TaxTMI 
TaxTMI 
2023 (11) TMI 336
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....ere therefore taken up for hearing together and are being disposed off by a single consolidated order for the sake of convenience. 3. At the outset itself it was pointed out by the ld. Counsel for the assessee that the majority of the issues raised in all appeals before us have already been adjudicated by the ITAT in the case of the assessee in the immediately preceding year, i.e. AY 2005-06, in its order passed in ITA Nos.1747/Ahd/2009 and 1657/Ahd/2015 dated 30.11.2022. Copy of the order was placed before us. A tabular detail was also filed before us pointing out the relevant paragraphs of the ITAT order of the immediately preceding year where the different issues raised were dealt with by the ITAT. Appeal pertaining to Assessment Year 2006-07 was first taken up for hearing. ITA No. 830/Ahd/2011 for AY 2006-07 4. Ground No.1 - 1.2 raised by the assessee, it was pointed out, related to the disallowance of project expenses treating them as capital expenditure. The said grounds raised in Ground Nos. 1 to 1.2 read as under:- "1. The Learned C.I.T. (A) has grossly erred in law and on facts in confirming disallowance of revenue Expenditure incurred on Lignite proje....
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....existing business of the assessee, but an entirely new project totally different and distinct from the existing industrial undertaking. The ld.CIT(A), we have noted, has confirmed, disallowance of project expense, as made by the AO in this regard, rejecting the assessee's contentions that it was a vertical integration of the existing business of the assessee, stating that generation of electricity requires various other machineries and equipments which are admittedly not manufactured by the assessee, and therefore, the power project cannot be said to be expansion of the assessee's existing business. The relevant findings of the Ld.CIT(A) at para 5.2 of his order is as under: "5.2 I have considered the facts of the case and the submissions of the Ld.A.R. carefully. It is seen that the Akrimota Power Project is entirely a new project which is being set up by the appellant. During the relevant period it was in the process of construction and had not started the generation of electricity. The Ld.A.R's claim that the project is an expansion of appellant's existing business is breft of reasoning. The appellant is engaged in excavation of Lignite which is one of the vario....
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....e considered the facts of the case and the submissions of the Ld.A.R. carefully. The Ld.A.R. has not contradicted the findings of the A.O. that the project under reference was entirely a new project and the construction thereof was not completed during the relevant period. Further the Ld.A.R. has not brought on record supporting facts to show that the project was an expansion of appellant's existing business. It is a well settled position of law that the expenditure incurred on interest for the money borrowed for setting up a new industrial undertaking is not deductible before its completion. In these circumstances, the A.O. has rightly rejected the appellant's claim for deduction under the provisions of sec.36(1)(iii) of the Act." The claim of depreciation was also disallowed with respect to machineries employed in setting up these projects for identical reason. 14. We shall first deal with the project expenses disallowed vis-àvis power projects and two lignite projects and also claim of depreciation on assets visà- vis these projects, all of which are disallowed for the same reasons, that were all treated as new undertaking of the assessee ....
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.... taken in respect of new line of business which is in the same business fold for the purposes of ascertaining income under Section 28 of the Act, it can be claimed as a deduction under Section 36(1)(iii) of the Act. 8. In the instant case, the Tribunal has returned the finding that there is a unity of control and management, in respect of the ferro alloys plant as well as the sugar plant and there is also intermingling of funds and dove7 tailing of businesses. In these circumstances it cannot be said that the respondent/assessee had not commenced its business and hence, interest would have to be capitalized in terms of the ratio of the judgment in the case of Challapalli Sugars Ltd (supra). If that is not so then, the only other conclusion that is possible on these facts, is that, the interest was paid by the respondent/assessee on borrowed capital for the purposes of business. That being the case, in our view, the Tribunal correctly allowed the financial charges i.e., interest paid to the extent of Rs 3,50,83,472/- as deduction under Section 36(1)(iii) of the Act. 9. These being the findings of fact, we do not consider it fit to interfere with the impugned judgme....
