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2020 (1) TMI 1290
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.... to issue of shares and is not relatable to regular business. 2.2 The Ld. CIT(A) failed to appreciate the facts mentioned in the case of Brooke Bond India Ltd. and Punjab State Industrial Development Corporation that expenditure incurred in relation to increase in share capital is not allowable. 2.3 The Ld. CIT(A) erred to direct the AO to allow depreciation of Rs. 64,16,093/- as depreciation on intangible assets. 2.4 The Ld. CIT(A) erred in directing the AO to allow i.e. depreciation based on his predecessor orders for A.Ys. 05-06 to 08-09 since appeals have been filed against all the above order before ITA T on 24.03.2016 and the departments appeal has not yet reached its finality on this issue on similar grounds 2.5. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored". 4. The respondent-assessee namely "M/s. Shriram EPC Limited", is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of integrated designing, engineering, procurement, construction and projection m....
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.... before the Hon'ble Supreme Court. The Ld. Sr. Departmental Representative also challenged the decision of Ld. CIT(A) to allow depreciation on technical knowhow as identical issue in earlier years was restored to the file of the Assessing Officer. 8. On the other hand, Ld. Authorised Representative submitted that ESOP cost debited to Profit and Loss account is not national loss but only business expenditure incurred wholly for the purpose of business and the same should be allowed as deduction, placing reliance on the decision of Hon'ble High Court of Madras in the case of PVP Ventures (supra). He further submitted that the Hon'ble Supreme Court had dismissed the SLP filed against the order of Jurisdictional High Court in the case of PVP Ventures(supra). As regards to depreciation, he submitted that the technical knowhow acquired under slump sale agreement is in the nature of business or commercial rights or right of similar nature are eligible for depreciation under Section 32(1)(ii) of the Act. He placed reliance on the decision of Co-ordinate Bench of the Tribunal in assessee's own case in ITA No. 895 to 897/Mds/2012, for assessment years 2005-06 to 2007-2008,....
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....the initial year, the same should be allowed in the year under consideration and this issue is remitted back to the file of the Assessing Officer to follow the decisions of earlier years. Accordingly, the ground of appeal No. 2.4 raised by the Revenue is partly allowed for statistical purpose. 12. In the result, the appeal filed by the Revenue in ITA No. 2011/CHNY/2016 for assessment year 2009-2010 is partly allowed for statistical purpose. 13. Now, we take up appeal of the Revenue in ITA No. 2012/CHNY/2016 for assessment year 2010-2011 for adjudication. 14. The Revenue has raised the following grounds of appeal:- "1. The order of the learned CIT(A) is contrary to law and facts of the case. 2. The Ld. CIT(A) erred in directing the AO to allow the 100% depreciation on addition to leased building of Rs. 13,16,008/-. 2.1 CIT(A) erred in wrongly applying the facts of the case of M/s. Amway India Enterprises vs. DCIT ITAT Delhi. It is to be noted that M/s. Amway India Enterprises was having the same premises for last several years and this fact was also considered. But in this case no information is furnished to show that premises was under occupation....
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.... expenses incurred towards FE fluctuation in connection with acquisition of capital asset needs to be capitalized in view of sec. 43A. 2.4 The CIT(A) failed to appreciate that the decision of Supreme Court in the case of Woodward Governor reported in 312 ITR 254 squarely applies to this case. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored". 15. The return of income for the AY 2010-11 was filed on 27.09.2010 disclosing total income of Rs. 36,19,28,086/- and the same was revised on 30.03.2012 disclosing total income of Rs. 25,90,69,900/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Company Range VI(2) Chennai (hereinafter referred as Assessing Officer) vide order dated 30.03.2013 passed u/s. 143(3) of the Income Tax Act, 1961 (in short "the Act") at total income of Rs. 38,71,57,712/-, after making the following additions. Depreciation on plant and machinery disallowed 22,12,713 Depreciation on windmills disallowed 2,60,27,878 Depreciation o....
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....penditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee." 25. A reading of the above Explanation clearly shows that where the business or profession of the assessee is carried on in a building, which is not owned by him, but has been leased out, in respect of which the assessee holds a lease or other right of occupancy, if any expenses are incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of the said Clause shall apply as if the said structure or work is a building owned by the assessee. The effect of Explanation 1 was considered in the decision in the case of Madura Coats. 26. After referring to various other decisions, the Court pointed out that the extensive repairs and r....
