TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 740
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....r Income Tax(Appeals)-I, Vadodara dated 31.05.2016 for the assessment years 2009-10, 10-11, 2010-11 and 09-10 respectively. Assessee's Appeal in ITA No.1501/Ahd/2014 for A.Y. 2009-10: 2. Grounds raised by the Assessee in ITA No.1501/AHD/2014 read as under: "1. The learned Commissioner of the Income Tax-I, Baroda ("the CIT") erred in fact and in law in revising the assessment by invoking powers u/s. 263 of the Income Tax Act, 1961 ("the Act") which was completed by way of assessment made u/s 143(3) despite the fact that the conditions stipulated for invoking such extraordinary jurisdiction were not satisfied. 2. The learned CIT erred in fact and in law in setting aside the assessment u/s. 143(3) and directing the Deputy Commissioner of Income Tax Circle-1(1), Baroda ("the AO") to frame fresh assessment on the issues already considered and decided during the proceedings u/s. 143(3) of the Act. 3. The learned CIT erred in fact and in law in observing that the assessment u/s. 143(3) was framed without proper enquiry and verification despite the fact that the AO had examined the issue at length and had called for various details during the course of assessment. 4. The learned ....
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....im of depreciation on an amount of Rs. 3,85,00,000/- being Foreign Exchange Fluctuation u/s.43A. Despite the fact that the said issue never formed part of showcause notice u/s.263(1) of the Act, and therefore direction on this issue is beyond the purview of section 263 of the Act. The ld.Authorised Representative(AR) in this respect relied upon the decision of Co-o0rdinate Bench of ITAT Ahmedabad in the case of Arsh Industrials & Investments Pvt. Ltd., vs ITO [1988] 32 TTJ 402 (Ahmedabad), Ultramarine & Pigments Limited Vs. ACIT, Range- 7(3), Mumbai in ITA No.2844/Mum/2013 for A.Y. 2009-10, CIT, Patiala Vs. Roadmaster Industries Lt.d, [2013] 40 taxmann.com 298 (Punjab & Haryana) and Damodar Velley Corporation Vs. DCIT [2016] 72 taxmann.com 127 (Kolkata - Tribunal). It was further submitted by the assessee that showcase notice issued u/s.263(1) of the Act is at page no.148 & 149 of the paper book and the said show-cause notice is restricted only to on account of two heads i.e. (i) Interest Payable on the loan received from Reliance Industries Limited, it was capitalized and was added to loan amount (ii) In respect of claim of depreciation @15% on WDB of Electrical Installations / Fi....
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....e had claimed depreciation @ 15% on WDV amount Rs. 5,60,65,380/- of electrical installation / fittings. The eligible rate of depreciation on electric installation / fittings as per Appendix-I was 10%. Thus there was an excess claim of depreciation @ 5% on electrical fittings as shown below; Depreciation claimed by the assessee @ 15% (including half the rate for period less than 180 days) 84,09,807 Depreciation eligible to the assessee @ 10% (including half the rate for period less than 180 days) 56,06,538 Excess depreciation allowed 28,03,269 The excess depreciation of Rs. 28,03,269/- claimed by the assessee was required to be disallowed. This being not done resulted in under assessment of income of Rs. 28,03,269/-. In view of the above, I am directed to give an opportunity of being heard and to show cause as to why the aforesaid assessment made by the Assessing Officer for the A.Y.2009-10, should not be enhanced or cancelled with a direction to make fresh assessment in accordance with the provisions of section 263 of the Act. For this purpose, you may appear before the Commissioner of Income Tax-I, Baroda in person or through your authorized representative on 19.12.20....
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.... of the considered view that these items have been considered for exemption u/s 10A by the A.O. without conducting the enquiries which are prima-facie warranted on the facts and circumstances of this case. It is trite law that lack of enquiry results in error within the meaning of Sec.263 of the l.T. Act, 1961. It is a fact that considering profit of Rs. 1,15,91,571/ for computation of income u/s.1OA without enquiries has resulted in error within, the meaning of section 263 of the I.T. Act, 1961. This has also caused prejudice to the revenue inasmuchas it has resulted in granting exemption without enquiries warranted, on facts and circumstances of the case. Accordingly, the order the AO in respect of profit of Rs. 1,15,91,571 / - is also set aside to the file of the AO. 8. The AO is directed to examine issues which are subject matter of notice u/s.263 and conduct enquiries required on facts and circumstances of the case. Thereafter, the AO is directed to take the decision as per law. In nutshell, the order passed, by the AO is set aside to the file of the AO for considering the issues which are subject matter of notice u/s.263 afresh and take decision as per law." From the pe....
