TaxTMI 
TaxTMI 
2022 (5) TMI 1265
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....sets not owned by the assessee amounting to Rs. 8,89,00,000/- without considering the findings of the AO that the assessee has furnished inaccurate particulars of income? 2. Whether in facts and circumstances of the case and in law, the Ld. CIT(A) is justified in reducing the penalty by Rs. 519,54,82,260/- levied by the AO u/s 271(1)(c) of the Act without considering the provisions of Explanation 1 to Section 27 1(1)(c) of the Act? 3. Whether in facts and circumstances of the case and in law, the Ld. CIT(A) is justified in ignoring ratio dicidendi as laid by Hon'ble Delhi High Court in the case of CIT vs. Zoom Communication Pvt. Ltd. (327 ITR 510)?" 3. In ITA No.3590/Del/2014, the Revenue has raised following grounds of appeal: "1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in wing the additional depreciation of Rs.4,49,49,17,000/- by relying on the decision of the Hon'ble ITAT in the AY 2005-06 in assessee's own case ignoring the fact that the matter is sub-judice as the Department has preferred an appeal before the Hon'ble Supreme Court on the issue. 2. On the facts and circumstances of the case and in law, the Id. CIT(A) ....
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.... the Ld. CIT(A) has erred, both on facts and in law in upholding the levy of penalty despite the issue involved being a debatable and controversial issue. 5. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in upholding the levy of penalty despite the fact that the addition made on account of disallowance of amortization of premium paid on purchase of securities is not sustainable on merits also. 6. On the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the levy of penalty despite the fact that there is neither any concealment of income nor furnishing of any inaccurate particulars. 7. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in upholding the levy of penalty ignoring the fact that penalty proceedings are independent proceedings, and as such, mere disallowance or addition could not lead to the levy of penalty." 5. In ITA No.3535/Del/2014, the assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of income Tax (Appeals) [CIT(A)] is bad both in the eye of law and o....
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.... Rs.41.30 Crores made by the AO on account of premium paid on purchase of securities. (ii) The addition has been confirmed despite the assessee following the mercantile system of accounting and following the accounting standards prescribed' Institute of Chartered Accounts of India." ITA No. 3590/Del/2014 (Departmental Appeal) Disallowance of additional depreciation: 6. The revenue has challenged the action of the Ld. CIT(A) in allowing additional depreciation of Rs. 449.49 cr. on the following two contentions: (i) that the activity of power generation cannot be considered as manufacturing of an article or thing, so as to be entitled for additional depreciation. (ii) that the Ld. CIT(A) erred in placing reliance on the decision of coordinate bench of this Hon'ble Tribunal in appellant's own case for AY 2005-06, ignoring the fact that the matter is subjudice as the department has preferred an appeal before the Hon'ble Supreme Court on this issue. 7. Hon'ble Supreme Court in the ease of CST Vs. M.P. Electricity Board, [1970] 25 STC 188 (SC) and in the case of State of AP & Ors. Vs. National Thermal Power Corpn. Ltd. and Ors., 2002 AIR 1895 has held that electricity is ca....
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....o judgments of the Hon'ble Supreme Court reads as under: "6. Reference was made to the decisions of Apex Court rendered in the case of M.P. Electricity Board 35 STC 188 (sic). In this case it was held that electricity is goods within the meaning of section 2(3) of Central Province and Virar Sales-tax Act. This decision was rendered in the context of the language of a particular statute. /As such this meaning cannot be extended to the facts of the present case". 23. Thus, taking into consideration all these aspects, we are of the view that admissibilitv of additional depreciation cannot be denied to the assessee merely on the ground that electricity is not an article or thing. The order of the Learned CIT(Appeals) is reversed to this extent and the disallowance is deleted. 24. In the result, the appeal of the assessee is partly allowed. Decision pronounced in the open court on 30.04.2012". 8. Further, Hon'ble Delhi High Court has decided the matter in favour of the assessee. in the case of Pr. CIT Vs. NTPC Sail Power Co. Pvt. Ltd. in ITA No. 1290/2018. Relevant observations of the Hon'ble Court in this regard are reproduced below for ready reference: "9. The Tribunal's ....
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....ctricity (generation income), is on the customers i.e., here SEBs. In other words, out of the total income of the appellant, the tax on 'generation income' is recoverable from SEBs while it is payable by the appellant itself on 'other income'. 13. The correct amount of tax payable by the appellant on its generation income (as is recoverable from SEBs) is ascertainable only at the time of filing of return when due adjustments to taxable income are made. 14. Thus, as at the time of finalization of accounts, the amount of tax recoverable from SEBs is recorded on provisional basis, and is reduced from the provision for taxes made in the books of accounts. Thereafter, at the time of filing of return of income, the correct tax liability on generation income is computed and paid on grossing up basis. 15. In light of the above, for the year under consideration, created a provision of Rs. 586.3 cr. (being 566.6 cr. towards income tax liability and Rs. 17.9 cr. towards Fringe Benefit Tax) as recoverable from SEBs, on estimation basis, in its books of accounts. Since the said amount was recorded in the books only on estimation basis, and the correct amount of tax liability as was recoverab....