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....t Industries Ltd. (supra) the facts of the case was that the assessee was in the business of ferro-alloys and had set up sugar manufacturing plants at different places which were treated as new business of the assessee and all expenditure incurred prior to the commencement of the business were treated as not allowable. In these facts and circumstances, the decision was rendered by the Hon'ble Apex Court holding that the different nature of the business was not a determinative factor for the purpose of deriving whether it is a new business or expansion of exiting business only. On the contrary, it is the unity of management and control and handling of funds which would determine the same. In the case of these projects, the issue has certainly not been examined from this angle. 18. We have also noted that the impugned appeal before us relates to Asst.Year 2005-06 which is more than 17 years old. No purpose, we find, will be achieved by restoring back to the file of the Revenue authorities for deciding this issue on this parameter. On the contrary, interest of justice could be well served by examining the facts from audited annual accounts of the impugned year, which have bee....
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....for withholding sales tax, and thus ignored the ratio laid down by Supreme Court in the matter of Mahalaxmi Sugar Mills Co. Ltd. (123 ITR 429). He has further erred in relying upon a High court decision and ignoring the Supreme Court's decision when the facts of both the cases are similar." 8. The learned Counsel for the assessee pointed out that the amount paid to the Sales Tax Authority had consistently been stated to be in the nature of interest for late payment of sales tax as per Section 47(4)(a) of the Gujarat Sales Tax Act. This was stated before the Assessing Officer which finds mention at paragraph no. 5 of the Assessment Order and was reiterated before the learned CIT(A), which finds mention at paragraph No. 5.2 of the order of the ld. CIT(A). He pointed out that the Hon'ble Apex Court in the case of Lachmandas Mathuradas Vs. CIT, reported in [2002] 122 Taxman 828 (SC), had held interest on arrears of sales tax to be compensatory in nature and allowable as deduction in computing profits of the business. 9. The ld. DR, however, relied on the order of the ld. CIT(A) drawing our attention to his findings to the effect that "after insertion of the Explanation to Section....
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....issue, the ld. Counsel for the assessee pointed out that identical issue was adjudicated by the ITAT in the Assessment Year 2005-06 at paragraph Nos. 26 to 29 of the order, wherein the order of the Ld.CIT(A) restoring the issue back to the file of the Assessing Officer for verifying which prior period expenses crystalized during the year and directing him to allow all such prior period expenses, was upheld by the ITAT. Our attention was drawn to paragraph Nos. 26 to 29 of the order as under:- "26. Ground No.4 raised by the assessee is against order of the ld.CIT(A) upholding rejection of claim of prior period expenses amounting to Rs. 67,37,949/-. The ground reads as under: 4. In facts and circumstances of the case, Your Appellant most respectfully submits that the Ld. A.O. erred in rejecting claim of Rs. 67,37,9497- being the amount of prior period expenses even through the said expenditure had, materialized and Crestaiised during this Financial Year and Ld. CIT (A) further erred in rejecting the claim by sending / restoring the matter back on the file of Id. A.O. Your Appellant further submits that both the authorities have failed to follow Hon. ITAT's Judgm....
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....hat he had no grievance against the direction of the ld.CIT(A) on the impugned issue. 29. In view of the above, We see no reason to interfere in the order of the ld.CIT(A) in this regard. This ground of appeal raised by the assessee is therefore dismissed." 14. The ld. DR was unable to distinguish the issue in the present case before us, either on facts or on law. In view of the same, we restore this issue back to the Assessing Officer to adjudicate the same afresh in accordance with the direction of the ITAT in its order passed for AY 2005-06 (supra). Grounds of appeal Nos. 3-3.1 are allowed for statistical purposes. 15. Ground No.4-4.2, it was pointed out, related to the issue of disallowance made of expenses relating to the earning of exempt income, as per the provisions of Section 14A of the Act. The said grounds read as under:- "4. That the Learned A.O. has erred in making an addition of Rs. 5929382/- U/s.14A of the Act, and Learned C.I.T.(A) has further erred in directing the Learned A.O. to make the disallowance U/s.14A as per Rule 8D, even though the Rule 8D becomes effective from 24.03.2008. 4.1 That both the lower authorities have faile....
