AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 341
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....ditional depreciation of Rs.19,43,45,096/-. 2. Whether on 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....
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....tal 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. 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 account....
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.... previous year relevant to the assessment year 2014-15 on account of leave liability, if the Hon'ble Supreme Court, in the case of CIT vs. Exide Industries Ltd., allow the appeal filed by the Department in their favour and deduction of provision made for 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 ar....
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....hinery purchased and installed in the preceding year but put to use for a period of less than 180 days in that year. In view of the second proviso to section 32(1) of the Act, for the assessment year 2010-11, the assessee claimed only 50% initial depreciation and the remaining 50% was claimed in the 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....
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....by the decision of the Hon'ble Karnataka High Court in the case of CIT & Anr Vs. Rittal India Pvt. Lid reported in (2016) 380ITR 423 (Karn). 6. The Ld. Sr. DR relied on the orders of the authorities below. 7. Heard both the parties and perused the relevant material on record. In this regard, we may refer to the decision of the Hon'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 wor....
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....at previous year. According to AO in his order at page no-4 referred that the assessee put to use new plant and machinery for less than 1B0 days and confirmed by the CIT-A in para-8 of impugned order and it is a requirement under 2nd proviso to section 32(1) which lifts the restriction on AO allow the further depreciation of 10% of which remained unclaimed out of 20% as referred 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 a....
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....rofits and gains of such eligible business shall be computed as if the transfer has been made at Arm's Length Price (in short, the 'ALP'). The profits of the eligible undertaking should be ordinary, having regard to ALP. To discover the ALP as mandated in Section 80IA of the Act, the assessee was show-caused as to why the same price computed by the assessee not been rejected as it cannot supply power at that 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.) C....
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....of sub-section (8) of section 80IA of the Act, the electricity transferred from the power plants to the cement manufacturing units was valued by the assessee with reference to the amount charged by the concerned State Electricity Board in its bills raised upon the assessee. The assessee took into consideration the average rate charged by the State Electricity Board for the previous month even though the rates at which electricity was sold by the assessee to third parties were higher than the rate charged by the State Electricity Board. 11.1. 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 gene....
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....d the previous legislation, and was in force during the previous years relevant to the assessment years 2008-09 and 2009-10. The sea change in the law brought about by the Electricity Act, 2003 was considered along with the regulations made by the Regulatory Commissions in the two States. It was noted that by reason of the 2003 legislation and regulations made thereunder, it was open to the assessee to sell electricity even to consumers and such sale could take place at mutually agreed rates notwithstanding the tariff fixed by the State Regulatory Commission. 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....
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....he Tribunal, the revenue pointed out before the Tribunal that the very basis of allowing relief to the Assessee was the decision of the Tribunal in the case of ITC Ltd., and that the Hon'ble Calcutta High Court had reversed the order of the Tribunal in the case of ITC Ltd., reported in CIT v ITC Ltd., (2016) 236 Taxman 612 (Cal). In ITC's case (supra) it was held by the Hon'ble Calcutta High Court, that the quantum of benefit u/s 80IA of the Act was to be worked out with reference to the market rate at which electricity could have been sold to the distribution licensee by a generating 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, ....
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.... was the one fixed by the tariff regulatory commission. However, such position has undergone sea change inasmuch as during the relevant previous years it was open to the assessee to sell even to a consumer and the price for sale to a distribution company or to a consumer that could be mutually agreed upon notwithstanding the tariff fixed by the State Regulatory Commission. We find that during the previous year relevant to the Asst Year 2009-10, the assessee in fact sold electricity at rates higher than that charged from it by the State Electricity Board. The assessee nevertheless made the computation 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. ....
