TaxTMI 
TaxTMI 
2023 (5) TMI 957
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...., respectively. Since all these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. Nobody has been appearing on behalf of the assessee right from the beginning when the appeals were first posted for hearing. Though the hearing in these appeals commenced way back in the year 2018, it was only on the 10th May, 2022, when the matter came up for hearing, that the learned CIT-DR apprised the Bench that the assessee's case had been referred to NCLT and the matter is pending. He was accordingly directed by the Bench to ascertain the status of the case pending with the NCLT; to which on the next date of hearing i.e. on 7th July, 2022, the learned DR submitted that the assessee-company was in liquidation. Notice was directed to be issued to the Official Liquidator namely CA Ramchandra Dallaram Choudhary and the matter was adjourned for hearing on 24.08.2022. In the meanwhile, on 21.07.2022, the Official Liquidator Shri Ramchandra Dallaram Choudhary filed a letter in the Registry mentioning the entire facts relating to the assessee's case for all the appeals before us stating that the NCLT vide its or....
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.... and that the admission of the Department's claim made no difference or had no impact to the hearing of appeal being proceeded with since if the Department won the case, the claim would remain intact; but, on the contrary, if the Department lost the case, the claim would get reduced to that extent. Therefore, noting the same, the matter was treated as heard on 01.03.2023. 4. As noted above, since the assessee has remained unrepresented throughout the course of hearing before us, we proceed to dispose of the appeals ex-parte qua the assessee, on the basis of material available on record. 5. We have noted that in the three appeals pertaining to the Department for AYs 2010-11, 2011-12 and 2012-13, the issues raised are identical relating to disallowance of expenses under Section 14A of the Act, disallowance of deduction under Section 80JJA of the Act, disallowance of prior period expenses and disallowance of interest under Section 36(1)(iii) of the Act. These issues are more or less repeated in all the appeals of the Department. Therefore, we shall be taking up the appeals pertaining to AY 2010-11 and if the facts in the subsequent years are found identical, the appeals will be trea....
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....(2AB) of the Act of Rs.11.44 crores since it had failed to prove with evidence that the in-house research and development facility was approved by DSIR. The Assessing Officer noted that the assessee had not furnished copies of Form 3CK, 3CL and 3CM for claiming the aforesaid deduction and accordingly he held that the assessee was, therefore, not entitled to claim deduction under Section 35(2AB) of the Act of Rs.11,44,57,375/-. His findings in this regard are recorded at paragraph No.5.5 & 5.6 of the order which read as under:- "5.5 On perusal of the above submissions it is seen that the assessee has not furnished any details/documentary evidence to prove that the in house research facility was approved by DSIR. The assessee has also not furnished any evidence to prove that it fulfilled the requisite conditions for allowance of deduction as prescribed in section 35 of the Act. The assessee was specifically requested to furnished copies of Form 3CK, 3CL and 3CM. The assessee has not furnished copies of such forms. It may be mentioned that Form No.3CM is the order of approval of In-house Research & Development facility u/s.35(2AB) by the Secretary, DSIR. Similarly, Form No.3CK is th....
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....s.7,50,72,249/- and revenue expenditure of Rs.36,98,000/- on scientific research facility. Accordingly while claiming deduction u/s 35(2AB), 150% of capital expenditure amounting to Rs.11,26,08,374/- (150% of 7,50,72,249/-) was claimed. Since Rs.36,98,000/- on account of revenue expense was already debited in profit and loss account, an additional 50% of such expenditure amounting to Rs. 18,49,000/- (50% of 36,98,000/-) was claimed. While computing the impugned disallowance the Assessing Officer has disallowed Rs.11,44,57,375/- (11,26,08,374 + 18,49,000) u/s 35(2AB). In this connection the appellant would like to mention that the Assessing Officer is not justified in making entire disallowance @ 150% in case ' of capital expenditure of Rs.7,50,72,249/-. Such expenditure is even otherwise allowable @ 100% as per the provisions laid down in section 35(l)(iv). The relevant excerpts of section 35 (1) (iv) are as follows: 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed : .... (i) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may b....