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....s confirmed by the ld.CIT(A). The said ground reads as under: "9. In facts and circumstances of the case, Your Appellant most respectfully submits that Ld, A.O, has erred in making an addition of Rs. 23,50,047/- u/s 14A of the Act and Ld. CIT (A) further erred in directing the Ld. A.O. to make the disallowance u/s 14A as per rule 8D, and Particularly when the Rule 8D has come into existence by IT Rules 2008 Dated 24/03/2008. Your Appellant further submits that both the lower authorities have failed to appreciate the facts that investments made in Tax Free Bonds, Equity Shares or Mutual Funds were out of own Capital & free .reserves and not out of borrowed funds." 57. As transpires from orders of the authorities below, the assessee during the impugned year had earned dividend income to the tune of Rs. 65,35,060/- and interest on tax free bonds of Ahmedabad Municipal Corporation of Rs. 1,26,20,421/-. The assessee had shown investment of Rs. 71,71,47,000/- as on 31.3.2005. In response to the query raised by the AO asking details of interest bearing funds utilized for investment in exempt income, the assessee filed reply stating that the investments were out of own in....
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....ly only w.e.f. Asst.Year 2007-08 onwards. He further pointed out that in the preceding year i.e. Asst.Year 2003-04, this issue had been decided by the ITAT in favour of the assessee. Our attention as drawn to page no.15 of the compilation of the orders wherein at para 6.3 the issue was dealt with by the ITAT deleting disallowance of interest expenses holding that in the case of CIT Vs. Gujarat Industrial Development Corpn 37 taxmann.com 254, the Hon'ble Gujarat High Court has held that department is expected to establish a nexus between interest bearing funds borrowed and those invested by the assessee respondent and only when it was shown that interest free funds were not available with the assessee, that question would arise of fastening tax liability on assessee. 60. The ld.DR, on the other hand, relied on the order of the ld.CIT(A). 61. We have heard both the sides. Vis-à-vis the issue of disallowance of expenses under section 14A of the Act, we agree with the ld.counsel for the assessee that invocation of Rule 8D is applicable for the purpose of computing the amount of expenditure to be disallowed only w.e.f. Asst.Year 2007-08, when said Rule were brou....
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....nsorship by GMDC at Celebration Time. He has thus failed to appreciate that the Expenditure was not Capital Exp. or not of personal nature and were incurred for the purpose of business. 5.1 It is also not open to the I.T. Authorities to substitute their own standards of reasonableness of any expenditure for the Assessee unless the transaction is not a genuine or straight forward one or is either colorable or illusory or fraudulent or there was a consideration other than business or is of a personal nature, the expenditure cannot be disallowed. Asian Tools & Plastics Co. Ltd. Vs. C.I.T. (551 ITR 392) not followed. The mere fact that it is also for instance motivated by Charity would not justify disallowance. Godavari Sugar Mills Vs. CIT (191 ITR 311) is also not followed." 20. The facts relating to the issue are that contributions made by the assessee to Index B and to Govt. of Gujarat for- celebrating Gujarat Gaurav Day and Sharad Utsav were disallowed by the AO treating them to be non-business in nature, rejecting assesses contention that these expenses were meant for advertisement of the assesses business. Ld.CIT(A) confirmed the disallowance finding that the....
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....y at Gandhinagar, which was set up for research and testing in the field of mining. It was contended by the assessee, that the laboratory being involved in the business of mining research and testing its activities were very useful to the assessee which was in the business of mining and the expenditure therefore was purely on the principle of commercial expediency. The ld.CIT(A) however rejected the claim of the assessee holding that the assessee had not established what benefit it had derived from the such expenditure. The relevant findings of the Ld.CIT(A) at page 38-39 para 20.2 of his order is as under: "20.2 I have considered the facts of the case and the submissions of the Ld.A.R. carefully. It is seen that the Ld.A.R. neither during the assessment proceedings nor during the appellate proceedings filed any details to establish that the impugned expenses were incurred for the purposes of the business of the appellant. It is also clear from the submissions that how such expenses have helped the appellant in its business of mining during the relevant period. Further it is also not clear the laboratory stated to be set up from the funds provided by the appellant were use....