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....price. The following were the relevant observations of the Tribunal: "5.6.5. Exclusion of Electricity Duty and Cess as directed bv Id CITA Now coming to the decision of the Id CITA to exclude electricity duty and cess, we find that the same has been addressed by the Hon'ble Gujarat High court in the case of CIT vs Shah Alloys Ltd in Tax Appeal No. 2092 of 2010 dated 22.11.2011, which approved the view taken by the Ahmedabad Tribunal in ITA Nos.844, 2072 and 2073/Ahd/2006 dated 8.1.2010, that the price charged by the Electricity Board inclusive of the amount of Electricity Duty represented the market value 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 gr....
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....ice charged to the related parties was on arm's length. In this regard, the provisions of Chapter X that the arm's length price for the goods or services should be determined on the basis of methods prescribed in Section 92C of the Act. In the circumstances therefore apart from the fact that the power tariff should be shown to be fair value, it must also be demonstrated that the price adopted for determination of profits of the eligible undertaking, the assessee had adopted power tariff which could be said to be arrived at on arm's length principle. 2. From the orders of the lower authorities as also from the contentions of the appellant, 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 (2....
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....e unit at Madhya Pradesh supplied power only to the AE i.e. the non-eligible unit and it did not have any transaction with any unrelated enterprises. In the circumstances the unit at Madhya Pradesh cannot be considered as the tested party for the purposes of application of CUP. On the contrary, it is noted that the non-eligible unit i.e. cement unit was sourcing power both from the AE i.e. the eligible undertaking as well as unrelated enterprises i.e. the SEB. In the circumstances it Is noted that reliable internal CUP data was available with the appellant to benchmark the ALP of the power generated & supplied by the eligible undertaking to the non-eligible unit. Similarly 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 ....
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....ng Units hereinafter referred to as Non Eligible Units), for carrying out the manufacturing. Noteworthy that non eligible units have also consumed power by purchasing the same from SEB. We observe that the assessee determined the ALP of specified domestic transactions at rate ranging from Rs. 7.66 per unit to Rs. 7.87 per unit which was the Average Annual Landed Cost (AALC) at which the non-eligible unit procured power from SEB. Thus , the assessee followed internal CUP for bench marking the specified domestic transactions of transfer of power from CPPs to non eligible unit at average landed cost at which the non eligible units procured electricity from the SEB by taking non eligible 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 th....
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....epresented the internal comparable ALP. 9.6. According to Ld. CIT(A), the excess surplus power sold in the open market at a price which was lower than the price at which the manufacturing units procured electricity from the SEB cannot the arm's length price of the power. Thus, the Ld. CIT(A) reversed the order of TPO/AO by directing that the price at which the SEB sold power in the open market under uncontrolled conditions is reliable internal CUP and accordingly came to the conclusion that ALC notified by the SEB is a fair, reliable and reasonable basis to bench mark the power procured by non-eligible unit from the eligible unit. The Ld. CIT(A) while allowing the appeal of the 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 ....
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....inate bench of the tribunal in the case of Star Paper Mills Ltd Vs DCIT in ITA No. 127/Kol/2021. Therefore, we are inclined to uphold the order of Ld. CIT(A) by holding that the ALC at which the power is procured by non-eligible units from SEB is the most appropriate ALP to bench mark the specified domestic transactions and accordingly the order passed by Ld. CIT(A) is upheld by dismissing the revenue's appeal on this issue. The grounds of appeal pertaining to this issue are dismissed." 9.6. Thus, respectfully following the consistent view taken by this Tribunal and 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 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....
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....ated July 29, 2011 (Page 66 at Page 73 of the Paper Book - paragraphs 10 at 15). This Hon'ble Tribunal also rejected the Department's appeal for the assessment years 2007-08 (Pages 97-98 of the Paper Book, paragraphs 33 at 34) and assessment years 2008-09 and 2009-10 (Page 106 at Pp 107-108 of the Paper Book, paragraphs 2 at 2.2), by following its order for the assessment year 2006-07. The Hon'ble Tribunal dismissed the Department's appeal for the assessment year 2010-11 (Page 163 at Pp 164-165 of the Paper Book-paragraphs 18 at 22-23) by following its order for the assessment years 2008-09 and 2009-10. 12.3. The Department preferred appeals before the Hon'ble Calcutta High Court against the orders of this Hon'ble Tribunal 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 Compi....
