TaxTMI 
TaxTMI 
2022 (1) TMI 174
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.... First we take up the assessee's appeal for AY 2006-07 bearing ITA No. 1577/AHD/2015. 2. The assessee has raised the following grounds of appeal 1.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in omitting to consider Ground No. 1 of the appellant's appeal challenging the very validity of the assessment order passed u/s. 143(3) read with Section 254, in the following terms: "1. In law and in the facts and circumstances of the appellant's case, the impugned order is void and deserves to be cancelled, inter alia, for the reason that it contains conclusions contrary to the decision of the jurisdictional High Court in DCIT v. Sun Pharmaceutical Industries Ltd. (227 CTR 206)." 1.2 The learned CIT(A) ought also to have considered that, as pointed out at para 2.2 and 2.3 of the very Statement of Facts accompanying the appellant's appeal before him, in truth and substance, the learned Assessing Officer had failed to carry out the directions of the Hon'ble ITAT in the matter of passing the assessment order impugned before him and for that reason as well, that order deserved to be ca....
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.... without the impugned land taken by it under the leases in question, in total disregard of the vital facts concerning the decision of the jurisdictional Gujarat High Court pointed out by the appellant, as aforesaid. 3. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in rejecting the appellant's alternative Ground for grant of depreciation on the impugned initial payments for the leaseholds which, in any case, were intangible assets as defined by the Explanation to Section 32(1). 4. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in rejecting the appellant's alternative Ground for granting deduction for the initial payments for the leaseholds In question on an proportionate basis considering the period for which the leaseholds were granted on the ground that there was no provision . in law for allowing such deduction. He ought to have appreciated, inter alia, that the appellant's claim was eminently covered by the ratio of the Supreme Court decision in Madras Industrial Investment Corporation Ltd. v. CIT(225ITR802). 5. In law ....
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....f the assessee on the reasoning that the lump sum payment made by the assessee represents the cost of the land and therefore the same should be treated as capital expenditure for the acquisition of the land. Under the provisions of section 32 of the Act, no depreciation is allowed on the land. The other observations made by the AO in the assessment order dated 30-12-2008 read as under: i. The lease period was for 99 years which is a substantial period of holding the rights in the land and that too was acquired on the significant lump sum payment at the time of acquiring the land on lease. After the significant lump sum payment, the negligible amount was to be paid i.e. Rs. 1 per square meter per annum. Thus, in substance and for all practical purposes, the assessee became the owner of such land. Likewise, the assessee by acquiring the impugned land has obtained the benefit of enduring nature with perpetual right of getting the renewal of the lease period. Thus, such payment of the premium amount towards the acquisition of land was capital in nature and the land is not subject to depreciation under the Act. Thus, the depreciation claimed by the assessee cannot be allowed as....
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.... 6.3 In view of the above the learned CIT (A) vide order dated 19 February 2009 was pleased to uphold the order of the AO. 7. Being aggrieved by the order of the learned CIT (A), the assessee preferred an appeal before the ITAT in ITA No. 1865/Ahd/2010. The ITAT vide order dated 28-12-2012 for the year under consideration has remitted the issue back to the AO for fresh adjudication as per the provisions of law and in the light of the judgment of Hon'ble Gujarat High Court in the case of the DCIT versus Sun Pharmaceuticals Ltd reported in 329 ITR 479. The relevant extract of the order of the ITAT reads as under: 19. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the facts and circumstances of the case in the present appeal are identical to that of earlier years. We find that on an identical issue in Assessment Year 2004- 05, the co-ordinate Bench of Tribunal in assessee's own case in ITA No.293/Ahd/2008 & 771/Ahd/2008 has remitted the matter back to the file of A.O. by holding as under:- "3. On this short submission of restoration, Ld. D.R. Mr. Kartar Singh had no objection but stated that once the matter....
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....A.O. but the distinction between the two grounds is that ground No.1 is about claim of depreciation on lease hold rights and ground No.2 is about the claim of expenditure pertaining to the said lease. The Hon'ble Court has decided only in respect of deductibility of lease rent but since the matter now stood restored back to the A.O., therefore, we hereby direct to keep in mind this subtle distinction and re-decide as per law. Identically, these two grounds may be treated as allowed but for statistical purposes." 20. Since it is an undisputed fact that the facts in the present year are similar to that of earlier year, we are of the view that since for A.Y. 2004-05, the matter has been remitted back to the file of A.O. to examine and decide the issue in line with the directions contained therein, in the year under appeal also the matter be remitted back to the file of A.O. to decide the matter. We respectfully following the decision of the co-ordinate Bench remit the issue to the file of A.O. to examine the facts and decide the issue in the light of decision in the case of DCIT vs. Sun Pharmaceuticals Ind. Ltd., and after giving reasonable opportunity of hearing to assessee.....
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....reported in 27 taxmann.com 97 wherein it was held that the assessee by acquiring the lease property has obtained the benefit of enduring nature by bringing into existence an asset. Accordingly, such payment of lease premium was treated as capital expenditure. 9. Aggrieved assessee preferred appeal to the learned CIT (A) who upheld the order of the AO by observing that the assessee failed to file any copy of the lease deed. Likewise, the assessee has also not filed the lease deed between the sun pharmaceuticals industries Ltd with the GIDC for the purpose of comparison. Furthermore in the case of Sun Pharmaceuticals Ltd the lease rent was of Rs. 40/- per annum. Likewise, in the case of sun pharmaceuticals industries Ltd there was no change in the capital structure of the assessee on the payment of lease premium whereas in the case on hand there is a change in the capital structure of the assessee by treating the same as intangible assets. 9.1 Moreover, the assessee failed to deduct the TDS under the provisions of section 194(I) of the Act on the amount of lease premium and therefore the same cannot be allowed as deduction under the provisions of section 40(a)(ia) of the Act. ....
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....n nature can be allowed as deduction. iii. Whether the principles laid down by the Hon'ble Gujarat High Court in the case of sun pharmaceuticals industries Ltd are applicable to the present facts of the case. iv. Whether the principles laid down by the Hon'ble Supreme Court in the case of Enterprising Enterprises Vs. DCIT reported in 293 ITR 437 are applicable in the given facts and circumstances. 13.1 Admittedly, it is the 2nd round of litigation before us, meaning thereby, the ITAT on the earlier occasion has set aside the issue to the file of the AO for fresh adjudication with some direction which has been reproduced somewhere in the preceding paragraph. 13.2 It is the trite law that the scope of adjudication of the issue in the set-aside proceedings is limited to the extent of the direction issued by the higher forum. In holding so we draw support and guidance from the judgment of Hon'ble Allahabad High Court in case of S.P Kochhar vs. ITO reported in 145 ITR 255, where it was held as under: The provisions of sections 251 and 254(1) as well as the various judicial pronouncements make it clear that the powers of the AAC are wider than those of th....