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.... proposition with regard to claim of expenses for business, holding that the correct test for such claims is that of commercial expediency alone . That as long as payment is made for the purpose of business and not for infraction of any law ,the same would be allowed as deduction. In view of the above, we hold that the assessee's claim of contribution to the Office of Commissioner of Geology & Mining, Gandhinagar amounting to Rs. 53,84,000/-, being for the purpose of business, is allowable as expenditure under section 37(1) of the Act." 22. The Ld.DR however relied on the order of the Ld.CIT(A) and pointed out that the facts in the present case were different from that in A.Y 2005-06 and the decision of the ITAT in that year could not be followed therefore for deciding the present issue. 23. We have heard both the parties, have gone through the order of the authorities below. We are not impressed with the contention of the Ld.Counsel for the assessee that the issue of allowability of payments made by the assessee to Index B and govt. Of Gujarat for celebrating Gujarat Gaurav Day and Sharad Utsav is squarely covered by the order of the ITAT in the A.Y 2005-06. As righ....
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....ibution of the appellant to Index B, Gujarat Gaurav Day and Shardotsav are in the nature of donations. In the case of MalayalaManorma Co. Ltd. Reported in (2006) 150 Taxman505(Ker) the hon'ble Kerala High Court has held that contribution made to the trust for rehabilitation of earth quake victims was not expenditure laid out wholly, necessarily and exclusively for the purpose of business and was not allowable as deduction. In view of the above, the disallowance by the AO is justified. The same is confirmed." 24. We are in complete agreement with the Ld.CIT(A) that these expenses are nothing but donations made by the assessee. These expenses have not been incurred for the purpose of business of the assessee. They are merely contributions made to these entities. That some benefit would accrue to the assessee is only incidental. The purpose of incurring the expenditure is definitely not for the business of the assessee. The same have therefore, we hold, rightly been disallowed by the Ld.CIT(A). the facts being found to be different from A.Y 2005-06, the contention of the assessee that the issue is covered by the order of the ITAT in A.Y 2005-06 is rejected. ....
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.... above, the learned Commissioner of Income-tax (Appeals) discussed the issue both on facts as well as on law. It is a fact that the Central Board of Direct Taxes has examined the receipt of interest as per the provisions of section 10(15)(iv)(c) of the Act. Therefore, where the utilisation is for purchase outside India of raw material, components or plant and machinery, so long as exemption granted is valid, the interest received by the other party is not covered by the Income-tax Act and by virtue of exemption granted by the Central Government, the question of TDS on the above amount does not arise at all. Since there is no requirement of TDS, question of disallowance under section 40(a)(ia) for non deduction of tax also does not arise. Moreover, as seen from the correspondence with the Ministry of Finance by the assessee-company way back in December, 1996 and February, 1997 it can be noticed that the Central Board of Direct Taxes also insisted on verifying the deployment of funds and the assessee vide the letter dated February 7, 1997 enclosed the auditor's certificate certifying the attached statement showing the deployment of funds equivalent to US$ 40.22 million and corres....
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....e assessee amounting to Rs. 1,56,036/- would not attract the provisions of Section 40(a)(ia) of the Act. The disallowance made by the Assessing Officer under the said section is, therefore, directed to be deleted. This ground of appeal of the assessee is accordingly allowed. Ground of appeal Nos. 6 & 6.1 are accordingly allowed. 29. Ground No.7, it was pointed out by the ld. Counsel for the assessee, related to the issue of treating the income earned by the assessee from projects which was still under construction, as income from other sources. The ld. Counsel for the assessee has pointed out that this issue was linked to the issue in Ground No.1 raised by the assessee wherein the expenses incurred in these projects were treated as capital in nature and disallowed. He pointed out that the income earned accordingly was treated as income from other sources since the projects were yet to commence operation. 30. The ld. Counsel for the assessee pointed out that this issue was dealt with by the ITAT in the immediately preceding year, i.e. AY 2005-06 vide order dated 30.11.2022, cited by the ld. Counsel for the assessee, in paragraph nos. 19 & 20 of the order holding the income ....