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....35(1)(iv) of the Act, that the assessee was unable to substantiate its claim of having incurred capital expenditure for Research and Development. In the absence of any representation on behalf of the assessee, the said finding of fact by the Ld.CIT(A) has remained uncontroverted before us. We therefore see no reason to interfere in the order of the Ld.CIT(A) denying assesses claim of 100% deduction of capital expenses incurred on Research and development u/s 35(1)(iv) of the Act. Also since the assesses claim of having incurred capital expense is not established its alternate claim of allowance of depreciation on the same also is not tenable. In view of the above ground of appeal No.1-2 raised by the assessee is dismissed. 13. In effect appeal of the assessee is dismissed. 14. We shall now deal with Department's appeal No.2174/Ahd/2016 for Asst. Year 2010-11. Ground no.1 raised by the Revenue reads as under: "1) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 1,58,643/- made on account of disallowance u/s.14A Rule 8D of the Act." 15. As is evident from bare perusal of the ground, the issue relates to disallowance of expenses pertaining to earning....
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....the Appellant during the year. Further on perusing the Balances sheet as at 31st 8 ITA No 245/AHD/2013 . A.Y. 2008-09 March 2008 we find that the share holders fund comprising of Share capital and reserves and surplus were to the extent of Rs.1.49 crores and during the year Appellant has also earned profit after tax of Rs.60.39 lacs meaning that the availability of interest free funds with Appellant at the year-end were in excess of investments. From the details of other income placed on record, it is seen that during the year dividend earned by the Appellant is of Rs.20,498/- and the disallowance made by A.O u/s 14A is of Rs. 1,02,007/- and thus the disallowance u/s. 14A worked out by A.O is more than the tax free income. Before us, Id. D.R. has not brought any decision of Tribunal or High Court on record to controvert the submissions made by Id. A.R that disallowance u/s. 14A cannot be more than tax free income. On the other hand, while dictating the order, we have come across the decision of Hon'ble Delhi High court in the case of Joint Investment Pvt. Ltd. vs. CIT ITA No.117 of 2015 decided on 25.02.2015 wherein the Hon'ble High Court has held as under: "9. In the pre....
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....efore, partly allowed." 17. Before us, the ld.DR was unable to either controvert the facts relating to the issue that the exempt income earned by the assessee amounted to Rs.87,700/- nor was he able to controvert the legal proposition that disallowance under section 14A of the Act could not exceed exempt income. 18. We have noted the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Corrtech Energy Ld., 372 ITR 97. As held by us, the disallowance under section 14A of the Act cannot exceed the exempt income. 19. In view of the above, in the absence of the ld.DR being able to controvert the finding of the ld.CIT(A), either on facts or in law, we therefore, see no reason to interfere in order of the ld.CIT(A) deleting the disallowance under section 14A of the Act to the extent of Rs.1,58,643/-. Ground no.1 raised by the Revenue is dismissed. 20. Ground no.2 of the appeal reads as under: 2) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.12,31,000/- made on account of disallowance of prior period expenses." 21. As is evident from the above, the issue relates to prior period expenditure amounting toRs.12,31,000/- disallowance of which ....
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....eard rival contentions. Page 13 to 16 of the paper book comprise all details of assessee's prior period expenditure amounting to Rs. 67,88,591/-falling under major heads of C & F, misc. expenditure, outward freight and travelling etc. Its ledger accounts reveals that the same have been recognized on various dates from 01-04-2005 to 31-03-2006. There is hardly any dispute on genuineness aspect of the above stated expenditure heads. This is not the Revenue's case that the same is capital expenditure otherwise not allowable u/s. 37 of the Act. Both the lower authorities nowhere rebut assessee's case that it has been following past practice or the issue stands decided in its favour in earlier assessment years. Case law (1958) 33 ITR 681 (Bom) CIT vs. Nagri Mills Co. Ltd holds that when an assessee company is assessed at uniform rate, year of raising an expenditure claim is of no consequence, more particularly, when the same is allowable. Next judgment (2010) 194 TAXMANN 158 (Del) CIT vs. Jagatjit Industries accepts consistent accounting practice claiming identical expenditure in mercantile system of accounting wherein the necessary expenditure vouchers have been received af....
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....Rs.8,10,34,266/- made u/s.80JJA of the I.T. Act." 26. Issue raised by the Revenue in the above grounds relates to disallowance of deduction made by the AO of Rs.8,10,34,266/- claimed by the assessee under section 80JJA of the Act which was deleted by the ld.CIT(A). 27. The ld.CIT(A) has dealt with the issue at para-7 of his order. The Ld,CIT(A) noted the reasons for the AO disallowing the claim, as finding that the assessee failed to qualify for claiming deduction under section 80JJA of the Act on account of the assessee not fulfilling either of the criteria laid down in the section for claiming the deduction, of employing biodegradable waste and producing any item as referred to in Section 80JJA of the Act out of the same. Thus, the ld.CIT(A) noted that pre-requisite for claiming deduction under section 80JJA of the Act being employment of biodegradable waste for producing articles referred to in the section, not being fulfilled by the assessee, therefore the assessee was held by the AO as not entitled to claim deduction under section 80JJA of the Act, and the entire claim of the assessee under the said section amounting to Rs.8,10,34,266/- was denied by the AO. 28. At para 7.1....
