TaxTMI 
TaxTMI 
2021 (2) TMI 713
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....by the assessee and the Revenue for assessment year 2013-14 are reproduced as under:- Assessee's Appeal Disallowance of 'other income' under Section 80IA The Learned AO and CIT(A) erred in disallowing amount to the tune of Rs. 27,80,384 under Section 80IA the following income classified as 'other income' without appreciating the fact that there is first degree nexus with the business of the assessee II. The Learned AO and CIT(A) failed to appreciate the fact that the decision of Hon'ble Apex Court in the case of M/s Liberty India (317 ITR 218) is not applicable to the facts of the present case. III. Without prejudice to the above, the Learned CIT(A) erred in estimating only 10% of 'other income' as expenses incurred in relation to earning of the 'other income' and 90% thereof as profit element therein not eligible for deduction without any nexus to any material or evidence. Disallowance of expenses under Section 14A IV. The Learned AO and CIT(A) erred in remanding the issue of applicability of Section 14A for fresh consideration by the Learned AO without appreciating that during the Assessment year 2004-05, the power bills du....
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....partite agreement was in place, there remained uncertainty with respect to realization. XIII The Learned CIT(A) ought to have appreciated that the Appellant is entitled to deduction on account of any debt written off as irrecoverable in the books of account as can be inferred from the decision of Hon'ble Apex Court in the case of TRF Ltd. v CIT [(2010) 323 ITR 397 (SC)] and the accounting and tax treatment of the Appellant in not recognizing the revenue is equivalent to the accounting and tax treatment of recognizing the revenue and simultaneously writing off the same as bad debt. Thus, in view of the settled law [CIT v. Sarkar Builders (2015) 375 hR 392 (SC)] that an assessee should not be prejudiced by the differences in accounting treatment adopted by him, the Hon'ble ITAT ought to have accepted the plea of the Appellant. XIV The Appellant craves leave to alter, modify, add any additional grounds of appeal during the course of the proceedings. Revenues Appeal 1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2. The learned CIT(A) has erred in deleting the disallowance made u/s 801A in respect of ....
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....he assessee, at the time of hearing submitted that this issue is covered against the assessee by the decision of ITAT, Chennai Bench in the assessee's own case for assessment years 2007-08 to 2010-11 in ITA No.1983/Mds/2011 and 2077/Mds/2013. But, the issue of surcharge received from Electricity Board has come up for consideration for the first time and hence it cannot be said that the issue if fully covered against the assessee. The AR further submitted that interest from EB's represents interest for delayed payment of receivables which is having a first degree nexus with main business activity of the assessee. Therefore, it forms part of income from operations eligible for deduction under the Act. The ld.AR further submitted that one more item of income came up for the first time for consideration is interest from contractors pertains to amount received from contractors for non-compliance with terms of agreement. The agreement between the parties is with regard to generation of electricity which is the main business activity carried out by the assessee for the impugned assessment years and hence forms a direct nexus to the main business activity of the assessee i.e., generation a....
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....iberty India Ltd., vs. CIT, referred to supra, same did not have a direct link with the business of power generation, and hence, while computing deduction u/s.80IA of the Act, the other income has been excluded. The facts for the year under consideration are similar to the facts considered by the Tribunal for earlier years except to the extent of two new items of income being surcharge from electricity boards and interest from others [interest received from Fenner India Limited as per terms of agreement]. Therefore, we are of the considered view that the assessee is not entitled for deduction towards eligible profit u/s.80IA of the Act in respect of other income because said income does not have first degree nexus with the main business activity of the assessee. In so far as surcharge from Electricity Boards, the issue has came up for discussion for the first time in the impugned assessment year and hence, needs to be considered in light of arguments advanced by the assessee that it has first degree nexus with business of generation and distribution of power. We have examined the claim of the assessee in light of proviso to Regulation 5(3) of Central Electricity Regulatory [term....
