TaxTMI 
TaxTMI 
2021 (8) TMI 608
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....ssee without going into the actual facts and materials of the case regarding the proportionate disallowance made by the AO. 2. The CIT(A) has erred in deleting the addition of Rs. 6,63,00,000/- on account of interest expenses without going into the facts that as per Auditor's note capital jobs were capitalized for: (i) 12 MW Thermal Power Plant on commissioning thereof on 25.09.2012 (ii) J. K. Nagar sub-station on completion of construction and commissioning at the close of the year. 4. The facts as noted by the AO to disallow the claim of the assessee are as under: "Interest required to be capitalized From the auditor's note it appears that during the year, following capital jobs were capitalized: (i) 12 MW Thermal Power Plant on commissioning thereof on 25.09.2012 (ii) J. K. Nagar sub-station on completion of construction and commissioning at the close of the year. From the above view it appears that the entire interest was not utilized in full for the business purpose of the assessee of the year under consideration. However, the assessee company had not provided any break up of the proportion to be capitalized. From the letter dated 08.02.2016 submitted by t....
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....the amount should be capitalized or allowed as deduction u/s 36(1)(iii) of the I T Act, 1961. The A/R of the appellant in a lengthy submission had submitted that part of the interest payment have been capitalized and the balance claimed as expenditure u/s 36(1 (Vi) as provided in the Act. No fault could be found with this reasoning. Moreover, the disallowance of interest had been made on ad hoc basis on the basis of an unscientific calculation which has no legal basis. The disallowance of Rs. 6,63,00,000/- is deleted. This ground of appeal succeeds and is therefore allowed." 6. Aggrieved by the aforesaid action of the Ld. CIT(A) the revenue is in appeal before us. 7. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee has taken borrowed funds of Rs. 35 cr., Rs. 50 Lakhs and Rs. 41 Lakhs from IDBI Bank, South Indian Bank and Axis Bank respectively totaling Rs. 85.41 cr. As per the auditor's report the assessee has commissioned its Thermal Power Plant on 25.09.2012, therefore, it capitalized the expenditure incurred on the interest outgoing from the borrowed fund for capital projects till that date (25.09.2012) i.e. ....
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.... has allowed the claim of the assessee on the well settled principle of law on this subject. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and confirm the same. These grounds of appeal of revenue are dismissed. 8. Ground no. 3 of revenue appeal reads as under: "3. In the facts and circumstances of the case, on the issue of addition of debenture redemption reserve in computing Book profit u/s. 115JB the order of the Ld. CIT(A) is erroneous. As per explanation 1 of sec. 115JB, the amount carried to any reserves, by whatever name called, is to be included in computing Book Profit. As the debenture redemption reserve is a reserve, the same should be included in the Book profit." 9. Brief facts of the case are that the AO has disallowed Rs. 3.50 cr. while computing income u/s. 115JB (MAT) of the Act. According to the AO, the Debenture Redemption Reserve (hereinafter referred to as "DRR") was carried to reserve so it should be added back under Explanation 1(b) to sec. 115JB of the Act and thus added back this amount. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who gave relief to the assessee by observing as under: "I have considered th....
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....wed." 10. Aggrieved by the aforesaid decision of the Ld. CIT(A), the revenue is in appeal before us. 11. We have heard rival submissions and gone through the facts and circumstances of the case. We note that an amount of Rs. 3,50,00,000/- was transferred by the assessee to Debenture Redemption Reserve (DRR) which was required to be paid at the time of redemption of the debentures and the assessee claimed exclusion of it while computing book profit u/s 115JB of the Act. However the AO was of the opinion that the amount carried to any 'reserve' need to be added as per Explanation 1(b) of Section 115JB of the Act and added it while computing the book profit. On appeal the Ld. CIT(A) has allowed the claim of assessee and excluded it from book profit. When we examine this issue we note that the Hon'ble Supreme Court in the case of National Rayon Corporation Vs. CIT 227 ITR 164 (SC) has held that " the basic principle is that an amount set apart to meet a known liability cannot be regarded as reserve". It is common knowledge that by issuing debentures a company takes a loan which it has to repay; and the loan is taken against the security of its assets. Even though the loan need not be....
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....he first ground of cross objection of the assessee is against the action of the Ld. CIT(A) in confirming the disallowance of claim of education cess amounting to Rs. 27,40,223/- in computing total income under normal provisions of the Act. The Ld. CIT(A) had decided this issue as under: "I have considered the submission of the appellant and perused the relevant assessment records. The A/R of the appellant has claimed deduction of Rs. 27,40,253/- on account of Education Cess. The AO in the assessment order had disallowed the claim. The A/R of the appellant had referred to the decision of the jurisdictional ITAT in the case of M/s. ITC Ltd. vs. DCIT ITA No. 685/Kol/2014 in support of his claim. The relevant portion of the order is reproduced as follows: "the assessee's additional last/substantive ground avers that it is entitled for the educations secondary higher education cess as overhead deduction amounting to RS.423618317.0 u/s 37 of the Act. We note that Hon'ble Rajasthan High Court's decision in DB Income Tax Appeal No. 52/Kol/2018 M/s Chambal Fertilizers Ltd vs DCIT decided on 31.07.2018 takes into account CBDT Circulated' dated 18.05.1967 for holding such cess....
