TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 341
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.... the facts and circumstances of the case as well as in Law, the Ld. CIT(A) erred in holding that deduction u/s 80IA of the IT Act will be allowed as claimed by the assessee. 3. Whether on the facts and circumstances of the case as well as law, the Ld. CIT(A) erred in holding that compensation paid Rs.71,67,714/- to obtain raw materials is Revenue Expenditure not Capital expenditure. 4. Whether on the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in holding that the amount received by the assessee of Rs.28,85,64,936/- as Industrial Promotion Assistance from the State Govt, is capital in nature as against revenue receipt as treated in the assessment order. 5. Whether on the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in holding that the amount received by the assessee for Rs.2,17,15,118/- as Interest Subsidy from the State Govt, is capital in nature as against revenue receipt as treated in the assessment order. 6. Whether on the facts and circumstances of the case as well as law, Ld. CIT(A) has erred in law in deleting the addition made by A.O u/s 14A under Rule 8D without appreciating the CBDT Circular No-5/2014. ....
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....d. CIT(A) erred in holding that the amount received by the assessee for Rs.2,17,15,118/- as Interest Subsidy from the State Govt, is capital in nature as against revenue receipt as treated in the assessment order. 6. Whether on the facts and circumstances of the case as well as law, Ld. CIT(A) has erred in law in deleting the addition made by A.O u/s 14A under Rule 8D without appreciating the CBDT Circular No-5/2014. 7. Whether on the facts and circumstances of the case as well as laws, Ld. CIT(A) has erred by giving direction to exclude the subsidy from the book profit assessable U/S.115JB, without appreciating that no adjustment is allowed for computation of book profit other than prescribed under explanation 1 to section 115JB(2). 8. Whether on the facts and circumstances of the case as well as laws, Ld. CIT(A) has erred in giving direction to the AO exclude the subsidy aggregating to Rs.28,24,91,754/- from the book profit assessable U/S.115JB of the Act. Without considering that the accounts of the assessee company were prepared in accordance with the provisions of Companies Act and these incentives were credited to Profit & Loss Account, and no adjustment is allowed for ....
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....r Leave Liability is withdrawn, while remanding the matter to the Assessing Officer with a direction to await the decision of the Hon'ble Supreme Court in the case of Exide Industries Ltd. (supra) and decide the issue accordingly. 2. For that further and in any event, a direction may be given to the Assessing Officer to allow the deduction of actual payment made during the previous year relevant to the assessment year 2014-15 on account of leave liability under the provisions of section 43B(f) of the Act in the remand proceedings." Additional Ground for Assessment Year 2014-15: "For that the Assessing Officer should have accepted the disallowance of Rs. 9,10,080/- offered by the assessee U/s. 14A and he erred in invoking and applying rule 8D." 3. In the cross appeals for AY 2013-14 & 2014-15 most of the issues raised by the Revenue are common, therefore, as agreed by both the parties, the same are taken up together and are being disposed off by this common order for the sake of convenience and brevity. 4. For the purpose of adjudication of the issues, we will take the facts for AY 2013-14. Brief facts of the case are that the assessee is a limited company engaged in man....
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....e assessment year 2011-12. Ld. AO disallowed the claim on the ground that initial depreciation is available only in the year of purchase and cannot be claimed in the subsequent year. The ld. CIT(A) allowed the claim of the assessee by following the decision of this Hon'ble Tribunal in assessee's own case for the assessment year 2007-08. "10.1. It is submitted that the identical claim of the assessee for the assessment year 2007-08 was allowed by the Hon'ble Tribunal by an order dated December 8, 2014 (page 83 at Pp 86-88 of Paper Book-paragraphs 10 at 15-18). The Hon'ble Tribunal also allowed the said claim for the assessment years 2008-09 and 2009-10 by a consolidated order dated August 25, 2017 (Page 140 at Pp 142-144 of Paper Book-paragraphs 7 at 7.2) and for the assessment year 2010-11 by an order dated September 13, 2017 (Page 180 at Pp 182-185 of Paper Book-paragraphs 46 at 52-53). The orders of this Hon'ble Tribunal for the assessment years 2008-09, 2009-10 and 2010-11 were passed after taking into consideration the judgment of the Hon'ble Karnataka High Court in CIT v. Rittal India (P) Limited, (2016) 380 ITR 423 (Karn). Subsequently, the Hon'ble Madras High Court in CIT ....
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....#39;ble High Court of Karnataka in the case of CIT and another vs. Rittal India Private Ltd (supra). The facts of the case therein are that the assessee being an existing industrial undertaking had acquired and installed new plant and machinery in the F. Y 2006-07 and claimed 50% of additional 20% depreciation i.e, 10% additional depreciation under section 32(l)(iia) of the Act in the corresponding assessment year 2007-OS for the reason that the new machinery was acquired after 01-10-2006. The relevant portions at page no 's at 9 and 10 of which is reproduced herein below for below for better understanding: "The language used in clause (iia) of the said section clearly provides that "a further sum equal to 20 per cent, of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)". The word "shall" used in the said clause is very significant. The benefit which is to be granted is 20 per cent, additional depreciation. By virtue of the proviso referred to above, only 10 per cent, can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per c....