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....dated July 29,2011 (Page 71 to 87 the Paper Book - paragraphs 10-15 at page-77 to 84). The said decision was rendered after considering the judgment of the Hon'ble Supreme Court in Enterprising Enterprises v Deputy Commissioner, (2007) 293 ITR 437 (SC). The said order of the Hon'ble Tribunal has been followed in first appeal for the assessment years 2007-08 (page 3, para 4), 2008-09 (page 55, para 4) and 2009- 10 (page 110, para 5). It was submitted that in this year also, the compensation amount of Rs.23,71,3401- should be held to be revenue in nature and an admissible deduction. 21. The CIT(A) deleted the addition made by the AO by following the order of the Tribunal in ITA No. 1936/Kol of 2010. Aggrieved by the order of the CIT(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 dec....
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....s are squarely covered by the decision of this Tribunal in assessee's own case for preceding AYs 2011-12 & AY 2012-13 except the change of figures 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. 3 for AY 2013-14 & 2014-15 raised by the Revenue are dismissed. Revenue's common Ground no. 4 for AY 2013-14 & 2014-15 regarding the issue of treating of industrial promotion assistance from the State Government as capital receipt: 11. 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 has dealt with this issue and decided in assessee's favour observing as follows: "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 We....
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....(Page 115 at Pp 122-125 of Paper Book-paragraphs 4 at 4.3) and for the assessment year 2010-11 by an order dated September 13, 2017 (Page 165 at Pp 168-171 of Paper Book-paragraphs 25 at 29-30). The Department had preferred appeal against the said order dated August 25, 2017 passed by this Hon'ble Tribunal for the assessment years 2008-09 and 2009-10 before the Hon'ble Calcutta High Court under section 260A of the Act being ITA No. 125/2019, GA No. 3548/2018 (Page 11 at Pp 23-24 - Question 10(i) of the Compilation of Case Laws). The Hon'ble High Court by an order dated September 12, 2019 was pleased not to admit the said question (Page 9-10 of the Compilation of Case Laws). 13.4. The identical question involving the 2000 Scheme came up for consideration recently before the Hon'ble Calcutta High Court in PCIT vs. Budge 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 t....
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....ec. 43(1) of I.T.Act. Revenue Ground No. 2 That Ld.CIT(A)-VI Kolkata has erred in law as well as on facts by deleting the addition made by the AO on account of Sales Tax Subsidy received by the assessee as revenue income of Rs 12,38,000/-. The decision rendered thereon by this tribunal is as under: 7. We have heard rival contentions on this issue and gone through the facts and circumstances of the case. We find that the facts are discussed in detail and which are undisputed. It is admitted that the assessee's issue of Sales Tax Incentive is capital in nature for the reason that the very scheme under which the expansion of the unit and subsidy under Rajasthan Sales Tax Scheme, 1998 was received explains the purpose of the scheme as incurring capital expenditure for installation of plant and machinery and for eligible for fixed capital investment. 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 circu....
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....er Hon'ble Supreme Court, law is that if the subsidy is asset-specific, such subsidy goes to reduce the actual cost. If the subsidy is to encourage setting up of the industry, it does not go to reduce the actual cost, even though the amount of subsidy was quantified on the basis of the percentage of the total investment made by the assessee. The law is already settled on the subject. Now, the only wavering is with reference to Explanation 10 provided under sec.43(l) of the Act. The said Explanation provides that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall 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 reimbursem....
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....he assets and under Explanation 10 to section 43(1) of the Act. We accordingly allow ground no.7 raised by the assessee in its appeal." 13.5. 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 2010-11and 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. 4 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed." 11.1. 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 & AY 2012-13 except for the change in figure 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. 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 peru....