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....xable profit has been rightly allowed by the ld. CIT(A). Addition on account of Pre-Commissioning Sales: 21. The revenue challenged the action of the Ld. CIT(A) in allowing capitalization of pre-commissioning expenses, after being netted off with pre-commissioning sales and deleting the addition made by the AO on account of pre-commissioning sales. 22. The issue under consideration has already been discussed at length and thereupon decided in favor by the Ld. CIT(A) for AY 03-04 to 05-06. 23. Relevant observations of the Ld. CIT(A) for AY 03-04 are as under: "I have examined in detail the reason given by the AO for including the pre- commissioning sales without netting the pre-commissioning expenditure. He has relied on the judgment of Hon'ble Rajasthan High Court in the case of Sarraf Textiles Industries vs. CIT (1998) 217 ITR 207. This case is fully distinguishable from the facts in the case of the appellant. The business activity, as admitted by the A 0 has already commenced in this instant whereas in case of Sarraf Textiles Industries Ltd. the business activity was not carried out by the assesses and, therefore, the interest received was assessable as income from other ....
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....e Ld. CIT(A) in deleting the disallowance of Rs. 138.12 cr. u/s 14A of the Act. The impugned issue has been decided in favour of the appellant by the Ld. CIT(A) by relying upon the decision of his predecessor Ld. CIT(A) for A.Y. 2004-05. The said decision of the Ld. CIT(A) for A.Y. 2004-05 has also been upheld by the Coordinate Bench of ITAT vide its decision dated 04.05.2018 in ITA No. 15/Del/2009. Relevant observations made vide the said order are reproduced below for ready reference: "14. After considering the submissions of both the parties and the material available on the record, it is noticed that an identical issue having similar facts has been adjudicated in the aforesaid referred to case of DCIT Vs Power Grid Corporation of India Ltd. wherein the relevant findings have been given in paras 10 to 11.5 which read as under: "10. We have heard both the parties and gone through the facts of the case as also the aforecited decisions relied on by the Id. AR on behalf of the assessee. Indisputably, the assessee did not incur any expenditure by way of interest for investment in tax free bonds. In fact, the tax free bonds were acquired on the orders of the Government on conversi....
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....es the nature of expenses incurred by the assessee may be relatable partly to the exempt income and partly to the taxable income. In the absence of section 14A, the expenditure incurred in respect of exempt income was being claimed against taxable income. The mandate of section 14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. The basic reason for insertion of section 14A is that certain incomes are not includible while computing total income as these are exempt under certain provisions of the Act. In the past, there have been cases in which deduction has been sought in respect of such incomes which in effect would mean that tax incentives to certain incomes was being used to reduce the tax payable on the non-exempt income by debiting the expenses, incurred to earn the exempt income, against taxable income. The basic principle of taxation is to tax the net income, i.e., gross income minus the expenditure. On the same analogy the exe....
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.... administrative expenses until Rule 8D came in to force. 11.4. Hon'ble jurisdictional High Court in their decision in Printers House (P) Ltd. (supra) upheld the findings of the ITAT, holding that expenditure cannot be disallowed on the basis of a mere estimate as to what possibly could have been incurred to earn income exempted from tax. 11.5. In the light of view taken in the aforesaid decisions, especially when the Revenue has not placed before us any material in order to controvert the aforesaid findings of the Id. CIT(A) so as to enable us to take a different view in the matter nor even referred to us any material that impugned expenditure was incurred to earn tax free interest income, we are not inclined to interfere with the findings of the Id. CIT(A). In view thereof, around no. 2 in the appeal for assessment year 200304, ground nos. i to iii in the appeal for the AY 2002-03, ground no.2 in the appeal for assessment year 2004- 05 and ground no.1 in the appeal for the AY 2007- 08, are dismissed." 28. Since, the facts of the assessee's case are similar to the facts involved in the case of DCIT, Circle-14(1), New Delhi Vs. Power Grid Corporation of India Ltd. (supra). So, ....
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.... Co-ordinate Bench of the Tribunal vide its order dated 30.04.2012. 37. Against the decision of Co-ordinate Bench of the Tribunal in assessee's own case for A.Y. 05-06 (supra), the appellant preferred an appeal before the Hon'ble Delhi High Court. 38. As on 31.03.2014, when the Ld. CIT(A) passed his order for the impugned assessment year i.e., AY 2006-07, the matter (with respect to the proceedings initiated under section 263 of the Act) for the immediately preceding assessment year i.e., AY 2005-06, remained decided against the appellant by the coordinate bench of this Hon'ble Tribunal vide its order dated 30.04.2012 (supra), and the pending for adjudication by the Hon'ble Delhi High Court. 39. Owing to such facts, the Ld. CIT(A) for the impugned assessment year, upheld the addition made by the AO, thereby making the following observations: "7.3 In this regard, it is found that similar issue was pending before ITAT Delhi, wherein vide para 16 of the order dated 30.04.2012 has decided the issue against the appellant ....... 7.4 Against the above order, appellant has filed an appeal before Hon'ble Delhi High Court which is still pending. So, as on date, this issue has been fo....