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....I have carefully considered the Assessment Order and the submission filed by the Appellant. The AO has observed that Appellant has shown total purchases of Rs. 20.77 crores in Profit & Loss Account of Biofeed Division which includes captive purchase at Rs.7.40 crores (including Maize purchased of Rs. 5.97 crores) and out of the balance Rs.13.37 crores, Rs.11.64 crores are shown as purchase of feed and these items are not bio-degradable waste as defined in Section 80DA. The AO also referred to definition of European Commission for Environment wherein Bio-degradable Waste is defined and came to conclusion that raw material used by Appellant is not bio-degradable waste. It was also contended by AO that Appellant has not produced any article being generation of power, production of bio-fertilizer, bio-pesticide, production of bio-gas or biological agent or making pellets/briquettes for fuel hence deduction claimed under Section 80JJA cannot be made available. The AO at para 4.9 of his order has made alternate argument that entire expenditure incurred by Appellant is required to be allocated between 80JJA undertaking and non~80JJA undertaking and if this allocation is made, Appellant is....
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....nditions, viz. (i) there should a collection and processing of or treatment of biodegradable waste, and (ii) this waste should be used for generating power or producing bio-fertilizers, bio-pesticides or other bio-logical agents etc. This analysis of the ld.CIT(A) is at para 7.2 of his order as under: "7.2 On careful consideration of entire facts, it is observed that provisions of section 80JJA reads as under: "Where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power or producing bio fertilizers, bio-pesticides or other biological agents or for producing biogas or making pellets or briquettes for fuel or organic manure, there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to the whole of such profits and gains for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences." The provisions as referred herein above states that following conditions need to be satisfied by Assessee to claim above deduction: (i) there s....
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....r fuel by the respondent assessee. This finding of fact was based on evidence led before the authorities by the respondent-assessee. We find that bagasse is a waste of the sugar factory. This waste is a bio-degradable waste and the same is collected on consideration by the respondent assessee from the factory. There could be no universal definition of the word "waste". The term waste has to be understood contextually i.e. place where it arises and the manner h-. which it arises during the processing of some article. The fact that sugar industry also regards Bagasse as waste is evident from Circular dated 4/2/2006 issued by the Sugar Commissioner, Maharashtra State, Pune. Besides the ITC classification of the Exim policy also classifies bagasse as a waste of sugar industry under Chapter 23 Heading 23.20 thereof. Further, the Central Excise Tariff Act 1985 also regards bagasse as waste of sugar manufacture and is classified under Chapter 23 heading 23.01 of the Central Excise Tariff Act, 1985. We do not agree with the submissions of the appellant's Counsel that collection would mean collecting free of charge and not by purchasing the same. The word "collecting" means to gather; t....
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....umed by these micro-organisms is called biodegradable. Further, bio-degradable agro-waste used by Appellant for producing biological agent being bio-feed are composed of various nutrition components such as protein, fibre, fat, vitamins, minerals, etc., and such waste is used to cultivate and multiply the useful microorganisms. It is the natural principle that when nutrition available in biodegradable waste is used by micro-organism, they rapidly grow and multiply manifold under suitable temperature. These facts reveals that Appellant has collected and processed bio-gradable waste only. In assessment order, AO has stated that waste collected by Appellant is not bio-degradable but he has not made any brought any evidences in support of his claim that how waste used by appellant is not biodegradable. The AO has referred to definition of biodegradable waste used by European Commission for Environment. However, on the website of said entity, definition is given for bio-waste and not bio-gradable waste. The definition as available on website in verbatim is reproduced hereunder: "Bio-waste is defined as biodegradable garden and park waste, food and kitchen Waste from households, rest....
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....ced hereinabove. It is observed that biodegradable waste collected by Appellant are further processed with the help of fermentation to produce biological agents being enzymes which are biocatalysts. Appellant has also explained the process of bio-feed in three parts being culture development, seed preparation and final production in plant. It is observed that specific micro-organisms are added in the fermentation process which at specified control parameters of pH, temperature, aeration and time produces specific Enzymes. For each Enzyme a specific microorganism is used will changing the raw material (bio-degradable waste) proportions. Enzymes help in improving the any metabolic reaction in various industrial applications. They help in speeding up the breaking down the complex compounds into simpler compounds thus helping to avoid using conventional and hazardous chemicals which are harmful to the environment. The appellant has further argued that it has manufactured bio degradable agents like Bio-feed Active, Bio-feed Plus and Bio-feed Ultra, etc., and these biological agents have helped in improving the digestion in animals and poultry. They have helped in breaking down the compl....
