TaxTMI 
TaxTMI 
2023 (12) TMI 635
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....ed as under: 1. The learned Commissioner Appeals erred in confirming as income of the appellant an amount of Rs. 4,263.63 lacs, being Renovation & Modernisation levy collected by the appellant. 2. Without prejudice to Ground 1 above, the learned Commissioner (Appeals) erred in holding that the amount collected towards Renovation & Modernisation levy was not in the nature of a capital receipt exempt from tax. 3. The learned Commissioner (Appeals erred in confirming as income of the appellant an amount of Rs. 2,558.18 lacs, being Research & Development levy collected by the appellant. 4. Without prejudice to Ground 3 above, the learned Commissioner (Appeals) erred in holding that a portion of the amount collected towards Research & Development levy was not in the nature of a capital receipt exempt from tax. 5. The learned Commissioner (Appeals) erred in confirming as income of the appellant an amount of Rs. 1,705.55 lacs, being Decommissioning Levy collected by the appellant. 6. The learned Commissioner (Appeals) erred in confirming as income of the appellant an amount of Rs. 1,836.71 lacs, being interest credited to Decommissioni....
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.... the business of generation of power and were therefore derived from the business of generation of power. On this basis, the above amounts were to be excluded from book profits in accordance with Explanation (iv) to section 115JA(2). 14. The learned Commissioner (Appeals) erred in not allowing deduction for expenditure incurred by the appellant in earning the income of Rs. 114,42.86 lacs, in computing the book profits of the appellant. 15. The learned Commissioner (Appeals) erred in confirming the action of the Additional Commissioner that the appellant had utilised the share capital received during the year for earning the interest income. The learned Commissioner (Appeals) erred in not appreciating the facts presented during the course of the appeal proceedings. 16. Without prejudice to Grounds 11 to 15 above, the learned Commissioner (Appeals) erred in confirming the action of the Additional Commissioner in making adjustments to the Profit and Loss account prepared by the appellant. 17. The learned Commissioner (Appeals) ought to have appreciated that no adjustments can be made to the Profit and Loss Account, other than those specified in the ....
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.... The ground of appeal is independent and without prejudice to other grounds of appeal filed earlier, pending disposal. 2. The learned Additional Commissioner of Income Tax erred in passing assessment order under section 143(3) without having legal and valid jurisdiction under the Act to pass the assessment order. The Additional Commissioner of Income Tax lacked jurisdiction to pass the assessment order under section 143(3) dated 8^th March 2001 and to exercise the powers of performing the functions of an Assessing Officer. 3. The learned Additional Commissioner of Income Tax erred in passing assessment order under section 143(3) where the assessment proceedings were initiated by the Joint Commissioner of Income Tax. Such order passed is bad in law, in the absence of an order transferring, jurisdiction under section 127 to the Additional Commissioner of Income Tax. 4. Your appellants crave leave to add, alter, amend, vary, omit or substitute the aforesaid ground of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised 5. The Ld. Counsel for the assessee made oral arguments prayi....
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....confirmed the assessment order. On appeal to the Tribunal, a new ground was taken for the first time that section 19A was introduced in the Wealth-tax Act with effect from April 1, 1965, and the assessment was, therefore, without jurisdiction. The Tribunal entertained the ground and our court upheld the order of the Tribunal. In Ugar Sugar Works Ltd. v. CIT [1983] 141 IT 326, out court was faced with a similar problem. In this case, the question of the Tribunal's jurisdiction was considered at length. It was held that the Tribunal's jurisdiction under section 254 was restricted to passing of orders on the subject-matter of the appeal though within the four corners of the subject-matter of appeal. However, within the four corners of that jurisdiction, the Tribunal was clothed with almost the same powers as those of the Appellate Assistant Commissioner except that of enhancement. The judgment in CWT v. Narielwalla (N.A.) (1980] 126 ITR 344 (Bom) was noticed and not adversely commented upon. It was distinguished observing that (headnote): "The question as to the initial jurisdiction in making an order would stand on a different footing, as in such cases the question o....
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...., has also taken the same view. We, therefore, hold that a ground by which the jurisdiction to make assessment itself is challenged can be urged before any authority for the first time." Additional ground raising legal issue can be raised when the facts are available on record: b. The Appellant next relies upon the judgements of the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT 229 ITR 383 (Pg No. 16 to 18 of Caselaw Paper book), Jute Corporation of India Ltd. vs CIT 187 IT 688 (Pg No. 19 to 24 of Caselaw Paper book) and CIT vs. S. Nelliappan 66 IT 722 (Pg No. 25 to 27 of Caselaw Paper book) and Special Bench order of the Tribunal in the case of All Cargo Global Logistic Ltd Vs DCIT (21 Taxmann 429) (Pg No. 28 to 47 of Caselaw Paper book) to urge that an appellant can raise an additional ground raising legal issues when the necessary facts are on record. Issue relating to exercise of jurisdiction by the Addl. Commissioner of Income-tax raises a legal issue. The facts as necessary for disposal as these grounds would include the relevant notices issued by the Assessing Officer in the course of assessment proceedings as well as the not....
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....of the issue concerning the jurisdiction of the AO, when it came across order dated 27.11.2017 passed by the Tribunal in the case of Tata Sons Ltd. Prior thereto, it was not aware of this issue. In its case, the assessment order was passed on 28.03.2001 and the appellate order by the CIT(A) on 22.10.2003. Since it was not aware of these issues before, there is good and sufficient cause for not raising the same before the AO and the CIT(A), Hence, it was fully justified in raising the same before the Tribunal. No limitation for raising of additional ground. d. The other issue as raised by the Revenue in written submissions dated 14.06.2019 filed by them before the Tribunal as well as in the course of hearing is that raising of an additional ground at this stage suffers from laches and ought not to be admitted. The Appellant submits that as per Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 ("the Appellate Tribunal Rules"), an appellant can with the leave of the Tribunal urge or be heard in support of any ground not set forth in the memorandum of appeal. The only limitation on exercise of such powers by the Tribunal is that the party who may be affected ....
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....e than a decade. Such a litigant does not deserve any relief in our discretionary and equitable jurisdiction. The jurisdiction is extraordinary as well. It is not meant to get over the bar prescribed in the Limitation Act, 1963 for bringing a suit either. This indirect and oblique way of seeking a discretionary relief has to be discouraged. The writ petition is, therefore, dismissed on the ground of maintainability and delay and laches." As stated above, in the present case, there is no requirement under the Act or the Rules or the Appellate Tribunal Rules for the time within which an additional ground could be raised. In these circumstances, the Appellant submits that the said additional ground need not be dismissed as delayed. f. Assuming without admitting that it was incumbent on the Appellant to file the additional ground within a reasonable time, it submits that it came across the issue raised in the additional ground through the Tribunal order dated 27.11.2017 in the case of Tata Sons Ltd. (193 & 3475/ Mum/ 2006) (Pg No. 91 to 141 of Caselaw Paper book) dated 27.11.2017 which came to its notice while preparing for the present appeal. After obtaining advise o....
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....dmission of the additional ground. The relevant submission of the Revenue filed by the Ld. DR is reproduced as under: "3. In this respect, the undersigned would like to bring to your kind notice of the decision of the Hon'ble ITAT, 'L' Bench, Mumbai in the case of M/s Stock Traders Pvt Ltd in ITA No. 4493/Mum/2003 and ITA No. 4737/Mum/2003 wherein under similar circumstances, the similar additional grounds raised by the assessee therein was dismissed by the Hon'ble Bench after holding that when there is no information in possession of the assessee that the internal procedure of the department regarding the transfer and posting of officers has not been complied with and the assessee in the said case after a lapse of 15 years was making a wild guess and hence did not accept the assessee's request that the assessment deserve to be quashed in as much as the assessing officer did not have authority of law. In this respect, the Hon'ble ITAT has made detailed discussion in Para 17 onwards of the above referred order. It is also brought to your kind notice that while dismissing the similar additional ground in the above referred case, the Hon'ble Tribun....
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.... 2.2 The decisions of coordinate Bench of ITAT in the case of Tata Sons Ltd Tata Communications Ltd etc dated on and near 31.10.2016, on which the assessee is heavily relying, has already been considered and not followed by another Bench of ITAT in ITA No: 4493/Mum/2003 dated 11.07.2018. A copy of this order is attached. (PB-III) 2.3 The claim of the assessee of challenging the jurisdiction after almost 14 years is therefore barred by the laches, being in the nature of unreasonable delay in asserting the claim which has prejudiced the party against whom relief is sought. 2.4 This ground of appeal challenging the jurisdiction of the Addl CIT to pass orders u/s 143(3) was not taken before the CIT(A) and is not admissible as a matter of right. If such additional grounds, which are likely to change the complexion of the case, are permitted to be taken before higher judicial forums then that would defeat the very scheme of appellate forums conceived by the legislature. The ITAT is supposed to decide only issues which were the subject matter of first appeal, especially when the fresh ground of appeal is going to challenge the complexion of entire appeal, otherw....
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.... (b) empower the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply." 3.2 Subsequent to the Cadre restructuring of the Income Tax Department in 2001, Addl CIT's/JCIT's were empowered to pass orders u/s 143(3). ....
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....he additional ground of appeal being raised is infructuous ab initio and does not merit admittance." 6.2 Thus, the ld DR has opposed the admission of additional ground mainly for the reasons that, firstly, additional ground has been filed with inordinate delay of more than 14 years and that too without any affidavit explaining the delay, secondly, the additional ground raised being mixed question of law and facts and require examination and investigation of fresh facts, which are not available on record of the Tribunal as well as record of Assessing officer. 6.3 We have heard rival submission of the parties and perused the relevant material on record. As regards the issue of admissibility of the additional ground, it is undisputed that this appeal has been filed by the assessee in the year 2004 and the additional ground has been raised before the Tribunal for the first time in year 2018 i.e. after a lapse of almost of 14 years. In the additional ground, the assessee seeks to challenge validity of the jurisdiction of Additional Commissioner of Income-tax in passing the assessment order in the capacity of Assessing Officer. The assessee is contending that the Additional Commiss....
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....lved in the additional ground raised and secondly, the said question of law should arise from the facts which are on record in the assessment proceedings. If investigation or examination of the fresh facts is required for admitting an additional ground, then same may not be admitted by the Tribunal. In the case of ACIT Vs Stock Traders p Ltd (supra), also identical additional ground had been raised by the assessee after lapse of substantial period but the Tribunal admitted the additional ground in identical circumstances. For ready reference, said additional ground raised by concerned assessee and the submission of said assessee are reproduced as under: 12. The assessee has also filed additional grounds. The same reads as under: On the facts and in the circumstances of the case and in law, it is submitted that the Addl. CIT did not have valid authority to perform and exercise the powers and functions of an Assessing Officer, as per the provisions of section 2(7)(a) read with section 120(4)(b) of the Act, and therefore, the above mentioned assessment order, which has been passed without authority of law, may be treated as bad in law, and be quashed. 13. Fo....
