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2023 (10) TMI 263
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....6/Viz/2020, I.T.A. No.324/Viz/2017, CO. No. 28/Viz/2022 I.T.A. No.324/Viz/2017, I.T.A. No.399/Viz/2014, I.T.A. No.67/Viz/2021, C.O. No.51/Viz/2021 I.T.A. No. 67/Viz/2021, I.T.A. No.49/Viz/2021, C.O. No.50/Viz/2021 I.T.A. No. 49/Viz/2021 Shri Duvvuru Rl Reddy, Hon'ble Judicial Member And Shri S Balakrishnan, Hon'ble Accountant Member For the Assessee : Sri GVN Hari, AR For the Revenue : Sri MN Murthy Naik, CIT-DR ORDER PER BENCH : ITA No. 25/Viz/2014 & ITA No. 26/Viz/2014 (Assessee's Appeals) The captioned appeals are filed by the assessee against the order of the Ld. Commissioner of Income Tax-1, Visakhapatnam [Ld. CIT-1] passed U/s. 263 of the Income Tax Act, 1961 [the Act] vide F.No. CIT-1/VSP/263/2013-14, dated 21/11/2013 and F.No. CIT-1/VSP/263/2013-14, dated 21/11/2013 for the AYs 2010-11 and 2011-12 respectively. Since the issues raised in both the appeals are identical, we shall first take up ITA No. 25/Viz/2023 as a lead appeal. ITA No. 25/Viz/2014 (By assessee) AY: 2010-11 2. Briefly stated the facts of the case are that the assessee is a Port Trust which came into existence under the Major Port Trust Act, 1963 and has been carrying on comm....
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....,90,328 Upto 2006-07 Upto 2007-08 12,27,664 2007-08 2008-09 3. Leave Encashment 4,44,91,804 Upto 2007-08 Upto 2008-09 5,09,64,466 3. The Ld. CIT-1, Visakhapatnam observed that since the assessee has been granted registration U/s. 12A of the Act up to the AY 2007-08, the entire income of the assessee was exempted from income tax. Therefore, the Ld. CIT-1, Visakhapatnam observed that in the light of the provisions of section 14A of the Act, the expenditure of Rs. 5,09,64,466/- pertaining to the AY 2007-08 and earlier assessment years, where exemption u/s 11 was claimed by the assessee, the expenditure pertaining to those assessment years clearly disqualified for being granted deduction on payment basis U/s. 43B of the Act on the reasoning that such disallowance made in the earlier years in the respective computation of income of the assessee did not materially affect the non-taxable status of the assessee which claimed and enjoyed the total exemption from taxation on account of its status as a Charitable Trust / institution. The Ld. CIT-1, Visakhapatnam observed that allowing the deduction....
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....CIT erred in observing that the provisions of section 14A would be attracted even in a year where no exemption is claimed in respect of the income of the relevant assessment year. 6. The Ld. CIT ought to have appreciated that view taken by the Assessing Officer to allow the above sum of expenditure is one of the possible views and hence the order of the Assessing Officer cannot be terms as erroneous. 7. The Ld. CIT erred in observed that the appellant admitted excess claim of deduction to the extent of Rs. 4,21,233/- and directing the Assessing Officer to consider initiation of penalty proceedings U/s. 271(1)(c) of the Act in respect of this amount. 8. The Ld. CIT ought to have appreciated that the above sum of Rs. 4,21,233/- pertains financial year 2008-09 in respect of which the appellant did not claim any exemption and such the provisions of section 14A are not at all applicable in respect of this amount even as per the view taken by the Ld. CIT. 9. Any other ground that may be urged at the time of appeal hearing." 5. As per the grounds of appeal raised by the assessee, we find that the core issue is with respect to disallowance of Rs. 5,09....
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....and hence invoking the provisions of section 14A is not valid in law. The Ld. AR further relied on the following case laws with respect to invoking of the provisions of section 263 by the Ld. CIT-1, Visakhapatnam. (i) CIT vs. Chettinad Logistics Pvt Ltd [2017] 248 Taxamn 0055 (Madras) (ii) Order of the Hon'ble ITAT in the case of D. Veerabhadra Reddy (HUF) in ITA No. 263/Viz/2014, dated 23/06/2017. (iii) Malabar Industrial Co. Ltd vs. CIT [2000] 243 ITR 83 (SC) (iv) CIT vs. Small Industries Development Bank of India [2012] 211 Taxman 341 9. The Ld. AR therefore pleaded that the order of the Ld. CIT-1, Visakhapatnam may be quashed. Per contra, the Ld. Departmental Representative (Ld DR) relied on the orders of the Ld. PCIT and argued in support of the same. 10. We have heard both the sides and perused the material available on record as well the orders of the Ld. Revenue Authorities. In the instant case, we find that there was a complete scrutiny assessment with respect to the AY 2010-11 wherein various details were called for by the Ld. AO before concluding the assessment order U/s. 143(3) of the Act. The Ld. AO in his detailed order has....
