TaxTMI 
TaxTMI 
2020 (11) TMI 940
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....ntitled to deduction under sections 80I & 80 IA of the Act amounting to Rs. 156.5 crores. 2. That on the facts and circumstances of the case and in law, having accepted that appellant is engaged in manufacture of LPG for which 80%(appx.)of gas was processed, the authorities below erred in holding that appellant is not an industrial undertakings engaged in manufacture or production of different article or thing. 3. That on the facts and circumstances of the case and in law, the CIT (A) erred in confirming the disallowance of 50%of LPG profits on an estimated basis amounting to Rs. 41.32 Crores. 4. That on the facts and circumstances of the case and in law the CIT(A)erred in confirming the disallowances of Rs. 40.55 lakh on account of amortization of the cost of lease hold land as a capital expenses. 5. That on the facts and circumstances of the case and in law, CIT (A) erred in upholding the sales, interest and miscellaneous income of Rs. 1125.11 lakh relating to pre- commencement stage of plant as income from other sources, rather than abating the same from the construction cost of the plant. 6. That on the facts and circumstances of the....
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.... in ITA No. 4454 and 4642/Del/2013 in assessee's own case for the assessment year 1996-97 which order has been followed by the tribunal in AY 1997-98 and 1998-99 in ITA No. 4057 and 5091/Del/2014 and 5775 and 5912/Del/2014. For the detailed reasons given therein ground nos. 1, 2 and 3 are allowed. 3. Ground no. 4 relates to amortization of leasehold expenses. During the course of assessment proceedings, the AO noticed that assessee has claimed deduction of Rs. 40.55 lacs on account of amortization of leasehold expenses paid by the assessee to various local government authorities for lease on rent. The AO was of the firm belief that the same is of capital in nature and hence, not allowable. The action of the AO was upheld by the Ld. CIT(A). 3.1 We find that this issue is no more res integra as the same has been decided against the assessee and in favour of the revenue by the Hon'ble Delhi High Court in assessee's own case in assessment year 1997-98 in ITA No. 956 and 957/2011 vide order dated 5.11.2012 [27 taxman.com 97]. Since the issue has been decided against the assessee by the Hon'ble Jurisdictional High Court, this ground is accordingly dismissed. 4. Ground no. 5 rela....
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....ards pay revision is contingent in nature since the wage settlement agreement had been entered into the following assessment year and not during the year under consideration. Accordingly, the addition of Rs. 11.18 crores was made which was confirmed by the Ld. CIT(A). 5.1 Before us, the Ld. counsel for the assessee vehemently stated that in view of the binding policy of the Government of India for pay revision of the assessee's employees, the assessee has made the provision since the pay revision was due w.e.f. 1.1.1997. It is a say of the counsel that the liability of the assessee had been crystalised and being ascertained liability should be allowed as deduction. 5.1.1. Per contrar, the Ld. DR supported the findings of the AO. 5.2 We have given the thoughtful consideration of the orders of the authorities below. We find that on identical set of facts in the year 1999-2000, the assessment of the assessee was subject to revisionary proceedings of the Ld. Commissioner u/s. 263 of the Act. The matter travelled upto the Tribunal and the Tribunal in ITA No. 2577/Del/2004 set aside the order of the Ld. CIT and allowed the claim of deduction of the provision of wage revision. Th....
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....er to expand its existing network, during the year under consideration, the assessee incurred expenditure of Rs. 35.80 lacs being the payment made to ONGC as reimbursement of expenses incurred and paid by ONGC for obtaining "seismtic data" from various parties pertaining to particular proposed contract area. The AO was of the firm belief that the aforesaid expenditure had been incurred in respect of new line of business which is not part of the appellant existing business and hence, it is capital in nature. The action of the AO was upheld by the Ld. CIT(A). 6.1 Before us, Ld. Counsel for the assessee stated that the expenditure of Rs. 35.80 lacs has been incurred for exploring the new business opportunities in the field of exploration, production and distribution of gas which was the existing business of the assessee. It is a say of the counsel that similar market expenses have held to be allowable by the tribunal in ITA No. 4454 and 4642/Del/2013 vide order dated 26.10.2020 for AY 1996-97. The Ld. Counsel also placed reliance on various judicial decisions. 6.2 Per contra, the Ld. DR strongly supported the findings of the lower authorities. 6.3 We have given t....