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....ular, the disallowance of Rs. 27,40,253/- claimed on account of Education Cess is confirmed. This ground of appeal. fails and is therefore, not allowed. 13. Aggrieved the assessee is in appeal before us. 14. We have heard rival submissions and gone through the facts and circumstances of the case. At the outset, the Ld. AR brought to our notice that the issue is no longer res integra in the light of the decision of this Tribunal in the case of SREI Infrastructure Finance Ltd. Vs. Addl. CIT, Range-9(2), Delhi in ITA No. 1318/Del/2012, ITA No. 1302/Del/2012, ITA No. 1821/Kol/2016 and ITA No. 2003/Kol/2016 dated 31.12.20019 wherein this Tribunal while adjudicating a similar issue has held as under: "25. Concise and summarized ground No.6 is reproduced below for ready reference: (6). Ld CIT(A) erred in not treating Education Cess as an allowable expenditure under section 37(1) of the Act. (Additional ground raised by assessee in ITA No.1318/Del/2012, for A.Y.2008-09, and Ground No.3 raised by the assessee in ITA No.1821/Kol/16 for A.Y.2011- 12). [ Hon`ble High Court Question No. (v)]. 26. We heard both the parties and carefully gone through the submission put forth on behalf of ....
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....ought to the notice of all the ITOs so that further litigation on this account may be avoided " 27. The Ld. AR also relied on the judgment of Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT (ITA No. 52/2018) which after taking into account aforementioned CBDT circular held that Sec. 40(a)(ii) applies only to taxes and not to education cess. Relevant extract of the decision is reproduced for ease of reference:- "13. On the third issue in appeal no. 52/2018, in view of the circular of CBDT where word "Cess" is deleted, in our considered opinion, the tribunal has committed an error in not accepting the contention of the assessee. Apart from the Supreme Court decision referred that assessment year is independent and word Cess has been rightly interpreted by the Supreme Court that the Cess is not tax in that view of the matter, we are of the considered opinion that the view taken by the tribunal on issue no. 3 is required to be reversed and the said issue is answered in favour of the assessee 28. We note that Coordinate Benches of this Tribunal in the following cases held that education cess should be allowed as an expense. The rel....
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....f Rs. 71,65,049/- and Rs. 77,76,699 (assessment year wise); respectively as allowable in computing total income other than MAT u/s. 115JB of the Act. Hon'ble Apex Court's land mark decision National Thermal Power Corporation Ltd (NTPC) V/s. CIT (1998) 229 ITR 383 (SC) as considered by this tribunal's Special Bench order M/s. All Cargo Global Logistics Ltd V/s. DCIT (12) 137 1TD 26 (Mum.) settles the law that we an very well entertain such a legal question in order to determine the correct tax liability when all the relevant facts form part of records. We thus allow assessee's additional ground to be raised. 12. Coming to merits of the hon'ble Rajasthan high court's decision in Chambal Fertilisers & Chemicals Limited V/s. JCIT(D.B Income Tax Appeal No. 52/2018, dated 31-07-2018 taking note of CBDT's Circular No. 91/58/66 dated 18-05-1965 as well as co-ordinate bench's order in ITC Limited V/s. ACIT( ITA No. 685/Kol/2014 dated 27- 11-2018 hold that such a claim of education cess is very much allowable in computing total income under the provisions of the Act." 29. The Ld Departmental Representative relied on the earlier decision of ITAT dated 27- 02-2019, wherein this Tribunal ha....
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.... capital profits. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of the AO by relying on the decision of Veekay Lal Investment Co. Pvt. Ltd. reported in 249 ITR 597 and has held as under: "I have considered the submission of the appellant and perused the relevant assessment records. There is a cleavage of opinion as whether profits on transfer of assets should be considered while computing MAT. The A/R of the appellant had cited a number of judicial decisions which have held that the profits on sale of fixed assets credited to P/L account need to be excluded while computing the books profit u/s 115JB of the Act. However, there are many other judicial decisions which have held otherwise. In this regard, reference is made to the decision of the Hon'ble Bombay High Court in the case of Veekay Lai Investment CO. Pvt Ltd reported in 24911TR 597 which held as follows : "We find merit in this appeal. According to section 115(1), in the case of an assessee being a company if the total income is less than 30% of its book profits then the total income of such company shall be deemed to be an amount equal to 30% of such book profit and such ....
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....the 2dmpany or undertaken in circumstances of exceptional or non recurring nature shows clearly that capital gains should be included for the purpose of computing book profits. That capital gains would certainly be one of the various items whose information is required to be given to the shareholders under the said clause 3(xii)(b). So also, the disclosure is required to be made in respect of investment in the capital of a partnership firm if the company is a partner on the date of the balance sheet (see page 165) of the Companies Act by A. Samaiya, fourteenth edition). Similarly, profits or losses on such investments are also required to be disclosed (see clause 3(xii)(b) of Part-Il of Schedule VI to the Companies Act. In the circumstances, the question is answered in the affirmative, i.e. in favour of the Department and against the assesses." Similar view was held by the Delhi ITA T in the case of Growth Avenue Securities Pvt. Ltd. Vs DCIT Appeal Number: ITA No. 3912/Del/2005." Therefore, on conspectus of the various judicial decisions, it has to be held that profits on transfer of assets should be considered while considering MAT. Therefore, there is no interference in com....