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....ng is treated as the owner of the building. So, according to us, the question to be considered in such a case is whether the assessee has acquired any enduring benefit by putting the refurbished building to use over a period of time in accordance with the agreement entered into between the assessee and the building owner. 25. So far as the question regarding the expenditure incurred by the assessee for refurbishing the building taken on lease is concerned, we are of the considered opinion that after the introduction of Explanation 1 to Section 32(1) of the Act, there is no scope left at all for any interpretation since, by a legal fiction, the assessee is treated as the owner of the building for the period of his occupation. This means that by refurbishing, decorating or by doing interior work in the building, an enduring benefit was derived by the assessee for the period of occupation and therefore, is a capital expenditure and not revenue expenditure. So also as contended by the learned Senior Counsel for the Revenue, the criteria that is to be adopted for identifying the enduring benefit is the nature of enhancement and advantage that the assessee has derived by putting....
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.... with a particular design as instructed by the said Airlines. 31. Furthermore, the expenses, which were incurred, clearly show that they are fixed and are capital in nature and that the test applied by the CIT(A) to state that the assessee cannot remove the same at the time of vacating the premises is an incorrect test applied by the CIT(A) because the CIT(A) did not take note of Explanation 1 to Section 32 of the Act. In the light of the said Explanation, it has become immaterial as to whether the assessee is the owner of the building or the lessee and there is no scope left for any interpretation since, by legal fiction, the assessee is treated as the owner of the building for the period of their occupation. 34. At the risk of repetition, it is not out of place to mention here that the decision of the Division Bench of the Kerala High Court in the case of Indus Motors Co. Pvt. Ltd. was referred to a Full Bench for reconsideration of the decision rendered in Joy Alukkas India (P) Ltd. Ultimately, the Full Bench of the Kerala High Court in the decision reported in (2016) 382 ITR 0503 reiterated that the observations and opinion expressed by Division Bench in the c....
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....rect the Assessing Officer to allow depreciation at the rate applicable to buildings. Accordingly, grounds of appeal Nos. 2 to 2.3 of the Revenue stands partly allowed. 19. Grounds of appeal No. 2.4 to 2.6, the challenges the decision of Ld. CIT(A) in allowing ESOP expenses as Revenue expenditure. 20. This issue was raised by the Revenue for the assessment year 2009-2010 in ITA No. 2011/CHNY/2016, wherein we decided the issue in favour of the assessee vide para 10 of above. Fact situation being the same, grounds of appeal No. 2.4 to 2.6 of the Revenue for assessment year 2010-2011 also stand dismissed. 21. Grounds 2.7 to 2.9 raised by the Revenue challenges the correctness of the decision of the Ld. CIT(A) to allow depreciation on electrical fittings at the rate applicable to plant and machinery. The Ld. CIT(A) allowed depreciation on electrical installation at Rs. 1,55,613/- at the rate applicable to electrical fittings. Contention of the assessee is that this electrical fitting form part of the plant and machinery and therefore depreciation should be allowed at the rate applicable to plant and machinery. Submission of the assessee that electrical installation are p....
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....turn of income for the assessment year 2011-12 was filed on 29.09.2011 disclosing total income of Rs. 67,57,69,760/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Company Circle VI(2), Chennai (hereinafter referred as "Assessing Officer") vide order dated 30.03.2014 passed u/s. 143(3) of the Income Tax Act, 1961 (for short 'the Act') at total income of Rs. 70,53,32,202/-. While doing so, the Assessing Officer made the following disallowances:- Depreciation on assets 5,16,933 ESOP expenses 1,16,85,044 Bad debts written off 2,73,17,449 Loss on sale of assets 21,000 Disallowance u/s.40(a)(i) 10,16,961 Disallowance u/s.14A 1,19,55,420 Depreciation on intangible assets addeddisallowed during assessment year 2007-08 10,65,211 Excessive depreciation on additions to buildings disallowed during assessment year 2010-11 11,84,407 Depreciation on plant and machinery disallowed during assessment year 2010-2011 18,80,807 29. Being aggrieved by the above additions, the assessee-company preferred an appeal before Ld. CIT(A), who vide impugned order partly allowe....
