AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 1662
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....made by the Learned Assessing Officer, is based on irrelevant considerations, against the principles of natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Disallowance under "Peripheral Development Expenses" - Rs. 1,81,73,621/- a. That on the facts and in the circumstances the case, the order of the learned CIT(Appeals) in partly sustaining the disallowance of Rs. 1,81,73,621/- under 'Peripheral Development Expenses' incurred through appellant's Corporate Office is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That the aforesaid expenditure of Rs. 1,81,73,621/- is incurred by the assessee wholly and exclusively for the purpose of its business, sustaining of the disallowance by the learned CIT(Appeals) is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. c. That in similar facts and circumstances, in the past years, in appellant's own case, the Jurisdictional ITAT (Hon'ble ITAT Cuttack Bench, Cuttack) having held that the similar, aforesaid expenditure are fully a....
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....case, the Hontble ITAT Cuttack Bench having held that "Interest on unpaid Electricity Duty and water charges" is fully allowable, the learned CIT (Appeals) in not deleting the said addition/disallowance of Rs. 168,47,54,889/- under 'Interest on Disputed Govt. duty (Electricity Duty and water charges)' is arbitrary, erroneous, and bad, both in the eye of law and on facts and legally untenable. d. That the aforesaid Rs. 168,47,54,889/- under "Interest on unpaid Electricity Duty and water charges, although a statutory liability, the learned CIT (Appeals) holding that the same is a provision and disallowable because the same is under dispute and no demand has been raised in respect thereof, is arbitrary, erroneous, and bad, both in the eye of law and on facts and legally untenable. 4. Disallowance of claim of Addl. Depreciation u/s.32(i)(iia) of the Act- Rs. 30,93,207/- a. That the learned CIT (Appeals) has mis-appreciated the facts and the sustaining of disallowance of Rs. 30,93,207/- under 'Additional Deprecation u/s.32(1)(iia) of the I.T Act is contrary to facts, erroneous and bad, both in the eye of law and on ....
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....d, both in the eye of law and on facts. 6. Addition of Rs. 59,81,49,044/- as "Income from Business and i. treatment of Short term Capital Gains of Rs. 4,55,26,088/- as "Income from Business"; and ii. Discarding of Loss under Long term Capital Gains of Rs. 8,89,62,948/- (in respect of Rs. 57,53,86,000/- gains booked in Profit and Loss Account, after indexation) and treating as "Income from Business" a. That on the facts and in the circumstances the case, the dismissal of the ground and sustaining of: i. the treatment of Short term Capital Gains of Rs. 4,55,26,088/- as "Income from Business" ii. Ignoring and discarding the Loss under Long term Capital Gains of Rs. 8,89,62,948/- (in respect of Rs. 57,53,86,000/- gains booked in Profit and Loss Account, after indexation); and iii. the addition of Rs. 59,81,49,044/- as "Income from Business" by the learned CIT (Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That in the facts and circumstances of the ....
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....1,31,24,984/- under 'Provision for Leave Encashment' disallowed in past assessment years u/s.43B(f) of the Act does not flow from the assessment order and dismissal of the same is on mis appreciation of facts, arbitrary, erroneous, bad, both in the eye of law and on facts and legally untenable. c. That in the past assessments years, the lower authorities having disallowed amounts debited under "Provision for Leave Encashment u/s.43B(f) of the Act, the amount of Rs. 11,31,24,984/- credited during the accounting year 2012-13 under the said "Provision for Leave Encashment" ought to be deducted in computing the assessed income for the assessment year 2013-14. 8. That the appellant craves leave to add, supplement, modify the grounds herein-above before or at the hearing of the appeal." 3. The brief facts are that the assessee is a public sector company is engaged in the business of bauxite mining, manufacture of Alumina and Aluminum & Power Generation and filed its return of income for the assessment year 2013-2014 electronically on 28.09.2013 with total income of Rs. 825,55,04,003/- and under the provision of section 115JB o....
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....s of the assessee and is fully allowable as deduction u/s.37 of the Act. Ld. AR further emphasized that the peripheral expenditure has been allowed for the earlier assessment years and the assessee has disclosed these facts in both assessment and in the appellate proceedings. The peripheral expenditure was allowed in assessee's own case by this Bench of the Tribunal in assessee's own case in ITA No.66-68, 459, 511 & 512/CTK/2003 order dated 30.11.2015 and in subsequent years. The ld. AR also placed copy of the order passed by this Bench of the Tribunal in ITA No.343&392/CTK/2015 and other connected assessee's appeals, order dated 23.04.2018 for the assessment years 2007-08 & 2008-09 and for other subsequent years. 8. Contra, ld. DR relied on the assessment order of the AO. 9. We have heard rival submissions and perused the material on record. The assessee has claimed the peripheral expenditure of Rs. 22,32,20,569/- and the AO has made the addition without considering the nature of expenditure and its benefit to the assessee. The CIT(A) after verifying the facts and considering the submissions made by the assessee in this regard granted the relief but restricted disallow....