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....leased out to the assessee did not cease to be belonging to GIDC, the lessor. The lease deed was registered because as per the Registration Act, it is compulsorily registrable, but it has not changed the ownership. It is not also disputed that the lease rent is very nominal and by obtaining this land by lease the capital structure of the company has not been changed. . . . . . Thus, by this payment the assets of the assessee company had not been increased because the land continued to be the land of GIDC. The benefit the assessee got is only of an advantage of carrying on the business more profitably by paying nominal rent on the land. The issue can be considered in another angle. It cannot be disputed that if the land is not obtained by the assessee it would not be possible for it to carry on the business........." 7. The Tribunal has thus, after referring to two decisions of Supreme Court, held that the land in question was not acquired by the assessee. That merely because the deed was registered the transaction in question would not assume a different character. The lease rent was very nominal. By obtaining the land on lease the capital structure of the assesse....
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....ving further, we also note that the genuineness of the expenses have nowhere been doubted by the authorities below. Thus, the claim of the assessee even pertaining to the earlier assessment year cannot be denied merely on the reasoning that such claim relates to the earlier assessment year i.e. treating as prior period items. There was no change in the rate of tax in the year under consideration viz a viz in the earlier assessment year. Accordingly, there is no loss to the revenue even claim of the assessee is allowed in the later assessment year. In holding so we draw support and guidance from the judgment of Hon'ble Bombay High Court in case of Nagri Mills Co. Ltd. reported in 33 ITR 681, the relevant portion of the finding is extracted herein: "We have often wondered why the Income-tax authorities, in a matter such as this where the deduction is obviously a permissible deduction under the Income-tax Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a comp....
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....e nature of the asset which has been acquired and not by the fact whether it is a payment in a lump sum or by instalments. 13.10 However, in the case on hand we find that the assessee has taken the land for setting up power receipt station in order to further distribution of power to customers and not for the purpose of extraction of the minerals. It is also pertinent to note that Hon'ble SC in its judgment in the case of Pingle Industries Ltd reported in 40 ITR 67 held that: "A large number of decisions were cited before us, but ho infallible criterion of universal application emerges therefrom and each case must turn on its own facts, though the decisions are useful as illustrations and as affording indication of the kind of considerations which may relevantly be borne in mind in approaching the problem. I shall refer in this judgment to such decisions only as have a bearing on the real controversy between the parties. 13.11 From the above judgment it is observed that the principles laid down in a given case cannot be applied in all the cases. As such, the issue depends upon the facts and circumstances of each case. Thus the issue whether the lease premium is capit....
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....40(a)(ia) of the Act, the same cannot be allowed as deduction as business expenses. In this connection we find that, there was the proviso attached to section 40(a)(ia) vide finance Act 2012, which has been held as retrospective, reads as under: [Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.] 13.14 It is pertinent here to refer the first proviso to section 201 of the Act which reads as under: [Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such ....
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....ntification of relief u/s.80-IA warrants much more liberal approach as compared to that of deductions u/s.80HH etc. 4. Without prejudice, on the facts and in the circumstances of the case, the CIT(A) has erred in holding that in quantification of relief u/s.SO-IA the following items are not to be considered as eligible: (i) Insurance receipts Rs. 3,40,16,353 (ii) Street-light maintenance income Rs. 1,44,61,003 (iii) Bad debts recovery Rs. 5,32,51,168 (iv) Interest on Fixed Deposits Rs. 26,76,505 (v) Rent recovered from Staff members for residential quarters Rs. 3,10,990 (vi) Miscellaneous receipts (Including Scrap Sales of Rs. 10,72,87,989) Rs. 11,57,69,618 5. On the facts and in the circumstances of the case, the CIT(A) has erred in not accepting the assessee's plea that it was not a fit case for levy of interest u/s.234A, u/s.234B, u/s.234C and u/s.2340 and he in particular erred in upholding levy of interest u/s.2340 on addition of Rs. 48,26,69,999. 6. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing ....
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....trative expenses Rs. 17,81,570.00 16.4 Thus, the AO made the disallowance of Rs. 38,18,571/- under the provisions of section 14A read with rule 8D and added the same to the total income of the assessee. 17. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing as under: I have carefully perused the assessment order and the submissions given by the appellant. The AO has applied the provisions of section 14A read with rule 8D. He has given a finding that there was an intermingling of own funds and borrowed funds. From A.Y. 08-09 the provisions of rule 8D have been made operative. The formula given in rule 8D takes care of the interest expenses in proportion to the investment in assets that give tax free income. It also works out administrative expenses in proportion to the average investment. Therefore, it takes care of the situation of availability of all types of funds and investment made by the appellant. The Assessing Officer has also considered various submissions given by the appellant during the course of assessment proceedings and after analyzing the submission, he has given a finding that no separate ac....
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....mption can be drawn that the owned fund of the assessee has been used in the impugned investment. Therefore, we are of the view that no disallowance of interest expenses on account of diversion of the fund is warranted. In this regard, we find support and guidance from the judgement of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 wherein it was held as under:- "The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both by the CIT(A) and Tribunal". 21.2 Similarly, we also rely on the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. India Gelatine & Chemicals Pvt. Ltd. reported in 376 ITR 553. The relevant extract of the order is reproduced below: The assessee had made investment in shares and mutual funds. It suo motu offered/ disallowed the amount of Rs. 2 la....
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.... 22. The 2nd issue raised by the assessee is that the learned CIT (A) erred in disallowing the depreciation on the intangible assets being leasehold right. Likewise the alternate contention to allow the deduction of the premium paid on the leasehold land as revenue expenses was also rejected. 23. At the outset we note that, this issue raised by the assessee has already been adjudicated along with the appeal of the assessee bearing ITA No. 1577/AHD/2015 for the AY 2006-07 where the ground raised by the assessee was allowed vide paragraph number 13 of this appeal. For the detailed discussion, please refer the relevant paragraph. In other words, the amount of lease premium was allowed as revenue expenditure. Once the deduction has been allowed to the assessee, the question of allowing either the depreciation or revenue expense does not arise. As such, the issue raised by the assessee becomes infructuous. Accordingly, the ground of appeal raised by the assessee is dismissed as infructuous. 24. The interconnected issue raised by the assessee in ground No. 3 and 4 is that the learned CIT (A) erred in in holding that there are certain incomes which are not eligible for deduction u....
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....Thus, a sum of Rs. 3,40,16,353/- was added to the total income of the assessee. 27. Aggrieved assessee preferred an appeal to the learned CIT (A). 27.1 The assessee before the learned CIT(A) submitted that the insurance claims were settled in the year under consideration with respect to the loss incurred in the earlier years. The accounting principles require that the income from the insurance claim should be recognized when its collection is reasonably certain. Furthermore, the same policy has been adopted by the assessee consistently in recognizing the insurance claim in the year in which it was received. The assessee also submitted that the insurance claim was received with respect to the eligible unit therefore it has integral nexuses with the eligible unit. Thus the same should be allowed as deduction. 28. The learned CIT(A) after considering the submission of the assessee observed that the insurance claim pertains to the period in which the unit was not eligible for deduction under section 80IA of the Act. Likewise, the assessee failed to demonstrate whether such insurance claim represents the revenue or capital receipt. Accordingly, in the absence of the necessary i....