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....al Development Corpn. Ltd. 268 ITR 130(Orissa High Court) b) Zuari Finance Ltd. 271 ITR 538 (Bombay High Court) c) Gujarat Lease Finance Corpn. Ltd. ITa No.1427/Ahd/2003 decided on 17/11/08 by Hon. ITAT, Ahmedabad "A"Bench. In view of the facts of the case and Judicial Pronouncement in the matter, Your Appellant most respectfully submits that claim of depreciation of Rs. 6958066/- in respect of Leased Buses to GSRTC may be allowed." 34. The issue relates to claim of depreciation on buses purchased from and thereafter leased to GSRTC.The transaction was held to be ingenuine and colorable device intended to avoid taxation by claiming depreciation. 35. The ld. Counsel for the assessee submitted that identical issue was dealt with by the ITAT in assessee's own case for the Assessment Year 2005- 06 vide order dated 30.11.2022 at paragraph Nos. 36-38 of the order holding that the assessee was entitled to claim depreciation on leased assets. Our attention was drawn to paragraph Nos. 36 to 38 of the order which reads as under:- "36. We have heard the rival contentions and gone through the orders of the authorities below as also the case laws referr....
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....nguished the said case before us, applying the decision of the Hon'ble apex court ,we hold that the assesses is entitled to claim depreciation on leased assets.The order of the Ld.CIT(A) upholding the disallowance of depreciation amounting to Rs. 72,30,369/- is set aside and the AO is directed to allow the same." 36. The ld. DR was unable to distinguish the issue in the present case before us, either on facts or on law. The issue, therefore, admittedly stands covered in favour of the assessee by the order of the ITAT in assessee's own case in the immediately preceding year i.e. AY 2005-06, following which we direct the Assessing Officer to delete the disallowance made on account of depreciation of leased assets of Rs. 69,58,066/-. Ground of appeal No.8 is allowed. 37. Ground No. 9 pertains to disallowance of claim of expenditure incurred for excavation of river diversion amounting to Rs. 3,28,32,791/- treating it to be capital in nature, which in turn was upheld to the extent of 80% by the ld.CIT(A). The said ground reads as under: "9. In Facts and circumstance of the case, Your Appellant respectfully submits that LD AO has further erred in disallowing claim of Rs....
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....h the advantage may endure for indefinite future. 53. In the present case the sole reason for treating the expense incurred on diversion of a river as capital was that it gave rise to enduring benefit. The Ld.CIT(A) has given a finding of fact that the said expenditure has not resulted in any asset coming into existence. And as contended by the assessee and not controverted by the Revenue, the purpose of incurring the expenditure was to remove obstacle/ hindrance so as to enable carrying out its activity of mining smoothly. 54. It is amply clear therefore that the expense was incurred only for enabling conduct of the business of the assessee, admittedly without any expenditure being incurred on capital account. The ratio settled by the Hon'ble apex court in the case of Empire Jute(supra) will therefore squarely apply in the facts of the present case. Accordingly therefore, we hold, that the impugned expenditure is to be treated as revenue in nature. 55. The decision of the Hon'ble Bombay High court in the case of Taparia Tools (supra) relied upon by the Ld.CIT(A) while holding the claim of expenditure to be on capital account ,has been pointed out by the ....