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.... not possess requisite strength in the eyes of law and void ab initio, then it will remain so even if there is acquiescence or participation by the assessee in the proceedings carried out. by the AO to frame the assessment order. It is well settled law that consent of the assessee cannot confer jurisdiction to an assessing officer who lacked jurisdiction under the law." A similar view was taken by the Hon'ble Mumbai ITAT in the case of Tata Communication Ltd. (ITA No. 6981/Mum/2005) and Tata Sons Limited (ITA Nos. 193 & 3745/Murn/2006). Given that the aforesaid decisions were recently pronounced, based on the facts of our case, we hereby attempt to file the enclosed additional ground of appeal in the captioned Appeal with a request that this ground may please be adjudicated by the Hon'ble Bench. The additional ground raised herein go to the very root of the matter and deal with the very jurisdiction and authority of the Assessing Officer to pass the assessment order. Therefore, this ground can be admitted in the interest of substantial justice and especially when the same is raised in a bonafide manner without indulging in delaying tactics. ....
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....ing the Appellant to produce certain information in connection with the assessment for the assessment year 1998-99(see pages 2 to 4 of paper book-II). 4. 08.03.2001 The Addl. Commissioner of Income-tax passed the assessment order under section 43(3) of the Act determining its total income as per the regular provisions of the Act at Rs. Nil after allowing set off of brought forward losses and book profits under section 115JA of the Act of Rs. 132,59, 12,000. 5. 22.10.2003 The CIT(A) disposed of the Appellant's appeal against the assessment order for assessment year 1998-99 partly allowing the same. 6. 12.01.2004 Aggrieved by the appellate order of the CIT(A), the Appellant filed an appeal before the Tribunal. 7. 23.07.2018 The Appellant has filed additional grounds before the Tribunal including an application for admission of the same. 8. 24.07.2018 30.08.2018 26.10.2018 The Appellant filed three letters with the Assessing Officer requesting for information in connection with the additional grounds of appeal. 9. 08.02.2019 The Appellant made its RTI application seeking information with respect to jurisdiction of the Add....
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....d by him without any valid jurisdiction. The Ld. Counsel has raised the validity of jurisdiction, secondly, on the ground that no order u/s 127 of the Act has been passed by the Commissioner of Income-tax for transfer of jurisdiction of case from Joint Commissioner of Income-tax to the Addl. Commissioner of Income-tax. In support thereof, the Ld. Counsel relied on following decisions: i. Tata Sons Ltd. vs. ACIT (AY 2001-02) (2016) (162 ITD 450) (AY 2001 - 02) (MUM - TRI) (see para 3.24 to 3.40 on Pg No. 155 to 160c of Caselaw Paper book); ii. Tata Communication Ltd. vs. ACIT (AY 2002-03) in ITA No.7071/Mum/2005 and 1108/Mum/2008 by its order dated 30.06.2017 (see para 13 to 18 on Pg No. 177 to 207 of Caselaw Paper book); iii. Tata Sons Ltd. vs. ACIT (AY 2002-03) in ITA Nos. 193 and 3745 /Mum/2006 vide its order dated 27.11.2017 (see para 18 on Pg No. 119 to 139 of Caselaw Paper book) iv. Tata Sons Ltd. vs. ACIT (AY 2004-05) in ITA No. 2639/Mum/2009 vide its order dated 11.03.2019 (see para 2-3 & 5.1 on Pg No. 211 to 212 & 235 respectively of Caselaw Paper book) v. Tata Communication Ltd vs. ACIT (AY 2003-04 and AY 2004-05) (ITA No.3972/M....
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....e charge of a Commissioner of Income-tax, was assigned to 'Range' ( which was called as regular Range), whereas cases having returned income above that threshold value were assigned to 'Special Ranges'. The 'Range' was further used to be comprised of units namely 'Circles' and 'Wards'. The 'Circles were headed by officers of the rank of the Asst Commissioner of Income-tax (ACIT), whereas wards were being headed by the officer in the rank of Income-tax Officer (ITO). The jurisdiction of the 'Range' having pecuniary limit of returned income, say from Rs. 2 lakh to 25 lakhs was assigned to the Asst Commissioner of income-tax (ACIT), whereas the cases of the 'Range', below the pecuniary limit of say Rs. 2 lakhs were divided amongst the 'Wards'. In this structure, the regular 'Range officer' was not acting as Assessing Officer and only the 'Special Range' DCIT was acting as an Assessing Officer, along with ACIT and ITO. 7.7 The Ld. DR referred to Circler No. 772 dated 23.12.1998 issued by the CBDT, wherein the post of Dy. Commissioner of Income-tax (DCIT) was re-designated as Joint Commissioner of Income-tax (JCIT) with effect from 1^st day of October, 1998. Thus in the case of the a....
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....ntative further submitted that the decisions cited by the assessee in the case of Tata Sons Ltd.(supra) and Tata Communication Ltd. (supra) relates to the era of the post re-structuring in the Department wherein 'Special Range' had been abolished and the cases of special ranges were redistributed among respective 'ranges' working under concerned Commissioner of Income-tax, further to be distributed among Assistant/ Deputy Commissioner of Income-tax (unit namely 'Circle') and ITO (Unit namely 'ward'), depending on the pecuniary limit of return of income filed. The Joint Commissioner of Income-tax /Additional Commissioner of Income-tax, who were heading the ranges, were given concurrent jurisdiction of Assessing Officer over all the cases under their Ranges, however, certain cases were assigned to them for completing scrutiny proceedings by them. In the case of Tata Sons Ltd.(supra) and Tata Communication Ltd. (supra), the matter under challenge was jurisdiction acquired by the Joint/ Additional Commissioner of Income-tax, Range for passing the assessment order under the capacity of concurrent jurisdiction. The Ld DR submitted that according to the assessee this transfer should have ....
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....of a specified categories of person and it is only when a question arises with respect to which Assessing Officer would exercise jurisdiction of a particular area, the section 124 would apply in those circumstances. He submitted that in the present case the issue involved is that the Additional Commissioner of income-tax had no inherent jurisdiction or authority to act as an Assessing Officer. He submitted that this issue has already been considered by the Tribunal in the case of Tata sons ltd (supra). 8. We have heard rival submission of the parties on the issue in dispute raised in additional ground and perused the relevant material on record. The Ld. DR has pointed out that notice u/s 143(2) dated 15/12/1998 for the assessment year under consideration has been issued by the Joint Commissioner of income-tax, Special Range 32, Mumbai. The said jurisdiction has not been disputed by the assessee. The assessee is disputing only the assessment order passed by Additional Commissioner of Income-tax, Special Range 32. According to the assessee, for assignment of jurisdiction to the Additional CIT, range -32, Mumbai, the CBDT should have issued a notification and in compliance thereof ....
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....fficer in the case of the assessee. Further, regarding the submission of Ld. Counsel for the assessee that no order u/s 127 of the Act has been issued for transfer of jurisdiction from Joint Commissioner of Income-tax to the Additional Commissioner of Income-tax, we are of opinion that in view of the above discussion, there was no requirement of issue of order u/s 127 of the Act by the Commissioner of Income-tax as no transfer of the case from one jurisdiction to another jurisdiction was involved and the case remained in the same jurisdiction. The decision in the cases of Tata Sons Ltd (supra) and Tata Communications Ltd (supra) relate to the period of post restructuring in the Income-tax department i.e. 1/08/2001, wherein cases were transferred to the Range Officer for completing assessment, and the assessment order passed by the Additional CIT range have been held as without authority of law. The other arguments whether there was no compliance by the assessee of section 124(3) of the Act i.e. not raising the issue of jurisdiction before the AO within the period of 30 days of issue of notice u/s 143(2) of the Act, are rendered merely academic; hence we are not commenting on the sa....
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....ore were not placed on the assessment record. He submitted that despite making thorough search of all record of the relevant authorities, those notifications / promotion orders could not be traced after a lapse of substantial period of more than 14 years. We find that in the case of Stock Traders P Ltd (supra), the assessee had placed reliance on the decision of the Tribunal in the case of Tata Sons Ltd (supra) and Tata communication limited (supra) but the Tribunal after considering the submission of the parties, rejected the additional ground challenging the authority of the Additional Commissioner of income-tax, in passing the assessment order. Thus, respectfully following the finding of the Tribunal in the case of Stock Traders P Ltd (supra), we dismiss the additional ground raised by the assessee. 9. The ground Nos. 1 and 2 of the appeal relate to taxability of renovation and modernization levy of Rs. 4263.63 lakhs collected by the assessee from customers. The Ld. Counsel for the assessee submitted that while raising invoices from customers, the renovation and modernization levy collected is in accordance with the notification issued by the Department of Atomic Energy Commi....
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....r or was actually passed over to the Government. Both the levies were collected and retained by the assessee. What the Notification provided was the manner in which the levies would be used by the assessee. B. Facts emerging on perusal of the second Notification: (1) Under the second Notification, both the levies authorized by the Government were to be recovered in the tariff fixed by the assessee from its customers. In the earlier Notification, what was provided was that they would be included in the tariff. (2) In the second Notification also, the assessee was not required to part with the levies so collected in favour of the Government. In fact, the levies, after their collection, were to be retained by the assessee. (3) The second Notification did not alter the fact that both the levies were intended to generate financial resources to enable the assessee to use and apply them for meeting its expenditure. (4) Second Notification also did not alter the position that none of the levies collected by the assessee would be passed over or was actually passed over to the Government. Both the levies were collected and retained by the assessee....
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....equires him to part with the same in favour of a A third party as the assessee in receipt of the income would be receiving it both on behalf of himself and the third party by virtue of the overriding title and not exclusively for himself. In cases of diversion of income, the income does not accrue to the assessee at all; it, in fact, accrues to the third party in that the destination of income is not towards the assessee in whose hands the money is placed but towards a third party in whose favour and for whose benefit the title is created. Resultantly, the assessee, after the income stands diverted at source by a superior title to a third party, would no longer be concerned with that income. 16. In Sitaldas Tirathdas' case (supra), a part of income from property paid as maintenance allowance to the dependants under a decree of the court, without the maintenance allowance being charged upon the property yielding income, was held to be a case of application of income. In Sijua (Jharriah) Electric Supply Co. Ltd.'s case (supra) the Hon'ble High Court has considered the judgment in Sitaldas Tirathdas' case (supra) and held as under : The concept of rea....