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....ng or reduction of the loss cannot be kept out of consideration while computing the assessee's income eligible for reduction under section 80-IA of the Act." 32.1 From the above, there remains no ambiguity to the fact that the assessee is eligible for deduction under section 80IA of the Act with respect to the impugned insurance receipt shown as income in the year under consideration. 32.2 However, we note that the learned CIT (A) has also given a finding in his order that there is no clarity whether the impugned insurance claim is on account of revenue loss or the capital loss. First of all, we note that the AO in his order has given very clear finding that the loss was claimed as deduction in the earlier year against which the impugned insurance receipt has been shown as income. If that be so, then in our considered view the same treatment should be given to the impugned insurance receipt. In simple words once the loss has been allowed as deduction in the earlier year, then the receipt against such loss by way of insurance claim should also be treated as income of the assessee. There cannot be different treatment for the loss claimed by the assessee and the income shown....
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....ved from the power distribution activity. The maintenance activity is altogether separate and independent to the power distribution activity. It is not necessary for providing the maintenance services to AMC that the assessee should be engaged in the activity of power distribution. Accordingly, the AO excluded the amount of Rs. 1,44,61,003/- from the eligible amount of deduction under section 80IA of the Act. 34. Aggrieved assessee preferred an appeal to the learned CIT (A). 34.1 The assessee before the learned CIT(A) contended that the income from the maintenance of the streetlight has direct nexuses with the business of distribution of power. Therefore, the same should be allowed as deduction under section 80IA of the Act. 34.1 However the learned CIT (A) disregarded the contention of the assessee by holding that the activity of maintaining the streetlight is different and independent to the activity of distribution of power. The assessee was raising the separate invoice to the AMC for maintaining the streetlight besides the bill raised for the consumption of the power. Accordingly, the learned CIT(A) was of the view that the receipt from the maintenance of streetlight i....
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....pression 'derived from the business' has generated a lot of controversy. To our understanding, it refers to the effective source from which the income arises. But to find out the effective source, the term derived from indeed demands an enquiry into the genealogy of the product which should be stopped as soon as the effective source is discovered. 38.2 At this juncture it is important to refer judgment of SC in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) which have interpreted the term 'derived from'. The relevant decisions of the Supreme Court "The Legislature has deliberately used the expression 'attributable to', having a wider import than the expression 'derived from', thereby intending to cover receipts from sources other than the actual conduct of the business of the specified industry." (p.85) 38.3 From the ratio of the aforesaid decision of the Apex Court, it is clear that the phrase 'derived from' covers receipts from the actual conduct of business of the specified industry as provided under section 80-IA of the Act. 38.4 Likewise, as per the Bombay High Court in the case of Hindustan Lever Ltd. v. CIT [1980] 121 I....
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....cluded the sum of Rs. 5,32,51,168/- from the amount of deduction claimed under section 80IA of the Act and added the same to the total income of the assessee. 40. Aggrieved assessee preferred an appeal to the learned CIT (A). 40.1 The assessee before the learned CIT (A) reiterated the submission as made in connection with the insurance claim which have been discussed in the preceding paragraph. 41. However the learned CIT (A) disregarded the contention of the assessee by observing that the bad debts were claim in the earlier years which were also allowed as deduction when the undertaking was not eligible for deduction under section 80 IA of the Act. Therefore any recovery of such bad debts cannot be allowed as deduction under section 80 IA of the Act. 42. Being aggrieved by the order of learned CIT (A) the assessee is in appeal before us. 43. The learned AR before us contended that the bad debts were recovered with respect to the eligible undertaking. Therefore, the same should be eligible for deduction under section 80 IA of the Act. 44. On the other hand, the ld. DR vehemently supported the order of the authorities below. 45. We have heard the rival contentio....
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....irect nexus with the business and one cannot view these transactions away from the business. Such transactions include receipts and payment of money in cash or in kind immediately or on credit and are part of business activities. If the assessee has to make the payment to the above four parties, which were standing in the balance sheet as creditors and which have been claimed as business deduction in an earlier year then only course left to the assessee is either to make the payment or if no payment is legally required, to show as profit under section 41(1) which has been so done by the assessee. There is a clear and direct business connection of such cessation or remission and such profits taxable under section 41(1) can be held as derived from industrial undertaking. The arguments of the ld. DR that they are not current year's profit from manufacturing activity is devoid of any merit because deduction under section 80-IA is available only on profits derived from industrial undertaking which is carrying on manufacturing activities and it is not confined to only current year's profit as per P&L account. The deduction under section 80-IA or 80-IB is available on profits and ....
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.... more liberally. The assessee also quoted several judgments before the learned CIT (A) in support of his contention. 48. However the learned CIT (A) disagreed with the contention of the assessee on the reasoning that there is no nexus between the activity of the assessee being distribution of power and the income received on the short-term deposits made with the bank. Thus, the finding of the AO was upheld by the learned CIT (A). 49. Being aggrieved by the order of the learned CIT (A), the assessee in appeal before us. 50. The learned AR before us contended that the interest was recovered with respect to the eligible undertaking. Therefore, the same should be eligible for deduction under section 80 IA of the Act. 51. On the other hand, the ld. DR vehemently supported the order of the authorities below. 52. We have heard the rival contentions of both the parties and perused the materials available on record. Undeniably, the fixed deposits were made by the eligible undertakings and interest was earned thereon. On perusal of the order of the AO, we also note that there was surplus fund available with the assessee which was parked in the fixed deposits. The relevant cont....
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....ed CIT (A) submitted that that the Hon'ble jurisdictional High Court in the case of Nirma Industries reported in 283 ITR 402 in the context of the provisions of section 80-I of the Act has held that the interest received on delayed payment is part and parcel of the sale proceeds. Accordingly the assessee contended that such amount of interest on the delay payment should be eligible for deduction under section 80-IA of the Act. 55. The learned CIT (A) agreed with the contention of the assessee by observing that the interest paid on account of delayed payment against the use of the power represents the business receipts. Therefore the same is eligible for deduction under section 80-IA (4 )of the Act. Thus the ground of appeal of the assessee was allowed. 56. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us. 57. The learned DR before us vehemently supported the order of the AO. 58. On the contrary, the ld. AR vehemently supported the order of the learned CIT (A). 59. We have heard the rival contentions of both the parties and perused the materials available on record. Once a bill is raised to the customer, it is expected from the cu....
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....tion drawn by Revenue is artificial in nature and is neither in consonance with law nor commercial practice. 30. The Tribunal was, therefore, not justified in holding that while computing deduction under section 80-I of the Act, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial undertaking. 31. In the result, both the questions stand answered as hereinbefore. The appeal is accordingly allowed and stands disposed of." 59.1 From the preceding discussion we note that the judgment was rendered in connection with the provisions of section 80I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act. In view of the above, we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the Revenue is dismissed. Unfulfilled guarantee revenue 60. The assessee charges from its customers who fail to use committed electricity units which is known as unfulfilled guarantee revenue. As per the assessee ....