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....he order U/s. 263 of the Act has erroneously considered the said amount of Rs. 4,21,233/- pertaining to AY 2009-10 as an excess claim of deduction made by the assessee and had directed the Ld.AO to initiate concealment and penalty proceedings for excess claim of deduction U/s. 43B of the Act. We find merit in the submissions of the Ld. AR that this expenditure pertains to the AY 2009-10 whereas the Ld. CIT-1, Visakhapatnam has considered it as an expenditure pertaining to the AY 2007-08 and earlier years. Since the order of passed U/s. 263 by the Ld. CIT-1, Visakhapatnam is quashed as per the preceding paragraphs of this order, this ground raised by the assessee needs no separate adjudication and hence this ground is dismissed as infructuous. 12. In the result, appeal of the assessee (ITA No. 25/Viz/2014) is allowed. ITA No.26/Viz/2014 (By assessee) AY: 2011-12 13. This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax-1, Visakhapatnam [Ld. CIT-1] passed U/s. 263 of the Income Tax Act, 1961 [the Act] vide F.No. CIT- 1/VSP/263/2013-14, dated 21/11/2013 for the AY: 2011-12. 14. The assessee has raised the following grounds of appeal: ....
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....rust Act, 1963 and has been carrying on commercial activities and services of a port and allied facilities relating to maritime trade and commerce since inception. The assessee being a Local Authority was exempted U/s. 10(20) of the Act up to the AY 2002-03. From AY 2003-04 to 2008-09, total income of the assessee was exempted U/s. 11 of the Act. Consequent to amendment to section 2(15) of the Act, the assessee filed its return of income for the AY 2009-10 onwards admitting its income under the head 'business income'. Further, the registration U/s. 12AA of the Act was cancelled w.e.f 1/4/2009 vide proceedings of the Ld. CIT-1, Visakhapatnam dated 11/09/2012. The assessee filed its return of income for the AY 2010-11 on 29/9/2010 admitting a total income of Rs. 81,20,30,260/-. The case was selected for scrutiny under CASS and accordingly notice U/s. 143(2) dated 5/9/2011 was issued and served on the assessee on 8/9/2011 by the DCIT, Circle-1(1), Visakhapatnam. The assessee in response to the notice, filed a revised return of income admitting the same income however, by claiming a higher TDS credit. Thereafter, the case has been assigned to the Addl. CIT, Range-1, Visakhapatnam by th....
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.... CIT(A) is not justified in confirming the disallowance of prior period expenses of Rs. 59,10,546/- comprising the following (i) Operating expenses - Rs. 14,46,646 (ii) Staff Cost - Rs. 43,96,606 (ii) Miscellaneous expenses - Rs. 67,294 - Rs. 59,10,546 (b) The Ld.CIT(A) ought to have appreciated that out of the above expenses a sum of Rs. 45,55,948 crystallized during the impugned assessment year and hence it is not a prior period expenditure. (c) Alternatively the Ld. CIT (A) ought to have held that the AO having chosen to consider for taxation prior period income of Rs. 2,83,04,075/- is not justified in disallowing prior period expenses. 3. (a) The Ld. CIT(A) is not justified in confirming the disallowance of arrears of salaries & wages amounting to Rs. 14,71,75,096 and arrears of pension amounting to Rs. 14,63,03,516. (b) The Ld. CIT(A) erred in holding that the above expenses are to be disallowed U/s. 14A of the Act. (c) The Ld. CIT(A) ought to have appreciated that the above expenses crystallized during the impugned assessment year and that in the absence of any exempted ....
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....per the definition of prior period item 'only errors or omissions in the earlier periods which are accounted in the current assessment year shall be considered as prior period items'. The Ld. AR further submitted that in the instant case, the liability for the wages, operating expenses and other expenses only crystallized during the impugned assessment year and hence it does not fall within the definition of prior period expenses. The Ld. AR also further referred to paper book page No.175 wherein a Memorandum of Settlement of Wages has been arrived between the Major Ports and All India Port & Dock Workers Federation (HMS). The Ld. AR also referred to Wage Settlement Memorandum and stated that the arrears due to the employees / workers have been agreed w.e.f 1/1/2007 onwards. The Ld. AR further submitted that this Wage Settlement was signed on 19/1/2010 and hence the arrears payable w.e.f 1/1/2007 has been provided in the books of account during the AY 2010-11. The Ld. AR relied on the various case laws as submitted in the paper book. Per contra, the Ld. DR fully supported the order of the Ld. Revenue Authorities. 23. We have heard both the sides and perused the material avail....