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....he learned CIT(A) may be set aside and that of the Assessing Officer restored". 32. Grounds 1 & 3 are general in nature, therefore do not require any specific adjudication. 33. In grounds 2 to 2.2, the Revenue challenges the correctness of the decision of Ld. CIT(A) in deleting the ESOP expenditure. 34. This issue was raised by the Revenue for the assessment year 2009-2010 in ITA No. 2011/CHNY/2016, wherein we decided the issue in favour of the assessee vide para 10 of above. Fact situation being the same, grounds of appeal No. 2 to 2.2 of the Revenue for assessment year 2011-2012 also stand dismissed. 35. Grounds 2.3 & 2.4 challenges the decision of the Ld. CIT(A) in deleting the expenditure incurred on abandoned projects. 36. The brief facts of the issue are as under:- Assessee made total claim of Rs. 2,73,17,449/- as bad debts. The breakup of bad debts are as under:- "Note on Bad Debts written off Rs. 2,73,17,449/- 1. Shriram Infrastructure and Power Ltd. - Rs. 2,19,02,210/- Shriram Infrastructure and Power Ltd. wanted to develop 4 to 5 power projects in Tamil Nadu, Jabalpur, Tuticorin, etc.,. We wanted to participate in the project and ....
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....refore the question that arises before us is whether this can be allowed as revenue expenditure. Admittedly, assessee is also in the business of wind power generation. The business of power generation is an existing one and the same should be allowed as deduction if there is unity of control of two management as held by Bombay High Court in the case of CIT vs. Idea Cellular 76 Taxcomm. 77 and Hon'ble Delhi High Court in the case of CIT vs. Monnet Industries Ltd., 332 ITR 627. 40. As regards to write off of amount paid to M/s. Alpha Energy Systems Ltd. Admittedly, advance was paid during the course of business of the assessee. Since the amount had become irrecoverable the same should be allowed as deduction as revenue loss if not as bad debts as held by the Hon'ble Jurisdictional High Court in the case of Devi Films Private Ltd. vs. CIT, 75 ITR 301 and Hon'ble Gujarat High Court in the case of CIT v. Abdul Razak & Co, 136 ITR 825. In the light of the above facts, the grounds of appeal 2.3 and 2.4 filed by the Revenue has no merits, hence, we dismiss the grounds raised by the Revenue. 41. Grounds of appeal 2.5 to 2.7 challenges the decision of Ld. CIT(A) in deleting....
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....rdingly, the Assessing Officer can allow depreciation at the rate applicable to buildings. From the perusal of the assessment order, it is clear that Assessing Officer had disallowed 90% of the opening value of written down which is not correct as assessee had not claimed it. However, the Ld. CIT(A) had rightly deleted the addition by holding it to be doubtful disallowance. The findings of the Ld. CIT(A) is based on proper appreciation of facts. We do not find any reason to interfere with the order of the Ld. CIT(A) on this issue. Accordingly, ground of appeal No. 2.8 filed by the Revenue stands dismissed. 48. In the result, the appeal filed by the Revenue in ITA No. 2013/CHNY/2016 for assessment year 2011-2012 stands dismissed. 49. Now we take up assessee appeal in ITA No. 1604/CHNY/2016 for assessment year 2011-2012 for adjudication. 50. The assessee raised the following grounds of appeal. "The order of the CIT (Appeals) is against law and fact of the case. 2. The CIT (A) erred in confirming the disallowance of Bad Debts of Rs. 15,00,000. 3. The CIT(A) erred in not appreciating the fact that the amount is allowable as business loss. 4.....