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....ome from the distribution of power activity which was very much eligible for deduction under section 80-IA of the Act. On the same analogy, the amount paid by the customer on account of the failure on its part for not utilizing the committed units, would partake the character of sale proceeds of power distribution activity. Thus to our understanding such amount of un-fulfilment commitment charges is very much eligible for deduction under section 80-IA of the Act. In holding so we draw support and guidance from the judgment of Hon'able Gujarat High Court in the case of Nirma Indutries Ltd. Vs. DCIT reported in 283 ITR 402 where in it was held as under: "When the assessee enters into a contract for sale of its products it could either stipulate (a) that interest at the specified rate would be charged on the unpaid sale price and added to the outstanding till the point of time of realisation, or (b) that in case of delay the payment for sale of products worth Rs. 100 to carry the sale price of Rs. 102 for first month's delay, Rs. 104 for second month's delay, Rs. 106 for third month's delay and so on. If the contention of Revenue is accepted, merely because the assessee has d....
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....eduction under section 80-IA of the Act. The assessee alternatively contended that if it is denied the benefit of deduction under section 80-IA, then only the net income from the rent after adjusting the corresponding expenses should only be considered for excluding from the deduction. 66.1 The AO was of the view that the impugned rental income has no connection with the power distribution activity. Therefore the same cannot be allowed as deduction under section 80-IA of the Act. Likewise, the alternate contention of the assessee was also rejected by the AO in the absence of the necessary information about the expenditure incurred by it against such rental income. Thus the AO excluded the gross amount of rental income of Rs. 3,10,990/- from the amount eligible for deduction under section 80-IA(4) of the Act. 67. Aggrieved assessee preferred an appeal to the learned CIT (A). 68. The assessee before the learned CIT-(A) submitted that the impugned amount of rent was received from the employees who were employed in the activity of distribution of power. Thus the impugned income represents the income eligible for deduction. Without prejudice to the above, the expenses incurred in ....
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.... not eligible for deduction under section 80-IA of the Act then in our considered view the corresponding depreciation should also be excluded from the profit of the eligible undertaking. Likewise, the expenses incurred in connection with the maintenance of such staff quarters should also be excluded. Accordingly, we direct the AO to exclude the rental income from the amount of eligible profit net of the expenses qua to such rental income. Hence the ground of appeal of the assessee is partly allowed. Delayed payment charges 74. The assessee was recovering the delay payment charges from the customers who have not paid the outstanding amount on the due date. As per the assessee, the late payment charges partake the character of the sales consideration. Therefore the same should be eligible for deduction under section 80-IA of the Act. The AO disregarded the contention of the assessee by observing that the delay payment charges are in the nature of interest and therefore the same cannot be treated as income from the power distribution activity. Accordingly, the AO excluded the amount of Rs. 6,80,81,655/- from the amount eligible for deduction under section 80-IA(4) of the Act. ....
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....m industrial undertaking, but in case of illustration (b) above, if the payment is described as sale price it would be profits derived from the industrial undertaking. This can never be, because in sum and substance these are only two modes of realising sale consideration, the object being to realise sale proceeds at the earliest and without delay. Purchaser pays higher sale price if it delays payment of sale proceeds. In other words, this is a converse situation to offering of cash discount. Thus, in principle, in reality, the transaction remains the same and there is no distinction as to the source. It is incorrect to state that the source for interest is the out-standing sale proceeds. It is not the assessee's business to lend funds and earn interest. The distinction drawn by Revenue is artificial in nature and is neither in consonance with law nor commercial practice. 30. The Tribunal was, therefore, not justified in holding that while computing deduction under section 80-I of the Act, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to....
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....uction under section 80-IA of the Act. Accordingly the AO excluded the sum of Rs. 11,57,69,618/- from the amount eligible for deduction under section 80-IA of the Act. 81.4 However, the AO accepted the alternate plea of the assessee to the limited extent by observing that the amount of scrap sale as discussed in the table given above can be adjusted against the assets shown in the balance sheet which will reduce the amount of depreciation and simultaneously the income of the assessee will increase. Thus the assessee can claim higher amount of deduction under section 80-IA of the Act. But all these adjustments will be made only for the limited purpose of computing the deduction under section 80-IA of the Act without reducing the amount of scrap sale for Rs. 10,04,30,079/- from the total income of the assessee. 82. Aggrieved assessee preferred an appeal to the learned CIT (A). 82.1 The assessee before the learned CIT (A) submitted that sale of the scrap has been generated in the course of business of carrying out the distribution of power. Therefore the same is eligible for deduction under section 80-IA of the Act. 82.2 The assessee without prejudice to the above also sub....
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....nsidered for the purpose of deduction under section 80-IA of the Act. 86.1 The assessee also submitted that the amount of scrap sale of Rs. 10,04,30,079/- out of the total scrap sales of Rs.11,57,69,618/- represents the sales of those items which were classified as fixed assets in the balance sheets which were pertaining to different block of assets. Thus, the assessee alternatively contended that the amount of the scrap sale of Rs. 10,04,30,079/- representing the scrap sales of fixed assets should be adjusted against the relevant block of assets and on the remaining amount the depreciation should be allowed. In effect, it was alternatively submitted by the assessee to reduce the amount of sale of the scrap to the tune of Rs. 10,04,30,079/- and adjust the same against the relevant block of assets. In other words, the amount of eligible profit will come down if the scrap sales of fixed assets of Rs. 10,04,30,079/- is reduced but simultaneously the amount of depreciation shall also reduce which will result in the enhancement of eligible profit to some extent. 86.2 However, the AO did not allow the deduction with respect to the scrap sale from the eligible profit. But the AO agr....
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....the assessee 90. The assessee vide letter dated NIL has filed the additional ground of appeal for allowing the deduction of Rs. 1,23,32,471/- representing the education cess paid on income tax under section 37(1) of the Act. 90.1 It was pleaded by the assessee in the application filed for the admission of the additional ground of appeal that the issue raised in the additional ground of appeal go to the root of the matter and the necessary facts are available on record. Accordingly, it was prayed by the learned AR for the assessee that the same should be admitted for adjudication. 91. On the other hand, the learned DR opposed to admit the additional ground of appeal on the reasoning that it was not raised before the authorities below. 92. We have heard both the parties and perused the materials available on record. The Hon'ble Supreme Court in the case of National Thermal Power Co. Limited vs. CIT, reported in 229 ITR 383, has held as under :- " Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal i....
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.... for statistical purposes. 92.3 In the result the appeal of the assessee is partly allowed for statistical purposes. Coming to the Revenue's appeal in ITA No. 738/AHD/2012 for the assessment year 2008-09 93. The revenue has raised the following grounds of appeal: 1. The Ld. Commissioner of Income-Tax {Appea!s}-XIV, Ahmedabad erred in law and on facts in deleting the disallowance of Rs. 8,98,880/- made by the Assessing Officer on account of fees for study relating to new project. 2. The Ld. Commissioner of Income-Tax (Appeals)-XlV, Ahmedabad erred in law and on facts in allowing the appeal of the Assessee on the finding of the Assessing Officer that the initial assessment year for deduction u/s.80IA of the Act in respect of the following units should be taken as under: Distribution Unit Assessment Year Ahmedabad 2005-06 Surat 2005-06 Bhiwandi 2007-08 3. The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad erred in law and on facts in allowing the claim of deduction u/s.80G and 80GGB of the Act. 4) a) The Ld. Commissioner of lncome-Tax{Appeals)-XIV, Ahmedabad erred in law and cr facts in directing the Assessi....