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....to Ground No.2. The Ld. AR relied on the decision of the CIT vs. Small Industries Development Bank of India reported in [2012] 211 Taxman 0341 (Bom.). The Ld. AR also further submitted that the assessee has offered prior period income of Rs. 2,83,04,075/- whereas the Revenue has not allowed as deduction of this income pertains to previous year where the exemption was claimed by the assessee. He therefore pleaded that a similar treatment shall also be given to the prior period expenditure. Per contra, the Ld. DR fully supported the orders of the Ld. Revenue Authorities and stated that since the expenditure pertains to the earlier years where the assessee is entitled for exemption U/s. 11 of the Act, this expenditure needs to be disallowed U/s. 14A of the Act in the current assessment year. 26. We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Authorities.We find from the submissions made by the Ld. AR that the Memorandum of Wage Settlement was signed on 19/1/2010 giving retrospective effect from 1/1/2007. The Memorandum of Settlement which was arrived at U/s. 12(3) of the Industrial Disputes Act, 1947 between the ....
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....s. 36 to 39/Hyd/2015 (AYs: 2007-08 to 2010-11), dated 4/09/2015 and submitted that the Coordinate Bench by relying on various case laws considered the assessee's claim of depreciation @ 15% on capital dredging and hence pleaded that the same decision may be applied to the instant case. Per contra, the Ld. DR submitted that the capital dredging is akin to roads being developed on land for free facilitation of the vehicles and hence it should be treated as buildings and the assessee is entitled for depreciation @ 10% only. The Ld. DR relied on the decision of the Hon'ble High Court of Bombay in the case of CIT vs. Mazagaon Dock Ltd reported in [1994] 206 ITR 260 (Bom.). 29. We have heard both the parties and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly, the assessee has incurred expenditure of capital dredging on which the assessee claimed depreciation @ 15% considering the capital dredging as "Plant & Machinery". The Ld. AO disallowed the excess depreciation claimed by the assessee and observed that the assessee is entitled for depreciation @ 10% on capital dredging as it has to be considered as "buildings". We also find that ....
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....ssary for the purpose of working of the dock and, as such, functional test is satisfied. We find it difficult to accept this submission because, in our opinion, the ratio of the decision of the Supreme Court squarely applies to the present case. It makes no difference whether the approach road is for a dry dock, wet dock or a factory or for any other premises because the basic fact that it provides approach to the dock or the factory remains the same. The Supreme Court has clearly held that such approach road should be treated at par with factory building and not as 'plant'. In that view of the matter, we do not find any force in the submission of the counsel for the assessee that the approach channel should be treated not as 'road' but 'plant'. In our opinion, the distinction sought to be made between the Supreme Court case and the present case is not well-founded. Accordingly, we hold that the approach channel constructed by dredging the sea is at par with the roads and culverts constructed in the factory premises and the depreciation allowable at the rates applicable to the factory will be allowable thereon. It cannot be held to be 'plant' as contended by the assessee. In that v....
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.... (i) CIT vs. McMillan & Co. [1958] 33 ITR 182 (SC). (ii) Investment Ltd vs. CIT [1970] 77 ITR 533 (SC) (iii) MKB Asia (P.) Ltd vs. CIT [2008] 167 Taxman 256 (Gau.) (iv) JuggilalKamlaat Bankers vs. CIT [1975] 101 ITR 40 (All.) (v) CIT vs. Smt. Vimala D. Sonwand [1994] 75 Taxman 335 (Bom.) 32. The Ld. AR further submitted that the assessee can cancel the agreement and reassume the possession of the land by giving six months prior notice, and in case of such cancelation necessary compensation has to be paid to the lessee. The Ld. AR further submitted that in the case law relied on by the Ld. AO in the case of P.L. Ganapathi Rao & ANR vs. CIT [2006] 285 ITR 501 (AP), cash basis accounting system was followed. Further, the Ld. AR also in his written submissions stated that the Ld. Assessing Officers in the earlier assessment years have accepted the amortization of income and without prejudice an amount of Rs. 9,14,57,284/- which was received in earlier years as upfront premium and accrued as income proportionately during the current AY, cannot be subjected to tax in the impugned assessment year. Per contra, the Ld. DR in his written submission....
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....] held as follows: "13. We, therefore, hold that the income-tax authority has no option/jurisdiction to meddle in the matter either by directing the assessee to maintain its accounts in a particular manner or adopted different method for valuing the work-in-progress. We reiterate the decision in Doom Dooma India Ltd.'s case (supra) and hold that an assessee has as the option/liberty to adopt any recognized method of accounting for his business and the income shall be computed in accordance with such regularly maintained accounting system." The following are observations of the hon'ble Supreme Court in Investment Ltd.'s case (supra): "...A taxpayer is free to employ, for the purpose of his trade, his own method of keeping accounts, and for that purpose to value his stock-in- trade either at cost or market price. A method of accounting adopted by the trader consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping account or of valuation. The method of accounting regularly employed may be discarded only if, in the opinion of the taxing authorities income of the ....