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....erred in Clause (iia) to sub-section (1) of section 32 of the Act. The facts of the present are similar to the decision supra relied on by the assessee. Therefore, we are of the view that the law laid down by the Hon'ble High Court of Karnataka in the case of CIT and another vs. Rittal India Private Lid supra is applicable to the present case, thus we hold that the assessee is entitled to claim remaining 50% depreciation of such 20% which is equal to the actual cost of new plant and machinery, accordingly ground no-I raised by the assessee is allowed." Respectfully following the same, we dismiss Ground No. 2 raised by the revenue". Respectfully following the said decision supra, we hold that the assessee is entitled for remaining portion of additional depreciation in the asst years 2008-09 and 2009-10 and accordingly the grounds raised by the assessee in this regard are allowed." 53. Respectfully following the decision of the Tribunal the assessee is entitled to additional depreciation (remaining portion). Thus ground no. 1 raised by the assessee is allowed." 10.2. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee's own ....
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....rate in open market being a manufacturer and not a distributor. Ld. AO referred the matter to Transfer Pricing Officer who carried out the proceedings and came to a conclusion that the transfer price of power for the eligible unit is proposed to be reduced by Rs. 145,91,05,550/- in the following manner: "A. Chanderia Unit - Rajasthan (AWNL) Name of the Seller Amount per unit (Rs.) Comments Eligible unit of assessee selling to IEX and RPPC 4.95 Average rate of power sold by eligible unit of assessee to unrelated consumer Approved Sources 3.29 As per tariff order Other short term source 4.14 As per tariff order Average (ALP) 4.13 B. Satna Unit - Madhya Pradesh Name of the Seller Amount per unit (Rs.) Comments Captive 2.45 As per tariff order Average (ALP) 2.45 8. Based on the above, the undersigned adopts the above price and rejects the assessee's analysis which is utter contravention to the basic principles of CUP method. The quantum of adjustment is as under: Location Units transferred (A) Rate Considered (B) Market rate /unit adopted as above (ALP) (C) Amount of Adjustment D = (B-C) * A Chanderia 3,56,02,57....
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.... Ld. AO, however, reworked the profits of the power plants for the assessment year under reference by substituting the value of electricity adopted by the assessee with much lower figures. Such lower figures were taken by the ld. AO from orders passed by the concerned State Electricity Regulatory Commission. For the State of Rajasthan, the ld. AO referred to an order dated November 16, 2010 passed by the Regulatory Commission of that State determining the annual fixed charges and energy charge in accordance with the statutory parameters and norms in respect of power generated by Rajasthan Rajya Vidyut Utpadan Nigam at its different generating stations and supplied to electricity distribution companies. The tariff was separately determined for each generating station based on different elements of cost incurred at each such station. For the State of Madhya Pradesh, the ld. AO referred to an order dated March 3, 2010 passed by the Regulatory Commission of that State determining, in accordance with the statutory parameters and norms, the fixed charges and energy charges for each generating station of the Madhya Pradesh Power Generating Company Limited which it could charge in respect ....
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....n. This Hon'ble Tribunal took note of the fact that in one of the years before it, the assessee in fact sold electricity at rates higher than that charged from it by the State Electricity Board. This Hon'ble Tribunal held that when it was permissible for the assessee to sell electricity to consumers at rates higher than that paid to the State Electricity Board, the prices charged by the State Electricity Board were a very good indication of the market value of electricity. This Hon'ble Tribunal thus concluded that the assessee did not commit any error in adopting such prices for working out the amount eligible for deduction under section 80IA of the Act. 11.3. The Hon'ble Tribunal by an order dated September 13, 2017 for the assessment year 2010-11 (Page 153, at Pp 159-162 of the Paper Book, paragraph 3 at paragraphs 13-16) followed the said decision for the assessment years 2008-09 and 2009-10 on this issue. 11.4. It is further submitted that against the said decision of the Hon'ble Tribunal dated August 25, 2017 for the assessment years 2008-09 and 2009-10 the department preferred appeal before the Hon'ble Calcutta High Court under section 260A of the Act, being ITA No. 125/2....
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....erating company and that benefit cannot be claimed on the basis of rate chargeable by the distribution licensee from the consumer. The Assessee however pointed out to the Tribunal that the view taken by the Hon'ble Calcutta High Court in the case of ITC Ltd. (supra) was taken on the basis of the provisions of Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948 that were in force up to the year 2003. It was pointed out before the Tribunal that The Electricity Act, 2003 (hereinafter referred to as "the 2003 Act") repealed the erstwhile legislation and the new legislation came into force on June 10, 2003. The 2003 Act was applicable and in force during the previous years relevant to the Asst Years 2009-10. It was also pointed out before the Tribunal as per the provisions of the 2003 Act and the regulations made in terms thereof by the States of Madhya Pradesh and Rajasthan, it was open to an assessee having a captive power plant to sell electricity even to a consumer at a mutually agreed rate. In other words, under the provisions of the 2003 Act and the regulations made there under it is not the position that a captive power plant can sell electricity only to a distributio....