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....al crisis. In a package of financial assistance, the Industrial Finance Corporation agreed to grant loan of Rs. 20 lakhs to the assessee provided the State Government guaranteed the repayment and also allowed the Industrial Finance Corporation to have first charge under the mortgage deeds. The State Government agreed to do so provided the assessee transferred its business to the State Government to manage and run the same. Under the Agreement, the State Government was entitled to 50 per cent of the profits. The assessee contended that the profits earned from the glass factory was not assessable in its hands but in the hands of the Government which was running and managing the said business. It was alternatively contended that only 50 per cent of the profits could be assessed in the hands of the assessee. Rejecting both the aforesaid submissions, the Hon'ble Supreme Court has held that income earned from that business accrued to the assessee directly which was merely applied by the State Government to discharge the obligations of the assessee. 18. On perusal of catena of decisions on the subject, it transpires that, in order to constitute diversion of income at source b....
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.... assessee-company had title to the fund, dominion over the fund and also the use of the fund. In these circumstances, it cannot be said that there has been any diversion of income at source by an overriding title from the assessee-company or that the amount that has been appropriated to the fund does not form part of the real income of the assessee. On the facts of the case, we are in agreement with the well-reasoned order of the learned Commissioner (Appeals) that it is a case of application of income and not of diversion of income at source. We therefore endorse his order. 20. We have also considered the submission of the assessee that the assessing officer has himself accepted that there was diversion of title at page 6 of the assessment order. We find that the assessing officer has made the aforesaid observation in the context of decommissioning charges and not in the context of the impugned levies. 21. The alternative plea of the assessee that the impugned levies are in the nature of capital receipts has been dealt with by the learned Commissioner (Appeals) in Para15 of his order. In order to constitute capital receipt, the receipt should be traceable to loss....
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....f the said decision has already been reproduced above while adjudicating ground Nos. 1 & 2 of the appeal. We also note the assessee in assessment years i.e. 2004-05, 2005-06 and 2006-07 has admitted the collection of different levies as its income and claimed deduction on the same for the purpose of section 80IA of the Act. Once, the assessee itself has admitted the receipt as income in subsequent years, we do not find any justification on the part of the assessee in contesting those receipt as not taxable 10.2 The issue in dispute in the year under consideration being identical to the issue in dispute raised in assessment year 1997-98, therefore, respectfully following finding of the Tribunal(supra), the ground Nos. 3 &4 of appeal of the assessee are accordingly dismissed. 11. The ground No. 5 of the appeal relates to income of the assessee of Rs. 1705.55 lakhs being De-commissioning levy collected by the assessee. The ground No. 6 relates to treating the interest of Rs. 1836.71 lakhs credited to de-commissioning fund. The Assessing Officer has noted that the term 'De-commissioning' used within conventional industry means action taken to take the plant or machinery out of op....
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....see by overriding title and same had been credited to the decommissioning fund. The contention of the assessee has been summarised by the Ld. CIT(A) as under: "i) The responsibility of decommissioning a nuclear power facility rests with the Government. ii) The decommissioning levy is collected on behalf of the Government of India, thus the levy belongs to the Government of India iii) The notification states that the collection of the levy would not constitute revision of tariff. It is clear from the above that the levy collected does not form part of the tariff and profits of the Nuclear Power Station. iv) The levy is required to be transferred to a separate fund irrespective of the fact whether the Nuclear Power Station has made a profit or not. Thus, this is a case of diversion by overriding title and not a case of appropriation of profits." v) The levy is not available for the Nuclear Power Stations for the recoupment of any losses. vi) The levy is to be utilised by the Government of India for the purposes of carrying out decommissioning activities, which activity is the responsibility of the Government of India. 11.2 The ....
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....the appellant's case. In the appellant's case the collections made are not at all meant to be passed on in favour of any one else. No third party is involved claiming the ownership of the funds collected but the same are in the effective possession of the appellant only to be used for some specific business purposes. The appellant has deliberated at length by way of a technical jargon as to how the funds are to be used but the basic fact remains that the decommissioning fund is to be exclusively used for appellant's own power station/plants which are the appellant's main source of power generation and sale thereof. These power plants need to be subjected to certain process as per the appellant's own version which include "closing down the facility and a minimum removal of the actual material coupled with continuing maintenance and surveillance, to a complete removal of residual radioactivity in excess of levels acceptable for unrestricted use of the facility and its cite". These activities, it has to be appreciated are quite normal activities having regard to the nature of the appellant's business of power generation. What the appellant describes as decommis....
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....g the issue of interest expenditure claimed by the assessee corresponding to the amount credited to decommissioning fund of Rs. 1836.57 lakhs, the CIT(A) followed his finding in assessment year 1992-93 and confirmed the disallowance of interest expenditure for utilisation of the funds out of decommissioning fund. 11.4 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us, the Ld. Counsel of the assessee relied on the decision of the Co-ordinate Bench of the Tribunal in the case of the assessee in ITA No. 843/Mum/2003 for assessment year 1992-93 which has been further upheld by the Hon'ble Bombay High Court in ITA No. 1002 of 2016. The relevant part of the decision of the Tribunal (supra) is reproduced as under: "11. Ground No. 12 relates to the deduction of interest credited to decommissioning reserve. Brief facts in this regard are that the assessee collects decommissioning charges from its customers at Rs. 1.25 paisa or 2 paisa per kwh. As per clause 12 of the office of the memorandum dated 4.09.1987, the decommissioning of a nuclear power station after its useful life includes decontamination, dis....
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.... which is aimed at for use as and when the power plant is decommissioned/ dismantled at the expiry of Its life. Thus, undisputedly the funds do not belong to the assessee accordingly, the same Is found reflected in the balance sheet. Now the issue about the levy of Interest on the said funds which does not belong to the assessee, it was used for the purpose of the business of the assessee. Levy of interest on the sald fund was done at the instance of the Department of Atomic Energy. Considering the said notification, the charge of interest cannot be called notional interest as there Is a charge on the assessee to do so. Therefore, we are of the opinion that the deduction of claim of Interest of Rs 331.73 lakhs is rightly claimed by the assessee. Accordingly, we reverse the orders of the Assessing Officer and the CIT (A) on this issue. Thus, ground no. 12 is allowed." 11.5 The Hon'ble High Court upheld the finding of the Tribunal observing as under: "5. Having heard the learned counsel for the parties and having perused the documents on record, we are in agreement with the view of the Tribunal. As noted, the assessee was under directives of the Government of India to col....
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.... decommissioning charges as income in the hands of the assessee. We also note that the assessee in assessment years i.e. 2004-05, 2005-06 and 2006-07 has admitted the collection of different levies as its income and claimed reduction on the same for the purpose of section 80IA of the Act. Once the assessee itself has admitted the receipt as income in subsequent years, we do not find any justification on the part of the assessee in contesting those receipts as not taxable. The ground No. 5 of the appeal of the assessee is accordingly dismissed, whereas the ground No. 6(six) of the appeal of the assessee is allowed for statistical purpose. 12. The ground No. 7 of the appeal relates to considering the interest income (Rs. 276.71 lakhs), consultancy receipt (Rs. 87.70 lakhs) and other income (Rs.1216.96 lakh) under the head "income from other sources" rather than adjusting the same against the "expenditure incurred on construction of plants" during the year under consideration. 12.1 Before the Assessing Officer, it was submitted that above receipts were having direct nexus with the activity of construction of plants and does not constitute independent sources of the income theref....
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.... The other income mainly constitutes the following items: i Receipts from sale of tender forms ii Interest from contractors on advances given iii Interest received from staff engaged in the project on certain loans given. iv Deposits of contractors forfeited v. Sale of scrap in respect of material used in the project vi. Penal interest vii. Rent from staff / contractors viii. Recoveries from staff for the transport provided ix. Miscellaneous receipts The location wise break-up of income is provided hereunder: Sr. No. Location Amount in Rs. Lacs Details at page nos. a) Corporate office 1045.96 122 b) RAPS 58.81 123 c) Kaiga 128.23 124 d) Engg. Division 136.81 125 - 126 e) RAPP 3 & 4 203.22 127 f) TAPP 3 & 4 8.34 128 Total 1,581.37 A summary is enclosed at page 129 of the compilation. It is submitted that the relevant expenditure in respect of items mentioned at (a), (b) and (c) above has not been claimed as a deduction in computing the total income and has been ....
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....rred to paperbook pages 210 and 211. for showing detail of income of Rs. 1581.378 lakhs, which has been reduced from expenditure incurred on construction. For ready reference, said detail is reproduced as under: Sr. No. Unit Interest Income Consultancy Receipts Other Income Total 1. Corporate Office 170.92 -- 875.03 1045.95 2. RAPS 12.49 --- 46.31 58.8 3. Kaiga 4.95 --- 123.28 128.23 4. Engineering Division --- 87.7 136.82 5. RAPP 3&4 85.93 117.29 203.22 6. TAPP 3&4 2.42 5.93 8.35 Grand Total 276.71 87.7 1167.84 1581.37 12.3 Further on page 211, in the details of corporate office, a sum of Rs. 8,75,02,500/- has been stated to be received as premium on bonds. It was submitted that expenses incurred for earning the said receipt had already been reduced from those receipts. A detail of income earned and corresponding expenditure for engineering division has been explained on page 214 to 215 of the paperbook. 12.4 We have heard rival submission of the parties on the issue in dispute and perused the relevant mat....
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....n dispute and perused the relevant material on record. Before us, also no such detail of the legal expenses amounting to Rs. 7 lakhs has been filed and therefore, we do not have any option other than to uphold the disallowance made by the Assessing Officer. 14. In ground No. 9, the assessee has prayed that deduction in respect of expenditure treated as prior period should have been allowed. 14.1 In our opinion, the Assessing Officer has made only disallowance in respect of legal expenses of Rs. 7 lakhs and he has not disturbed either prior period income or prior expenses except said disallowance of Rs. 7.00 lakhs for legal expenses, which we have already upheld and therefore the ground No. 9 of the appeal of the assessee is also dismissed. 15. The ground No. 10 of the appeal relates to disallowance of employee state insurance (ESI) and provident fund (PF) amounting to Rs. 53.47 lakhs u/s 43B of the Act. Before the Assessing Officer, the assessee filed an annexure of the detail of ESI and PF amounting to Rs. 53.47 lakhs which has been disallowed by the Assessing Officer as same was paid after the due date under the relevant Acts. Since, the issue in dispute of payment of em....
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.... (hereafter in this section referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956) Explanation.- For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), as increased by - if any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited to the profit and loss account, and as reduced by, It can be seen from clause (1) that the provision creates a legal fiction regarding the total income chargeable to tax. Such a fiction is applicable only to those assessees which (a) are Companies except the Companies engaged i....
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....ns of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for calculation or depreciation shall correspond to the method and rates which have been adopted for calculating the depreciation for such financial year or part of such financial year falling within the relevant previous year". The further details of Section 115JA may not be necessary for the present purpose. 13. Then came to Section 115JB, which was inserted in the Income Tax Act by Finance Act of 2000 with effect from 1.4.2001. The relevant portion as it stands today reads as follows:- "115JB. Special provision for payment of tax by certain companies.- (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1^st day of April, 2007 is less than ten per cent of its....
