2010-11 from various generating companies i.e. Rs. 3.07 per unit. The assessing officer would accordingly recomputed the profit of eligible undertakings for the purpose of section 80IA(4). Since the same would still work out to be loss figure, no deduction under 80IA(4) would be allowed to the appellant for the year under consideration also. Further, the loss so computed of CPPs would be carried forward and set off against deduction claimed under section 80IA." 23. Being aggrieved by the order of the ld. CIT(A) assessee is in appeal before us. The ld. AR before us submitted that the Hon'ble Jurisdictional High Court had adjudicated the identical issue in the own case of the assessee in its favor in tax appeal no.708/2016. 24. On the other hand ld. DR vehemently supported the order of the authorities below. 25. We h....
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....-Section(8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. 7. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub-Section (8) of Section 80IA of the Act. However, in so far as the Tribunal's reasoning to adopt the market value of the goods at Rs. 5.40 ps. per unit is concerned, we find no error. Undisputedly, GEB suppl....
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....nit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed." 5. Issue once again reached the Division Bench of this Court in case of CIT v. Alembic Ltd. in Tax Appeal No.471/2009 and connected appeals. The Division Bench referring to earlier judgments of the Court held as under : "11. We have considered th....
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....rofit by adding expenditure incurred for earning exempted income u/s 14A of the Act of Rs. 2,14,40,870/- as well as above submission of the appellant have been considered. In this regard, it is mentioned that the book profit u/s 115JB is computed as per explanation (1) to subsection (2) of section 115JB. A bare perusal of clause (f) of explanation (1) makes it that the) amount of expenditure relatable to any exempt income, other than section 10(30), is liable to be added back to net profit as shown in the P&L account As per section 14A it transpires that it talks of disallowing any expenditure incurred in relation to income not includible in the total income. The expression in relation to used for making disallowance under section 14A has been employed in Explanation (1) to section 115JB(2) as expenditure relatable to', in more or less the/same form. It is manifest that the amount of dividend is exempt under section 10(33)/[not section 10(3) of the Act]. Thus, any expenditure relatable to' the exempt dividend income would fall under clause (f). The Explanation 1, which provides in unequivocal terms that the amount of expenditure relatable to' exempt income shall be adde....
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.....2 The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot used while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act. 33.3 However, in our considered view the disallowance needs to be made as per Clause (f) to Section 115JB of the Act independently. The judgment of Hon'ble Gujarat High Court relied on by the ld AR in the case of Alembic Ltd. (supra), does not deny to make the disallowance as per clause (f) u/s 115JB of the Act. 33.4 Thus it is clear that the disallowance needs to be made in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw our support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance about exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- ....
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....y allowed for statistical purposes. 35. Now coming to the Revenue appeal in ITA No.937/Ahd/2015 for A.Y. 2011-12. The Revenue has raised following grounds of appeal: "1, On the facts and in the circumstances of the case and in law, the Id.. CIT(Appeals) erred in deleting the disallowance of ? 14.51 Lacs on account of lease rent holding. The Id.CIT(A) erred in not appreciating the fact that the lease rent was paid in respect of capital assets in accordance with accounting standard 19(AS-19) which distinguishes finance lease from the operating lease and regards the former as a finance transaction and not a lease transaction with conformity with the International Accounting Standard. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 9,57,77,910 made on account of disallowance of expenditure for replacement of re-membraning cells - II disregarding the decision of the Hon'ble Supreme CourFlrTtRenifase of CIT vs Saravana Spinning Mills Pvt. Ltd. (2007) 293 ITR 201 (SQ. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred in considering the 'tonners&#....
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....the case of appellant itself for AY 2004-05 in its appeal order in tax appeal no. 776 of 2013 dated 01/08/2014 has held the lease rent is deductable as revenue expenditure and has decided similar issue in favour of appellant and against the Department. Respectfully following this decision of Hon'ble High Court of Gujarat it is held that lease rent of Rs. 14,51,000/- is deductable as revenue expenditure for the year under consideration also. In view of this the AO is directed to allow this lease rent of Rs. 14,51,000/- as revenue expenditure. Thus, the ground of appeal no. 2 of the appellant is allowed." 40. Being aggrieved by the order of the Ld. CIT(A) Revenue is in appeal before us. 41. Both the parties before us relied on the order of the authorities below as favorable to them. 42. We have heard the rival contentions and perused the materials available on record. At the outset, we find that the impugned issue is covered in favor of the assessee in its case by the Judgment of Hon'ble Gujarat High Court in Tax appeal no. 579 of 2016 vide order dated 03/10/2016. The relevant extract of the order is reproduced below: "9.0. Now, so far as question no.2 in Tax Ap....