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.... same cannot be allowed as deduction. Hence the AO added the same to the total income of the assessee. 96. Aggrieved assessee preferred an appeal to the learned CIT (A). 97. The assessee before the learned CIT-(A) submitted that the fee was paid in connection with the study of a new project relating to generation and distribution of electricity. The primary activity of the assessee is distribution of electricity and the fees was paid to prepare a feasibility report in connection with the expansion/extension of the existing business. Therefore the same should be allowed as deduction under section 37(1) of the Act. 98. The learned CIT-(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: I have carefully perused the assessment order and the submissions given by the appellant. The appellant company had made the payment for feasibility studies for new project which was considered to be capital expenditure by the A, O. The appellant has submitted that the project for which the studies were conducted was in the same line of business. The appellant had no intention to start a new line of business and the fees were....
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....t was not a relevant factor in determining whether the deduction was allowable or not. The expenses were miscellaneous expenses and legal charges for the proposed cement factory project. This expenditure was not related to the setting up of a new factory, it pertained to exploring the feasibility of expanding or extending the existing business by setting up a new factory in the same line of business. The assessee, during the course of its business, might incur expenditure for obtaining a project report or legal opinion regarding the validity of such project. This could not, be considered as capital expenditure as, in that case, any legal expenses incurred by an assessee for taking any opinion on the desirability or feasibility of expansion of the business would not be allowable as deduction. Such expenditure was unmistakably connected with the running of the business. Therefore, the Tribunal was justified in allowing the miscellaneous expenses and law charges incurred for assessee's proposed cement factory project as business expenditure even when the project had not come into operation." 100.1 we also refer the Judgment of Hon'ble Gujarat High Court in case of DCIT Vs.....
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....1st April, 2004. 102.2 Likewise, it has started the renovation and modernization of the existing network of transmission/distribution lines from the financial year 2006-07 for its Bhiwandi Distribution undertaking which substantially got completed in the year under consideration. Thus, the assessee has started claiming the deduction under section 80IA of the Act from the year under consideration upon the fulfilment of the condition specified under section 80IA of the Act i.e. 50% increase in the plant and machinery in the network of transmission/distribution lines of the book value as on 1st April, 2004. 102.3 However, the AO was dissatisfied with the contention of the assessee on the reasoning that the year under consideration was the 1st year for claiming the deduction under section 80 IA of the Act. The AO was of the view that the activity of renovation and modernization in the network of transmission/distribution lines has begun from the financial year 2004-05 in case of Ahmedabad and Surat undertaking which is spreading up to the financial year under consideration. As such, the condition of increase by 50% in the value of plant and machinery as specified under section 80....
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....under: (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park ^60[or develops ^61[***] a special economic zone referred to in clause (iii) of sub-section (4)] or generates power or commences transmission or distribution of power ^62[or undertakes substantial renovation and modernisation of the existing transmission or distribution lines ^63-64[***]] : ^65[Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of sub-section (4), the provisions of this subsection shall have effect as if for the words "fifteen years", the words "twenty years" had been substituted.] 108.1 A bare reading of the above provision reveals that the deduction is available to the assessee at its option for 10 consecutive a....
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.... ('Act'), as substituted by the Finance Act, 1999 with effect from 1-4-2000, provides for deduction of an amount equal to 100 % of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in sub-section (4) of that section) in accordance with the prescribed provisions. Sub-section (2) of section 80-IA further provides that the aforesaid deduction can be claimed by the assessee, at his option, for any ten consecutive assessment years out of fifteen years (twenty years in certain cases) beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. as stipulated therein. Subsection (5) of section 80-IA further provides as under- "Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that subsection for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of inco....
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....nsels/D.R.s be suitably instructed. The above be brought to the notice of all Assessing Officers concerned. 108.3 From the perusal of above circular it become clear that the assessee has option to choose initial year or first year out of the block of 15 or 20 years as case may be to claim deduction for 10 consecutive years but not the year in which the assessee becomes first time eligible to claim deduction. 108.4 In view of the above detailed discussion and after considering the facts in totality, we are of the view that there is no infirmity in the order of the learned CIT(A). Accordingly we decline to interfere in his order. Hence, the ground of appeal of the revenue is dismissed 109. The issue raised by the Revenue in ground No. 3 is that the learned CIT-A erred in deleting the addition made by the AO on account of the deduction claimed by the assessee under section 80G/80GGB of the Act. 110. The assessee has shown certain donations in the profit and loss account, prepared separately, of the undertakings eligible for deduction under section 80-IA of the Act. The assessee has disallowed the same while computing the deduction under section 80-IA of the Act an....
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....e appellant. The deduction u/s. 80IA is required to be computed as per the provisions of that section and deduction u/s. SOG has to be allowed out of the gross total income, if there is some positive gross total income. The donations are only in the nature of application of income. The object and purpose of section 80IA and section 80G & 80GG are completely different. After considering above facts, I am of the opinion that the profit eligible for deduction u/s. 80IA will have to be first computed and then the donation has to be considered for working out .the deduction. It is necessary that all other deductions under chapter VIA be first ascertained and deducted before granting deduction u/s. 80G of the Act. Reliance is placed on Scindia Steam Navigation Ltd. Vs. CIT [75 Taxman,495] (Bom,). Accordingly, the claim of the appellant is in order and the allocation made by the A. O, is set aside and the addition made is directed to be deleted. The ground of appeal is accordingly allowed. 112. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us. 113. Both the learned DR and the AR before us vehemently supported the order of the authoriti....
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.... to the institutions which is entitled for deduction under section 80G/80GGB of the Act. It has to be disallowed/added back while computing the eligible profit of the business referred therein under section 80-IA of the Act. It is for the reason that this donation does not relate to the business referred under section 80-IA of the Act which is eligible for deduction. But the same can be claimed as deduction by virtue of the provisions of section 80G/80GGB of the Act separately subject to the conditions specified therein. Hence, we do not find any infirmity in the order of learned CIT (A). Thus, the ground of appeal of the Revenue is dismissed. 115. The 4th issue raised by the Revenue is that the learned CIT (A) erred in deleting the following adjustment made while computing the deduction u/s 80-IA of the Act. 1) The Ld. CIT(A) cannot reduce the preceding year loss of the Bhiwadi distribution unit from the current year profit. 2) The Ld. CIT-(A) erred in holding that the income from delayed payment from customers is eligible income for the deduction u/s 80-IA of the Act. 3) The Ld. CIT-(A) erred in allowing the income from unfulfilled guarantee revenue ....
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....Act. Accordingly, the AO has done so by adding the sum of Rs. 38,18,571/- to the book profit of the assessee under section 115JB of the Act. 121. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: I have carefully perused the assessment order and the submissions given by the appellant. The appellant has submitted that in the computation of 115JB, no adjustment of notional allowance as per section 14A was permissible. The appellant has also sought to rely on the judgment of ITAT, Delhi In the case of Goetz India [32 SOT 101] in which it has been held that under Clause F of explanation to section 115JA, the provisions of section 2 and sub-section 3 of section 14A cannot be imported. Further, the appellant has also relied on the decision of ITAT, Ahmedabad in the case of Gujarat State Energy Generation Limited in the order dated 15/04/2011 in ITA No. 1777 and 2028/Ahd/2009, It has been held by the Hon'ble Bench that after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres only such items which are specifically mentioned in Explanation to section 115JB need to be exc....