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....mputation for the purpose of section 80IA of the Act with reference to the price charged from it by the State Electricity Board. In such circumstances, we hold that, when it was permissible for the assessee to sell electricity to consumers and distribution licensees at rates higher than that paid by it to the State Electricity Board, the price charged by the State Electricity Board would be a very good indication of the market value of electricity and the assessee did not commit any error in adopting such price for working out the amount eligible for deduction u/s 80IA of the Act." 14. After coming to the conclusion that the decision of the Hon'ble Calcutta High Court in the case of ITC Ltd. (supra) would not be applicable to the case of the Assessee, the Tribunal thereafter went into the question as to what would be appropriate rate to the adopted as sale price by the TPP unit of the Assessee to its Cement manufacturing units. The Tribunal thereafter referred to the decision of the Hon'ble Supreme Court in the case of Thiru Arooran Sugars Ltd. v CIT, (1997) 227 ITR 432 (SC), as to the meaning of the word "Market Price" wherein in the context of market price of sugarcane which wa....
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....ue even though the assessee was not required to charge electricity duty. 5.6.6. In view of our aforesaid findings, we direct the Id AO to accordingly modify the earlier years profits also which were modified by him, in the same lines as directed for Asst Years 2008-09 and 2009-10 herein. Accordingly, the grounds raised by the assessee in this regard deserve to be allowed and that of the revenue deserve to be dismissed." 16. The aforesaid decision of the tribunal would apply to the present AY also. Respectfully following the order of the Tribunal we allow grounds 2 to 4 & 6 raised by the assessee in its appeal and dismiss ground no. l raised by the revenue in its appeal." 11.5. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee's own case for preceding assessment year i.e. AY 2010-11 and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 2 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed." 9.4. We, further, observe that ld. CIT(A) after considering the facts of the case for the year ....
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....ant, it is noted that both the parties have in principle accepted and agreed that the most appropriate method for determination of ALP of power tariff is CUP Method. In the Ld. TPO's opinion the power tariff orders issued the relevant SECs was the most relevant indicator of the arm's length price for power supplied by CPPs. Apart from relying on the orders of the regulatory authorities determining the tariff, the Ld. TPO also took into account the judgment of the Hon'ble Calcutta High Court in ITC Limited reported in (2015) 64 Taxman.com 214wherein the Hon'ble Court had held that the CPPs were not permitted to sell power to anyone else but to power distribution companies and that too at the controlled rates notified by the regulatory authorities. The Ld. TPO also took into consideration the fact that during the relevant year the appellant itself had sold 3,32,891 units generated by CPP in Rajasthan on IEX where per unit price realized was Rs.4.95. Keeping in view these facts and documents the Ld. AO concluded that the rates adopted by the appellant at Rs.6.76/6.85 per unit & Rs.6.79/Rs.6.84 per unit for the CPPs at Rajasthan & Madhya Pradesh was excessive and did ne....
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....arly in the case of CPP at Rajasthan, it is noted that the eligible unit had supplied power to the AE as well as unrelated enterprises i.e. lEX/Grid. It is however noted that the power which the eligible undertaking supplied to non-AEs did not even constitute 0.11% of the total power generated by the CPP during the relevant year. In the circumstances therefore the rate at which the transaction was conducted by the eligible unit with non-AEs cannot be considered to be reliable data because the facts indicate that such sale was more in nature of reducing effective cost of generation by selling the excess power generated rather than incurring the generation loss. On the contrary however, in the case of CPP at Rajasthan also it is noted that the cement manufacturing undertaking to which the eligible unit supplied power, had procured substantial quantity of power throughout the year from unrelated enterprise i.e. SEB and therefore the tariff at which the said AE, i.e. non-eligible unit purchased power from SEB represented reliable internal CUP. I therefore find that even after introduction of domestic transfer pricing provisions to specified domestic transactions and becoming applicable....
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....units as the tested party in the TP Study Report and accordingly ALP of the power captively consumed has been benchmarked at ALC of power purchased by the tested party from SEB. The assessee also duly reported these transactions in the audited report in Form 3CEB. Accordingly to the TPO the average rate of Rs. 3.47 per unit calculated on the basis of sale data of power by independent CPPs/IPPs as determined by various tariff orders would be the ALP of the domestic specified transactions. Accordingly the TPO recommended adjustment to the tune of Rs. 6,75,22,00,000/- and the AO passed the draft assessment accordingly. According to the assessee the internal CUP has to be used for the determination of ALP at which the non-eligible units/manufacturing units procured the power from unrelated party i.e. SEB. Now the issue before us whether the CUP method can be applied to bench mark specified domestic transactions of transferring power by CPPs to non eligible units. We have also perused the provisions as contained in Rule 10B of the Income Tax Rules which provide as to where the CUP can be and has to be applied. We observe from the said rule 10B that we have to see the price at which the ....