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....nd no. 16 is accordingly become infructuous. 8. Ground no. 9 relates to the disallowance made u/s. 14A of the Act. During the course of certain assessment proceedings, the AO noticed that the assessee has received dividend income of Rs. 18.96 crores. The AO was of the opinion that assessee must have incurred certain expenditure for earning the exempt dividend income. By applying the provision of section 14A of the Act the AO computed the disallowance of Rs. 26.29 crores which was confirmed by the Ld. CIT(A). 8.1 Before us, the counsel for the assessee stated that the asessee was directed to purchase shares of ONGC by the Government for disinvestment and cross purchase of shares of PSU and pursuant to the directions of the Government of India, the assesee invested Rs. 556.28 crores out of which Rs. 450 crores was paid as advance in financial year 1998-99 and balance Rs. 106.28 crores was paid in the year under consideration. It is a say of the counsel that the entire investments have been made out of own funds and therefore there should not be any disallowance u/s. 14A of the Act. The counsel further pointed out that nowhere in his assessment order, the AO has recorded any sat....
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.... the capital asset i.e. if the capital assessee is held more than 180 days full depreciation is allowable and if held less than 180 days 50% of the eligible depreciation is allowable. 9.2 Per contrary, Ld. DR strongly supported the findings of the AO. 9.3 In our considered opinion, the claim of revenue loss is well supported by the decision of the Hon'ble Supreme Court of India in the case of Woordword Governor (Supra) and in so far as the claim of depreciation is concerned, the action of the AO is based on the second proviso to section 32(1)(ii) of the Act which is not at all applicable on the facts of the case in hand. 9.3.1 In the present case it is an admitted fact that the addition to the actual cost was made on account of exchange rate variation and not on account of acquisition of any capital fixed assets. In our considered opinion, the addition to the actual cost of fixed assets is amended by the provisions of section 43A of the Act. In our view section 43A nowhere states that where the cost of fixed assets is increased on account of any exchange rate variation there is deemed acquisition of any fixed asset. Considering the facts in totality, we direct the AO to al....
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....pital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future " 10.4 In light of the aforesaid ratio laid down by the Hon'ble Supreme Court of India, we find that the said consultancy payment made by the assessee to EIL was to enhance the existing infrastructure of the assessee in IT segment. This was definitely for the benefit of the management to conduct the business of the appellant in the more efficient manner. We are therefore, of the considered view that such consultancy fee should be allowed as revenue expenditure and accordingly we direct the AO to do the same. The ground no. 11 is accordingly allowed. 11. Ground no. 12 relates to the expenditure on right of use. The underlying facts in this issue are that as part of its business of production, transmission and distribution of gas, the assessee has laid transmission lines under the soil all across the country for which it incurred the expenditure amounting to Rs. 32,06,000/- and claimed the same as deduction, though the same was capitalised as part of cost of land in its books of accounts. The AO did not make any observation in such claim of the assessee an....
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..... 7.95 crores out of the said payment tax amounting to Rs. 6.67 crores has been paid by the assessee before the due date of filing of return. Therefore, to this extent, no disallowance should be made as laid down by the Hon'ble Supreme Court in the case of Allied MotoRs. 224 ITR 677. We further find that assesee suo moto disallowed Rs. 1,19,56,547/- u/s. 43B of the Act, therefore, no further disallowance need to be made. This additional ground is accordingly allowed. 13. The other additional grounds related to claim of deduction on account of prior period adjustments. Before us, the counsel for the assessee stated that certain disallowances have been made in assessment years 2001-02 and 2002-03. The counsel prayed for the allowance of such expenditure during the year consideration. We are of the view that when there is no revenue leakage whether the expenditure is allowed during the year under consideration or in the year of claim should not make any difference and even if such expenditure are allowed during the year and it will result into the adjustments being made in subsequent assessment years that will only increase unnecessary paper work and unnecessary pressure on the rev....