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....7 for the assessment years 2008-09 and 2009-10 was followed by the Hon'ble Tribunal for the assessment year 2010-11 decided by an order dated September 13, 2017 (Page 190 at pages 193-194 of the Paper Book - paragraphs 68 at 73-74). A still later decision in the assessee's favour is that of the Hon'ble Calcutta High Court in PCIT v. Ankit Metal and Power Limited, (2019) 416 ITR 591 (Cal) (Page 76 at Pp 84,86-87 of the Compilation of Case Laws). It is submitted that this ground is covered in favour of the assessee. 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: "73. At time of hearing, it was agreed by the parties before us that identical issue arose for consideration in Assessee's own case for AY 2009-10 and in that year, the Hon'ble Tribunal in ITA No. 942/Kol/2013 and ITA No.329/Kol/2013 by its order dated 25.8.2017, held that the interest 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 availabl....
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....n under section 80IB/80IC as profits derived from eligible business according to its judgment in CIT v Meghalaya Steels Ltd., (2016) 383 ITR 217 (SC). Hence respectfully following the said decision of the Hon'ble Supreme Court in Balaji Alloys supra, we hold that the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed." 74. Respectfully following the decision of the Tribunal in Assessee's own case, we hold that the interest subsidy in question is a capital receipt not chargeable to tax. Thus, ground nos. 10 and 11 raised by the assessee are allowed." 14.2. 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 2010-11and 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 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 fo....
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....the assessee is in the business of manufacturing cement, jute goods, vinoleum, auto trim parts, etc. From time to time, the assessee makes investments out of its own funds in shares of companies and units of mutual funds. The assessee does not borrow any funds for making such investments. The mutual fund investments of the assessee are not in equity-oriented funds as defined in the explanation to section 10(38) of the Act and disposal/redemption thereof attracts capital gains tax. Substantial part of the mutual fund investments of the assessee are in growth schemes which do not provide for payment of any dividend during the currency of the scheme. Only some of the mutual fund schemes in which the assessee invests provide for payment of dividend. Such dividend is usually reinvested in the respective schemes without being actually received by the assessee. The assessee receives dividend warrants only in respect of some of its investments in mutual funds and in respect of the shares held by it 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 previ....
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....al funds. 15.5. Further ld. Counsel for the assessee submitted that in course of the assessment proceedings, the assessee submitted a detailed statement in respect of the expenditure of Rs. 6,40,792/- offered by it for disallowance as incurred in relation to the exempt dividend income. In the said statement, the assessee included appropriate proportion of the emoluments of the employees involved in management/maintenance of the assessee's investment portfolio. The assessee included 2% of the remuneration paid to Shri P. K. Chand (Chief Financial Officer) and 15% of the remuneration of Shri R.C. Jha, Manager (Finance & Accounts), who were engaged in multiple activities and were required to spend only a part of their time in managing/maintenance of the assessee's investment portfolio, and the entire remuneration of Shri M. K. Sharma, Asst. Manager (Accounts). The assessee also included in the said statement the other expenses incurred by it for managing/maintenance of its investment portfolio such as bank charges, telephone charges, stationery and printing charges and conveyance and other expenses. 15.6. It is also submitted by the assessee that almost the entire ex....
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....isallowed. The only reason given by ld. AO for making the disallowance was that rule 8D was applicable for the assessment year. It is submitted even rule 8D stipulates that ld. AO can resort to sub-rule (2) only where ld. AO, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of expenditure made by the assessee. It is submitted that in the instant case, ld. AO did not express any dis-satisfaction with the assessee's claim of expenditure and was not entitled to invoke section 14A(2) or rule 8D(2)(iii). In Maxopp Investment Ltd. vs. CIT, [2018] 402 ITR 640 (SC) [Page 110 at Pages 134, 136-137 of the Compilation of Case Laws], the Hon'ble Supreme Court was pleased to hold as follows: "......Keeping this objective behind Section14A of the Act in mind, the said provision has to be interpreted, particularly, the word 'in relation to the income' that does not form part of total income. Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in Section 14A of the Act. This is so held in Walfort Share & Stock Brokers (P.) Ltd., relevant passage whereof is al....