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....assessee has relied on the series of decisions namely PCIT vs. Gujarat Alkalies & Chemicals Ltd. (supra), CIT vs. Godawari Power & Ispat Ltd. (supra) and Reliance Infrastructure Ltd. in ITA No. 2180 of 2011 (Bombay-High Court) and the decision of Coordinate Bench of Kolkata in the case of DCIT vs. Birla Corporation Ltd. in ITA No. 971/Kol/2012 for AY 2008-09. We note that in all the above decisions, the AALC at which the power is purchased by the non-eligible unit of the assessee was considered to be the fair market value / transfer price of power supplied by the eligible unit to the non-eligible unit. Before us, the Ld. A.R also argued that non-eligible units has to be held as a tested party and AALC at which the power was purchased by the tested party from SEB/ third party is the most appropriate ALP to bench mark the transfer of power supplied by eligible unit to non-eligible unit. The said view of the assessee is squarely covered by the two decisions of Hon'ble Benches namely Star Paper Mills Ltd. vs. DCIT (supra) and DCIT vs. Balrampur Chini Mills Ltd. (supra). Having considered the ratio laid down, we are of the view that there is no infirmity in the order of Ld. CIT(A) w....
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....ng assessment year i.e. AY 2011-12 & 2012-13 and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 2 for AY 2013-14 & 2014-15 regarding transfer pricing adjustment made for deduction u/s 80IA of the Act raised by the Revenue are dismissed. Revenue's common Ground no. 3 for AY 2013-14 & 2014-15 relating to the claim of compensation paid for obtaining limestone connected to mining activity: 10. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee's own case for AY 2011-12 & 2012-13 dealt with this issue and decided in assessee's favour observing as follows: "12. We have heard rival contentions and perused the records placed before us. The third common ground in the Department's appeal relates to disallowance of the assessee's claim for deduction of Rs.35,79,586/- on proportionate basis of the compensation paid in connection with the mining activity for obtaining limestone used as raw material for manufacture of cement. Compensation of Rs.17,92,420/- relates to the assessee's Satna Cement W....
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....ribunal for the assessment years 2007-08 [ITAT 80/2015 and GA 1714/2015 - Page 47 at 52 - Question 2(c) of the Compilation of Case Laws] and for the assessment year 2010-11 [ITA 124/2019-Supplementary Affidavit affirmed by the Department - Page 36 at Page 43 - Question 14(c) of the Compilation of Case Laws]. The Hon'ble High Court, by orders dated September 26, 2019 (Pages 45-46 of the Compilation of Case Laws) and March 11, 2020 (Page 29 at Page 30 of the Compilation of the Case Laws) respectively, was pleased not to admit the said appeals filed by the department on this issue for the assessment years 2007-08 and 2010-11. Further, this issue was not raised by the department before the Hon'ble Calcutta High Court in ITA No. 125/2019 preferred for the assessment years 2008-09 and 2009-10 (Page 11 at Pp 23-25 of the Compilation of Case Laws). We find that this Tribunal in assessee's own case for AY 2010-11 dealt with this issue and decided in assessee's favour observing as follows: "19. We have already seen that the Assessee is also in the business of manufacturing of cement. Limestone is the main raw material for manufacture of cement. The Assessee obtained mining lease from the S....
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....IT(A), the revenue has raised Gr.No.2 before the Tribunal. 22. At the time of hearing, it was brought to our notice that identical issue was considered by the Tribunal in assessee's own case for A.Y.2008-09 and 2009-10 in ITA Nos. 971/Kol/2012 & 298/Kol/.2013 and this tribunal on an identical issue held as follows: "2.2. We have heard the rival submissions. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee's own case for the Asst Year 2006-07 wherein it was held that "We have heard the parties and perused the material placed on record. The I A. Counsel for the assessee has elaborated the facts of the case making reference of several decisions of Tribunal and Hon'ble Supreme Court and High Courts. After careful consideration of the same and evidences filed on record and in the paper book, we find that the assessee is required to pay compensation as determined by the local authority/ court to the persons whose rights are infringed because of the mining activity. We also observe that Ld. CIT(A) has properly analysed the facts of the present case and distinguished the facts decided by the Hon'ble Apex Court in the case of En....
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....ws: "13. We have heard rival contentions and perused the records placed before us. The fourth common ground of the Department's appeal relates to the assessee's claim that industrial promotion assistance of Rs.16,94,84,638/- received from the West Bengal State Government is a capital receipt and cannot be subjected to tax. The said amount was received by the assessee in terms of the West Bengal Incentive Scheme, 2000 (hereinafter referred to as "the 2000 Scheme") for expansion undertaken at the assessee's Durgapur Cement Works involving an investment of about Rs.100 crore. 13.1. The material facts are that the assessee undertook expansion at its cement unit in Durgapur, West Bengal at a cost of about Rs.100 crore and increased the manufacturing capacity from 0.6 million tonnes per annum to 1.6 million tonnes per annum. The expansion was practically a new unit. Commercial production post-expansion commenced in December, 2005. The said expansion undertaken by the assessee qualified as a Mega Project under the 2000 Scheme because of the extent of investment. In terms of the 2000 Scheme, the assessee was entitled to industrial promotion assistance which was quantified at 75% of the....