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....wn by the Hon'ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act. 124.3 However, it is pertinent to note that the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- "We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of....
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....unds of appeal: 1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No. 1 of the appellant's appeal challenging the validity of the assessment order impugned before him after treating it as being general and after making a broad observation that the assessment order had been passed by the Assessing Officer after duly considering the appellant's submissions. He ought to have appreciated, inter alia, that far from being general, the appellant's ground was based on two specific reasons duly supported by elaboration in the Statement of Facts accompanying the appeal and that it was not open to him to summarily dismiss the ground without appropriately considering and dealing with the same. 2. In law and in the facts and circumstances of the appellant's case, the learned CIT(A} has grossly erred in upholding the disallowance of Rs. 29,74.843 out of interest expenditure and Rs. 38.20,843 (Rs. 48,20,843 minus Rs. 10,00,000 suo motu disallowed by the appellant out of abundant caution) out of administrative expenditure debited to the appellant's Profit and Loss Account by mere....
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.... of his impugned order). The learned CIT(A) ought to have appreciated, inter alia,: (a) that the appellant's alternative claim had been based on the ratio of the decision of the jurisdictional Gujarat High Court in Sun Pharmaceutical Ltd. v. DCIT (227 CTR 206); (b) that, as elaborately explained at para 13 of the Statement of Facts accompanying the appellant's appeal, this alternative claim of the appellant had been rejected by the learned Assessing Officer in a rather summary and arbitrary manner. 4.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred, even while partly allowing the appellant's claim for a higher quantum of deduction u/s. 80IA than granted by the learned Assessing Officer, in upholding the learned Assessing Officer's action of reducing the following items of income while arriving at the quantum of that deduction; Rs. in Crore Ahmedabad Bhiwandi Unit Unit (a) Streetlight maintenance income from Ahmedabad Municipal Corporation which was directly related to the appellant's supplying power to the said Ahmedabad Municipal Corporation in t....
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....r's own stand. 6. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in setting aside the issue raised by the appellant vide Ground No, 8 of its appeal reading as under instead of himself deciding it on merits: "8. In law and in the facts and circumstances of theappellant's case, the learned Assessing Officer has grossly erred in adding Rs. 75,00,000 to the appellant's returned book profit u/s. 115JB by refusing to grant deduction on that account claimed by the appellant on the ground that it represented credit to the appellant's Profit and Loss Account in respect of write back of provision for doubtful debts no longer required which was eligible to be reduced in the computation of book profit U/S.115JB in pursuance of the retrospectively amended provision of clause (i) of Explanation 1 below Section 115JB(2)." 7. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No. 10 of the appellant's appeal challenging levy of interest u/s. 234C and 234D on the ground that the levy was consequential in nature, ins....
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....ssessee for the assessment 2008- 09 has been decided by us vide paragraph Nos. 21 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the year under consideration i.e. AY 2009-10. Hence, the grounds of appeal filed by the assessee is partly allowed. 129. The next issue raised by the assessee in ground No. 3.1 and 3.2 of its appeal is that the learned CIT(A) erred confirming the disallowances of depreciation @ 25% on lease hold right. 130. At the outset we note that the issues raised by the assessee in its ground of appeal for the AY 2009-10 are identical to the issues raised by the assessee vide ground No. 2 in ITA No. 776/AHD/2012 for the assessment year 2008-09. Therefore, the findings given in ITA No. 776/AHD/2012 shall also be applicable for the year under consideration i.e. AY 2009-10. The appeal of the assessee for the assessment 2008-09 has been decided by us vide paragraph No. 23 of this order in its favour. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the ye....
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....ing section HA of the Act from the business expenditure claimed by the appellant. This expenditure was debited to the P & L Account as part of the business expenditure. Hence, the assesses has claimed that such expenditure is considered as relating to the earning of exempted income then it should be reduced from the expenditure where it is debited and consequently the business income of the eligible unit would increase. However, I find that the expenditure is intermingled and is relating to the income of the industrial undertaking which is eligible for deduction as also ' the other industrial undertaking. That apart the disallowance is made by way of specific provisions of section 14A and Rule 8D. Hence, it cannot increase the profit of the eligible industrial undertaking as claimed by the appellant. Accordingly, this claim of the appellant cannot be accepted and the ground of the appeal is accordingly dismissed. 140. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 141. The learned AR before us contended that the amount of disallowance made under section 14A read with rule 8D of income tax rule, if any confirmed, then the enhanced....
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....t 2009 retrospectively. Out of such provision of Rs. 48,26,69,999.00 an amount of Rs. 12,93,52,069/- was written back in the year under consideration. Similarly, an amount of Rs. 75 lacs was written back out of the provision made for bad debts pertaining to the period after the AY 1997-98 and onwards. The assessee further submitted that as per the proviso below explanation 1 to section 115JB of the Act, the amount written back out of such provision is eligible for reduction from book profit when the same is written back. 145.1 However the AO was of view that assessee can only reduce the book profit by the amount of provision written back if the same is added in the profit in the year in which such provision was made. Thus, the amount of Rs. 12,93,52,069/- was reduced by the AO as the same was added to book profit in the AY 2008-09, but there was no evidence brought on record to prove that Rs. 75 lakh was also added in the book profit in the year when such provision was made. In fact such amount can only be added back in the book profit by revising the return of income of respective assessment years. However, no evidence has been brought on record suggesting that the assessee has....
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....ether the assessee is not entitled for the reduction of Rs. 75 lacs credited to the profit and loss account on account of reversal of the provisions for the bad debts under section 115JB of the Act in the given facts and circumstances. The Supreme Court in CIT v. HCL Comnet Systems & Services Ltd. [2008] 174 Taxman 118/305 ITR 409 (SC) held that provisions for bad and doubtful debts cannot be added under Explanation to Section 115JB of the Act. In order to ensure that provision for bad and doubtful debts debited to profit and loss account, is increased to the net profit for the purposes of computation of book profit under section 115JB of the Act, clause (i) in Explanation to section 115JB(2) has been inserted by Finance Act, 2009 with retrospective effect i.e., from 1-4-2001. 150.1 From perusal of para 40.2 of CBDT Circular dated 3-6-2010, it is evident that clause (i) in Explanation after Section 115JB(2) has been inserted so as to provide that if any provision for diminution in the value of any asset has been debited to the profit and loss account, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. It is ....
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....wn against the assessee. In view of preceding analysis, the assessee cannot be penalized for not adding the provisions for bad debts on account of retrospective amendment as discussed above. Hence, the ground of appeal of the assessee is allowed whereas ground of the revenue is dismissed. 151. The next issues raised by the Assessee in ground Nos. 6 to 9 are either premature, consequential or general in nature which do not require any separate adjudication. Hence the same have been dismissed being infructuous. 151.1 Coming to the additional ground of appeal filed by the assessee seeking the deduction of Rs. 1,54,56,655/- and 28,06,343/- representing the education cess paid on income tax and dividend distribution tax under section 37(1) of the Act. 152. It was pleaded by the assessee in the applications filed for the admission of the additional ground of appeal that the issue raised in the additional ground of appeal go to the root of the matter and the necessary facts are available on record. Accordingly, it was prayed by the learned AR for the assessee that the same should be admitted for adjudication. 153. On the other hand, the learned DR opposed to admit the addition....