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....t, we find that compensation paid in terms of arbitral award is not linked to interest earned by the assessee from the party and hence, the same cannot be set-off against interest earned by the assessee. Therefore, alternative plea of the assessee is rejected. We further note that a similar issue has been considered by the Co-ordinate Bench of the Tribunal in assessee's own case for assessment year 2012-13 in ITA No.2200/Mds/2016, where under identical set of facts the Tribunal has upheld re-computation of eligible deduction u/s.80IA of the Act, however accepted the plea of the assessee for deduction of 10% expenses towards other income while computing the deduction. The relevant findings of the order of the Tribunal are as under:- "6.3 We have considered the rival submissions. On perusal of the Assessment Order and also the order of the Co-ordinate Bench of this Tribunal in the assessee's own case referred to supra clearly shows that the issues in regard to the handling charges, interest received from employees and miscellaneous income has been held to be not interlinked with industrial activity of power generation and therefore in view of the decision of the Hon'ble Supr....
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....oth sides and considered material on record, we find that disallowance of expenditure in relation to exempt income u/s.14A of the Act is recurring issue and is a subject matter of deliberation of the Tribunal in the assessee's own case for assessment years 2007-08 to 2012-13. Further, the Tribunal after considering relevant facts and also following its earlier order has set aside the issue to the file of the AO and directed him to re-adjudicate the issue in accordance with law. The relevant findings of the Tribunal are as under:- 6.5 We have considered the rival submissions. As the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 referred to supra wherein the Co-ordinate Bench of this Tribunal following the decision in the assessee's own case in ITA Nos.712 & 713/Mds/2010 dated 11.04.2013 wherein it has been held as follows: 13. We have perused the orders and heard the rival submissions. Insofar as ground of the Revenue that ld. CIT(Appeals) had not considered the decision of Special Bench of this Tribunal in the case of Daga Capital Management (P) Ltd. (supra), we find that this de....
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....the assessee that there is uncertainty in the realization of surcharge from the Electricity Boards and unless there is an uncertainty in realization, the same cannot be considered as accrued for the year for the purpose of taxation. The assessee has taken support from AS9 issued by the Institute of Chartered Accountants of India and argued that where the ability to assess the ultimate collection with reasonable certainty is lagging at the time of raising any claim, revenue recognition is postponed to the extent of uncertainty. Since there is no certainty of realization of surcharge from Electricity Boards, the assessee has postponed recognition of income even though said surcharge has been accounted in the books of accounts of the assessee on accrual basis. The assessee has taken support from the decision of Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd., vs. CIT, 225 ITR 746 and argued that in the event of uncertainty of realization of income, the same even though accrued in the accounts, deserves to be excluded for the purpose of computation of taxable income. The assessee has taken support from the decision of the Hon'ble Supreme Court in the case of CIT vs. Ex....
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....e, there is no doubt regarding the payment of dues when there is binding tri-party agreement. Accordingly, held that surcharge recoverable from Electricity Boards is taxable on accrual basis, but not on receipt basis. The relevant findings of the Tribunal are as under: 4.3 We heard the rival submissions and perused the material placed before us. In this case there is provision for levy of surcharge in delayed payments and the assessee has not reckoned the surcharge as income. The assessing officer has assessed the surcharge on the basis of the accounting system followed by the assessee. The tariff in respect of NLC which is central generating station is governed by the Central Electricity Regulation Commission (in short 'CERC') which is generally notifies once in three years. Accordingly, CERC has notified tariff regulations 2001 for the period 2001-04, Tariff regulations-2004 for the period 2004-09 and tariff regulations 2009 for the period of 2009-14 and presently tariff regulations 2014 is valid till 31.03.2019. In all the above notification CERC has provided late payment surcharge and the assessee has levied surcharge, but could not recover from the Electricity Boards.....
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.... electricity bills which is untenable. The assessee is following mercantile system of accounting and as per the system of accounting followed by the assessee, the income is accrued. Now the question is whether the recovery of surcharge levied or leviable by the assessee is uncertain or certain? Is there any uncertainty in accrual or collecting the surcharge? In this connection, the AO brought out the list of conditions, stipulations and strict guidelines to the Electricity Boards in Para No.8.3 to 8.6 from the tripartite agreement in the Assessment Order which is extracted as under: 8.3 However, the tripartite agreement also stipulates strict guidelines to the Electricity Boards for making payment of current dues, i.e., dues payable on or after 1st October 2001. For ready reference, list of such conditions and guidelines given in the tripartite agreement dated 17.04.2002 are given below. * "12. All CPSUs ( viz., assessee company and other power suppliers) will continue to raise and collect their current bills against the SEBs or their successor entities in accordance with the existing practice or such other arrangement as may be mutually determined. Notwi....