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.... Budge Refineries Limited, (2022) 139 taxmann.com 124 (Calcutta) and the revenue's appeal against the order of the Hon'ble Tribunal was dismissed. We find that this Tribunal in assessee's own case for AY 2010-11 dealt with this issue and decided in assessee's favour observing as follows: "29. At the time of hearing, it was agreed by both the parties that identical issue was considered by this Tribunal in assessee's own case in A.Y.2008-09 and 2009-10 in ITA Nos. 971/Kol/2012 and ITA No.942/Kol/2013, 298/Kol/2013 and 329/Kol/2013 and this tribunal in its order dated 25.8.2017, on the aforesaid issue held as follows: "4.3. We have heard the rival submissions and perused the materials available on record including the paper book containing the entire West Bengal Incentive Scheme 2000 and eligibility certificate issued by the competent authority approving the expansion of existing unit thereby approving the fact of assessee falling under the category of 'Mega Unit' under the said scheme. We find that Subsidy could be reduced from the cost only if it is found that the cost for acquiring the asset was directly or indirectly met out of the subsidy. In order to apply the proviso, it is....
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....nt. Even the issue of assessee is covered in its favour by Tribunal's decision in assessee's own case all along from AYs 2002-03 to 2006-07. It is not brought to our notice by the Revenue that the matter has been decided by Hon'ble Calcutta High Court, despite a query from the Bench. In such circumstances, and taking a consistent view, we hold that the CIT(A) has rightly treated the sales tax subsidy receipt as 'capital in nature'. 8. In respect to the issue of application of Explanation-10 to Sec.43(1) of the Act we find from the facts of the case that the Rajasthan Govt, has framed a incentive scheme i. e., R.S.T/C.S.T. Exemptions Scheme 1998 for encouragement of setting up of industrial project or expansion of existing industrial projects. It is also a fact that the maximum limit of the subsidy was restricted with reference to the value of fixed capital investment in land, building, plant & machinery but no part of the subsidiary was specifically intended to subsidize the cost of the any fixed assets, therefore, it cannot be said that subsidy was to meet a portion of cost of asset. According to us, assessee has rightly not reduced the amount of subsidy received....
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....hall not be included in the actual cost of the asset to the assessee. It is further, provided thereunder, that where such subsidy or grant or reimbursement of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. In order to invoke Explanation 10, it is necessary to show that the subsidy was directly or indirectly used for acquiring an asset. This is again a question of fact. The relatable subsidy to such asset can be reduced from the cost only if it is found that the cost for acquiring that asset was directly or indirectly met out of the subsidy. Likewise in the proviso, it is necessary to show that the subsidy has been directly or indirectly used to acquire an asset but it is not possible to exactly quantify the amount directly or indirectly used for acquiring the asset. Here also, a finding of fact is necessary that an asset was acquired by directly or indirectl....
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....round no. 4 for AY 2013-14 & 2014-15 raised by the Revenue are dismissed. Revenue's common Ground no. 5 for AY 2013-14 & 2014-15 relating to the claim of interest subsidy from the State Government as a capital receipt: 12. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee's own case for AY 2011-12 & 2012-13 dealt with this issue and decided in assessee's favour observing as follows: "14. We have heard rival contentions and perused the records placed before us. The fifth common ground in the Department's appeal relates to the assessee's claim that interest subsidy, since renamed "Capital Investment Subsidy", of Rs. 3,04,22,210/- received under the amended Rajasthan Investment Promotion Scheme, 2003 (hereinafter referred to as "the 2003 Scheme") in respect of expansion undertaken at the assessee's Chanderia Cement Works should be treated as a capital receipt. The ld. AO held that the subsidy was incidental to carrying on of the business of the assessee and treated the same as revenue receipt. On appeal, the ld. CIT(A) held it to be a capital receipt by following this Hon'ble Tribunal's decision in assessee's own case ....
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....t subsidy in question received under the very same scheme as in the present year, was a capital receipt not chargeable to Tax. The following were the relevant: "6.2 We have heard the rival submissions and perused the materials available on record. The ld. AR drew our attention to page 77 of Supplementary Paper Book Volume III to the order dated 7.6.2007 passed by the Commercial Taxes Officer, Special Circle Bhilwara, Government of Rajasthan, sanctioning a sum of Rs 15,91,813/- towards Interest Subsidy to the assessee. The said order also clearly mentioned that the said interest subsidy of Rs 15,91,813/- would not be paid to the assessee in cash and instead the same would get adjusted with the sales tax liability payable by the assessee. Based on this, the ld. AR argued that the interest subsidy also takes the character of sales tax subsidy and hence to be treated as capital receipt. We find that this issue was subject matter of adjudication in assessee's own case for the Asst Year 2007-08 in ITA No. 686 & 581/Kol/2011 dated 8.12.2014 wherein it was held that the said interest subsidy would have to be treated as a capital receipt but with a direction to reduce the same from the co....