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.... argument of the Ld. AR could not be accepted due to the fact that accounting the same in the impugned assessment year and later claiming it to be a bad debt since the whereabouts of the firm is not known is not a valid argument. Income has to be recognized when the services are rendered as per the AS-9 issued by the ICAI. Merely non-accounting of income due to the fact that the party could not be traceable is not a valid accounting procedure. Accordingly, we are of the considered view that the income has to be recognized in the books of accounts and the Ld. AO has rightly added the amount of Rs. 9,15,000/- which was also confirmed by the Ld. CIT(A). Thus, we do not want to interfere in the order of the Ld. Revenue Authorities. 36. With respect to the additional ground raised by the assessee, the Ld. AR did not press this ground and therefore the same is dismissed as infructuous. 37. In the result, appeal of the assessee (ITA No. 396/Viz/2014) is partly allowed: C.O. No. 26/Viz/2022 (By Revenue) (AY:2010-11) 38. This Cross Objection is raised by the Revenue against the additional ground raised by the assessee. Since the additional ground raised by the assessee in its....
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....Amount (Rs.) 1. Upfront premium / unexpired discounts added as income as per para-2 54,86,32,514 2. Disallowance of excess claim of depreciation as per para-3 (para 3.1, paraj 3.2 and para 3.3) 45,66,68,986 3. Disallowance of prior period expenditure as per para 4 3,82,46,499 4. Disallowance of donation and contribution as per para 5 5,28,847 5. Disallowance of excess claim on account of contribution to pension fund as per para-6 14,72,27,627 Assessed income 329,92,79,523 42. Aggrieved by the order of the Ld.AO, the assessee filed an appeal before the Ld. CIT(A), Visakhapatnam. After considering the submissions made by the assessee from time to time and after discussing the case with the Ld. AR, the Ld. CIT(A) partly allowed the appeals of the assessee for the AY 2010-11 & 2011- 12. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal: "1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts. 2. (a) The Ld. CIT(A) is not justified in confirming the disallowance of prior period expenses of Rs. 3....
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.... to the disallowance of prior period expenses of Rs. 3,82,46,499/- U/s. 14A of the Act. This issue is identical to that of the issue raised by the assessee in its appeal ITA No.396/Viz/2014 (Ground No.2) for the AY 2010-11. Since the facts and circumstances pertaining to this in both the appeals ie., ITA No. 396/Viz/2014 and ITA No. 397/Viz/2014 are same, our decision given while adjudicating the issue with respect to the disallowance of prior period expenses in ITA No. 396/Viz/2014 (AY: 2010-11) mutatis mutandis applies to the similar issue involved in Ground No.2 of ITA No. 397/Viz/2014 also. Accordingly, this ground raised by the assessee is allowed. 46. Ground No.3 raised by the assessee is with respect to disallowance of excess depreciation of Rs. 45,66,68,986/- on treating the capital dredging as Plant & Machinery instead of treating it as Buildings. This issue has already been decided in ITA No. 396/Viz/2014 vide Ground No.4 and our decision given therein applies mutatis mutandis to issue involved in Ground No. 3 of ITA No. 397/Viz/2014 also. Accordingly, this ground raised by the assessee with respect to excess claim of depreciation in respect of capital dredging is dism....
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....hat similar contributions have also made with respect to pension payments made during the year. Further, we also accept the contention of the Ld. AR that the actuarial valuation as on 31/3/2011 works out to Rs. 1,896.07 Crs and the assessee due to the cash flow issues is providing the contribution to Pension Fund over a number of years subject to availability of funds. The case law relied by the Ld. AR in GlaxoSmithkline Pharmaceuticals (supra), the Hon'ble High Court of Bombay Held as follows: "3. Similar issue had been raised by the Revenue in the matter of Commissioner of Income Tax vs. Suashish Diamonds Limited being Income Tax Appeal No. 568 of 2012. By an order dated 1^st March, 2013 in the matter of Suashish Diamonds Limited (supra), this Court has held that even if the expenditure as claimed is not allowable U/s. 36(1)(iv) of the Act, the same is allowable U/s. 37 of the Act. The Tribunal in the above case had followed the decision of this Court in the matter of Commissioner of Income Tax vs. Western India Paper and Paperboard Private Limited reported in 189 ITR 309. 4. In view of the above, we see no reason to entertain the question of law as proposed as ....