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....4/CHNY/2016 filed by assessee and Revenue respectively for assessment year 2012-2013. 56. The assessee in ITA No. 1740/CHNY/2016 has raised the following grounds of appeal. "The order of the CIT (Appeals) is against law and fact of the case. 2. The CIT(A) erred in confirming part of the disallowance made u/s. 14A r.w. Rule 8D. 3. The CIT (Appeals) erred in not appreciating the fact that the AO applied Rule 8D without recording having regard to the accounts of the appellant as to why he was not satisfied with the correctness of the appellants claim that no expenditure was incurred in relation to the income which does not form part of total income. In this connection the appellant rely on the Delhi High court judgment in the case of CIT Vs. Taikisha Engineering India Ltd. (229 Taxman 143) and CIT Vs. I.P. Support Services India Pvt. Ltd. (378 ITR 240). 4. without prejudice to the appellants ground that the disallowance u/s. 14A r.w. Rule 8D is not attracted the following grounds are raised. a) The CIT(A) erred in not appreciating the fact that the appellant has not received any dividend income from the investment made in Associate Enter....
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....decisions (iii) Redington (India) Ltd. vs. Addl. CIT, 392 ITR 633, (iv) CIT vs. Chettinad Logistics P. Ltd., 248 Taxman 55. In view of the above judgments, we allow the appeal filed by the assessee. 62. In the result, the appeal filed by the assessee in ITA No. 1740/CHNY/2016 for assessment year 2012-2013 stands allowed. 63. Now we take up cross appeal of the Revenue in ITA No. 2014/CHNY/2016 for assessment year 2012-2013. 64. The Revenue raised the following grounds of appeal. "1. The order of the learned CIT(A) is contrary to law and facts of the case. 2. The Ld. CIT(A) erred in directing the AD to allow ESOP expenses for Rs. 14,43,000/- 2.1. Ld. CIT(A) failed to note that ESOP expenditure is incurred in relation to issue of shares and is not relatable regular business. 2.2 Ld. CIT(A) failed to note the facts mentioned in the case of Brooke Bond India Ltd. and Punjab State Industrial Development Corporation that expenditure incurred in relation to increase in share capital is not allowable. 2.3 The Ld. CIT(A) erred in directing the AD to allow the u/s. 14A r.w. 8D expenses for Rs. 1,39,34,748/-. 2....
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....to 2.5 raised by the Revenue stand dismissed. 70. Grounds 2.6 and 2.7 challenges the decision of Ld. CIT(A) in deleting the addition made on account of excess depreciation on building of Rs. 2,02,55,619/-. 71. This issue was raised by the Revenue for the assessment year 2010-2011 in ITA No. 2012/CHNY/2016, wherein we decided the issue in favour of the assessee vide para 18 of above. Fact situation being the same, grounds of appeal No. 2.6 and 2.7 of the Revenue for assessment year 2012-2013 also stand dismissed. 72. In the result, the appeal filed by the Revenue in ITA No. 2014/CHNY/2016 for assessment year 2012-2013 stands dismissed. 73. Now, we take up Revenue appeal in ITA No. 2744/CHNY/2016 for assessment year 2013-2014. 74. The Revenue raised the following grounds of appeal. "1. The order of the learned CIT(A) is contrary to law and facts of the case. 2. The Ld. CIT(A) erred to direct the AO to allow the ESOP expenses of Rs. 1,99,602/- 2.1. Ld. CIT(A) failed to appreciate that ESOP expenditure is incurred in relation to issue of shares and is not re la table regular business. 2.2. Ld. CIT(A) failed to appreciate the fact....
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.... in leasehold building is treated as capital expenditure. 3. The Ld. CIT(A) failed to appreciate that the decision of the earlier CIT(A)'s order in the assessee's own case for the assessment year 2012-13 has not become final and the Department has preferred appeal before the ITAT Chennai vide ITA No. 275/CIT(A)-15 dated 22/03/2016. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored". 75. The grounds of appeal No. 1 & 4 are general in nature therefore, does not require any adjudication. 76. Grounds 2 to 2.2 challenges the decision of Ld. CIT(A) in allowing ESOP expenses as revenue expenditure. 77. This issue was raised by the Revenue for the assessment year 2009-2010 in ITA No. 2011/CHNY/2016, wherein we decided the issue in favour of the assessee vide para 10 of above. Fact situation being the same, grounds of appeal No. 2 to 2.2 of the Revenue for assessment year 2012-2013 also stand dismissed. 78. Grounds 2.3 to 2.5 challenges the decision of Ld. CIT(A) in deleting the disallowance of Rs. 1,17,70,125/- ma....