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..... CIT(A). Thus, common ground no. 5 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed." 12.1. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee's own case for preceding AYs 2011-12 & 2012-13 and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 5 for AY 2013-14 & 2014-15 raised by the Revenue are dismissed. Revenue's common Ground no. 6 for AY 2013-14 & 2014-15 relating to the disallowance u/s 14A of the Act read with Rule 8D of the Rules and assessee's additional ground stating that ld. AO should have accepted the disallowance offered by the assessee u/s 14A of the Act and he erred in invoking and applying Rule 8D: 13. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee's own case for AY 2011-12 & 2012-13 dealt with this issue of disallowance u/s 14A of the Act and decided in assessee's favour observing as follows: "15. We have heard rival contentions and perused the records placed before us. The sixth common ground of the....
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....t in companies. The only activity in relation to such dividend income is deposit of the warrants received in the bank account. 15.3. Further it is submitted that during the relevant previous year, there was no change in the share investments of the assessee. In respect of its share investments, the assessee received 7 dividend warrants for an aggregate sum of Rs. 1,17,21,334 /- which were deposited in the assessee's bank account for the purpose of encashment. The rest of the dividend income of Rs. 11,67,12,929/- was from investment in schemes of mutual funds providing for declaration of dividend. Out of the said amount, a sum of Rs.10,29,03,619/- was reinvested in units without physically receiving the warrants. Only 11 warrants for an aggregate sum of Rs. 1,38,09,310/- were physically received and had to be deposited in the bank. Break-up as on March 31, 2011 and March 31, 2010 of the assessee's investments which yielded dividend during the year and those which did not yield or were incapable of yielding dividend is tabulated under: (Rs. in lakh) Particulars As at 31.3.11 As at 31.3.10 Average Percentage 1.Investments in mutual fund schemes and shares which yielded di....
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....onery and printing charges and conveyance and other expenses. 15.6. It is also submitted by the assessee that almost the entire expenditure incurred by the assessee is in connection with its business of manufacturing diversified goods. Only the surplus business funds of the assessee are invested by it in safe and liquid investments, which activity is looked after by the aforesaid three officers of the assessee to the extent specified in the assessee's statement of expenditure. The assessee's share investments are non-moving. The expenditure of Rs. 6,40,792/- incurred in connection with management/maintenance of the assessee's investment portfolio was correctly tabulated by it in the statement submitted to ld. AO. The said statement includes not only the concerned employees' remuneration but also other office expenses. No other infrastructure of the assessee was utilised in connection with the management/maintenance of its investment portfolio. In the facts of the assessee's case, the quantum of investment or the amount of investment income are not at all determinative of the quantum of expenditure incurred by the assessee in connection therewith. Further, Section 14A(2) of the Ac....
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....is so held in Walfort Share & Stock Brokers (P.) Ltd., relevant passage whereof is already reproduced above, for the sake of continuity of discussion, we would like to quote the following few lines therefrom. "The next phrase is, "in relation to income which does not form part of total income under the Act". It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A. ** ** ** The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A." 35. The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the Legislature has no....
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....disallowance on any reasonable basis. It would not therefore be correct to say that once ld. AO rejects the mode of computation of disallowance under section 14A of the Act as made by the assessee, he has no other option but to resort to rule 8D of the Rules. Reference in this behalf is invited to an unreported judgment dated July 19, 2018 of the Hon'ble Calcutta High Court in the case of PCIT vs. Britania Industries Ltd. [ITAT No.45/2017, GA No.420/2017], where the following view taken by this Hon'ble Tribunal was approved: "...Even in a case where the AO rejects the claim of the assessee that no expenses were incurred to earn the exempt income, it is not mandatory for him to invoke the method of calculation prescribed by Rule 8D(2) of the Rules and is free to make the disallowance on any reasonable basis. By applying the Rule 8D of the Rules blindly sometimes absurd disallowances would result. In our view, therefore while examining the claim of the assessee regarding expenditure incurred in earning the exempt income including a claim that no expenses were incurred, the AO is bound to take note of such absurdities and refrain from invoking the method of disallowance of expenses ....
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....t of the Hon'ble Supreme Court in Maxopp's case (supra), investments in subsidiary companies would have to be considered if they yielded dividend income. To this extent finding of the ld. CIT(A) is contrary to law. It is necessary to add that the amendments made to section 14A by the Finance Act, 2022 have no relevance in the instant case. The said amendments will apply only where it is undisputed that expenditure has been incurred but the assessee does not want it disallowed on the ground that no exempt income was earned. That is not the controversy in the instant case. In the instant case, the dispute is whether any expenditure over and above the sum of Rs.6,40,792/- was actually incurred by the assessee. In any event, the said amendments are effective only from AY 2022-23 and have no application for the earlier years as held by the Hon'ble Delhi High Court in PCIT v. Era Infrastructure (India) Ltd, (2022) 141 taxmann.com 289 (Del). 15.12. Though the ld. Counsel for the assessee has pleaded that in lack of proper satisfaction recorded by ld. AO questioning the correctness of the claim of disallowance suo moto made by the assessee, the alleged disallowance is uncalled for and ha....