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....the Act, the assessee filed its return of income for the AY 2009-10 onwards admitting its income under the head 'business income'. Further, the registration U/s. 12AA of the Act was cancelled w.e.f1/4/2009. The assessee filed its return of income for the AY 2011-12 admitting a total income of Rs. 2,10,79,75,050/-. The case was taken up for scrutiny under CASS and the assessment was completed U/s. 143(3) on 31/1/2013 determining the total income at Rs. 3,29,92,79,523/-. Subsequently, the Ld. CIT-1, Visakhapatnam initiated the revisionary proceedings U/s. 263 of the Act setting aside the order passed U/s. 143(3) with a direction to the Ld.AO to consider the disallowance of expenditure of Rs. 8,51,10,123/- in terms of section 14A of the Act. Accordingly, the Ld. AO completed the assessment making an addition of Rs. 8,51,10,123/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee made various written submissions. The Ld. CIT(A) after considering the submissions, partly allowed the appeal directing the Ld. AO to make an addition of Rs. 8,47,67,472/-. Aggrieved by the order of the Ld. CIT(A), the assessee is in a....
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.... declaring NIL income. Subsequently, a revised return was filed for the AY 2015-16 on 28/03/2017 admitting NIL income. The case was selected for scrutiny under CASS and accordingly notice U/s. 143(2) was issued on 27/7/2016 which was duly served on the assessee on 4/8/2016. Further, a notice U/s. 142(1) of the Act dated 6/2/2017 was issued and duly served on the assessee on 9/2/2017. Thereafter, a letter dated 21/8/2017 was issued to the assessee informing the assessee regarding the conversion of 'limited scrutiny' to 'complete scrutiny' with the approval of the Pr. CIT-1, Visakhapatnam as the case falls under the categories prescribed under the CBDT's Instruction No. 20/2015 dated 29/12/2014 and Instruction No.5/2016 dated 14/7/2016. Subsequently, notice U/s. 142(1) of the Act has been issued on 28/09/2017. In response to the notice, the assessee's Authorized Representative appeared from time to time and filed the submissions as called for. The Ld. AO after discussing the facts and examining the books of accounts, submissions of the assessee, completed the assessment U/s. 143(3) of the Act by making the following additions: Sl No Nature of addition Amount (Rs.) 1. U....
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....hey need no adjudication. 64. Ground No.2 is with respect to the treatment by the Ld. Revenue Authorities theupfront premium received on leasing of lands as revenue receipt. This issue identical to that of the issue raised by the assessee in its appeal ITA No. 396/Viz/2014 vide Ground No.5.Since the facts and circumstance of the case as well as the issue involved in both the appeals are identical our decision given on Ground No.5 of the assesse's appeal in ITA No. 396/Viz/2014 mutatis mutandis applies to the Ground No.2 of the instant appeal (ITA No.235/Viz/2020) also. Accordingly, we direct the Ld. AO to delete the addition made on account of upfront premium received during the assessment year. We are therefore inclined to allow this ground raised by the assessee. 65. Ground No.3 pertains to disallowance of excess depreciation of Rs. 2,85,45,401/- as claimed by the assessee in respect of capital dredging. This issue identical to that of the issue raised by the assessee in its appeal ITA No. 396/Viz/2014 vide Ground No.4.Since the facts and circumstance of the case as well as the issue involved in both the appeals are identical our decision given on Ground No.4 of the assesse....
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....ts and circumstance of the case as well as the issue involved in both the appeals are identical our decision given on Ground No.4 of the assesse's appeal in ITA No. 397/Viz/2014 mutatis mutandis applies to the Ground No.5 of the instant appeal (ITA No.235/Viz/2020) also. Accordingly, from the judicial pronouncements as relied on by the Ld. AR on this issue, we find that the Hon'ble High Court of Bombay in the case of ACIT vs. Glaxo Smithkline Pharmaceuticals in ITA No. 2232 of 2011 has held that even if the expenditure is not allowable U/s. 36(1)(iv) of the Act, but the same is allowable U/s. 37 of the Act. Respectfully following the above decision, we are inclined to allow the contribution to Pension Fund in excess of 27% on account of salaries, wages and pension U/s. 37 of the Act and hence this ground raised by the assessee is allowed. Since, the expenditure is allowed on contribution basis, we are of the opinion that the provisions of section 43B of the Act are not applicable. It is ordered accordingly. 69. In the result, appeal filed by the assessee (ITA No.235/Viz/2020) is partly allowed. ITA No. 325/Viz/2017 (By Assessee) (AY: 2012-13) 70. This appeal filed by th....
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....aw applicable to the facts of the case. 2. The Ld. CIT (A) is not justified in sustaining the addition of Rs. 30,17,00,000/- made by the Assessing Officer towards disallowance of provision for payment of gratuity. 3. The Ld. CIT(A) ought to have held that the addition made by the Ld. AO is beyond the scope of 'rectification' as contemplated in Section 154 of the Act. 4. Without prejudice to the above, the Ld. CIT(A) ought to have held that the claim of the appellant towards provision for payment of gratuity is eligible for deduction under the provisions of the IT Act. 5. Any other ground that may be urged at the time of appeal hearing." 72. The assessee has also raised an additional ground which read as under: "On the facts and in the circumstances of the case, whether the Assessing Officer is justified in assessing the total income of the appellant without granting exemption U/s. 11 of the Income Tax Act, 1961?" 73. The only issue raised from the above original grounds of appeal is with respect to disallowance of provision for payment of Gratuity for Rs. 30.17 Crs which is beyond the scope of the rectification U/s. 154 of the Act.....
