TaxTMI 
TaxTMI 
2022 (6) TMI 364
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.... ITA No. 1257/Ahd/2015 and CO No. 111/Ahd/2015 relevant to the Asst. Year 2011-12 is taken as lead case for disposal of the above batch of appeals. 3. The grounds of appeal raised by Revenue in ITA No. 1257/Ahd/2015 for A.Y. 2011-12 read as under: "1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred (i) in deleting disallowance of Rs.72,96,816/- made u/s 14A of the IT Act |r.w. Rule 8D while computing Book Profit u/s 115JB of the IT Act, ignoring the provisions of Explanation [1] (f) to Section 115JB of the IT) Act. (ii) (a) in deleting the addition of Rs.4,73,27,345/- (net of depreciation) made on account of capital expenditure in respect of spares (b) in deleting the addition of Rs.46,89,661/- (net of depreciation) made on account of repairs & maintenance claimed. (c) in not applying the ratio of the decisions in the case of Ballimal Naval Kishor vs.CIT 222 ITR 414 (SC) and the Supreme Court decision in the case of CIT us Saravana Spinning Mills Pvt. Ltd. (2007) 293 ITR 201 (SC), to the fact of this case. (iii) in allowing the sundry balance written off amounting to Rs.5,02,042/- while ....
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.... the purpose of deduction us. 80IA of the Act. 8. The learned AO erred in fact and in law in not directing, the AO to allow deduction u/s. 80IA on the enhanced profits on account of disallowance of expenses treated as capital in nature. 9. The learned CIT(A) erred in fact and in law in confirming the action of AO in charging interest u/s. 234B of the Act. 10. The learned CIT(A) erred in fact and in law in confirming the action of AO in charging interest u/s. 234C of the Act. 11. The learned CIT(A) erred in fact and in law in confirming the action of AO in ^charging interest u/s. 234D of the Act. 12. The learned CIT(A) erred in fact and in law in confirming the action of AO in initiating penalty proceeding u/s. 271(l)(c) of the Act." 5. As against this disallowances mentioned above, five disallowances were already considered by this Tribunal in ITA No. 3003/Ahd/2010 & ors. relating to A.Ys. 2003-04 & ors., vide order dated 28.02.2022. It is being agreed by both the parties. The issues are already covered in assessee's own case in ITA No. 3003/Ahd/2010. However, issue regarding disallowance under s.14A of the Act in computation of book ....
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....TA No. 2974/Del/13 (ITAT Delhi)] In the above case the AO has made addition of disallowance u/s. 14A for computing book profit u/s. 115JB which was confirmed by the CIT(A). On further appeal, the Hon'ble IT AT, Delhi has deleted the adjustment of disallowance u/s. 14A for computing the book profit u/s. 115JB and held that There is no estoppel against the law. The mere fact that the assessee has accepted this disallowance affects that disallowance only and nothing more than that; it does not clothe such an adjustment, in computation of book profit under section 115JB, with legality. There is no dispute that there is no corresponding tax exempt income. Therefore, the adjustment in question is indeed unsustainable in law. ii) H5BC Invest Direct (I ndia) Ltd. v. DCIT [ITA Nos. 3485&3944/Mum/2012] The expenditure disallowed U/S.14A is only that incurred and claimed by the assessee in respect of dividend income, exempt u/s. 10. It is only on this basis, and this basis alone, that we have found Explanation l(f) to section 115JB (s.115JA) to be providing a clear legal basis to the adjustment qua expenditure relatable to dividend income. That the amount disall....
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....edabad has held that adjustment made by the AO is not as per law. Respectfully following this decision of Hon'ble ITAT, Ahmedabad in the case of Alembic Ltd. for AY 2007-08 it is held that the AO is not correct in disallowing Rs. 72,96,816/- while computing book profit u/s 115JB by invoking the provisions of section 14A read with Rule 8D. In view of this the AO is directed to delete the disallowance of Rs. 72,96,816/while computing book profit u/s115JB. Thus,the ground of appeal no. 3 of the appellant is allowed." For the well-considered reasons given in the judgment passed by the Ahmedabad Bench, Mumbai bench and Delhi Bench, we have no hesitation in confirming the deletion made by the CIT(A). Therefore, this ground of appeal raised by the Revenue is hereby rejected. 8. In the remaining issues, namely, Ground Nos. 1to 3, 5 &6 are being covered in assessee's own case in ITA No. 3003/Ahd/2010 & ors. relating to A.Ys. 2003-04 & ors., dated 28.02.2022. The findings of the same had been reproduced hereunder: "14. Issue No.1 regarding Replacement of parts in machineries treated as capital in nature. The Ld AR Mr. Milan Metha appearing for the assessee submission is of....
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....otwithstanding its high cost. It is also to be submitted that the Original Equipment Manufacturer which in the case of the assessee company is BHEL / General Electric, USA have very categorically prescribed the operating life of the above bucket which helps to ensure trouble free operation and to avoid any catastrophic damage to the machine. Further it is also to be stated that by replacement of the buckets on completion of 48000 hours of continuous operation the power generation capacity is neither increased nor is the power plant efficiency or life of the plant gets increased. The cost of the Gas Turbine parts such as Buckets and Nozzles are high primary due to very special metallurgy and manufacturing process provided by the manufacturer viz. General Electric. USA. The landed cost to the assessee company also increases as the same is required to be imported and thus attracts custom duty, air freight, insurance etc. The details of spares consumed at regular intervals for various Asst. years is as under: Asst Year Item Description Amount (Rs.) 2003-04 Stage - 1 Bucket Kit, Frame - VI PNo. 314B7162G015 3,96,92,557 2004-05 Stage - 1 Bucket Kit along ....