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....n pointed out in the aforementioned decision. Firstly that the provisions of section 14A has to be interpreted, particularly, the words that "in relation to the income" that does not form part of total income. Therefore, it was held that the principle of apportionment of expenses comes into play as that is the principle which is incorporated in section 14A of the Act. With regard to as to how the power under section 14A(2) read with rule 8D of the Rules could be invoked it was pointed out that the assessing officer needs to record satisfaction that having regard to the kind of the assessee suo motu disallowance under section 14A was not correct and it will be in those cases where the assessee in his return has himself apportioned but the assessing officer was not accepting the said apportionment. In any event, the assessing officer will have to record its satisfaction to the said effect." [emphasis added] 15.9. It is further submitted that even in a case where ld. AO is not satisfied with the correctness of the assessee's apportionment, it is not mandatory for ld. AO to invoke the method of calculation in rule 8D and he is free to make the disallowance on any reasonable....
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....nses incurred in respect of such employees and infrastructure have to be necessarily apportioned between the taxable and exempt activities. As held by the Hon'ble Supreme Court in CIT v. Walfort Share and Stock Brokers P. Ltd., (2010) 326 ITR 1(SC) and in Maxopp's case (supra), the principle of apportionment of expenses comes into play as that is the principle which is incorporated in section 14A of the Act. The assessee adopted a reasonable basis for such apportionment. The ld. AO did not find anything to dispute the assessee's computation except for saying that it is not as per rule 8D. In such circumstances, the disallowance offered by the assessee under section 14A of Rs. 6,40,792/- has to be accepted and no further disallowance can be made under the said provision. 15.11. Ld. Counsel for the assessee took an alternate plea submitting that assuming for the sake of argument that section 14A(2)/rule 8D(2)(iii) can be invoked, the finding of the ld. CIT(A) to the extent he held that only the investments which yielded dividend income should be considered for disallowance under section 14A read with rule 8D(2)(iii) cannot be faulted. Of course, in view of the judgment of th....
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....sessee voluntarily at Rs 4,00,096/- which was later revised to Rs 4,43,903/- based on the devotion of certain executives of the organization for managing the investment portfolio and other indirect expenses connected thereon, should be accepted and the ld. AO had not given any proper finding as to why the said disallowance was not proper. He simply resorted to computation mechanism provided in Rule 8D of the Rules and made disallowance thereon under the third limb of Rule 8D(2)(iii). Alternatively he prayed that 0.5% of dividend bearing investments alone be considered (The investments from where dividends were actually received by the assessee alone excluding the dividends that were reinvested) and also prayed for exclusion of investments made in subsidiaries as they are apparently strategic investments. We find that the ld. AO had given a finding in the assessment order as to why the workings of disallowance u/s 14A of the Act need to be rejected. Hence it cannot be said that the ld. AO had mechanically applied Rule 8D(2) of the Rules for making disallowance u/s 14A of the Act. It was argued by the Id AR that 69.07% of the assessee's investments (including in non-equity orient....
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....8 taxmann.com 196 (Kol Trib). We also find that the reliance placed in this regard by the Id A R on the decision of the Hon'ble Delhi High Court in the case of CIT vs Oriental Structural Engineers Pvt Ltd in ITA 605/2012 dated 15.1.2013 wherein it was held that It was the contention of the revenue that Rule 8D of the Income Tax Rules. 1962 had not been applied properly in respect of the assessment year 2008-09. This aspect has been considered by the Tribunal in detail and it has observed as under: It was the contention of the revenue that Rule 8D of the Income Tax Rules. 1962 had not been applied properly in respect of the assessment year 2008-09. This aspect has been considered by the Tribunal in detail and it has observed as under: 6.3. We have carefully considered the submissions and perused the records. We find that Ld. Commissioner of Income Tax (Appeals) has given a finding that only interest of Rs 2,96,731/- was paid on funds utilized for making investments on which exempted income was receivable. Further. Ld. Commissioner of Income Tax (Appeals) has observed that in respect of investment of Rs 6,07,75.000/- made in subsidiary companies as per ....