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.... I.T Act is less than 30% of the book profits of the Company, Section 115JB mandates the department to resort to the fiction in those cases where the tax payable on the basis of the 'total income' computed in accordance with the I.T. Act is less than a specified percentage (7=% for the years in issue) of the book profit. Further, Sections 115JA and 115JB also stipulate a definite manner of preparing the annual accounts including the profit and loss accounts. More specifically, Section 115JB stipulates that the accounting policies, accounting standards, etc. shall be uniform both for the purpose of income tax as well as for the information statutorily required to be placed, before the annual general meeting conducted, in accordance with Section 210 of the Companies Act, 1956. 14. It may be mentioned here that under Section 166 of the Companies Act every Company is mandated to hold a general meeting in each year. Section 210 mandates that every year the Board of Directors of the Company in the general meeting shall lay before the Company a balance sheet as at the end of the relevant period and also a profit and loss account for the period. Parts II and III of Schedul....
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....f income tax payable by the appellant. 17. It must be remembered that Section 115JB creates a legal fiction regarding the total income of the assessees which are Companies. The book profit of the Company is deemed to be total income of the assessee in the circumstances specified in the said Section, which are already noticed earlier. The expression "book profit" for the purpose of the said Section is explained in the Section itself to mean the net profit as increased or decreased by the various amounts shown in the various sub-clauses of the Section. The "net profit" itself must be the net profit as shown in the profit and loss account of the Company. Subsection (2) mandates that the profit and loss account of the Company is required to be prepared in the manner specified therein. Though in view of the requirement under Section 69 of the Electricity Supply Act the appellant is required to maintain accounts in a different form than the one contemplated under Section 115JB(2), the prescription under Section 69 is only regarding the general duty of the appellant for the purpose of Electricity Supply Act. Nothing in theory prevents the Parliament from obligating the appellant ....
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....ould be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive". to give the benefit of such clause any more to those who were getting the benefit of such exclusion clause, in our opinion, it is not an absolute rule. The other attendant circumstances, the context, the history and the mischief sought to be remedied by the amendment are all required to be examined before reaching at definite conclusion. 19. The Circular No.762 not only is binding on the respondents, but also explains the purpose in introducing Section 115JA. The relevant portion reads as follows:- "46.1 In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. 46.2 The Finance Act has inserted a new section 115JA of the Income-tax Act, so as to levy a minimum tax on companies who are having book profits and paying dividends but ar....
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.... However, the CBDT understood that Companies engaged in the business of generation and distribution of electricity and Enterprises engaged in developing, maintaining and operating infrastructure facilities, as a matter of policy, are not brought within the purview of the amendment (Section 115JA) for the reason that such a policy would promote the infrastructural development of the country. Such an understanding of the CBDT is binding on the department. 20. If that is the background in which Section 115JA is introduced into the Income Tax Act, Section 115JB, which is substantially similar to Section 115JA, in our opinion, cannot have a different purpose and need not be interpreted in a manner different from the understanding of the CBDT of Section 115JA. 21. Another submission made by the learned counsel for the appellant is that in view of the judgment of the Supreme Court in C.I.T. v. B.C. Srinivasa Setty [(1981) 128 ITR 294 (SC)] and CIT v. Eli Lilly and Co. (India) P. Ltd. [(2009) 312 ITR 225 (SC)], where the computation provision could not be applied in a particular case, it is indicative of the fact that the charging Section also would not apply. It was held....
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....e charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section". 22. Another reason is that the appellant or bodies similar to the appellant, which are totally owned by the Government - either State or Central - have no share holders. Profit, if at all, made by the appellant would be for the benefit of entire body politic of the State of Kerala. In the final analysis, all taxation is meant for the welfare of the people in a Constitutional Republic. Therefore the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. Therefore, we are of the opinion that the fiction fixed under Section 115JB cannot be pressed into service against the appellant while making the assessment of the tax payable under the Income Tax Act. 16.1 The Hon'ble supreme in Civil No. 151, 152, 154 and 13571 of 2015 upheld the decision of Hon'ble Kerala High Court observing as under: 2. The judgment under appeal was rendered by the Division Bench of the Kerala High Court in Kera....
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....ound Nos. 17 and 18 of the appeal of the assessee are consequential in nature and therefore same are not required to be adjudicated upon and same dismissed as infructuous. AY 1999-2000 19. Now, we take up the appeal of the assessee for AY 1999-2000. The grounds raised by the assessee are reproduced as under: 1. The learned Commissioner (Appeals) erred in confirming as income of the appellant an amount of Rs. 1,986.21 lacs, being Decommissioning Levy collected by the appellant. 2. The learned Commissioner (Appeals) erred in confirming as income of the appellant an amount of Rs. 2,278.46 lacs, being interest credited to Decommissioning Fund. 3. The learned Commissioner Appeals erred in confirming as income of the appellant an amount of Rs. 4,965.52 lacs, being Renovation & Modernisation levy collected by the appellant. 4. The learned Commissioner (Appeals) erred in confirming as income of the appellant an amount of Rs. 322.09 lacs, being interest credited to Renovation and Modernisation fund. 5. Without prejudice to Grounds 3 and 4 above, the learned Commissioner (Appeals) erred in holding that the amount collected towards Renovat....
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....ommissioner (Appeals) erred in confirming the action of the Assistant Commissioner in including the following amounts as being part of book profits under section 115JA: Sr. No. Particulars Amount a) Interest income on deposits with banks 10,077.98 b) Interest income from Inter Corporate Deposits 267.46 c) Interest on staff loan 225.12 d) Interest Others 222.63 e) Delayed payment charges 9,312.97 f) Miscellaneous receipts 694.82 Total 20,800.98 The learned Commissioner (Appeals) ought to have appreciated that the above incomes were inextricably linked to the business of generation of power and were therefore derived from the business of generation of power. On this basis, the above amounts were to be excluded from book profits in accordance with Explanation (iv) to section 115JA(2). 15. The learned Commissioner (Appeals) erred in not allowing deduction for expenditure incurred by the appellant in earning the income of Rs. 20,800.98 lacs, in computing the book profits of the appellant. 16. The learned Commissioner (Appeals) erred in holding that there is no difference in facts fo....
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....r assessment year 1998-99, the ground No. 1 is dismissed, whereas the ground No. 2 is allowed for statistical purposes, 22. The ground Nos. 3 and 4 of the appeal of the assessee relate to amount of receipt of Rs. 4965.52 lakhs by way of renovation and modernization levy and interest of Rs. 322.09 lakhs credited to the renovation and modernization fund respectively. In ground no. 5, the assessee has prayed for treating the receipt of Rs. 4965.52 lakhs by way of renovation and modernization levy as capital receipt. The issues in dispute raised in above grounds have already been adjudicated by us in the appeal for assessment year 1998-99, therefore, following our finding in ground the appeal for assessment year 1998-99, the issues in dispute are decided mutatis mutandis. 23. The ground Nos. 6 to 8 of the appeal of the assessee relate to amount of Rs. 2979.31 lakhs collected by way of research and development levy, interest of Rs. 206.57 lakhs credited to research and development fund and research and development levy being in the nature of capital receipt. The identical grounds have been decided by us while adjudicating ground Nos. 3 and 4 of the appeal of the assessee for asses....
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....st 16, 2000 requested the appellant to submit details of the prior period expenses and also requested the appellant to make submissions as to why disallowances should not be made in respect of the said expenditure. The appellant submitted the information requested vide letters dated November 27, 2000, December 12, 2000 and January 12, 2001. The information was furnished in respect of each item of expenditure and explanations were also provided in that respect. However, information in respect of legal expenses aggregating to Rs. 7 lakhs was not received by the appellant and the same could not be furnished during the course of the assessment proceedings. The learned Additional Commissioner in the assessment order held that the legal expenses incurred are not deductible in the absence of details. The appellant submits that the learned Additional Commissioner ought to have appreciated that producing evidence in respect of every item of expenditure is not possible for an organisation of the size of the appellant. The appellant further submits that the expenditure had crystallized during the previous year relevant to the assessment year 1998-99 and therefore ou....
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....case of the assessee. The identical ground has been adjudicated by us in assessment year 1998-99 and therefore following our finding in assessment year 1998-99, the ground No. 12 of the appeal is adjudicated mutatis mutandis. 28. The ground Nos. 13 to 16 have been raised by the assessee alternatively to ground No. 12 of the appeal. Since ground No. 12 has been already adjudicated in favour of the assessee, therefore, these grounds are rendered academic only. Accordingly, same are dismissed as infructuous. 29. In ground No. 17 of the appeal, the assessee has raised the issue of adjustments to book profit u/s 115JA of the Act. Since, we have already held that section 115JA is not applicable over the assessee; therefore, this issue is merely academic hence dismissed as infructuous. AY 2000-01 30. Now we take up the appeal of the assessee for assessment year 2000-01. The grounds raised by the assessee in form No. 36 filed on 05/05/2004 are reproduced as under: "The appellant company objects to the appellate order dated 15 March 2004 passed by the Commissioner of Income-tax (Appeals)- III, Mumbai [ CIT (A)] under section 250 of the Income Tax Act, 1961 ('the Act....
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.... obsolete stock of Rs. 36.22 lacs Taxability under section 115JA of the Act 11. The leamed CIT(A) erred in holding that the provisions of section 115JA apply to the appellant. 12. The learned CIT(A) erred in confirming the action of the Assistant Commissioner in holding that the other income of the appellant was not derived from the business of generation of power. 13. The learned CIT(A) erred in confirming the action of the Assistant Commissioner in including the following amounts as being part of book profits under section 115JA: Sr. No. Particulars Amount (Rs. In Lacs) a. Interest income on deposits with banks 10.870.92 b. Interest income from Inter Corporate Deposits 184.75 c. Interest on staff loan 364.37 d. Interest Others 445.17 e. Gain on sale of fixed assets 10.96 f. Miscellaneous receipts 560.24 g. Income on R & M funds and R & D funds credited to the respective funds 841.79 Total 13,278.20 The learned CIT (A) ought to have appreciated that the above incomes were inextricably linked to the business of generation of power and were therefore d....
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....mission in the appeal for assessment year 98-99 that post restructuring in the Income tax department, the special ranges were abolished and all cases assessed under those special ranges were transferred to the jurisdiction of normal ranges. Accordingly, the case of the assessee was transferred to Range 3(2), Mumbai, under the charge of the same Commissioner i.e. Commissioner of income-tax-III, Mumbai. The scanned copy of notification issued by the Commissioner of income-tax-III, Mumbai, distributing the case i.e Company having alphabet N, under the range 3(2), filed by the ld DR is extracted as under: 31.2 In view of returned income of the assessee for the year under consideration being more than threshold limit prescribed, the case was transferred to unit i.e. circle 3(2), Mumbai [falling under Range 3(2), Mumbai] which was headed by the officer in the rank of Assistant/ Deputy Commissioner of Income-tax . At the time of the issue of notice under section 143(2), the unit was headed by the officer in the rank of the Deputy Commissioner of Income-tax but subsequently, he might have been transferred and in his place officer in the rank of Asst Commissioner of income-tax, must have....