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....additional ground raised by the assessee is dismissed as not pressed. 76. In the result appeal of the assessee(ITA No. 325/Viz/2017) is allowed. ITA No.236/Viz/2020 (By Assessee) (AY: 2016-17) 77. This appeal filed by the assessee against the order of the Ld. CIT(A)-1, Visakhapatnam in ITA No. 10269/2018-19/CIT(A)- 1/VSP/2020-21, dated 21/09/2020 arising out of the order passed U/s. 143(3) of the Act for the AY 2016-17. 78. Briefly stated the facts of the case are that the assessee is a Port Trust came into existence under the Major Port Trust Act, 1963 and has been carrying on commercial activities and services of a port and allied facilities relating to maritime trade and commerce since inception. The assessee being a Local Authority was exempted U/s. 10(20) of the Act up to the AY 2002-03. From AY 2003-04 to 2008-09, total income of the assessee was exempted U/s. 11 of the Act. Consequent to amendment to section 2(15) of the Act, the assessee filed its return of income for the AY 2009-10 onwards admitting its income under the head 'business income'. Further, the registration U/s. 12AA of the Act was cancelled w.e.f 1/4/2009 vide proceedings of the Ld. CIT-1, Visak....
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....um received on leasing of lands as revenue receipt as against the amount recognized by the appellant over the lease period. b) Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that to the extent of Rs. 8,97,03,423/- the income was subjected to the tax twice ie., once in the year of receipt and again in the impugned assessment year on amortization basis. 3. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 10,11,32,350/- made by the Assessing Officer towards excess claim of depreciation in respect of capital dredging by restricting the rate of depreciation to 10% as against 15% claimed by the appellant. 4. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 7,00,00,000/- made by the Assessing Officer towards disallowance of provision made towards interest payable on Government Loans. 5. Any other grounds that may be urged at the time of hearing." 80. The assessee has also raised an additional ground in its appeal which reads as under: "On the facts and in the circumstances of the case, whether the total income of the appellant is eligible for exemption U/s 11 of the Income Tax Act, ....
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....t they may be upheld. 85. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. The main contention of the Ld. AO is that whether the interest is payable on loans borrowed from Government of India are eligible for deduction U/s. 43B of the Act in respect of its non-payment. The Ld. Revenue Authorities contention is that the outstanding liability being interest payable was not paid to the Government by the assessee before the due date and hence is not an allowable expenditure U/s. 43B of the Act. Further, the Ld. CIT(A) has also stated that the Governments are custodians of funds and the Banks and Financial Institutions are also organs of the Government and hence non-payable of interest in accordance with the provisions of section 43B shall be disallowed. In this regard, for the sake of brevity, we extract below section 43B of the Act: "Sec. 43B: (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing su....
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....he Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006); (f) "non-banking financial company" shall have the meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (g) "systemically important non-deposit taking non-banking financial company" means a non-banking financial company which is not accepting or holding public deposits and having total assets of not less than five hundred crore rupees as per the last audited balance sheet and is registered with the Reserve Bank of India under the provisions of the Reserve Bank of India Act, 1934 (2 of 1934). Following clause (g) shall be substituted for the existing clause (g) of Explanation 4 to section 43B by the Finance Act, 2023, w.e.f. 1-4-2024: (g) "small enterprise" shall have the meaning assigned to it in clause (m) of section 2 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006)." 87. From the bare reading of the above provisions and Explanation to Section 43B, the terms "public financial institutions"; "scheduled bank"; "State industrial investment corporation"; "co-operative bank", "primary agricult....
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....es of a port and allied facilities relating to maritime trade and commerce since inception. The assessee being a Local Authority was exempted U/s. 10(20) of the Act up to the AY 2002-03. From AY 2003-04 to 2008-09, total income of the assessee was exempted U/s. 11 of the Act. Consequent to amendment to section 2(15) of the Act, the assessee filed its return of income for the AY 2009-10 onwards admitting its income under the head 'business income'. Further, the registration U/s. 12AA of the Act was cancelled w.e.f 1/4/2009 vide proceedings of the Ld. CIT-1, Visakhapatnam dated 11/09/2012. The assessee had filed its original return of income for the AY 2012-13 on 27/09/2012 declaring total income of Rs. 45,68,31,160/-. Subsequently, the assessee filed revised return of income for the AY 2012-13 on 8/2/2014 admitting total income of Rs. 45,68,31,160/-. The case was selected for scrutiny manually with the approval of the Chief Commissioner of Income Tax, Visakhapatnam in F.No. 64/CCIT/VSP/Tech/12-13, dated 19/03/2013. Accordingly, the statutory notice U/s. 143(2) of the Income Tax Act 1961 dated 26/03/2013 was issued by the then ACIT, Circle-1(1), Visakhapatnam which was duly served on....