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....e disallowance of Rs. 8,85,94,567/- after allowing depreciation of Rs. 71,83,343/- and added to the total income of the assessee. 47. Aggrieved assessee preferred an appeal to Ld. CIT (A) who has deleted the addition made by the AO by observing as under: ''5.3 The reasons as mentioned by the AO in the assessment order for making net disallowance of Rs. 8,85,94,567/- (after allowing depreciation of Rs. 71,83,343/-) being cost of replacement of Membrane Cell as well as above submission of the appellant have been considered. In this regard it is mentioned that following the decision of Hon'ble ITAT, Ahmedabad, for assessment years 2003-04 and 2004-05 in appellant's own case on the similar issues have been decided in its favour in the appeal orders as passed by the CIT(A)-I, Baroda for assessment years 2009-10 and 2010-11. Following such decisions as given in these appeal orders, for the year under consideration also it is held that Membrane Cell expenditure of Rs. 9,57,77,910/- is a revenue expenditure. Another stand which without prejudice to its main ground of appeal no. 4 of the appellant is that the AO has erred in not granting additional depreciation as per th....
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....eal is dismissed." 50.1 As the fact of the case are identical to the fact as discussed above therefore respectfully following the same we do not find any reason to disturb the findings of Ld. CIT (A). Hence the ground of appeal of Revenue is dismissed. 51. The next issue raised by the Revenue is that Ld. CIT(A) erred in deleting the addition made by the AO on account of depreciation claim of the assessee at the rate of 60% on Chlorine tonners. 52. The AO during the assessment proceedings found that the assessee has claimed depreciation at the rate of 60% on Caustic Chlorine Plant though it is entitled to depreciation at the rate of 15% only. Accordingly, the AO worked out excessive depreciation claimed by the assessee amounting to Rs. 1,09,93,340/- and added to the total income of the assessee. 53. Aggrieved assessee preferred an appeal to Ld. CIT(A) who deleted the addition made by the AO by observing as under: ''8.3 The reasons as mentioned by the AO in the assessment order for making disallowance of depreciation of Rs. 1,09,93,340/- being difference in rate of depreciation at 15% as per Departmental stand and 60% as per appellant's claim as well as above....
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....e Tax vs. Chemplast Sanmar Ltd. reported in [2008] 2S6 ITR 81 (Mad) , held that chlorine toners are gas cylinders. It was held as under : - "8. The above view of ours is also supported by the decision of the Delhi High Court in CIT vs Goyal MG Gases Ltd. [2008] 296 ITR, 72, which the Appellate Tribunal has relied upon. In the case before the Delhi High Court, the contention of the assessee therein was that the containers/tankers were nothing but big cylinders as they had all the attributes of a cylinder, which was rejected by the Revenue on the ground that since the so-called cylinders were merely containers and were mounted on trucks, the assesses therein was entitled to depreciation at the rate of 25 per cent as eligible to "plant arid machinery". While deciding the issue whether the item claimed by the assessee therein is gas cylinders or machinery, the Division Bench has found that there is no dispute that the item in question was gas cylinder, though no doubt a big one and that the expression "gas cylinder" used in Appendix I to the Income Tax Rules does not the mention the size of the gas cylinders nor does it say that gas cylinders should be only for cooking purpose....
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....ted 20/01/2014 for AY 2007-08 has dismissed the Departmental appeal holding that the CIT(Appeals) and Tribunal treating the same as simplicitor computers and granting depreciation at the rate prescribed under the Law calls no interference. In view of this it is held that the appellant is entitled for additional depreciation on the computers for the year under consideration also. Thus, the ground of appeal no. 8 of the appellant is allowed." 60. Being aggrieved by the order of Ld. CIT(A) the Revenue is in appeal before us. 61. Both the parties before us relied on the order of the order of the authorities below as favorable to them. 62. We have heard the rival contentions and perused the materials available on record. At the outset, we find that the impugned issue is covered in favor of the assessee in its case by the Judgment of Hon'ble Gujarat High Court in Tax appeal no. 942 of 2013 vide order dated 20/01/2014. The relevant extract of the order is reproduced below: "10. Coming to the second question, facts are that during the previous year relevant to the Assessment Year 2007-08 the assessee installed certain computers in its factory premises and claimed deprecia....