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....by us while adjudicating ground Nos. 3 and 4 of the appeal of the assessee for assessment year 1998-99, therefore, respectfully following the same the ground Nos. 6 to 8 of the appeal of the assessee are decided mutatis mutandis. 35. The ground No. 9 of the appeal of the assessee relates to assessing of 'consultancy receipt' and 'other income' including interest income amounting to Rs. 2563.71 lakhs as income from other sources. The identical issue has been decided by us while adjudicating ground no. 7 of the appeal of the assessee for assessment year 1998-99. Therefore, following our finding in assessment year 1998-99 the ground no. 8 of the appeal is adjudicated mutatis mutandis. 36. The ground No. 10 of the appeal relates to disallowance of provision for the loss/obsolete stock of Rs. 36,22, 537/-. The assessee submitted unit -wise breakup of provision of loss/obsolete stock, which is reproduced as under: Unit Rs. TAPS 7,82,025 MApS 25,69,758 KAPS 2,70,754 Total 36,22,527 36.1 Regarding the unit KAPS, the assessee submitted that amount of Rs. 2,70,754/- represented actual loss due to fire in the go down. The Assessing Officer accordingly al....
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....e claim of the assessee cannot be allowed. Therefore, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute, and accordingly, we uphold the same. The ground No. 10 of the appeal of the assessee is dismissed. 37. The ground No. 11 of the appeal of the assessee relates to applicability of section 115JA or the case of the assessee. The identical ground has been adjudicated by us in assessment year 1998-99 and therefore following our finding in assessment year 1998-99, the ground No. 11 of the appeal is allowed in favour of assessee. 38. The ground Nos. 12 to 15 have been raised by the assessee alternatively to ground No. 11 of the appeal. Since ground No. 11 has been already adjudicated in favour of the assessee, therefore, these grounds are rendered academic only. Accordingly, same are dismissed as infructuous. 39. In ground No. 16 of the appeal, the assessee has raised the issue of adjustments to book profit u/s 115JA of the Act. Since, we have already held that section 115JA is not applicable over the assessee, therefore, this issue is merely academic hence dismissed as infructuous. AY 2001-02 40. Now we take up the appeal of the assessee fo....
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....eceipts 97.48 4. Infirm Power 1,759.28 5. Other Income 269.69 Total 2,764.70 10. Without prejudice to Ground No. 9 above, the learned CIT(A) erred in not directing to allow deduction for expenditure incurred in respect of the income of Rs. 2.764.70 lakhs brought to tax. Prior Period Expenses 11. The Learned CIT(A) erred in confirming the disallowance of prior period expenses to the extent of Rs. 421.04 lakhs 12. Without prejudice to the above. the learned CIT(A) / Assessing Officer may be directed to disallow only the net prior period expenditure after setting off prior period expenditure against prior period income. 13. Without prejudice to Ground Nos. 11 & 12 above. the learned CIT(A)/Assessing Officer may be directed to allow deduction of the prior period expenses in respective financial years. Extra ordinary item written off 14. The learned CIT(A) erred in confirming the disallowance of extra ordinary item written off Rs. 1,038.88 lakhs. Provision made for Loss and Obsolete Stock 15. The learned CIT(A) erred in confirming the disallowance in respect of the provi....
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.... Additional Commissioner of Income Tax erred in passing assessment order under section 143(3) without having legal and valid jurisdiction under the Act to pass the assessment order. The Additional Commissioner of Income Tax lacked jurisdiction to pass the assessment order under section 143(3) dated 17th February 2004 and to exercise the powers of performing the functions of an Assessing Officer. 3. The learned Additional Commissioner of Income Tax erred in passing assessment order under section 143(3) where the assessment proceedings were initiated by the Asst. Commissioner of Income Tax. Such order passed is bad in law, in the absence of an order transferring, jurisdiction under section 127 to the Additional Commissioner of Income Tax. 41.1 We have heard rival submission of the parties on the issue of jurisdiction in passing the assessment order challenged by the assessee. The identical additional grounds raised by the assessee have been admitted in appeal for AY 1998-99, but after detailed discussion and following finding of the Tribunal in the case Stock Traders P Ltd (supra), same have been dismissed. Accordingly, following our finding in AY 1998-99, the additional ....
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..... 3. From the break up of these expenses filed, the major expenses related to salaries and bonuses, repairs, maintenance etc. It is difficult to believe that unpaid salaries and bonuses could not be calculated and provided for in the book. Similarly, repairs and maintenance are on going expenses and are paid regularly to contractors. It is difficult to imagine that a period of 3 months from the year end was not sufficient for assessee to obtain bills from contractors and account them. 4. Under mercantile system of accounting, which is recognised as proper system of accounting by both institute of Chartered Accountants of India and Income tax, all expenses related to that year should only be debited to P&L account and claim in respect of only those expenses is allowable. Any expenses that pertains to the period other than for which assessment is under processing is to be disallowed. Though the assessee is following the Mercantile System of Accounting yet the above expenses were not accounted for as per the above principle. Hence contentions raised by the assessee is rejected and amount of Rs. 542.02 lakhs claimed during this year which pertains to last yea....
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....AO has merely rejected the claim of the appellant seeking deduction of Rs. 542.02 lakhs in respect of prior period expenses on the ground that these expenses pertained to earlier years. Although the appellant had filed detailed submissions and paper book running into more than 100 pages vide its letter dated 10^th Feb. 2004 but the AO has not even summarily discussed the contentions made by the appellant in the said letter. Simply from the fact that an expenditure relates to the transaction of an earlier year does not make it a liability for the earlier year unless it can be established that the liability was determined and crystallized in that year. When an assessee follows mercantile system of accounting, every liability claimed by it has to be examined as to whether such liability had crystallized and quantified during the year in which it was claimed as deduction. The liability though pertaining to the transaction in an earlier year might have been determined and crystallized in later year. In that case, it has to be allowed as a deduction in the relevant later year. It cannot be disallowed merely on the ground that it related to a transaction of the earlier year. In the case o....
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....specifically asked to file evidence during the hearing of appeal but no evidence has been filed so far. In the absence of any evidence the claim of the appellant that these expenses had crystallized during the year under consideration cannot be accepted. Accordingly, the disallowance of Rs. 8.08 lakhs made by the AO is upheld. 9.2.1(6) RAPS - Rs. 130.14 lakhs. Neither before the AO nor before me, the appellant has filed any evidence to show that the liability in respect of these expenses has crystallized during the year under consideration. Although the appellant was specifically asked to file evidence during the hearing of appeal but no evidence has been filed so far. In the absence of any evidence the claim of the appellant that these expenses had crystallized during the year under consideration cannot be accepted. Accordingly, the disallowance of Rs. 130.14 lakhs made by the AO is upheld. 9.2.1(c) MAPS - Rs. 25.93 lakhs. (i) Repayment of electricity charges recovered from the employees - Rs. 6.44 lakhs. It was submitted that the appellant company had recovered the electricity charges from the employees during the period from November ....
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....O nor before me, the appellant has explained the nature of this entry not to speak of filing any evidence to prove that the liability in respect of this amount had crystallized in this year. Therefore, the contention of the appellant in respect of this amount cannot be accepted. Accordingly, the addition of Rs. 2.09 lakh made by the A0 on this count is upheld. 9.2.1(d) KAPS - Rs. 189.69 lakhs. (I) Trade tax - Rs. 14.02 lakhs. It was submitted that the appellant company had received crane hire charges from M/s. Oswal Chemical and Fertilizer Ltd. in the A.Y. 1994-95 and 1997-98. The same was offered to tax in the respective assessment years. The Trade Tax Officer, Sahajahanpur, UP had raised a demand of Rs. 14.02 lakhs on the crane hire charges received by the appellant. The demand was disputed by the appellant. However, in the previous year relevant to A.Y. 2001-02, the appellant decided to make the payment of Trade Tax. As the liability of Trade Tax was accrued during the current year, it was submitted that the same should be allowed as deduction in this year. I have considered the contention of the appellant. The payment made by the appellant is....
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....e allowed in the year of payment. Accordingly, the appellant is eligible for deduction in respect of the amount of Rs. 82.82 lakh in year under consideration. Therefore, the addition of Rs. 82.82 lakh made by the AO is deleted. (iv) Leave Salary and Pension Contribution - Rs. 17.69 lakhs. According to the appellant, the appellant company had made contribution of Rs. 17,68,552/- to the Pay & Accounts Officer, Department of Atomic Energy on account of leave salary and pension fund of the employees in the previous year relevant to the A.Y. 2001-02. A copy of the cheque dated 18.4.2000 for Rs. 3,32,69,624/- which inter alia includes the payment of Rs. 17,68,552/- and a copy of the letter dated 18.4.2000 addressed to the Pay & Accounts Officer, Department of Atomic Energy, Mumbai remitting therewith the said amount was filed in support of the claim. All these documents appear at page no. 104 and 105 of the paper book filed before the AO. It was contended that the said amount requires to be allowed as deduction since the liability to pay the amount crystallized during the previous year relevant to the A.Y. 2001-02. I have considered the contention of the appell....
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....for material received in earlier years due to to lack of documentary evidence to support crystallisation of expenses in the year under consideration. Similarly in respect of KAPS, the Ld. CIT(A) has deleted the addition for trade tax and bonus, whereas in respect of repair and maintenance and leave salary and pension contribution, the assessee failed to justify crystallisation of expenses in the year under consideration. Similarly the Ld. CIT(A) has disallowed the miscellaneous expenses and corporate office expenses due to lack of evidence supporting crystallisation of expenses in the year under consideration. In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is justified and we do not find any error in the same, accordingly we uphold the same. Further, in ground No. 10, the assessee has claimed for setting off of prior period expenditure against prior period Income. In our opinion, when the items of the prior period income are different than the nature of the expenditure, same cannot be allowed to be set off against the prior period income, which has been declared by the assessee on accrual basis. As far as claim of the assessee for allowing the said prior peri....
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....he expenditure of Rs. 1038.88 lacs incurred by the appellant on the construction of dome cannot be allowed as deduction. Accordingly, the action of the AO in this regard is upheld. Therefore, the ground of appeal at Sr. No. 13 is rejected." 46.1 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that Ld. CIT(A) has observed that no explanation or documentary evidence in respect of the claim of the expenditure was filed before the lower authorities. The Ld. CIT(A) has also observed that any amount incurred on account of current repairs to the premises can be allowed as revenue expenditure whereas the amount incurred has been claimed by the assessee for construction of a capital asset. In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned, and therefore we uphold the same. The ground No. 14 of the appeal of the assessee is accordingly dismissed. 47. The ground No. 15 of appeal relates to disallowance of provision for loss /obsolete stock. The Ld. CIT(A) upheld the disallowance observing as under: "11.2 I have considered the contention of the appellant. The ....