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....d. CIT (A) is not justified in sustaining the addition of Rs. 3,07,59,772/- made by the Assessing Officer by treating the entire upfront premium on lease of land as income of the appellant as against income admitted by the appellant on amortization basis. 3. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 1,34,42,478/- made by the Assessing Officer towards alleged excess claim of depreciation on capital dredging by holding that the eligible rate of depreciation would be 10% as applicable to building and not 15% as applicable to plant. 4. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 1,17,61,944/- made by the AO towards disallowance of prior period expenses. 5. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 28,79,099/- made by the Assessing Officer towards disallowance of contribution to VPT employees family security fund. 6. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 78,60,27,634/- made by the Assessing Officer towards alleged excess contribution to pension fund. 7. Any other ground that may be urged at the time of appeal hearing." 95. The assessee has als....
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....account in the respective accounting years and therefore provided during the FY 2011-12 being the year of finalization of expenses. On this issue, the Ld. AR relied on the case of Addl. CIT vs. Jay Engineering Works Ltd [1978] 113 ITR 389 (Del.) and CIT vs. Marshall Sons Co. (I) Ltd [1995] 124 CTR 213. The Ld. AR further in his written submissions has stated that the Ld. CIT(A), Visakhapatnam in the assessee's own case for the AY 2004-05 has deleted the addition with respect to prior period expenditure. He therefore pleaded that this may be allowed. Per contra, the Ld. DR relied on the orders of the Ld. Revenue Authorities. 100. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. Admittedly, the prior period Staff Cost comprises of VRS ex-gratia payments, pension payments and leave encashment and difference of leave salary payable including fixation of payment to employees, refixation of pay on grant of additional increments etc. From the submissions of the Ld. AR, we find that due to certain disciplinary cases these payments could not be finalized in the earlier assessment years and hence after final....
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.... when claiming of such deduction in the relevant year is due to bona fide reason of either being an error in accounting or information not been available in that year. Therefore, the addition of Rs. 22,46,12,886/- made by the Assessing Officer is hereby deleted and this ground of appeal is allowed." 101. Further we find that the Ld. CIT(A) sustained the additions made by the Ld. AO. In our considered view since these expenses have been crystallized and finalized during the FY 2011-12, these expenditures need to be allowed in the year of finalization. We are therefore inclined to allow this claim made by the assessee and set-aside the orders of the Ld. Revenue Authorities on this ground. 102. With respect to Ground No.5, regarding the addition of Rs. 28,79,099/- towards disallowance of contribution to VPT Employees Family Security Fund, the Ld. AR submitted that a provision has been made during the FY towards the Family Security Fund of the employees of the VPT. The Ld. AR submitted that these expenditure are incurred during the course of carrying of the assessee's business and shall be allowable U/s. 37 of the Act. Per contra, the Ld. DR relied on the orders of the Ld. Rev....
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....A No.399/Viz/2014 (By Revenue) (AY: 2011-12) 108. This cross appeal filed by the Revenue against the combined order of the Ld. CIT(A) in ITA No.0266/12-13/Addl.CIT, R-1/VSP/13-14 & ITA No. 0362/12-13/ACIT,C-1/VSP/2013-14 dated 28/03/2014 arising out of the order passed U/s. 143(3) of the Act for the AY:2010-11 & 2011-12. 109. The Revenue has raised the following grounds of appeal: "1. The order of the Ld. CIT(A) is erroneous in law and to the facts of the case. 2. The Ld. CIT(A) erred in allowing pension to be included under the head "salaries and Wages" for computation of allowable contribution towards Pension Fund and thus allowed excess deduction to the assessee. 3. The Ld. CIT (A) erred in not appreciating the fact that payment of pension is made out of a specific fund maintained for that purpose and not like normal business expenditure. 4. Any other ground that may be urged at the time of hearing." 110. The only issue raised by the Revenue in its grounds of appeal is with respect to contribution to pension fund in excess of the annual limit of 27% of the salaries and wages. This issue was decided by us while adjudicating the asse....