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....ing the ratio as specified by Hon'ble Gujarat High Court in 251 ITR 133 and Learned CIT(A) has further erred by not following ratio as specified by Hon'ble Gujarat High Court in 251 ITR 133 and trating date of trial run as date of commencement of commercial production. 3. In facts & Circumstances of the case, Your Appellant, most respectfully submits that the Ld. Assessing officer has erred by disallowing the additional depreciation of Rs. 67,24,96,232/- towards Plant & Machinery & Boiler in respect of Akrimota power project holding that generation of power is not an article or a thing manufactured by appellant company and the Ld. CIT(A) has further erred by accepting above addition." 43. The depreciation pertaining to Akrimota project of Rs. 66,53,47,522/- was denied on the ground that the project commenced operations in October 2005, though assessee claimed commencement in March 2005 when trial runs were done which contention was rejected by the authorities below. 44. The claim to additional depreciation of Rs. 67,24,96,232/- on Plant and Machinery deployed in the said Akrimota project was denied holding that Power did not qualify as article or thing manufa....
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....l reasons, and since the assessee has demonstrated the fact of actual production of power in the trial run conducted, this explanation of the assessee could not have been simply brushed aside, that too, ignoring all the evidences filed by the assessee and making adverse observation solely for the reasons that there was huge time gap between the trial run and actual production trial which were also duly explained by the assessee. The ld.counsel for the assessee further relied on the decision of Hon'ble Madras High Court in the case of Lakshmi General Finance Ltd., [433 ITR 94 (Madras)] for the proposition that where even on trial production, machineries can be said to be ready for use and depreciation thereon allowed. 24. The ld.DR relied on the order of the authorities below. 25. We have beard both the parties and we find that the assessee's case for claiming depreciation rests entirely on the fact that it had conducted trial run of its machinery during the impugned year. The Revenue does not dispute the allowability of claim of depreciation on the machinery on the basis of trial run conducted. The contention/basis for denying depreciation is refuting the claim of....
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.... G.I.I.C. and the ld. CIT(A) has further erred by confirming addition pertaining to accrued interest on doubtful deposit." 49. The facts relating to the issue being that the assessee had made advances to GIIC but not accounted for interest on the same. The reason advanced by the assessee was that the advance itself was irrecoverable since GIIC was at the stage of closure , therefore interest on the same being doubtful for recovery, it had not been accounted for as income. The AO/CIT(A) however rejected the assesses contention holding that the interest income was due on mercantile basis and therefore interest of Rs. 27.94 lacs, being due on advances made to GIIC, was added to the income of the assessee . 50. The issue raised by the assessee, Ld.Counsel for the assessee pointed out, had been dealt with by the ITAT in the immediately preceding year in ITA No. 1747/A/2009 A.Y 2005-06, at para 35 of the order, ruling in favour of the assessee as under:- "35. He also drawn to para 15-15.5 of the order taxing lease rental and interest on delayed rentals on accrual basis rejecting assesses claim of accounting for on receipt basis as under: "15. The ground No.8 of ap....
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....me Court in the case of Godhra Electricity Co Ltd. V CIT 225 ITR 546 and Uco Bank v CIT 237 ITR 889 in this regard. The Learned assessing officer has not accepted the contention of the appellant has made the addition of Rs. 5,37,26,160/-. The addition made by the Learned Assessing officer also includes a sum of Rs. 2,68,63,0807- which pertains to the period beyond the period covered by the lease agreement. 11.7 The said lease agreement provided for interest on delayed lease rentals. Since, the lease rentals itself were not recoverable, interest on delayed lease rental was also not provided for. The Learned assessing officer has made addition of Rs. 3,27,89,8737- being interest on delayed payment of lease rentals by GSRTC. 11.8 Your appellant had advanced certain sum to GIIC. Since the said sum itself was doubtful, interest in respect of the same was also not provided relying on the on the decision of Hon'ble Supreme Court in the case of Uco Bank v CIT 237 ITR 889 . The Learned assessing officer has not accepted the contention of your appellant and has made the addition of Rs. 27,94,000/-." 15.3 I have considered the facts of the case and the submissio....