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....aised by the assessee in form No. 36 filed on 20/08/2007 are reproduced as under: The appellant company objects to the appellate order dated 30 March 2007 passed by the Commissioner of Income-tax (Appeals)- III, Mumbai [ CIT (A) '] under section 250 of the Income Tax Act, 1961 ('the Act) on the following grounds: Decommissioning Levy 1. The learned CIT(A) erred in confirming as income of the appellant an amount of Rs. 3,449.33 lacs, being Decommissioning Levy collected by the appellant. 2. The learned CIT (A) erred in confirming as income of the appellant an amount of Rs. 3,652.06 lacs, being interest credited to Decommissioning Fund. Renovation & Modernisation Levy 3. The learned CIT(A) erred in confirming as income of the appellant an amount of Rs. 8,623.31 lacs, being Renovation & Modernisation levy collected by the appellant. 4. The learned CIT(A) erred in confirming as income of the appellant an amount of Rs. 2,999.27 lacs, being interest credited to Renovation and Modernisation fund. 5. Without prejudice to Grounds 3 and 4 above, the learned CIT(A) erred in holding that the amount collected toward....
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....wance of prior period expenses to the extent of Rs. 1,188.41 lakhs 15. Without prejudice to the above, the learned CIT(A) / Assessing Officer may be directed to disallow only the net prior period expenditure after setting off prior period expenditure against prior period income. 16. Without prejudice to Ground Nos. 14 & 15 above, the learned CIT(A)/Assessing Officer may be directed to allow deduction of the prior period expenses in respective financial years. Expenditure on Research & Development 17. The learned CIT(A) erred in confirming the disallowance of expenditure on Research & Development levy of Rs. 82.50 lakhs. Provision made for Loss and Obsolete Stock 18. The learned CIT(A) erred in confirming the disallowance in respect of provision made for loss and obsolete stock of Rs. 64.08 lakhs. Taxability under section 115JB of the Income Tax Act 19. The learned CIT(A) erred in confirming the increase of the net profit by the following amounts, while computing the book profit of the appellant under Section 115JB of the Income Tax Act, 1961. Sr. No. Particulars Amount (Rs. in lacs) Decomm....
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....and miscellaneous income of Rs. 23.93 lakhs. 53.1 The facts in brief qua the issue in dispute are that the assessee in the computation of the total income claimed deduction under section 80 IA in respect of profit derived from Kakrapar atomic Power Station (KAPS). The profit of the KAPS included interest income of Rs. 48.34 lakhs. Before the Ld. CIT(A), the assessee claimed that interest income was earned on loans given to the staff working at KAPS, and the staff being integral part of the unit, any income earned from such a staff had a nexus with the business operation of KAPS and accordingly chargeable under the head business income and forms part of the profit of KAPS. The assessee relied on the decision of CIT Vs The Madras Motors Ltd 257 ITR 60( Mad) and other decisions. The assessee also claimed deduction under section 80IA of the Act on the miscellaneous income of Rs. 52.22 lakhs. However the Ld. CIT(A) rejected the contention of the assessee observing as under: 6.3.1 The eligibility of deduction us 80-IA in respect of various items of income shown by the appellant is examined in view of the above discussion. The appellant has claimed deduction u/s 80 IA on inter....
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....undertaking. The nexus of those receipts with the industrial undertaking is indirect and incidental. Accordingly, those receipts are not eligible for deduction u/s 80IA." 53.2 Before us the learned counsel for the assessee referred to paperbook page 178 and relied on the submission made before the lower authorities and submitted that interest income being derived from the undertaking, is eligible for deduction under section 80IA of the Act. Regarding miscellaneous income also learned counsel for the assessee submitted that same is eligible for deduction under section 80IA of the act. 53.4 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute is regarding claim of deduction on interest income earned from giving loans to staff working at undertaking namely KAPS, under section 80IA of the Act. In our opinion, the activity of providing loans or advances to the employees working at the eligible unit, is not part of the business activity of the undertaking. It might be a welfare activity on the part of the assessee but interest earned on such loans and advances to a staff cannot be any income derived ....
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.... head income from other sources. The identical issue has been decided by us, while adjudicating ground No. 10 of the appeal for assessment year 200102, and issue has been restored to the file of the learned Assessing Officer for verification and to be decided in accordance with law . However in the instant case no such details are filed before the Ld. CIT(A) and therefore the Ld. CIT(A) rejected the claim of the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under : "10. The ground of appeal at Sr. No. 13 has been taken without prejudice to ground no. 11 this ground it has been contended that the expenditure incurred in respect of the income of 336.02 lacs should be deducted from the said amount and only the net income should be brought to tax. However, neither in the ground of appeal nor in the statement of facts or during the course of hearing of appeal, the appellant specified the expenses which have been incurred to earn the income of Rs. 336.02 lacs. In absence of any details or documentary evidence to prove that any expenditure has been incurred for earning the income of Rs. 336.02 lacs, the claim made by the appellant cannot be accepted. ....
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....sessee claimed that since payment has been made out of research and development levy fund, and such levies have been treated by the Assessing Officer as revenue receipts, therefore the expenditure incurred out of such R &D fund should be allowed as revenue expenditure. The Ld. CIT(A) has rejected the claim of expenditure as being in the nature of the capital expenditure. The relevant finding of the Ld. CIT(A) is reproduced as under: "17.2 I have considered the contention of the appellant. In this case, the appellant has made contribution of Rs. 82.50 lacs towards the setting up of Fueling Machine Test facility to Bhabha Atomic Research Centre. The total cost of the project is 150.30 lacs. The amount of Rs. 82.50 lacs has been provided in respect of capital project which has to be treated as capital expenditure. Such expenditure is not allowable as deduction u/s 37 of the I.T. Act. The appellant has not made any argument or filed any evidence to claim that the said expenditure is allowable under any other provisions of the I.T. Act. Accordingly, the appellant is not entitled to the deduction of Rs. 82.50 lacs. Therefore, the action of the AO in this regard is upheld. ....
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....(A) erred in confirming as income of the appellant an amount of Rs. 3,417.72 lacs, being interest credited to Renovation and Modernisation fund. 5. Without prejudice to Grounds 3 and 4 above, the learned CIT(A) erred in holding that the amount collected towards Renovation & Modernisation levy was not in the nature of a capital receipt and accordingly taxable. Research & Development Levy 6. The learned CIT(A) erred in confirming as income of the appellant an amount of Rs. 5,205.58 lacs, being Research & Development levy collected by the appellant 7. The learned CIT (A) erred in confirming as income of the appellant an amount of Rs. 2036.22 lacs, being interest credited to Research and Development fund. 8. Without prejudice to Grounds 6 and 7 above, the learned CIT(A) erred in holding that a portion of the amount collected towards Research & Development levy was not in the nature of a capital receipt and accordingly taxable. Deduction under section 80-IA 9. The learned CIT(A) erred in confirming the exclusion of an amount of interest income of Rs. 128.65 lakhs and miscellaneous income to the extent of Rs. 477.45 lakhs fro....
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....cted to disallow only the net prior period expenditure after setting off prior period expenditure against prior period income. 18. Without prejudice to Ground Nos. 16 & 17 above, the learned CIT(A)/Assessing Officer may be directed to allow deduction of the prior period expenses in respective financial years. Provision made for Obsolete Stock 19. The learned CIT(A) erred in confirming the disallowance in respect of the provision made for loss and obsolete stock of Rs. 10.34 lakhs. Computation of book profits under section 115JB 20. The learned CIT(A) erred confirming the action of the assessing officer in increasing the net profit by the following amounts, while computing the book profit of the appellant under Section 115JB of the Income Tax Act, 1961 Sr. No. Particulars Amount in lakhs 1. Decommissioning Reserve 3,470.39 2. Renovation & Modernization Reserve 8,675.97 3. Research & Development Reserve 5,205.58 4. Interest on above reserves 9,069.02 Total 26,420.96 21. The learned CIT(A) erred in denying the claim for deduction of Renovation & Modernisation expenditure ....
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....exercise the powers of performing the functions of an Assessing Officer. 3. The learned Additional Commissioner of Income Tax erred in passing assessment order under section 143(3) where the assessment proceedings were initiated by the Asst. Commissioner of Income Tax. Such order passed is bad in law, in the absence of an order transferring, jurisdiction under section 127 to the Additional Commissioner of Income Tax. 64.1 We have heard rival submission of the parties on the issue of jurisdiction in passing the assessment order challenged by the assessee. The identical additional grounds raised by the assessee have been admitted in appeal for AY 1998-99, but after detailed discussion and following finding of the Tribunal in the case Stock Traders P Ltd (supra), same have been dismissed. Accordingly, following our finding in AY 1998-99, the additional grounds of the appeal for year under consideration are accordingly admitted and dismissed. 65. Now we take up regular grounds for adjudication. 66. The ground Nos. 1 to 10 of the year under consideration are identical to ground Nos. 1 to 10 of the appeal for assessment year 2002-03, and therefore following our finding,....
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....e action of the lower authorities in allocating the said R & D expenditure towards the profit from the undertaking eligible for deduction under section 80IA is justified and we do not find any error in the order of the Ld. CIT(A) in upholding the allocation of the R&D expenditure to the eligible units. The ground No. 11 of the appeal of the assessee is accordingly dismissed. 68. The ground Nos. 12 to 15 of the appeal of the assessee relates to rejection of reducing certain incomes from the expenditure incurred during construction period. The identical rounds raised in assessment year 2001-02 have been decided by us, therefore relevant ground No. 12 to 15 of the present appeal are also decided mutatis mutandis. 69. The ground Nos.16 to 18 of the appeal relate to prior period expenses of Rs. 552.41 lakhs. The identical grounds have been adjudicated by us in the appeal for assessment year 2001-02 and 2002-03. Following our finding on those assessment years, the ground No. 16 to 18 of the appeal are decided mutatis mutandis. 70. Ground of 19 of the appeal relates to provision made for obsolete stock. This ground of the appeal was not pressed before us and therefore same is dis....
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....ed by the appellant, it has incurred an expenditure of Rs. 14,63,152/- on the leveling of R & D site. As per the resolution passed by the Board of the appellant company, there is proposal to construct building for R & D at cost of Rs. 2.63 lacs. The amount of Rs. 14,63,152/- has also been incurred in connection with the construction of the building which is capital in nature. Such types of expenses are not allowable w/s 37 of the I.T. Act. The appellant has not made any argument or filed any evidence to claim that the said expenditures is allowable under any other provisions of the I.T. Act. In view of these facts and circumstances of the case, it is held that the appellant is not entitled to deduction of Rs. 14,63,152/- being amount spent out of the Research & Development Fund. Accordingly, the ground of appeal at Sr. No. 30 is rejected." 73.1 We have perused the finding of the Ld. CIT(A) and heard rival submission of the parties. The assessee has not disputed that the expenditure has been incurred in relation with construction of the building for research and development. The expenses and construction of the building for the purpose of research and development is in t....