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....on Ltd reported in 2014 [ID2]-GJX-0224THYD wherein after detailed discussion of Supreme Courts and other Judgements held as follows: "... ... 15. We have heard the submissions of the parties and perused the orders of the revenue authorities as well as other materials placed on record. It is quite evident from the facts emanating from record that the expenditure incurred of Rs.20,21,46,278/- which is subject matter of disallowance was towards repair/replacement of nozzles, buckets, shrouds, bearings, pieces and combustion liners which are parts of the three gas tur bines utilized for generating power. It is also a fact that the power generation plant consists of two systems i.e., gas turbines and generating unit. As can be noticed from the process of generation of power as discussed by the CIT(A) in his order, there is no intermediate product in the generation of power. It is also a fact on record that the replaced/repaired parts were relating to three gas turbines. A book let submitted by the assessee regarding operation and maintenance of heavy duty gas turbine clearly shows that a well planned maintenance programme is required for getting the maximum equipment availabili....
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....in the case of CIT V/s. Saravana Spinning Mills, there is a clear observation of the Hon'ble Supreme Court that the Textile Plant consists of different departments having its own independent plants and machinery which produce different intermediate products. However, in the case of the assessee there is no such intermediate products which requires independent and separate plants and machinery. On the contrary, what the assessee has replaced is certain parts of the gas turbines and the gas turbines as a whole have not been replaced. Therefore, in this context the observation made by the Hon'ble Supreme Court in the case of CIT V/s. Saravana Spinning Mills rather favours the assessee. Because the Hon'ble Supreme court in the said decision has held that when certain parts of a air conditioner or a T.V. is replaced, it does not amount to replacement of entire unit. Therefore, applying the same logic to the facts of the assessee's case, it can be said that there is no replacement of the gas turbine as a whole but certain repair and replacement to some of the parts of the gas turbine, which does not result in bringing into existence a new asset of enduring nature, rather, the repair and ....
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.... bucket which helps to ensure trouble free operation and to avoid any catastrophic damage to the machine. e. Further it is also stated that by replacement of the buckets on completion of 48000 hours of continuous operation the power generation capacity is neither increased nor is the power plant efficiency or life of the plant gets increased. f. The cost of the Gas Turbine parts such as Buckets and Nozzles are high primary due to very special metallurgy and manufacturing process provided by the manufacturer out side India and the assessee company procures the same by import and thus attracts custom duty, air freight, insurance etc. g. Further the replacement of parts is Capital or Revenue is No more Res integra based on the observation made by the Hon'ble Supreme Court in the case of CIT V/s. Saravana Spinning Mills and CIT V/s. Sri Mangayarkarasi Mills (P) Ltd. 315 ITR 114 wherein held that when certain parts of an air-conditioner or a T.V. is replaced, it does not amount to replacement of entire unit. h. Thus this issue is already dealt by the co-ordinate Benches of ITAT, Hyderabad in the case of DCIT -Vs- AP Gas Power Corporation Ltd wherein a....
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.... 17.1. Relevant portion of CBDT Circular No. 1/2016 dated 15.02.2016 is extracted below: In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years. The matter has been examined by the Board. It is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such ....
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.... period of claim should be availed in continuity. Thus the Assessing Officers are directed to allow deduction u/s 80IA in accordance with this clarification and Standing Counsels/D.R.s are suitably instructed pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in subsection (5) of section 80IA of the Act. 19. Following this Circular the SLP filed by the department was also dismissed against High Court's ruling that loss in year earlier to initial assessment year already absorbed against profit of other business cannot be notionally brought forward and set off against profits of eligible business as no such mandate is provided in section 80-IA(5) of the IT Act reported in Assistant Commissioner of Income-tax, Tirupur -Vs- Velayudhaswamy Spinning Mills (P.) Ltd. reported in [2016] 76 taxmann.com 176 (SC). Following the same we hereby reject the Grounds of appeal filed by the Revenue and allow the claim of deduction u/s.80IA in favour of the assessee. 20. Issue No.3 relates to disallowance under Section 14A of the Act. The Ld Counsel for the ass....
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....n the assessee had sufficient interest-free funds out of which concerned investments had been made, disallowance under Section 14A is not justified. Thus we clear in our mind the direction given by the Ld CIT[A] to apply Rule 8D is not proper and there being the surplus funds were invested by the assessee and there were no administrative expenses, the disallowance made u/s.14A is unwarranted and liable to be deleted. Thus the Cross Objection filed by the assessee is allowed by deleting the addition made u/s.14A of the Act. 23. Issue No. 4 relates to depreciation on building used for Managing Director's residence. Ld AR submitted that as per the depreciation chart in the tax audit report, an addition of Rs.87,27,750/- on account of GIPCL House under the head factory building. The assessee claimed MD's house is residence-cumoffice building is used for the purpose of residence/office of the Managing Director and he discharges his official duties 365 days for official meetings, therefore the rate of depreciation of 10% is claimed by the assessee. Per Contra the Ld DR relied on the orders of the Lower Authorities. 24. We have given our thoughtful consideration on the m....