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....ecision are as under: "The assessee-company had advanced certain loans to its subsidiary company on interest at the rate of 12 per cent, per annum. Interest income was included in the total income of the assessee. For the assessment years 1977-78 and 1978-79, the assessee claimed that it had not charged interest from the subsidiary company due to its financial condition. The Income-tax Officer found on verification that interest had actually accrued for both the assessment years on the basis of the method of accounting followed by the assessee and the interest was waived only after the accrual. The Commissioner of Income-tax (Appeals) affirmed the views of the Assessing Officer. The resolution forgoing interest was passed a few days before the close of the accounting year in respect of the assessment year 1977-78 and another resolution was passed after the close of the accounting year in respect of the assessment year 1978-79. The Tribunal held that what was waived by the assessee was income which had already accrued to it according to the method of accounting regularly employed by it. On a reference: Held, that the taxability is attracted not only when income was....
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....d during the course of assessment proceedings. Your appellant has failed all the requirements and law for allowing the claim of Bad Debts. 11.15 The Learned assessing officer has disallowed the claim of Bad Debt amounting to Rs. 11,75,96,456/- ignoring the provisions of law." 18.2 I have considered the facts of the case and the submissions of the Ld.A.R. carefully. The close analysis of the submissions made by the appellant before the A.O. clearly reveal that he did not take legal action for recovery of impugned debt on his own volition. In other words, the effective steps were not taken by the appellant to recover the outstanding debt. There is no evidence of any correspondence which were made by the appellant with the defaulting party. The appellant reversed the entries in its books of accounts of subsequent year. Therefore, under these circumstances it can not be held that the debt under reference became bad during the relevant period. In this regard reliance is also placed on the decision of the Hon'ble Gujarat High Court in the case of Dhall Enterprise and Engineers Pvt. Ltd Vs. CIT 295 ITR 481 has held that "under clause (vii) of section 36(1) of the Inc....
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.... therefore, had discontinued its lease agreement with it. 54. The Ld.Counsel for the assessee stated that the issue raised is identical to that raised in assessee's case for the immediately preceding year, i.e. AY 2005-06 dealt with by the ITAT at para 39-41 of its order as under: "39. Having held so, we now proceed to deal with the issue of taxing the lease rentals; on accrual basis as held by the Revenue or on cash basis as claimed by the assessee. 40. We find that the solitary basis with the Revenue for taxing lease rentals on accrual basis is that the assessee was following mercantile system of accounting and even section 145 of the Act directs following of either cash or mercantile system and not hybrid system. But as rightly pointed out by the Ld.Counsel for the assessee, even as per the accrual basis only those amounts certain for recovery are to be accounted for. In the present case the contention of the assessee was that GSRTC being in stringent financial position was not paying lease rentals .This is evident from the fact that the assessee had written off lease rentals of earlier years unrecovered of Rs. 11.75 Crs. Therefore even as per the accrual sy....
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.....5 is thus allowed. 57. Ground No. 6 relates to the addition made to the book profits of the assessee for the purposes of paying tax thereon in terms of Section 115JB of the Act. The said ground reads as under:- "6. In facts & Circumstances of the case Your Appellant, most respectfully submits that the Ld. Assessing officer has erred by making addition of Rs. 59,29,382/-made in the original assessment order pertaining to the exempt income calculated u/s 14A of the Income Tax Act, 1961 and Rs. 60,00,000/- pertaining to the provision for the FBT in order to calculate book profit for the purpose of levy of tax w/s 115JB of the IT act and Ld. CIT(A) has further erred by confirming the addition of Rs 59,29,382/- of expenditure pertaining to exempt income in calculating book profit u/s 115JB of the Income Tax Act, 1961" 58. The addition in challenge before us being that relating to disallowance of expenses made under normal provisions of the Act in terms of Section 14A of the Act and the amount of Fringe Benefit Tax (FBT) paid by the assessee amounting to Rs. 60,00,000/-. The ld. Counsel for the assessee, at the outset itself, pointed out that the Hon'ble Karnataka High Co....