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.... collected towards Research & Development levy was not in the nature of a capital receipt and accordingly taxable Deduction under section 80-IA 9. The learned CIT(A) erred in confirming the exclusion of an amount of interest income of Rs. 281.63 lakhs and other income to the extent of Rs. 658.85 lakhs from the "Profit of the business" eligible for deduction under Section 80 IA of the Income Tax Act, 1961 10. Without prejudice to Ground No. 9, the learned CIT(A) erred in confirming the exclusion of the gross interest income and other income from the "Profits of the business" eligible for deduction under Section 80 IA of the Income Tax Act 1961 instead of the net income. The learned CIT(A) erred in not netting off the interest income and other income against the interest and other expenditure. Income reduced from expenditure incurred during Construction Period 11. The learned CIT(A) erred in confirming the action of the assessing officer in taxing as income, the following amounts which had been reduced by the appellant company from the expenditure incurred during construction period: Sr. No. Particulars Amount (Rs. In Lakhs) 1.....
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....s, while computing the book profit of the appellant under Section 115JB of the Income Tax Act; 1961. Sr. No. Particulars Amount (Rs. In Lakhs) 1. Decommissioning Reserve 3,052.70 2. Renovation & Modernization Reserve 5,361.98 3. Research & Development Reserve 3,217.19 4. Interest on above reserves 9,605.31 Total 21,237.18 Renovation and Modernisation Expenditure 22. The learned CIT(A) erred in confirming the action of the assessing officer in disallowing the claim of the appellant company to allow the Renovation and Modernisation expenditure incurred in Kalpakkam unit as revenue expenses. 75. Before us, the assessee vide letter dated 18/07/2018, has raised additional ground, which are identical to additional ground raised in assessment year 2002-03 and 2003-04. We have already admitted additional grounds in those assessment years and after considering submission of the parties, those additional grounds have been dismissed. Following our finding in assessment year 2002-03 and 2003-04, the additional grounds raised in the year under consideration are also dismissed. 76. Now we take up the regular gro....
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....sment year 2002-03 and 2003-04, ground No. 10 to 14 of the appeal are decided mutatis mutandis. 82. The ground Nos. 14 and 15 of the appeal relate to disallowance under section 14A of the Act. 82.1 The brief facts, the issue in dispute that the assessee shown tax-free exempted income from investments, however no disallowance for earning such exempted income was shown by the assessee. Before the Assessing Officer assessee submitted that company has made investment of Rs. 2,63,198 lakhs in bonds as per the recommendation of the 'Ahluwalia committee' of Government of India. It was submitted that those Bonds were compulsorily allotted by the different Electricity Board for converting existing debt as investment. It was explained that investment in Bond was from internal funds i.e. debt and not from borrowed funds and therefore no disallowance of interest could be made under the provisions of section 14A of the Act. The Assessing Officer accepted the contention regarding the interest disallowance, however he pointed out that assessee has not made any disallowance towards administrative expenses incurred for earning exempted income. The Assessing Officer made disallowance of propor....
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....7,095.98 4. Stores and spares 1,766.52 5. Repairs to Plant &machinery 7,104.01 • • Rebates and discount 31767.17 Total &nb....
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....In the case of Rhythm Exports Pvt. Ltd. (supra), it has been held that it is the duty of the assessee to allocate the expenditure to exempt income w/s 14A but in case the assessee fails to allocate the same, the AO has no option but to disallow the same on proportionate basis. The decision of Hon. Bombay High Court in the case of General Insurance Corporation of India supra) and other decisions relied upon by the appellant are not applicable since the same was rendered in respect of section 80M and before the introduction of section 14A in IT. Act. In view of this discussion, the action of the AO in disallowing expenditure of Rs. 31,91,02,695/- u/s 14A of the I.T. Act is upheld. (Addition confirmed Rs. 31,91,02,695/-). Therefore, grounds of appeal at Sr.no. 15 and 16 are rejected." 82.3 Before us the learned counsel for the assessee referred to paperbook page 190 and submitted that as far as exempted income is concerned, the assessee received cheques from state electricity boards toward interest, which were deposited in bank account and no other administrative cost was incurred by the assessee for earning the exempted income. 82.4 We have heard rival submission of th....
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....the act are not applicable in the case of the being a government company, therefore consequently action of the Assessing Officer for increasing the profit for the purpose of section 115 JB of the act is not sustainable in the foreground of the appeal of the assessee are accordingly allowed. 86. The ground No. 22(sic) of the appeal relates to disallowance of the claim of the assessee for considering renovation and modernisation expenditure incurred in 'Kalpakkam' unit as revenue expenditure. This expenditure was not debited to the profit and loss account and therefore no deduction for the same was claimed in the return of income filed, however by way of a note to the return of income the assessee made this claim. The Ld. CIT(A) however rejected this claim observing as under: "18.1 I have carefully considered the submissions of the appellant. I have also perused the note no. 6 given in the return of income. Not to speak of giving the details of expenditure incurred from the Renovation and Modernisation Fund, even the amount spent from the said fund has not been specified by the appellant before me or before the AO. In absence of any details or other information the claim ....
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....The relevant finding of the Ld. CIT(A) is reproduced as under: As regard the delayed payment charges amounting Rs. 32433.04, it is seen that the appellant supplies power to various electricity boards. In case the payment is not made by the boards in time, the appellant charges interest at certain rate from them on delayed payments. In this way interest of Rs. 32433.04 was recovered by the appellant during the year from the trade debtors. In the case of Nirma Industries Ltd. Vs. DCIT 283 IT 402(Guj), Mayank Electro Ltd. Vs. I.T.O. 71 TTJ 612(Ahd), JCIT Vs. Sidheshwari Paper Udyog Ltd. 94 ITD 187(Del), it has been held that deduction w/s 80 IA is allowable on interest received from trade debtors for late payment of sales consideration. Respectfully following these decisions, the AO is directed to allow deduction w/s 80IA to the appellant in respect of the amount of Rs. 32433.04 lakh. Further, the appellant is also entitled to deduction w/s 80IA in respect of the write back of provision no longer required. These provisions were created on account of certain expenses debited to the profit and loss account. These expenses had earlier gone to reduce the profits for the ....
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....s the same and there is no distinction as to the source. Looking from this angle, the interest becomes part of the hire sale price and is clearly derived from the sales made and is not divorced there from. It is, thus, the direct result of the sale of goods and the income is derived from the Business of industrial undertaking. 89.2 We find that the Ld. CIT(A) has followed decision of the Hon'ble Gujarat High Court on the issue in dispute. Before us, the learned DR has not brought on record any contrary decision of the jurisdiction High Court and therefore we do not find any error in the order of the Ld. CIT(A) on the issue in dispute in following the finding of the Hon'ble Gujarat High Court (supra). The ground No. one of the appeal of the Revenue is accordingly dismissed. 90. The ground No. 2 (two) of the appeal relate to deletion by the Ld. CIT(A) of the provision for doubtful debts amounting to Rs. 74.33 lakhs while working out book profit under section 115JB of the Act. The Ld. CIT(A) deleted the provision for doubtful that in advances added by the Assessing Officer to the net profit while computing book profit under section 115JB of the Act relying on judicial precedents....
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....exclusion of an amount of interest income of Rs. 91.74 lakhs and Miscellaneous Income to the extent of Rs. 398.21 lakhs from the "Profit of the business" eligible for deduction under Section 80IA of the Act. 8. Without prejudice to Ground No. 7, the learned CIT(A) erred in confirming the exclusion of the gross interest income and miscellaneous income from the "Profits of the business" eligible for deduction under Section 80 IA of the Act instead of the net income. The learned CIT(A) erred in not netting off the interest income and miscellaneous income against the interest and other expenditure. Income reduced from expenditure incurred during construction 9. The learned CIT(A) erred in confirming the action of the Assessing Officer in taxing as income, the following amounts which had been reduced by the appellant company from the expenditure incurred during construction period: Sr. No. Particulars Amount (Rs. In Lakhs) 1. Interest on Staff Loan 91.29 2. Penal Interest recovered from employees 5.77 3. Sale of Power 49.29 4. Other income 1,672.00 Total 1,818.35 10. Without prejudice to Gro....
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....issioner of Income Tax. Such order passed is bad in law, in the absence of an order transferring, jurisdiction under section 127 to the Additional Commissioner of Income Tax. 92.1 The identical additional grounds have been admitted by us in assessment year 2002-03 to AY 2004-05. Therefore following our finding in those assessment years, the additional ground raised in the year under consideration is also admitted. After considering submission of the parties, the facts and circumstances of the year under consideration being identical to assessment year 2002-03 to 2004-05, therefore following our finding in those assessment years, the additional grounds for the year under consideration are also dismissed. 93. As far as regular grounds raised by the assessee are concerned, same are covered by the grounds raised by the assessee in the earlier years and therefore same are decided mutatis mutandis. 94. Now we take up the appeal of the Revenue for assessment year 2005-06. The grounds raised by the Revenue reproduced as under: 1. "On facts and in the circumstance of the case and in law the Ld CIT(A) erred in holding that the receipt amounting to Rs. 2555.06 lakhs from del....
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....delayed payment charges and provision no longer required are concerned. The decision of my predecessor is in favour of appellant. There is no change in the facts as far as interest, delayed payment charges and provision no longer required are concerned. Therefore, Assessing Officer is directed to allow deduction u/s. 80IA in respect of delayed payment charges and in respect of provision no longer required. The decision of Assessing Officer in respect of interest is upheld. As far as miscellaneous income is concerned, it is noticed that majority of these incomes, details of which have been filed in the appellate proceedings cannot be said to be derived from appellant's business activity. However, two of these incomes, charges from contractors at Rs, 1,11,124/- and sale of scrap at Rs. 7,76,029/- are directly having nexus with the manufacturing activity of appellant. Therefore, Assessing Officer is directed to grant deduction in respect of these two items. The claim of deduction in respect of balance miscellaneous income is rejected." 95.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Ld. CIT(A) has follo....
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.... change of the investment pattern or with regard to earning income from these funds. To my mind, this is a case where appellant is not spending anything either for maintaining the investments Or, for earning tax free income thereon. Therefore, it is held that investments under consideration are outside the scope of Section 14A. The disallowance made by Assessing Officer is therefore deleted." 96.1 We have heard rival submission of the parties on the issue in dispute and perused relevant material on record. We find that identical issue of the disallowance under section 14A in respect of the administrative expenses has been restored by us to the file of the Assessing Officer in assessment year 2004-05 in case of appeal of assessee, and therefore following our finding in assessment year 2004-05, the issue of disallowance of administrative expenses for earning exempted income is restored back to the file of the Assessing Officer. The ground No.2 two of the appeal of the Revenue is accordingly allowed for statistical purposes. AY 2006-07 97. Now, we take up the appeal of the assessee for assessment year 2006-07. The grounds raised by the assessee vide form No. 36 dated 03/05/20....