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....nce u/s 14A of the Act r.w. Rule 8D(2)(iii) of the Rules." 15.13. 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 assessee fail to prove that there is change of facts in the years under appeal vis-à-vis preceding AY 2010-11 and also Revenue being unable to controvert 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. 6 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed." 13.1. 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 assessee fail to prove that there is any change of facts in the years under appeal vis-à-vis preceding AY 2011-12 & 2012-13 and also Revenue being unable to controvert 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. 6 for AY 2013-14 & 2014-15 raised by the Revenue and the additional ground raised by the assessee for both the years under ....
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.... of the Act for the first time by insertion of sub-clause (xviii) by the Finance Act, 2015 with effect from April 1, 2016 i.e. assessment year 2016-17. In paragraph 5.3 of Circular No. 19 dated November 27, 2015 containing explanatory notes to the provisions of the Finance Act, 2015, it is stated that the said amendment takes effect from April 1, 2016 and would accordingly apply to assessment year 2016-17 and subsequent assessment years [(2015) 379 ITR (St.) 19 at 35, 36]. The assessment year involved herein is 2011-12 before the amendment of section 2(24). Having regard to the decisions holding the field, subsidy received on capital account was not income within the meaning of the Act at least till the assessment year 2015-16. It is submitted by ld. Counsel for the assessee that since the said subsidies are not income within the meaning of section 2(24) of the Act, the same cannot also form part of the total income or be subjected to tax under section 115JB of the Act. The subject matter of taxation under the Act is "income". The charging section 4 of the Act provides for levy of tax in respect of "total income". "Total income" is defined in section 2(45) of the Act to mean "the t....
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.... a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Appollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. The third issue involve in the instant appeal which requires adjudication is whether the action of Tribunal entertaining / allowing the claim which was made by the assessee before the Assessing Officer by filing a revised computation instead of filing a revised return since the time to file the revised return was lapsed, for claiming to treat the incentive subsidies in question as capital receipts instead of revenue receipts as claimed in original return. The Assessing Officer had denied this....
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....it u/s 115JB of the Act. Thus, common ground no. 7 for AY 2013-14 and 7 & 8 for 2014-15 raised by the Revenue are dismissed. Revenue's Ground no. 8 for AY 2013-14 relating to the issue of addition of provision for sick leave, which was written back and credited to P&L A/c, while calculating book profit u/s 115JB of the Act: 15. We observe that the assessee claimed exclusion of provision for sick leave written back amounting to Rs. 1,35,70,743/- in order to compute book profit u/s 115JB of the Act. Ld. AO denied the claim without assigning any reason for such denial. Further, we notice that the assessee filed detailed written submissions before both the lower authorities and ld. CIT(A) after considering the same reversed the action of ld. AO and allowed assessee's ground observing as follows: "35. Ground No 17 emanates from the action of the Ld.AO in denying the exclusion of provision for sick leave written back amounting to Rs.1,35,70,743/- while computing book profit under Section 115JB of the Act. There is no discussion in the impugned order in this regard. 36. During the course of the appellate proceedings, the appellant-company / Ld. A.Rs have made the f....