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....the assessee under Section 115JB of the Act. This ground of appeal of the assessee is accordingly allowed. Ground of appeal No.7 is thus allowed. In effect, this appeal of the assessee is partly allowed. ITA No. 1133/Ahd/2014 for AY 2007-08 63. We shall now take up assessee's appeal for AY 2007-08. Ground No.1 reads as under: "1. In facts & Circumstances of the case, Your Appellant, most respectfully submits that the Ld. Assessing officer has erred by disallowing expenditure of Rs. 35,74,535/- incurred on lignite Project at Bhavnagar for Carbshal project by holding it as new project, since the no commercial production have been commenced instead of treating the same as extension of existing business as appellant is already engaged in the business of Mining activities of Lignite since last several years. The Ld. CIT(A) has further erred by upholding such addition and not following the ratio as specified by Gujarat High Court in the case of CIT vs. Alembic Glass India Ltd. (103 ITR 715) (Guj. HC) and CIT vs. Core Health Ltd, (251 ITR 61) (Guj.)." 64. Ground no.1 raised therein relates to the disallowance of expenditure incurred on lignite project, holding i....
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....8. Ground no.3 raised by the assessee relates to the disallowance of expenses relating to the earning of exempt income as per the provisions of Section 14A of the Act. This issue raised by the assessee, it was common ground, is similar to the issue raised by the assessee in its appeal bearing No.830/Ahd/2011, Ground No.4 (supra). We have dealt with issue deleting the disallowance made, at para16-18 of our order above. Following the same, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance made under Section 14A of the Act. Ground of appeal No.3 is thus allowed. 69. Ground No.4 reads as under: "4. In facts & Circumstances of the case, Your Appellant, most respectfully submits that the Ld. Assessing officer has erred by making addition of Rs. 76,63,967/- in respect of advertisement expense by treating the same as contribution to Government and not eligible as business expense instead of appreciating the fact that by mistake it has been debited as contribution to government but actually it is in nature of Advertisement Expense. The Ld. CIT(A) has further erred by Confirming such addition & not treating such as Adv....
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....orate advertisement campaigning. The reply submitted by the Assessee Company is considered but not found acceptable. The Assessee Company is not dealing in any branded product and it is also not facing any competition. Hence the question of advertisement of making its name, activity or product familiar among users does not rise. Considering above facts the expenses of Rs. 76,63,967 being payment to Government bodies i e. persons specified u/s 40A(2)(b) of the Act is disallowed treating it as non business expenditure." 72. We have noted that in for A.Y 2005-06 the ITAT has allowed assesses claim for deduction of amounts paid to commissioner, geology and Mining finding it to be incurred for the purpose of business of the assessee. At the same time in A.Y 06-07, we have denied this claim with respect to contribution made to Index B Fund at para 23-24of our order.The issue of allowability of above two payments therefore are covered by the orders of ITAT following which we allow the payment made to commissioner, geology and Mining and disallow that made to Index B Fund. As for payments made to advertisement agencies, we see no justification in the orders of the authorities b....
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....ee is engaged in the Mining activity it amount to manufacturing activity and since generation of power is incidental to related to its main activity it also qualifies for additional depreciation. However without appreciating such fact the Ld. Assessing Officer has disallowed the claim of additional depreciation of Rs. 592,11,502/-. The Ld. Assessing Officer has further erred in appreciating the fact that as per Section 80-IC(2) generation of Power is treated as manufacturing of Article or thing & eligible for deduction @100% of the profit of manufacturing activity. The Ld. CIT(A) has further erred by confirming such additions & not appreciating the facts of the case." 76. The issue raised in the aforesaid ground is similar to the issue raised by the assessee in its appeal bearing No.2817/Ahd/2013 for AY 2006-07, in Ground Nos. 2 & 3 (supra), which was allowed in favour of the assessee, following the decision of ITAT in assessee's own case for AY 2005-06, at para 44-47. In view of the above, and respectfully following the decision of the Co-ordinate Bench in assessee's own case for the AY 2005-06, we uphold the grievance of the assessee and direct the Assessing Officer to allow t....