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.... not claimed this expenditure before the lower authorities, they have not got opportunity to examine the same as per the provisions of Act, thus In the interest of justice, the ground is restored back to the file of the Assessing Officer with a direction to examine assessee's eligibility to claim of deduction of the items raised in the ground of appeal de novo afresh after providing an opportunity of being heard to the assessee. Thus the additional ground of appeal raised by the assessee is allowed for statistical purposes. 154.3 In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Coming to ITA No. 1669/Ahd/2012 an appeal by Revenue corresponding to AY 2009-10 155. The Revenue has raised the following grounds of appeal: 1. The Ld. Commissioner of Income-Tax (Appeals)-XIV Ahmedabad has erred in law and on facts in holding that the receipts on account of delayed payment interest is eligible for deduction u/s.80IA of the Act. The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in taw and on facts in holding that the receipts on account of unfulfilled guarantee revenue is eligible for deduction u/s....
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....nding expenses to the sale of the waste oil has been treated as arising in the course of the eligible business. In other words the corresponding expenses have not been disturbed by the AO during the assessment proceedings. Additionally, the reasoning given by us in the appeal of the assessee in ITA No. 776/AHD/2012 for the AY 2008-09 with respect to insurance receipts, bad debts recovery shall also be applicable on the issue of sale of receipt as discussed above. The appeal of the assessee and the Revenue for the assessment year 2008-09 has already been decided by us vide paragraph Nos. 59, 65, 80 and 86 of this order. The learned AR and the DR before us also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the year under consideration i.e. AY 2009-10. Hence, the grounds of appeal filed by the Revenue is dismissed. 158. The next issue raised by the Revenue in ground No. 2 of its appeal is that the learned CIT (A) erred in allowing the claim of the assessee under section 80G and 80GG of the Act. 159. At the outset we note that the issues raised by the Revenue in its ground of appeal for the AY 2009-10 are identical to the issu....
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.... The next issues raised by the Revenue in ground Nos. 5 & 6 of its appeal are general in nature and do not require any separate adjudication. Hence, the same are dismissed being general in nature. 164.1 In the result appeal filed by the Revenue is partly allowed. Coming to ITA No. 1977/AHD/2013, an appeal by the Assessee corresponding to AY 2010-11 165. The assessee has raised the following grounds of appeal: 1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No. 1 of the appellant's appeal challenging the validity of the assessment order impugned before him after treating it as being general and after making a broad observation that the assessment order had been passed by the Assessing Officer after duly considering the appellant's submissions. 2. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the disallowance of Rs. 39,38,873 out of interest expenditure and Rs. 80,30,260 out of administrative expenditure debited to the appellant's Profit and Loss Account by merely observing that the appell....
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....ant's case, the learned CIT(A) has grossly erred in setting aside the issue raised by the appellant vide Ground No. 9 of its appeal reading as under instead of himself deciding it on merits: "9. In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in adding Rs. 75,00,401 to the appellant's returned book profit u/s. 115JB by refusing to grant deduction on that account claimed by the appellant on the ground that it represented credit to the appellant's Profit and Loss Account in respect of write back of provision for doubtful debts no longer required which was eligible to be reduced in the computation of book profit U/S.115JB in pursuance of the retrospectively amended provision of clause (i) of Explanation 1 below Section 115JB(2)." 6. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No. 11 of the appellant's appeal challenging levy of interest u/s. 234C and 234D on the ground that the levy was consequential in nature, instead of ordering for the deletion thereof. 7. In law and in the facts and ci....
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....2 shall also be applicable for the year under consideration i.e. AY 2010-11. The appeal of the assessee for the assessment 2008-09 has been decided by us vide paragraph Nos. 38, 52, 73 and 86 of this order in favour of the assessee in part. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the year under consideration i.e. AY 2010-11. Hence, the grounds of appeal filed by the Assessee is partly allowed. 172. The next issue raised by the Assessee in ground No. 4 of its appeal is that the learned CIT(A) erred in holding that amount of disallowances made under section 14A not to be added in the computation of deduction under section 80IA of the Act. 173. At the outset we note that the issue raised by the Assessee in its ground of appeal for the AY 2010-11 is identical to the issues raised by the assessee vide ground No. 5 in ITA No. 1581/AHD/2012 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1581/AHD/2012 shall also be applicable for the year under consideration i.e. AY 2010-11. The appeal of the assessee for the assessment 2009-10 has been decided by us vide paragraph No....
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....ing both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. 180.1 The view that the Tribunal is....
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.... account of unfulfilled guarantee revenue of Rs. 50,73,422/- which is income not having first degree nexus & not derived from Assessee's business of power generation. 2c). The Ld, Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of claim of deduction u/s.80IA of the Act made on account of miscellaneous receipts of scrap sales ,from sale of waste oil which is income not having first degree nexus & not derived from Assessee's business of power generation. 2d). The Ld. Commissioner of Income-Tax (Appeals)-XlV, Ahmedabad has erred in .law and on facts in deleting the disallowance of claim of deduction u/s.80IA of the Act made on account of delayed payment charges of Rs. 7,37,40,408/- which is income not having first degree nexus & not derived from Assessee's business of power generation . * 2e). The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of claim of deduction u/s.80IA of the Act made on account of other income of Rs. 5,56,489/- which is income not having first degree nexus to not derived from Assessee's busi....
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....e rival contentions of both the parties and perused the materials available on record. Admittedly, the own fund of the assessee exceeds the amount of loans provided without charging interest thereon. The own fund of the assessee stands at Rs. 3960.15 crore only whereas the amount of loans and advances to subsidiary stands at Rs. 49.79 crore only which can be verified form the financial statement available on record. Thus, a presumption can be drawn that such amount of loan advances have been provided by the assessee out of its own fund. Therefore, there cannot be any disallowance of interest expenses. Hence the ground of appeal of the Revenue is hereby dismissed. 188. The next issue raised by the Revenue in ground Nos. 2(a) to 2(e) of its appeal are that the learned CIT (A) erred in allowing the deduction in under section 80IA on the amount of income earned on delayed payment interest, unfulfilled guarantee, delayed payment charges, receipt on sale of scrap & waste Oil and other income. 189. At the outset we note that the issues raised by the Revenue in its ground of appeal for the AY 2010-11 are identical to the issues raised by the Revenue vide ground 4(a) to 4(e) in ITA No....
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....mitted that the contribution under section 35(1)(ii) of the Act was paid by the Ahmedabad power generation unit, therefore the same was debited in the profit and loss account of such unit. Furthermore, there is no provision under the Act requiring the apportionment of such contribution paid by the assessee among all the units. 194. The learned CIT (A) after considering the submission of the assessee deleted the disallowance made by the AO by observing as under: I have carefully perused the findings of the assessing officer and submissions made by the appellant. The undisputed facts of the present case are that appellant has made contribution of Rs. 3 crore which was eligible to weighted deduction @ 125% i.e. of Rs. 375,00,000 under Section 35[ 1) [ii) of the Act. The Assessing Officer has observed that this contribution of Rs. 3 crore is required to be apportioned to Ahmedabad Generation Unit which is not eligible for deduction under Section 80IA and Ahmedabad Distribution Unit which is eligible for deduction under Section 80IA. On the basis of such apportionment Assessing Officer has reduced profit eligible for deduction under Section 80IA for Ahmedabad Distribution Un....