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....he application of the CERC notification. NTPC's argument that the tariff for power plants from 2004-09 was lower than the tariff norms for 2000-04 has not been disputed by the Revenue. Even a bare look at the later Tariff Regulations shows that the rate of return was revised downwards. NTPC submits that it accounted sales for electricity for Rs. 2212.8 crores based upon the previous experience in tariff fixation orders of CERC. This was even though the billed amount was Rs.2306.6 crores. This estimate was bona fide and made on a realistic assessment of sales estimation that could be realized in terms of accepted tariff notifications. There was nothing erroneous or prejudicial to Revenue's interest in such estimate. 21. This Court finds that power generation companies owned or controlled by the Central Government are a sub-species of business entities for which a separate provision has been enacted by the Act. There is no dispute that the income of utilities, especially ones subject to stringent public control, are tightly regulated in terms of what are the accounting methods to be adopted, how depreciation is to be claimed, allowances rate of return on capital, etc. All these asp....
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....iscussion regarding downward revision of sales figures in this case did not make it any less vulnerable to correction under Section 263. The view taken by him is one which is endorsed by law, as the CERC Regulations left the NTPC with little choice to make such revision awaiting a final determination in regard to the whole period after the expiry of the assessment in that instance. 23. This Court is of the opinion that the question of law framed in this appeal has to be answered in favour of the assessee. The Commissioner acted erroneously in exercising revisional power under Section 263. The orders of the Commissioner and the ITAT are hereby set aside. The order of the AO dated 27.11.2006 is restored. However, the merits of that order, on aspects other than what has been discussed here and pending in appeal, are not being touched upon. The appeal is allowed in the above terms." 42. Importantly, the matter concerning the proceedings initiated under section 263 of the Act for A.Y. 2005-06, interalia, concerning the impugned issue, even reached the Apex Court, wherein the Hon'ble Supreme Court found no infirmity with the decision of the Hon'ble Delhi High Court dated 16.04.2014 (s....
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....s operations but has to be the year in which assessee has chosen to claim deduction under section 80IA for the first time. It was accordingly held that the provisions of section 80-IA(5) treating undertaking as a separate sole source of income cannot be applied to a year prior to the year in which the assessee opted to claim relief under section 80-IA for the first time. The Court concluded that depreciation and carry forward loss relief to the unit which claims deduction under section 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction under section 80-IA. Relevant observations of the Hon'ble Court in this regard are as under: "18. From a reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of te....
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....the appeal of the assessee on this ground is allowed. Section 80IA deduction-Steam Turbine Units: 55. This Ground of appeal pertains to disallowance of deduction claimed under section 80IA in respect of steam units of Combined Cycle Gas Power Plants (CCGPS), with a view that steam turbine units do not constitute independent separate industrial units and the profits derived therefrom do not qualify for deduction under section 80IA. 56. The issue under consideration is already decided in favor of the appellant by the coordinate bench of the Tribunal and the Hon'ble Delhi High Court in appellant's own case for preceding years. The revenue has accepted the legal position for the A.Y. 2007-08, A.Y. 2008-09, A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13. Keeping in view the accepted factual position by the revenue, the addition made in the instant year is liable to be deleted. Disallowance in respect of Road, Rail connectivity: 57. This ground of appeal pertains to disallowance of Rs. 8.89 cr. in respect of expenses incurred on assets not owned by the appellant. 58. Before us, it was argued that during the year under consideration, the assessee had incurred an amount of Rs. 20.74 cr.....
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....ccordingly, Rs. 41.3 cr. was amortized during the year under consideration. 62. During the year under consideration, the interest income earned on such securities of Rs. 61.8 cr. However, the appellant offered Rs. 20.5 cr. to tax, being interest earned Rs. 61.8 cr., as reduced by the impugned amount of amortization of premium of Rs. 41.3 cr., as evident from Schedule 20 of the audited Financial Statements. 63. The AO disallowed by taking a view, that payment of premium made at the time of purchase of securities is a part of cost of acquisition of securities, and the same cannot be set off against interest accrued on securities. Reliance was placed by the AO on the decision of the Hon'ble Supreme Court In the case of Vijaya Bank Ltd. vs. CIT, 187 ITR 451. 64. Further, appreciating the reliance placed by the AO on the decision of the apex court in the case of Vijaya Bank (supra), the impugned disallowance was also confirmed by the Ld. CIT(A). 65. Thus, the impugned disallowance has been made by the Ld. AO, and has further been upheld by the Ld. CIT(A) based on the decision of the apex court in the case of Vijaya Bank (supra). 66. Vide the said decision, the apex court held that ....