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....eases until the default is cured. * Recovery of overdues from the State Governments: Payments that remain outstanding after 90 days from the date of billing shall be recovered on behalf of the CPSUs by the Ministry of Finance through adjustment against releases due to the respective State Government on account of plan assistance. States share of Central taxes and any other grant or loan." 8.4 From the above guidelines and conditions as given in the tripartite agreement, particularly in Para 14 (highlighted) it is amply clear that interest (or surcharge) becomes payable from Electricity Boards if payments due to the assessee company are not made within 60 days from the date of billing or within 45 days of receipt of bill, whichever is later. It is also provided in Para 17 of the agreement that payments that remain outstanding after 90 days from the date of billing shall be recovered, on behalf of the assessee company, by the Ministry of Finance through adjustment against releases due to the respective State Government on account of plan assistance, States' share of Central taxes and any other grant or loan. This tripartite agreement would be in force till 31.10.200....
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....ra. The facts of the case are clearly distinguished by the AO in his Assessment Order. In the cited case law as stated in the Assessment Order, the consumers have gone to the court and the Hon'ble Court has decreed in favour of the consumers against the increase of Electricity Charges on account of Electricity dues. The tariff could not be realized either by Court orders or Government Orders, since there was a decree granted by the Trial Court which was affirmed by the Appellate Court and there was an uncertainty in releasing the dues in the case of Godhra Electricity Co. Ltd. There was no tri-partite agreement, as if, in the case of the assessee to ensure recovery by Ministry of Finance through adjustment in the case of Godhra Electricity Co. Ltd.. Therefore, the case law relied upon by the assessee cannot come to help of the assessee. The tripartite agreement entered in to with the Government of India, Reserve Bank of India and the state Governments has to be given due credence and simply cannot be brushed aside. Considering all the facts and merits of the case we hold that there was no uncertainty in realizing the tariff or surcharge by the assessee company and....
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....sed the materials available on record and gone through the orders of the authorities below. The issue regarding deduction claim u/s.80IA of the Act, in respect of income derived from unit TPS-I expansion is squarely covered in favour of the assessee by series of decisions of Co-ordinate Bench of ITAT, Chennai in assessee's own case for assessment years 2008-09 to 2010-11. The Tribunal under identical set of facts has allowed deduction towards income generated from new industrial undertaking by following its earlier order for assessment year 2001-02 in ITA No.2315/Mds/2003. The relevant findings of the Tribunal are as under:- "5.0 For the AYs 2008-09, 2009-10 and 2010-11, the Revenue raised the grounds relating to the issue of deduction u/s.80IA. During the assessment proceedings the AO found that the assessee has claimed the deduction u/s 80IA pertaining to the Unit TPS-I expansion. AO was of the view that the Unit TPS-I was an expansion of the existing unit and hence not eligible for deduction u/s80IA.The AO disallowed the deduction holding that the expansion cannot be considered as a new unit. The disallowance made by the AO u/s.80IA for the AYs 2008-09, 2009-10 & 2010-1....
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....oducing new techniques for enhancing its already existing productivity. 5.2 Aggrieved by the order of the AO, the assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) deleted the addition as under: 4.2 I have carefully considered the facts of the case and the submissions of the Ld.AR. I have also gone through the decisions relied on by the Ld.AR and the AO. The main objection of the AO is that the new unit started cannot be considered as separate undertaking because it is using the same manufacturing technology and the finished goods are also the same, i.e., power. The new unit, i.e., unit TPS-I Expansion is nothing but the expansion of the already existing TPS-l unit. He further stated that benefit of sec 80-lA shall be applicable only to the assessee who have started "new business" of generation of power and not to those expanding their business by establishing new plant and machinery and also by introducing new technology for enhancing existing productivity. But reading of the section, in my opinion, does not lead to the interpretation as expounded by the AO. Relief u/s 80-lA(1) is in respect of profits and gains derived by an undertaking from busines....