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.... Odisha. It is wholly and exclusively used for the purpose of business. The ld. AR referred to the nature of the expenditure incurred through the corporate office at Bhubaneswar and further substantiated that the assessee has evidence to prove the claim. Therefore, we, considering the apparent facts and material on record, are of the opinion that the claim of the assessee in respect of incurring of expenditure at peripheral areas as per the order of the Govt. is not disputed and the reasons recorded by the lower authorities in respect of sustenance of the addition to the extent of Rs. 56,27,609/- cannot be overlooked. Accordingly, in the interest of justice, we remit this issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide the same on merits. This ground of appeal is allowed for statistical purposes." We respectfully follow the order of the coordinate bench of Tribunal and remit this disputed issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide on merits and allow this ground of appeal for statistical purposes." From the above observations of the Tribunal....
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....ve heard rival submissions and perused the material available on record. We find that the issue under consideration is covered by the order of the Tribunal in assessee's own case for the assessment year 2006-07 & 2007-08 in ITA No.233 & 234/CTK/2011, order dated 20.07.2012 and also for the assessment year 2005-06 in ITA No.286/CTK/2013, order dated 11.05.2016 has followed the above order of Tribunal and decided in favour of the assessee. The observation of the Tribunal for the assessment year 2005-06 are as under :- "4. We have considered rival contentions and found that the issue under consideration is covered by the order of the Tribunal in assessee's own case vide order dated 20-07-2012 for the assessment year 2006-07 & 2007-08, wherein the Tribunal on merit allowed such interest after observing as under :- 6.1With respect to the interest on electricity duty provided for by the assessee was in consequence to the preference and not claimed as prior period expenses on the basis of statutory auditors pointing out that the amount held by the assessee to be paid as statutory duty in a bank was for earning interest. Therefore, corresponding payment of i....
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....claim of the assessee on account of interest on disputed Govt. duty (Electricity duty and water charges) and this ground of assessee is allowed." We respectfully follow the reasoning and observation of the judicial decision and direct the AO to delete the disallowance of interest on disputed Govt. duty (Electricity duty and water charges) and this ground of appeal of assessee is allowed. 12. In fourth ground of appeal grievance of the assessee is that the CIT(A) erred in confirming the disallowance of additional depreciation u/s.32(1)(iia) of the Act. The AO in the course of assessment proceedings found that there is no mention regarding the date of acquisition of these assets. The assessee explained that under industrial projects of this kind it is natural and common that the procurement of individual machinery and installation activities go on stretching from one year to the another and it is not possible to install and commission all such items in the same year of acquisition (procurement). The AO observed that in the absence of the dates of acquisition of all the individual parts & machineries, the assessee cannot be presumed to have complied with the requirem....
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....'s own case for the assessment year 2004- 05 and the Tribunal vide its order dated 25.5.2012 restored the matter to the file of the AO for reconsideration and allow the claim of additional depreciation u/s.32(1)(iia) on the plant and machinery acquired and installed after 1.4.2002, observing as under: "Having considered the rival submissions, we find that on a plain reading of section 31(1)(iia) inserted by the Finance Act, 2002, it is dear that both acquisition and installed of plant or machineries should take place after 31.3.2002 to enable the assessee to claim additional depreciation of 15% if it achieves substantial expansion by way of increase in the installed capacity by not less than 25% in the previous year. The RPU unit as contended by the assessee though acquired by the assessee on amalgamation which the amalgamated company had started commencement of installation of the said unit. The assessee also contended before us that to start the unit, many plant & machinery were acquired and installed after 1.4.2002 (during F.Y. 2002-03 and 2003-04) enabling the Unit to become operative and capable o manufacturing rolled products for commercial purpose. Such s....
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....ning of exempted dividends and accordingly, the only way disallowance can be computed proportionately as per Rule 8D(2)(iii) of I.T.Rules. 20. Ld. AR before us submitted that the assessee has already disallowed the sum of Rs. 1,20,828/- in the computation of income with the (return of income) u/s.14A of the Act in respect of expenses incurred relating to its exempted income and Rule 8D is not applicable. Ld. AR further submitted that this issue has been decided by the Tribunal in ITA Nos.352/CTK/2016 along with other connected appeals, order dated 27.04.2018 for the assessment year 2010-2011. Contra, ld. DR relied on the order of AO. 21. We have heard rival submissions and perused the material on record. In the instant case the AO made the disallowance u/s.14A of the Act and applied Rule 8D. The CIT(A) in appeal has confirmed the action of AO. We find that this issue has been decided by the Tribunal in assessee's own case for the assessment year 2010-2011 in ITA No.352/CTK/2016 along with other connected appeals vide order dated 27.04.2018, wherein the Tribunal observed as under :- "17. We have heard rival submissions and perused the material available on....