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....r Section 80JJA of the Act. 34. On the basis of the above factual aspects to which the provision of law were applied by the ld.CIT(A), he held, the assessee was entitled to claim deduction under section 80JJA of the Act having fulfilled all the parameters required by the said section and also finding no basis with the AO for denying deduction tothe assessee. 35. The ld.CIT(A) thereafter went on to note that the AO had also raised another issue regarding allocation of expenditure between eligible and non-eligible units also. On this aspect, the ld.CIT(A) noted certain pertinent points that the assessee had given comprehensive working of profits derived from 80JJA units on purchases, could not be allocated on the basis of turnover as contended by the AO, since the profits relating to the eligible units had to be allocated to it, and could not be disturbed between the eligible and non-eligible units. He noted that the assessee had also given a method for allocating power and fuel expenditure, store expenditure and other expenditure which were on actual basis. He further noted that the AO did not find the allocation to be improper nor the AO pointed out any single instance of expense....
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....egradable waste as defined in section 80JJA of the Act, and item produced by the assessee from these bio-feed i.e. enzymes, qualified as "biological agents" as required by section 80JJA, and that the basis of allocation of expenditure by the assessee between the units and eligible for deduction under section 80JJA of the Act and not eligible for deduction 80JJA adopted by the assessee was consistent and correct. The ld.DR having unable to disturb the finding of the ld.CIT(A) either on facts and or in law, we see no reason to interfere in the order of the ld.CI(A) allowing the assessee's entire claim of deduction under section 80JJA of the Act. Ground of the appeal No.3 of the Revenue is dismissed. 37. In the result, the appeal of the Revenue in ITA No.2174/Ahd/2016 is dismissed. Now we take up Revenue's appeal, ITA No.2175/Ahd/2016 (AY 2011-12) 38. The Revenue has raised the following two grounds for adjudication: 1. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.1,15,440/- made on account of disallowance u/s.14A r.w. Rule 8 of the Act. 2. That the ld.CIT(A) erred in law and on facts in deleting the disallowance of deduction of Rs.15,06,65,677/-....
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....n. 44. Next ground is ground no.(b) which reads as under: "That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.13,32,326/- made u/s.115JB of the Act." 45. The issues raised in the above grounds are two folds viz. (i) with respect of disallowance made under section 14A of the Act, (ii) addition of disallowance made under section 14A while computing MAT income as per the provisions of section 115JB of the Act. 46. Here we are concerned with issue no.(ii) where the Revenue is aggrieved by action of the ld.CIT(A) in deleting the addition of Rs.13,32,326/- made under section 115JB of the Act. 47. We find that the issue on hand is no more remain res integra because Special Bench ITAT, Delhi in the case of ACIT vs. Vireet Investments (P.) Ltd [2017] (82 taxmann.com 415 (Delhi Trib.) (SB) held that disallowance under section 14A of the Act shall not apply to MAT computation. In holding so, the Tribunal has relied upon the decision of Hon'ble Delhi High Court in the case of Bhushan Steel Ltd., where it has been held that the computation under the MAT provisions is to be made without resorting to the computation as contemplated under section 14A read with Rule 8....
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....ng the submissions of the assessee, the ld.CIT(A) observed that the assessee has huge own funds as against the interest free advances given by the assessee for Rs.3.15 crores, and the presumption would be that such interest bearing advances were given out of own funds and not out of interest bearing funds available with the assessee. To support this observation, the ld.CIT(A) has relied on various case laws, which are noticed in the impugned order from page nos.52 to 54. He accordingly deleted the impugned addition made by the AO. 51. We have heard the ld.DR; perused orders of the Revenue authorities. It is evident that the AO has disallowed the impugned interest amount under section 36(1)(iii) of the Act under the presumption that borrowed funds have been diverted for non-business purpose. However, we find that the assessee has huge own funds to the extent of Rs.299.90 crores as against the advances made by the assessee to the tune of Rs.3.15 crores, and that the amount so advanced was to its sister concerns. These facts have not been denied by the Department. The ld.CIT(A) has elaborately discussed the issue in the light of various judgments to proposition that when interest fre....