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....00/- of depreciation on account of the capitalization affected due to exchange rate variation. 9. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs. 41809754/- towards consultancy fee paid to M/s EIL and other consultants treating it as capital expenditure. 10. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of depreciation on capitalization of Jamnagar-Loni pipeline and Ghandhar plant amounting to Rs. 153,59,63,050 crores. 11. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of penalty amounting to Rs. 198248 as capital expenditure. 12. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs. 23,36,98,000 lakh towards prior period adjustments. 13. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of year end foreign exchange variation on Revenue account ofRs. 315000. 14. That the orders passed by the Assessing Officer and the CIT(A)are bad in law and....
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....ocessing Plant, Gandhar. The AO was of the opinion that the work of Jamnagar Loni Pipeline was completed after 31.3.2001 and the same was not ready and not put to use on or before 31.3.2001. The AO accordingly disallowed the claim of depreciation aggregating to Rs. 99.37 crores. The reasons given by the AO for disallowing the claim of depreciation in respect of LPG Gas Processing Plant Gandhar is that assessee has not established that the LPG Plant was ready for use on 31.3.2001 and consequently disallowed depreciation aggregating to Rs. 54.22 crores when the matter was agitated before the Ld. CIT(A). The Ld. CIT(A) held that in order to claim depreciation the asset should be put to use for the purpose of business. As regards Jamnagar Loni Pipe Line, the Ld. CIT(A) observed that small work is relating to pipe line was still pending to be done and therefore, the said pipe line was not put to use by the appellant company in the year under consideration. In so far the LPG Gas Processing Plant Gandhar is concerned, the Ld. CIT(A) observed that production started only in April, 2001 and certain works were yet to be completed and accordingly upheld the action of the AO in disallowing the....
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.... • On the basis of the aforesaid, the AO inferred that since the aforesaid bill was raised after 31.03.2001, the Pipeline could not be said to have been commissioned on or before that date • The activities referred to at pg 26 of the impugned order were completed up to 31.03.2001, but bill was raised after 31.03.2001: • The jobs for which the final bill had been raised after 31.03.2001 was for the balance works of material reconciliation, submission of drawings, clean up and restoration, having no relevance to commissioning of pipeline. • Further the bill itself states that cumulative work done till date was Rs. 45.62 crores [Refer Page 21 of AO order] • Refer, pg 228 of the Paper Book, being "Completion of Commissioning Certificate" issued by Engineers India Ltd certifying as follows: "This is to certify that system/ sub-system as detailed below has been successfully commissioned and it under operational control of Client's production department. The minor items will no effect the normal operation of the system/ sub-system...." Section 2: Section 2: • Final....
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....¢ The payment included job of chain link fencing, construction of guard room, and final painting of civil jobs, etc. which are the work not related to the completion of and were only for cleanup/restoration which had no relevance to commissioning or capitalization of the pipeline. • Different section of the pipelines were commissioned as per the certificate issued by the pipeline - in charge dated 22.02.2001 Section C: Abu Road Intermediate Pumping Station • Final bill of M/s Larson & Turbo was raised for period up to 31.05.2001, even though the Contractual Date of Completion was 21.11.2000 • On the basis of the aforesaid, the AO inferred that since the aforesaid bill was raised after 31.03.2001, the Pipeline could not be said to have been commissioned on or before that date. • Only 5% payments related to various jobs which were payable only after completion of work in all respect and acceptance by engineer- in-charge but these had no relevance to the capitalization of the pipeline. • Disallowance of depreciation cannot be based mere....