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....rther disallowance was called for. 35. In order to disallow this expense the AO had to first record, on examining the accounts, that he was not satisfied with the correctness of the Assessee's claim of Rs. 3 lakhs being the administrative expenses. This was mandatorily necessitated by Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules. 36. In para 3.2 of the assessment order, the AO records that, in answer to the query posed by the AO requiring it to produce calculation for disallowances, the Assessee "submitted that they have not incurred any expenditure for earning the dividend income." Thereafter, in para 3.3, the AO records "I have considered the submissions of the Assessee and found not to be acceptable." Thereafter, the AO proceeded to deal with the said provisions of Section 14A and Rule 8D and observed, in para 3.3.1, that making of investment, maintaining or continuing investment and time of exit from investment are well informed and well coordinated management decisions that, in relation to earning of income, are embedded in indirect expenses. It is then stated in para 3.4 that, in view of the above, the provisions of sub-sect....
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....curred expenses to manage its investments which may yield exempt income, and Assessee grossly failed to calculate such expenses in a reasonable manner to ascertain the true and correct picture of its income and expenses." 40. Consequently on the aspect of administrative expenses being disallowed, since there was a failure by the AO to comply with the mandatory requirement of Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise. The question framed in ITA 549 of 2015 is answered accordingly. We found that in the instant case the AO could not make distinction between the equity shares and debt funds and calculated the disallowance, we are of the opinion this disputed issue has to be re-examined and apply the provisions of Section 14A r.w.rule 8D. Accordingly, we follow the ratio of judicial decision and restore this disputed issue to the file of the&....
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....ant case the AO has treated the short-term and long-term capital gain earned by the assessee as business income of the assessee and in appeal, the CIT(A) has confirmed the action of AO. At the outset, we find that the Tribunal in assessee's own case for the assessment year 2010-2011 in ITA No.352/CTK/2016, order dated 27.04.2018 along with other connected appeals, has allowed the appeal of the assessee. The observations of the Tribunal in this regard are as under :- "39. We have heard rival submissions and perused the material available on record. We find that the main object of the assessee is manufacturing and assessee being a public sector company has enough funds and made investment in the mutual funds and on redemption the income is offered under the capital gain and the main object being the business and the maximum income is established through the direct business operations and not from the financial transaction. The investment has been made with the mutual funds/liquid funds/ closed ended funds and encashment on redemption/maturity. Further, the total profit earned by the assessee company by way of capital gains is only about 4% of the total income of the assessee....
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.... shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-intrade, the income arising from transfer of such shares/securities would be treated as its business income, (b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capita....
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....relates to non-deduction of credit amount under provision for leave encashment disallowed in the past assessment years u/s.43B(f) of the Act. The AO made disallowance on account of provision for leave encashment u/s 43B(f) of the Act, on the ground that the same is allowable only if the said expenditure has actually been paid by the assessee. On appeal, the Ld. CIT(A) has sustained the disallowance made by the AO as there are no proper explanation envisaged by the assessee. 27. On further appeal before us, ld. AR of the assessee submitted this issue has been decided by the Tribunal in assessee's own case for the assessment year 2010-2011 in ITA No.352/CTK/2016 along with other appeals, order dated 27.04.2018 and prayed for allowing the appeal. Contra, ld. DR relied on the order of lower authorities. 28. We have heard rival submissions and perused the material available on record. We find that the Tribunal in assessee's own case for the assessment year 2010-2011 in ITA No.352/CTK/2016 along with other appeals, order dated 27.04.2018 relying on its earlier order has restored the disputed issue to the file of AO. The observations of the Tribunal in this regard ....
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....9;re-valuation of nonmoving stores and spares'. 2. In the facts and circumstances of the case, the Ld. CIT(A) is not justified in deleting Rs. 20,50,46,948/- out of the addition of Rs. 22,32,20,569/-made by way of disallowance on account of the claim of 'peripheral development expenses'. 3. Other grounds, if any, may be agitated at the time of hearing. 31. Ground No.1 in appeal of Revenue argued by ld. DR is relating to disallowance of the loss claimed on account of re-valuation of non-moving stores and spares and ld. AR relied on the order of CIT(A). 32. We have decided this issue in assessee's own case for the assessment year 2011-2012 in ITA Nos.374/CTK/2014, wherein the Tribunal has observed as under :- "We have decided this issue in appeal of the assessee for assessment year 2011-2012 (ITA No.374/CTK/2014) in favour of the assessee and against the Revenue relying on the decision of the Tribunal in assessee's own case for the earlier assessment years. We follow the same reasoning given in the aforesaid appeal and we do not see any reason to interfere with the order of the CIT(A), who has passed ....