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....s growth schemes) did not provide for payment of any dividend Upon redemption/disposal of such investments, the assessee would be liable to capital gains tax and income from such investments is not exempt under the provisions of the Act. He argued that even in respect of the assessee's investments in other schemes of mutual funds providing for payment of dividend, the assessee is liable for capital gains tax upon disposal/redemption of the units since such schemes are also not equity oriented. We find that the ld. A R also made an alternative argument that only dividend bearing investments should be reckoned for disallowance under Rule 8D(2)(iii) of the Rules and that strategic investments should be excluded We find lot of force in the alternative argument of the Id AR that only dividend bearing investments are to be considered for making disallowance u/s 14 A of the Act. In this regard, the reliance placed by the Id A R on the decision of this tribunal in the case of REI Agro Ltd. reported in 144 ITD 141 (Kol) is very well founded wherein it was held that: 8.1 Thus, not all investments become the subject-matter of consideration when computing disallowance under section 14A r....
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....ble to commercial expediency, because as per submission made by the assessee, it had to form Special Purpose Vehicle (SPV) in order to obtain contracts from the NHAI and the SPVs so formed engaged the assessee company as contract to execute the works awarded to them (i.e. SPVs) by the NHAI. In its profit and loss account for the year, the assessee has shown the turnover from execution of these contracts and therefore no expense and interest attributable to the investments made by the appellant in the PSVs can be disallowed u/s 14A r.w. Rule 8D because it cannot be termed as expense/interest incurred for earning exempted income. Under the circumstances, Ld. Commissioner of Income Tax (Appeals) is correct in holding that disallowance of a further sum of Rs 40,556/- calculated @ 2% of the dividend earned is sufficient. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals), hence we uphold the same. On going through the above observations we are of the view that this is merely a question of fact and does not involve any question of law much less a substantial question of law, as the Tribunal held that the expenses which hav....
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....& 8 for 2014-15 relating to the issue that whether subsidy/incentives being capital receipts needs to be excluded from the book profit u/s 115JB of the Act: 14. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee's own case for AY 2011-12 & 2012-13 dealt with this issue and decided in assessee's favour observing as follows: "16. The seventh common ground of the Department's appeal is against the decision of the ld. CIT(A) directing the ld. AO to exclude the subsidy/incentive from book profit under section 115JB of the Act. The ld. AO rejected the assessee's claim to exclude the following incentives in computing Book Profit u/s 115JB of the Act: Particulars Amount (in Rs.) Interest Subsidy received from Govt. of Rajasthan under Rajasthan Investment Promotion Scheme, 2003 Rs. 3,04,22,210 Incentive from Govt. of West Bengal in the form of Industrial Promotion Allowance Rs. 16,94,84,638 Total Rs. 19,99,06,848 The ld. AO held that the accounts were prepared in accordance with the provisions of Companies Act and these incentives were credited to Profit & Loss Account. Besides, the claim was not made through IT ....
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....of section 5 reads as under: "5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which -" (emphasis added) The "total income" consists of all items of "income" as defined in clause (24) of section 2 of the Act. 16.2. What can be taxed u/s 115JB of the Act is the "total income" which is income as defined in section 2(24) of the Act chargeable under section 4 and computed in the manner laid down in section 115JB. What is not "income" within the meaning of section 2(24) is outside the purview of the Act; cannot form subject matter of the charge of tax under section 4; cannot form part of "total income" and cannot be subjected to tax either under the normal computation provisions or under section 115JB of the Act. The absence of provision in section 115JB of the Act for exclusion of such capital receipt credited to the profit and loss account cannot result in its taxation. 16.3. It is submitted by ld. Counsel for the assessee that this issue is now squarely covered in favour of the assessee by the judgment of the Hon'ble Calcutta High Court in PCIT vs. Ankit Metal & ....
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....ellant. In this case Supreme Court has made it clear that its decision was restricted to the power of the Assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under Section 254 of the Income Tax Act, 1961. The Hon'ble Supreme Court in the said decision held as follows: "..........In the circumstances of the case, we dismiss the Civil Appeal. However, we make it clear that the issue in this case is limited to the power of the Assessing Authority and does not impinge on the power of the Income Tax Appellate Tribunal under Section 254 of the Income Tax Act, 1961." This judgment was followed by our Court in the case of Britannia Industries Ltd. (supra) holding that Tribunal has the power to entertain the claim of deduction not claimed before the Assessing Officer by filing revised return. Respectfully following the aforesaid decision as well as the view already taken by us in this case that the aforesaid subsidies are capital receipt and not an 'income' and not liable to Tax Tribunal in exercise of its power under Section 254 of the Income Tax Act justified this claim though....