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....tegral part of the first unit as it could survive independently of the first unit. Reference may be made to (the decision in CIT v. Indian Aluminium Co Ltd, 108 ITR 367(SC), CIT v. Gedore Tools (India) P. Ltd, 126 ITR 673, CIT v. Ambur Cooperative Sugar Mills Ltd, 127 ITR 495(Mad.), CIT v. Hutti Gold Mines Co.Ltd, 128 ITR 476(Kar). In the case of the appellant, the main section grants relief in respect of profits and gains of an undertaking. Explanation 2 under subsection (3) of sec 80-IA cannot govern or restrict the relief available under the main section. It is not correct to interpret the relief that can be granted u/s.80-IA on the basis of a wording in an Explanation to a subsection concerned only with regard to transfer of machinery previously used for any other purpose to a new business. Various Hon'ble Courts including the Hon'ble Supreme Court, on issues relating to deductions u/s. 80HH, 80I and 80J, have consistently held that expansion in production of the existing product in a geographically separate and independent undertaking will be entitled to relief under those sections. In fact, the heading of these section as well as 80-lA is "Deduction in respect of pro....
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.... UPS is an integral part of computer system eligible for higher depreciation at the rate of 60%. 8.2 Having heard rival contentions and perused materials available on record, we find that this issue is squarely covered in favour of the assessee by the decision of the ITAT, Chennai Benches in assessee's own case for assessment year 2012-13 in ITA No.2163/Mds/2016, where under identical set of facts the Tribunal has allowed depreciation at the rate of 60% on UPS on the ground that UPS is an integral part of computer system eligible for higher depreciation. The relevant findings are as under:- 7.7 In regard to Ground No.5, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in allowing the depreciation on UPS at 60% as against 15% allowed by the AO. It was submitted that the Ld.CIT(A) had allowed the same following decision of the Hon'ble Supreme Court in the case of CIT vs. BSES Rajdhani Power Ltd. in SLP No.1266/2010. The Ld.DR vehemently supported the order of the AO. 7.8 In reply, Ld.AR vehemently supported the order of the AO. 7.9 We have considered the rival submissions. UPS being the integral part of the computer sy....
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.... which is a subject matter of deliberations by the Coordinate Bench of the Tribunal in the assessee's own case right from assessment years 2007-08 to 2012-13. The Tribunal under identical set of facts has held that civil structures qua water supply and drainage systems is part of plant and machinery and eligible for depreciation at 15% applicable to plant and machinery. The relevant findings of the Tribunal are as under:- 7.10 In regard to Ground Nos.6.1 & 6.2, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in allowing the assessee's claim of depreciation at 15% in respect of the civil structures. It was a submission that the AO had restricted the depreciation to 10%. It was a submission that the Ld.CIT(A) had allowed the claim of the assessee by following his predecessors orders. It was fairly agreed by both the sides that this issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 referred to supra wherein Para No.2.4, the Co-ordinate Bench of this Tribunal has held that the civil structures made for drainage and water supply in th....
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....ee's own case for assessment years 1993-94 to 1999-2000 reported in (2016) 69 taxman.com 174. The ld.DR on the other hand fairly agreed that this issue is also covered in favour of the assessee by the decision of the Tribunal in assessee's own case for earlier assessment years, however he supported the order of the ld.AO. 10.2 We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. We find that the Tribunal has considered an identical issue for assessment year 2012-13 in ITA No.2163/Mds/2016, where by following the decision of Jurisdictional High Court in assessee's own case for assessment years 1993-94 to 1999-2000 held that insurance spare consumption to be treated as revenue in nature. The relevant findings of the Tribunal are as under:- "7.13 In regard to Ground No.8, it was submitted that the issue was against action of the Ld.CIT(A) in allowing the assessee's claim of treating the spares valued at more than Rs. 50.00 lakhs as Revenue expenditure instead of a capital. It was fairly agreed by both the sides that the issue was squarely covered by the decision of the Hon'ble jurisdictional High Co....