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.... to the facts of the present case, we hold that the order passed by learned CIT u/s. 263 is bad in law and not sustainable in law. Therefore the same is quashed. 9. Even, otherwise on the merits of the case, the ld. CIT(A) has held that this "windmill" was not used in any manufacturing activity. Therefore as per CIT this does not qualify for additional depreciation. In this respect we are of the considered view that as per provision of section 32(l)(iia) which reads as under: "in the case of any new machinery or plant (other than ships an aircraft), which has been acquired and installed after 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing..". From the afore mentioned reading we find that the only requirement of section is that the assessee should be engaged in the business of manufacture or production of any article or thing. This condition is clearly satisfied by the assessee who is engaged in the manufacture of pigments, HDPE etc. A close reading of the provision brings out that there is no requirement that the windmill should be used in any manufacturing activity. However, a windmill which generates po....
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..... Since we have allowed Ground No.7 of this appeal filed by the assessee, therefore other grounds raised by the assessee become infructuous in view of our findings on ground no.7 as subsequently to the passing of order u/s.263 of the Act, the ld.AO had made additions which have already been deleted by the ld.CIT(A). 14. In the result, appeal of the assessee is allowed. Revenue Appeal in ITA No.2998/Ahd/2014 for A.Y. 2010-11: 15. Ground raised by Revenue read as under: (i) On the facts and in the circumstances of the case, the Id.CIT(Appeals) erred in deleting the addition/disallowance of Rs. 56/74,523/- out of total addition/disallowance made by the AO of Rs. 7~59,65,871/- on account of repairs to Plant & Machinery, being capital in nature, without appreciating the fact that the expenditure incurred had an enduring benefit. (ii) On the facts and in the circumstances of the case and in law, the ld.CIT (Appeals) erred in directing the Assessing Officer to allow depreciation on Jetty & Trestle @ 15%, as claimed by the assessee, treating the same as plant and machinery, instead of allowing 10% applicable to buildings, thereby deleting the addition of ' 4,05,58,751/- made on acco....
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.... the order of the AO and submitted that the expenses incurred has increased the endurance value of the plant & machinery. 6. We have carefully considered the rival submissions together with the orders of the authorities below. We notice that the repair expenditure of the aforesaid amount have been treated as capital expenditure by the CIT(A) on the ground that such expenditure includes mainly expenses on fabrication/erection/dismantling. The AO had on the other hand held that such expenditure carries endurance value and therefore capital expenditure. We do not find any reason to agree with either of the contentions of the Revenue authorities. Having regard to the nature of work that the assessee is engaged in and having regard to the staggering value of plant & machinery held by the assessee, such expenses of fabrication of structures, erection and dismantling expenses for insulation on ground piping etc. is a normal incidence of business expenditure. The test of enduring benefit flowing from expenditure of any, in is of no avail and is a not conducive test for the purposes of determination of character of expenditure. Having regard to the nature and ordinary course of business a....
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....rds mythology of identifying unusable stores and spares and segregating them for write off purposes. The AO not given any finding on the bonafides and correctness of such treatment. Thus, while the loss if any arising on write off of stores and spares in the given set of circumstances ordinarily are admissible expenditure, the factual aspects requires to be examined. Therefore, we consider it expedient to restore the issue back to the file of the AO for examination of the issue de novo in accordance with law. The AO, while doing so, shall be entitled to verify the process for identification of the source and spares which are subjected to write off/diminution. Needless to say, a reasonable opportunity shall be granted to the assessee while determining the issue. The issue is thus set aside to the file of AO." 20. Therefore, respectfully following the above decision, we order accordingly. 21. In the result, appeal of the Revenue is dismissed. Cross Objection No.30/Ahd/2015 (arising out of ITA No.2988/Ahd/2014 for A.Y. 2010-11): 22. Grounds raised by the Assessee in Cross Objection read as under: "1. The learned Commissioner of Income-tax (Appeals) - 1 ["the CIT(A)"], Baroda e....
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....iation of Rs. 28,94,339 on foreign exchange loss arising from reinstatement of creditors for fixed assets. 4. Without prejudice to the above, the learned CIT(A) erred in fact and in law in not allowing the foreign exchange loss as revenue expenditure despite holding that the same does not form part of the cost of the fixed asset. 5. The learned CIT(A) erred in fact and in law in confirming the action of the AO in charging interest u/s. 234B of the act. 6. The learned CIT(A) erred in fact and in law in confirming the action of the AO in charging interest u/s.234C of the act. 7. The learned CIT(A) erred in fact and in law in confirming the action of the AO in initiating penalty proceedings u/s.271(1)(c) of the Act. 8. Your respondent craves a right to add to or amend, alter, substitute, delete or withdraw all or any of the grounds of cross objections." 27. At the time hearing, the ld.Counsel for the assessee submitted that the issue is squarely covered by the Tribunal decision in assessee's own case of M/s.Gujarat Chemical Port Terminal Co.Ltd., Vs. DCIT, Circle-1(1)(1), Surat in I.T.A.No.1888/AHD/2016 for the assessment year 2012-13 dated 13.12.2019 ( copy filed ) passed ....