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.... CASS. Accordingly, notice U/s. 143(2) of the act was issued on 17/7/2017 which was duly served on the assessee on 25/07/2017. A notice U/s. 142(1) of the Act dated 9/2/2018 was issued which was duly served on the assessee on 15/2/2018. Due to change in incumbent, notice U/s. 143(2) of the act was issued through ITBA module on 14/08/2018. Thereafter a notice U/s. 1242(1) of the Act calling for certain information was also issued to the assessee on 31/8/2018. Thereafter, a show cause notice dated 9/11/2018 was also issued to the assessee through online. In response, the assessee filed the submissions / information through e-proceedings module from time to time. After examining the relevant information / written submissions filed by the assessee through ITBA module, the Ld. AO completed the assessment by making the following additions / disallowances: Sl No Nature of addition Amount (Rs.) 1. Upfront premium added as income as per para-4 212,96,25,561 2. Disallowance of excess claim of depreciation as per para 5 13,11,29,794 3. Disallowance of excess claim on account of contribution to Pension Fund as per para 6 118,00,00,000 4. Disallowance o....
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....& Machinery instead of treating it as roads on part with buildings and accordingly allowed depreciation @ 15% instead of depreciation @ 10% on buildings. On this ground, the Ld. DR submitted that the Railway Permanent Way is akin to road and should be treated as "buildings" for the purpose of calculation of depreciation. The Ld. DR also submitted that the Ld. AO has also distinguished the decision of the Hon'ble Apex Court in the case of CIT vs. Karnataka Power Corporation reported in 247 ITR 268 (SC) relied on by the assessee in support of its claim. Therefore, the Ld. DR pleaded that the order of the Ld. AO be upheld. Per contra, the Ld. AR relied on the order of the Ld. CIT(A) and argued in support of the same. 118. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. In the instant case, we find that the Ld.CIT(A) following the principle of consistency has considered the Railway Permanent Way under "Plant & Machinery" by following the adjudication of the same issue in the AY 2012-13. From the records available before us, we find that the Ld. CIT(A) in the earlier years has relied on the order of th....
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....s of the Visakhapatnam Port Trust. However, where there were cases of Court attachments, these arrear payments were released during the FY 2015-16 and hence pleaded that these expenses were crystallized only during the FY 2015-16 and hence to be allowed as business expenditure. The Ld. AR therefore pleaded that the order of the Ld. CIT(A) be upheld. 121. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities on this issue. The Ld. CIT(A) in para 4.6.3 held as follows: "4.6.3. I have carefully considered the issue. Generally, the expenditure is allowed in the year in which it is incurred against the income of the year. The appellant argued that the expenditure was incurred on account of 'stocks' arrears and interest. The reason for not claiming in the year was seemingly the delay in receipt of consumption. It is not the case of the Assessing Officer that the expenditure is not genuine or not related to business. It appears to be departmental lacuna because that made difficult in claiming the expenses. Regarding the wages, it is claimed that the proposals are made in the FY 2015-16 pertaining to the p....
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..../Viz/2021 (supra), we have partly allowed the issues raised by the Revenue in favour of the assessee. Therefore, considering the outcome of the Revenue's appeal, these grounds of Cross Objection raised by the assessee are accordingly disposed off. 126. In the result, CO raised by the assessee is disposed off as discussed herein above. ITA No.49/Viz/2021 (By Revenue) (AY: 2015-16) 127. This appeal filed by the Revenue against the order of the Ld. CIT(A)-1, Visakhapatnam in ITA No. 10251/2017-18/CIT(A)- 1/VSP/2019-20, dated 21/09/2020 arising out of the order passed U/s. 143(3) of the Act. 128. Briefly stated the facts of the case are that the assessee is a Port Trust came into existence under the Major Port Trust Act, 1963 and has been carrying on commercial activities and services of a port and allied facilities relating to maritime trade and commerce since inception. The assessee being a Local Authority was exempted U/s. 10(20) of the Act up to the AY 2002-03. From AY 2003-04 to 2008-09, total income of the assessee was exempted U/s. 11 of the Act. Consequent to amendment to section 2(15) of the Act, the assessee filed its return of income for the AY 2009-10 onwards....
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....ilway Permanent Way' as the railway tract is an integral unit of the system for carrying out materials for loading and unloading up to the Railway siding of Indian Railways and accordingly, railway permanent way should be treated as roads on par with buildings, which are entitled for depreciation at 10% only instead of 15%. 7. The Ld. CIT(A) is not justified in allowing the donations and contributions of Rs. 1,56,99,298/- as the business expenditure as none of these contributions are related to the business activities of the assessee. 8. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and / or as the time of hearing of appeal." 130. At the outset, it is pertinent to mention here that the Sl. No. of Grounds of appeal are given as 5, 6, 7 and 8 instead of 1, 2, 3 and 4. Therefore, to avoid confusion while adjudicating the grounds, we shall proceed to renumber the grounds with Ground No.1, 2, 3 and 4 instead of 5, 6, 7 and 8. 131. Grounds No. 1 and 4 are general in nature and therefore they need no adjudication. 132. With respect to Ground No.2, the Revenue has contended that the Ld. CIT(A) has erred in treating....