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....JB. During the year under consideration the appellant had written back and credited provisions for sick leave no longer required amounting to Rs. 1,35,70,743/- to the Profit & Loss Account. It is submitted that the provision for sick leave amounting to Rs.3,08,60,603/- was created and accounted in the appellant's financial books for the FY 2007-08 relevant to AY 2008-09, when the Accounting Standards- 15 (Revised) was notified by the Institute of Chartered Accountants of India. In terms of the revised AS-15, the manner of determination and quantification of Retirement & post retirement benefits to Employees underwent a sea change. The assessee was required to first identify and quantify the additional liability arising upon application of the revised Standard in the initial year in its books of accounts; upto 01.04.2007. This additional liability arising on transitioning from the pre-revised AS-15 to the revised AS-15 was mandatorily required to be adjusted from the brought forward balance of Reserves and Surplus as on 01.04.2007 and the company could not charge it to the P&L A/c. Accordingly the transitional provision for sick leave of Rs.3,08,60,603/-; created and accounted i....
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....was never claimed as deduction in computation of book profit u/s 115JB for the A.Y. 2008-09 being the year in which it was created. Applying the provisions of clause (I) of Explanation to Sec 115JB, the write back of such provisions deserves to be reduced from the book profit computed under Sec 115JB of the I.T. Act. 11.4 The appellant reiterates that no part of Rs. 1,35,70,743/- written back in F.Y. 2012-13 was claimed as deduction in the year in which provision was created and adjusted from General Reserve during the FY 2007-08. It is out of this provision, that sum of Rs. 1,35,70,743/- has been written back to the profit & loss account in the relevant AY 2013-14. Since the provision was never claimed as deduction in the year of debit i.e. 2007-08, the write back of such provision is also not taxable under deeming provisions u/s 115JB. In view of the foregoing the appellant submits that the AO was grossly unjustified in not excluding the provision of Rs.1,35,70,743/- written back and credited to the Profit & Loss Account for the year ended 31st March 2013. The AO may therefore be directed to allow deduction of the same from the income computed under the deeming provisions of Se....
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....d assessed to tax u/s 115JB. The Ld. AO is accordingly directed to exclude the said sum of Rs.1,35,70,743/- while determining the book profit u/s 115JB. Ground No. 17 of the appeal is accordingly allowed." 15.1. The above finding of ld. CIT(A) remains uncontroverted by ld. D/R and we, after considering the fact that the appellant identified transitional liability on account of provision of sick leave but in terms of Accounting Standards-2015 (Revised) the said provision was not debited to profit and loss account but directly adjusted against the balance in general reserve. Thus, the claim was neither debited to profit and loss account nor claimed as deduction from the book profit. Under these facts and circumstances, we hold that the claim of the assessee of excluding the provision for sick leave written back was justified. Thus, no interference is called for in the finding of ld. CIT(A). Thus, ground no. 8 raised by the Revenue for AY 2013-14 is dismissed. Revenue's common Ground no. 9 for AY 2013-14 & 2014-15 relating to the upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules: 16. We have heard rival contentions and perused the rec....
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....r section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." (emphasis added) 17.2. The same view was taken by the Hon'ble Karnataka High Court in CIT v. Gokal Das Images Private Limited, (2020) 429 ITR 526 (Karn) - paragraph 10 at page 533 of the Reports (Page 156 at page 163 of the Compilation of the Case Laws). Relevant portion of the decision of the Karnataka High Court in Gokaldas Images' case (supra) is extracted hereinbelow: "10. The Commissioner of Income-tax (Appeals) has held that as per section 115JB of the Act, the assessee being a company is liable to tax on book profits in accordance with the aforesaid provision and there is no exemption granted to the non-dividend company in this regard. However, the tribunal by placing reliance on decision of the Supreme Court in Apollo Tyres v. CIT [2002] 122 Taxman 562/255 ITR 273 has held that Assessing Officer while determining book profits under section 1....
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....inance Act, 2022 inserting Explanation 3 to Section 40 of the Act as per which education cess cannot be claimed as expenditure. Therefore, common ground no. 1 raised by the assessee for AY 2013-14 & 2014-15 is dismissed. 21. Ground no. 2 & 3 for AY 2013-14 and ground no. 1 & 2 for AY 2014-15 raised by the assessee relates to deduction of provision made for leave encashment and the allowability of the deduction u/s 43B(f) of the Act for the amount actually paid. 21.1. The assessee had claimed deduction on account of provision made for leave encashment relying upon the decision of the Hon'ble Calcutta High Court in Exide Industries Limited v. Union of India, (2007) 292 ITR 470 (Cal) whereby clause (f) of Section 43B of the Act was held unconstitutional. Ld. AO disallowed the claim by observing that the matter is sub judice before the Hon'ble Supreme Court. On appeal, ld. CIT(A) directed ld. AO to allow deduction in respect of the provision only if the Hon'ble Supreme Court upheld the decision of the Hon'ble Calcutta High Court by rectifying the assessment once the judgment was rendered by the Hon'ble Supreme Court. The assessee's ground of appeal was dismissed subject to the said o....