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....the statement showing computation of book profit (Annexure - H) along with the extracts of financial statements (Annexure - I) for the FY 2007-08. The appellant has also enclosed herewith the actuarial valuation report (Annexure - J) obtained from a professional actuary ascertaining the transitional provision of sick leave at Rs.3,08,60,603/-. On conjoint reading of these documents, it shall be observed that the provision of sick leave was never debited to P&L A/c nor separately claimed as deduction from the computation of book profit for the AY 2008-09 and in that view of the matter, the write back of Rs. 1,35,70,743/- out of the transitional provision cannot be taxed in the hands of the appellant under the deeming provisions of Section 115JB. 11.3 Reference in this regard is made to the specific provision contained in clause (i) in Explanation 1 to Section 115JB provides that the amount withdrawn from the reserve or provision referred to in clauses (a) to (i) and credited to the Profit & Loss Account shall be reduced from the book profit. In other words provision for sick leave written back to the Profit & Loss Account is to be deducted while computing book profit. In th....
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....ision for sick leave was first accounted in terms of the Accounting Standards- 15 (Revised) notified and made applicable from 01.04.2007. In terms of the said revised AS, the company 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 and the same was required to be mandatorily required to be adjusted from the brought forward balance of Reserves and Surplus as on 01.04.2007. Accordingly the appellant had identified the transitional liability on account of provision for sick leave of Rs.3,08,60,603/- in the FY 2007-08 but in terms of AS-15 (revised) the said provision was not debited to P&L A/c but directly adjusted against the balance in General Reserves. As a consequence, the provision for sick leave to the extent of Rs.3,08,06,603/- was neither debited nor claimed as deduction from the book profit in the FY 2007-08 relevant to AY 2008-09. It is noted that out of this aforesaid provision which has since been brought forward over the years, that the appellant has written back provision to the extent of Rs. 1,35,70,743/- in the P&L A/c for the relevant FY 2....
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....l, ld. CIT(A) held that the provisions of section 14A and rule 8D cannot be applied in the computation of book profit under section 115JB of the Act. He placed reliance on the judgment of the Hon'ble Calcutta High Court in CIT v. Jayshree Tea and Industries Limited in ITAT 47 of 2014 and G.A. 1501 of 2014 decided on November 19, 2014. 17.1. It is submitted that this question is decided in favour of the assessee by the judgment of the Hon'ble Calcutta High Court in Jayshree Tea's case (supra) (page 152 of the Compilation of Case Laws). Question No. 2 in Jayshree Tea's case is relevant in this behalf. The material extracts from the said judgment are as below: QUESTION 2 in Jayshree Tea's case "2. Whether on the facts and in the circumstances of the case the Ld. Tribunal has erred in law in upholding the order of CIT (Appeals) that disallowance under Section 14A of the I.T. Act, 1961, amounting to Rs.2,20,15,787/- is not to be considered for book profit for calculation of book profit under Section 115JB of the I.T. Act, 1961?" DECISION OF THE HON'BLE COURT "We admit the question no.2 for adjudication in this appeal. By consent of the partie....
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....f the assessee." (emphasis added) 17.3. Respectfully following the judgments/decisions referred herein above, we fail to find any infirmity in the finding of ld. CIT(A) in deleting upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules. Thus, common ground no. 8 raised by the Revenue for AY 2011-12 & AY 2012-13 are dismissed." 16.1. Respectfully following the judgments/decisions referred herein above, we fail to find any infirmity in the finding of ld. CIT(A) in deleting upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules. Thus, common ground no. 9 raised by the Revenue for AY 2013-14 & 2014-15 are dismissed. 17. Other grounds raised by the Revenue AY 2013-14 & 2014-15 are general in nature which needs no adjudication. 18. Thus, both the appeals filed by the Revenue for AY 2013-14 & 2014-15 and additional ground raised by the assessee are dismissed. 19. Now, we take the remaining issues raised in assessee's appeal in ITA No. 496 & 497/KOL/2020 for AYs 2013-14 & 2014-15. 20. Ground no. 1 for AY 2013-14 relates to education cess being claimed as an expenditure u/s 37(1)....