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.... • EIL have certified that the job was finally completed on 31.11.2001 • On the basis of the aforesaid, the AO inferred that since the aforesaid bill was raised after 31.03.2001, the Pipeline could not be said to have been commissioned on or before that date • M/s Jai Hind Products was awarded the job for laying of spur pipelines for total of Rs. 6 Crores • Since spurlines were integrated with Jamnagar - Loni Pipelines and laid before 31.03.2001, the capitalization was done on 31.03.2001 • Bills were raised late as their were some complication, not affecting the commissioning, in execution of job by the contractor Gandhar LPG plant • All the systems of LPG recovery units, all the utility systems and all the offsite systems had been commissioned, except for those referred at pg 25 of the CIT(A) order • From this certificate it is sent that, even as on 31.03.2001, certain important sub-systems of the plant were admittedly not ready. • From the completion certificate of M/s Bridge and Roof Co. Pvt.....
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....pany. • copy of RGI registers stating opening and closing balance, quantity manufactured and quantity removed from the factory • copy of invoices raised on the customers • details of excise duty on LPG. adjusted through CENVAT/PLA account 22.4 The rebuttal of the assessee mentioned hereinabove have been considered thoroughly with the relevant documentary evidences referred therein and placed in the paper book. Considering the facts in totality, we are of the considered view that assessee has successfully commissioned the Jamnagar Loni Pipeline and the LPG Gas Processing Plant Gandhar and is very much eligible for claim of depreciation on the capitalised cost thereon. We accordingly, direct the AO to allow the depreciation of Jamnagar Loni Pipeline and Gandhar Plant. Ground o. 10 is accordingly allowed. 23. Ground No. 11 relates to the disallowance of payment of penalty of Rs. 1,98,248. Facts on record show that this amount was capitalised alongwith cost of project and transferred to IEDC account as it was incurred before the completion of the project. However, the AO without applying his mind disallowed the ....
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.... stage of plant as income from other sources, rather than abating the same from the construction cost of the plant. 6. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance u/s 14A of Rs. 2236.88 lakh on notional interest burden and administrative charge calculated by assessing authority in its own way to earn tax free dividends. 7. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of Rs. 654.50 lakh of depreciation on account of the capitalization affected due to exchange rate variation. Ld. CIT(A) also erredin not allowing suo moto depreciation on Rs. 153.60 crores which was not allowed by AO in AY 2001-02 (by not accepting capitalization of Jamnagar Loni Pipeline and LPG plant at Gandhar). 8. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs. 1664.65 lakh towards expense related to prior period adjustment that are actually errors or omissions of the past, booked during the year. 9. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming foreign exch....
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....s been decided in ITA No. 301/Del/2006 vide ground no. 10 & 13 of that appeal. For the reasons given therein the ground no. 7 and 9 are allowed. 32. Ground no. 8 relates to prior period adjustments. Similar issue has been decided in ITA No. 301/Del/2006 & in ITA no. 858/Del/2006 (AY 2001-02) vide ground no. 12 of that appeal. For the reasons given therein the ground no. 8 is allowed. 33. Ground no. 10 relates to allowability of depreciation on fixed assets. Identical issue has been decided in ITA No. 858/Del/2006 (AY 2001-02) vide ground 10 of that appeal. For the reasons given therein the ground no. 10 is allowed. 34. Ground no. 11 relates to levy of interest u/s. 234C of the Act. The claim of the assessee is that there was no deferment of advance tax on the total income declared in the return of income. The assessee contends that the advance tax of Rs. 140 crores for the quarter ended 15.09.2001 was credited to the Government Treasury on 17.09.2001 since 16.09.2001 was a Holiday. It is a say of the counsel that since the tax was deposited vide cheque no. 985562 dated 14.9.2001 with SBI CAG Branch, New Delhi duly receipted by the Bank on 15.09.2001. The date of clearin....