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....h sections 80HH and 80-1, of the Income-tax Act, 1961 - Deductions - Profit and gains from infrastructure undertakings [Computation of deduction] - Assessment year 1993-94 - Assessee, engaged in manufacturing ayurvedic products, had a head office and four units in different cities - While computing deduction under sections 80HH, 80-1 and 80-IA available to assessee's units, Assessing Officer allocated research and development (R&D) expenses debited to head office to units proportionate to turnover of units - Whether R&D activities were in relation to new drugs and there was nothing to indicate that in event of assessee deciding to commercially exploit benefits of R&D work, products would be manufactured by said units - Held, yes - Whether since presumption of a nexus between R&D activities and units in question was not well founded, impugned allocation of R&D expenses to units was not justified - Held, yes" [Paras 17 & 18][ln favour of assessee] Respectfully following the aforesaid decision and facts of the present case, the Assessing Officer was not justified in apportioning contribution made under Section 35(1)(ii) for Research & Development to Ahmedabad Distribution....
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....pport and guidance from the judgment of Hon'ble Bombay High Court in the case of Zandu Pharmaceuticals Works Ltd. vs. CIT reported in 31 taxman.com 191 wherein it was held as under: While computing the profits and gains of the concerned undertaking, only expenses relating thereto can be deducted. In other words, the expenses must be incurred, for and on behalf of the concerned undertaking. The expenses attributable to any other unit or the head office expenses which have no relevance to the industrial undertaking, cannot be deducted in respect of the said undertaking while computing the profits and gains of the undertaking. [Para 10] It is also a fact on record that the amount of contribution was claimed by the assessee in the profit and loss account of the non-eligible undertaking. Hence, we do not find any infirmity in the order of learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. 198. The next issue raised by the Revenue in ground No. 4 of its appeal is that the learned CIT (A) erred in allowing the claim of the assessee under section 80G and 80GG of the Act. 199. At the outset, we note that the issues raised by the Revenue in its ground ....
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....of this order partly in its favour. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the year under consideration i.e. AY 2010-11. Hence, the grounds of appeal filed by the Revenue is partly allowed. 204. The issues raised by the Revenue in Ground Nos. 7 and 8 are general in nature which don't require any separate adjudication. Hence the same is dismissed being infructuous. In the result, the appeal filed by the Revenue is partly allowed. Coming to ITA No. 3178/Ahd/2016, an appeal by the Revenue corresponding to AY 2011-12 205. The Revenue has raised the following ground of appeal: 1) "Whether the Ld. CIT(A) is right in law and on facts in deleting the disallowance of Rs. 1,86,30,366/- made by the A.O. u/s. 14A r.w.r 8D of the Act." 2) "Whether the Ld. CIT(A) is right in law and on facts in deleting the disallowance of Rs. 2,28,11,782/- made by the A.O. u/s. 36(l)(iii) of the Act." 3) "Whether the Ld. CIT(A) is right in law and on facts in restricting the disallowance made by the A.O. u/s. 80IA of the Act." 4) "Whether the Ld. CIT(A) is right in law and ....
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.... in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the instant case, the Tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the Tribunal held that disallowance under section 14A could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed that where the assessee did not make any claim for exemption, section 14A could have no application. 210.1 In view of the above, there is no dispute to the fact that the assessee was not supposed to make any disallowance in the return of income under the provisions of section 14A read with section rule 8D of Income Tax Rule. 210.2 Now the question arises, whether the assessee can claim the benefit of the disallowance made by the assessee in the income tax return before the judicial forum. It is the trite law that the income tax has to be levied on the income which is determined under the provi....
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....t year 2010-11 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the grounds of appeal filed by the Revenue is dismissed. 213. The next issue raised by the Revenue in ground Nos. 3 & 4 of its appeal are that the learned CIT (A) erred in allowing the deduction in under section 80IA on the amount of income earned on unfulfilled guarantee, delayed payment charges, receipt on sale of scrap & waste Oil and income from shifting services. 214. At the outset we note that the issues raised by the Revenue in its ground of appeal for the AY 2011-11 are identical to the issues raised by the Revenue vide ground 4(a) to 4(e) in ITA No. 738/AHD/2012 for the assessment year 2008-09. Therefore, the findings given in ITA No. 738/AHD/2012 shall also be applicable for the year under consideration i.e. AY 2011-12. The appeal of the Revenue for the assessment 2008-09 has been decided by us vide paragraph Nos. 65, 80 and 86 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the grounds of appeal filed by ....
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....ribution Units (which were eligible to deduction u/s. 80-IA) and thereby in short computing the quantum of deduction to which the Ahmedabad and Surat Distribution Units were eligible and thereby leading to a disallowance of deduction u/s 80IA of Rs. 1,74,75,619/- in case of Ahmedabad Distribution Unit and of Rs. 85,01,194/-in case of Surat Distribution Unit.. 7.4 In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in setting off of entire carry forward loss of Surat Distribution Unit in respect of A.Y.2009-10 (as per the Assessment Order of A.Y.2010-11) while calculating income eligible for deduction under Section 80IA for the year under consideration. However, he ought to have appreciated, inter alia, the decisions in favour of the appellant by the first appellate authority in respect of various claims of eligible income u/s 80IA for the assessment year 2010-11; and should have set off the loss against eligible profits to that extent in A.Y. 2010-11 itself: thereby reducing the carry forward of loss for A.Y.2010-11 and consequently, the set off of loss in respect of Surat Distribution Unit for the year und....
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....or the assessment year 2008-09. Therefore, the findings given in ITA No. 776/AHD/2012 shall also be applicable for the year under consideration i.e. AY 2011-12. The appeal of the assessee for the assessment 2008-09 has been decided by us vide paragraph Nos. 38, 45, 52, 86 and 73 of this order in favour of the assessee in part. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the year under consideration i.e. AY 2011-12. 222.1 Before parting, we note that the AMC store billing activity of the assessee was not connected with the distribution of power. Therefore the same was not allowed by the learned CIT (A) while computing the deduction under section 80 IA of the Act. At the time of hearing the learned AR has not brought anything on record contrary to the finding of the learned CIT (A). Hence, we do not find any reason to interfere in the order of learned CIT (A). Hence, the grounds of cross objection filed by the Assessee is partly allowed. 223. The next issue raised by the assessee in its cross objection is that the learned CIT (A) erred in restricting the deduction under section 80G and 80GGB ....
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....as prayed by the learned AR for the assessee that the same should be admitted for adjudication. 231. On the other hand, the learned DR opposed to admit the additional ground of CO on the reasoning that it was not raised before the authorities below. 231.1 We have heard both the parties and perused the materials available on record. The Hon'ble Supreme Court in the case of National Thermal Power Co. Limited vs. CIT, reported in 229 ITR 383, has held as under :- " Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question be....