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....11. Without prejudice to the above, the disallowance of expenses under section 14A of the Act is on a higher side and must be reduced considering the facts of the appellant company. Income reduced from expenditure incurred during construction 12. The learned CIT(A) erred in confirming the action of the Assessing Officer in taxing as income, the following amounts which had been reduced by the appellant company from the expenditure incurred during construction period: Sr. No. Particulars Amount (Rs. In Lakhs) 1. Interest on Staff Loan 98.76 2. Penal Interest recovered from employees 76.50 3. Sale of Power 1,321.31 4. Other income 1,185.53 Total 2,682.10 13. Without prejudice to Ground No. 12 above, the learned CIT(A) erred in not considering the submissions of the appellant company to allow a deduction for expenditure incurred in respect of the income of Rs. 2,682.10 lakhs brought to tax. 14. Without prejudice to Grounds Nos. 12 & 13 above, the learned CIT(A) erred in not directing the Assessing Officer to recompute the depreciation allowable to the appellant company pursuant to the....
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.... IA of the Act. 27. Without prejudice to Ground Nos. 24 to 26, the learned CIT(A) erred in confirming the exclusion of interest income on gross basis and miscellaneous income from the "Profits of the business" eligible for deduction under Section 80IA of the Act instead of the net income. 28. The learned CIT(A) erred in rejected the claim of the appellant company for netting off the interest income and miscellaneous income against the interest and other expenditure. Depreciation 29. The learned CIT(A) erred in not deciding on merits, the issue relating to the classification of assets under the head Plant & Machinery for determining the rate at which depreciation is eligible to the appellant company. 30. The learned CIT(A) erred in directing the Assessing Officer to verify the supplementary tax audit report and based on the said verification, decide on the claim made the appellant company. Computation of book profits under section 115JB 31. The learned CIT(A) erred in confirming the action of the Assessing Officer in increasing the net profit of the appellant company by the following amounts, while computing the book pro....
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....tatis mutandis. 100. The ground No. 3(three) of the appeal relates to interest credited to renovation and modernisation fund. The ground No. 4(four) of the appeal relates to interest credited to the research and development fund. The issue in dispute involved in these grounds is covered by our finding in appeal for assessment year 98-99, therefore following our finding in assessment year 98-99, the ground No. 3(three) and 4 (four) of the appeal of the assessee are accordingly dismissed. 101. The Ground Nos. 5 to 11 of the appeal of the assessee relate to disallowance amounting to Rs. 4,073.58 lakhs under section 14A of the Act. 101.1. The brief facts qua the issue in dispute are that the assessee earned tax free interest amounting to Rs. 22905.68 lakhs on tax-free bonds. The assessee made proportionate disallowance of administrative expenses amounting to Rs. 2062.9 7 lakhs. But the Assessing Officer invoked Rule 8D of Rules and computed disallowance of interest expenditure amounting to rupees to Rs. 2544. 42 lakhs [under rule 8D(2)(ii) of rules] and disallowance of administrative expenses amounting to rupees to Rs. 1529.16 lakhs [ under rule 8D(2)(iii) @ 0.5 % of average i....
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.... CBDT wide notification dated 04/03/2008. According to the Assessing Officer said rule was having retrospective application. But we find that Hon'ble Supreme Court in the case of CIT Vs Essar Technologies Ltd (Civil Appeal No. 2165 of 2012) held that Rule 8D is applicable only from assessment year 2008-09 onward and can't be applied for prior assessment years. Therefore the computation of disallowance made under section 14A of the Act following Rule 8D for the AY under consideration is rejected. 101.4 The fact that no interest has been incurred for investment in the bonds bearing tax-free interest income has been accepted by the Assessing Officer in assessment year 2004-05 and 2005-06, therefore no disallowance for interest can be made under section 14A of the Act in the year under consideration following the Rule of consistency. As far as disallowance for administrative expenses, the assessee itself has made suo-moto disallowance following the method of disallowance adopted by the Assessing Officer in assessment year 2004-05. Therefore the disallowance made by the Assessing Officer following the rule 8D is rejected. The finding of the Ld. CIT(A) on the issue in dispute are set ....
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....owed his ground in favour of the assessee observing as under: "Ground 60 Addition of consultancy service charges I have perused the nature of the consultancy service charges and understand that the case pertain to the revenue recognition principles being followed by the appellant company from year to year. As per the revenue recognition policies of the appellant company, it recognises the income only after the approval is received from the Quality Assurance department. This principle cannot be challenged saying that the books of accounts are maintained using mercantile system. Accordingly, the above addition cannot be said to be permissible for computing book profits under section 115JB of the Act. Accordingly, the above ground no. 60 is allowed. (relief allowed for 115JB Rs. 36.17 lakh)" 105.1 Accordingly this ground, being infructuous, same is dismissed. 106. The ground nos. 24 to 28 of the appeal relate to interest income and miscellaneous income. The identical grounds have been decided by us in earlier assessment years 2002-03 to 2005-06, therefore following our finding in those assessment years, the grounds no. 24 to 28 of the....
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..... However, to avoid unwarranted disallowance on this account, as a matter of abundant precaution it is assumed that the assessee has claim depreciation on the impugned assets at the rate of 15%. Accordingly, excess claim of depreciation at the rate of 10% (i.e.15% -5% = 10%) stands disallowed. The disallowance on this account works out to Rs. 53,43,70,410/-." 107.1 Before us the learned counsel for the assessee submitted that Ld. CIT(A) has not decided this issue of the classification of the asset under plant and machinery. 107.2 We have heard rival submission of the parties on the issue in dispute and perused relevant material on record. The Ld. CIT(A) has referred to the submission of the assessee on the issue in dispute, which are reproduced as under: "The learned Addl. Commissioner erred in not considering the submissions made by the appellant company in its correct perspective. The appellant is a Public Sector Enterprise wholly owned by Government of India, engaged in the business of generation of electricity. In the process of generating nuclear power, the appellant company requires Reactor building, Service Building, Pump house building & Turbine buil....
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.... 2. the constructing of such structures. Turbine Building The Turbine Building is an enclosed metal and girder structure that houses: (1) Turbine, generator and the support lubrication and cooling systems, (2) Condensate-feedwater systems supply water to the steam generators (3) Circulating water to and from condenser, (4) Electrical switchgear rooms that supply electrical power to plant components, (5) Demineralised water system that supplies clean water for cooling plant components, and (6) Control Room outside the building are the transformers that either supply power to the plant for start-up or that supply power to the grid for distribution In view of the above, the appellant company submitted that as such nomenclature does not affect the nature of the assets. The essence of classification of assets should be based on the use of the assets. One type of assets may be considered as the 'Building' for an entity whereas the same assets can be considered as 'Plant' for another entity. The appellant submitted that for determining the nature of an asset one needs to examine on th....
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....uch buildings. In the instant case, the functions of the asset are akin to a power generating plant. Also the asset cannot be used as a building for multi-purpose utilities. The asset Is in the existence with a limited purpose of generating electricity. The asset may have nomenclature of a building but serves the commercial function of a plant. The appellant also submitted that in the earlier year and subsequent assessment years, the nuclear reactors were treated as machinery by the assessing officer and no disallowance was made by the AO in respect of the same. In view of the above discussion, I hold that the asset is in the nature of plant. CAPITALIZATION OF TAPS-4 The AO had held that the appellant had not provided any data or material when the addition on as count of factory building is made to class of plant and machinery. Therefore it was taken of having put into use for a period less than 182 days. Consequently the appellant company was granted deprecation @ 5% (50% of 10% ie. rate of deprecation applicable to building). In this regard, the appellant submitted that the date of commercial operation of TAPS -4 was ....
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....750.81 lakhs, however in the revised return of income it claimed depreciation at Rs. 159,643.98 lakhs. The reason for difference was explained as misclassification of the asset and arithmetical error while computing the written down value. Before the Ld. CIT(A) the assessee filed 'engineer's certificate' for valuation of plant and machinery eligible for depreciation at the rate of the 80% and 100 % (hundred percentile). It was submitted by the assessee that the above errors were identified during the tax audit for assessment year 2008-09. A copy of the relevant annexure to tax audit report for assessment year 2008-09 was also submitted during the course of the appeal before ld CIT(A). It was further submitted that assessee obtained supplementary tax audit report from the tax auditor in which revised claim of the depreciation was certified by the auditor and reason for the claim of additional depreciation were stated. In view of the additional supplementary tax audit report, the Ld. CIT(A) directed the Assessing Officer to verify and allow the ground of the appeal. In our opinion, there is no error in the finding of the Ld. CIT(A) on the issue in dispute and accordingly we uphold th....
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.... annual net sale of electrical energy and annual capital outlay . The relevant finding of Ld. CIT(A) qua the issue in dispute is reproduced as under: "ALLOCATION OF PROPORTIONATE ADMINISTRATIVE EXPENSES TO THE UNITS CLAIMING DEDUCTION UNDER SECTION 80lA OF THE ACT The appellant company submitted that the A while passing the assessment order, has apportioned proportionate administrative and other expenses debited to Profit & Loss account to units claiming deduction under section 80lA of the Act of Rs. 11,557.04 lakhs stating that administrative expenses debited to the aforesaid units is not proportionate to and on much lower side as compared to the administrative & other expenses shown in Profit & loss account. In this connection, the appellant company submitted that each unit of NPCIL is a profit center. All the expenses relating to each unit is captured at the respective unit and no unrelated expenditure is debited to any site/ unit. The identifiable Head office expenses are transferred to the respective locations. Unidentifiable head office expenses are allocated to Power stations and projects in the ratio of aggregate of annual net sale of ele....
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.... 3 (three) of the appeal of the Revenue are general in nature and therefore same are dismissed as infructuous. 114. In the result, the appeals are allowed /dismissed as indicated in below table: S. No. ITA No. AY Assessee/ Revenue Result 1 202/Mum/2004 98-99 Assessee Allowed partly for statistical purpose 2 114/Mum/2004 99-2000 Assessee Allowed partly for statistical purpose 3 4413/Mum/2004 2000-01 Assessee Allowed partly for statistical purpose 4 3867/Mum/2008 2001-02 Assessee Allowed partly for statistical purpose 5 4743/Mum/2007 2002-03 Assessee Allowed partly for statistical purpose 6 4744/Mum/2007 2003-04 Assessee Allowed partly for statistical purpose 7 4745/Mum/2007 2004-05 Assessee Allowed partly for statistical purpose 8 4603/Mum/2007 2004-05 Revenue Dismissed. 9 2452/Mum/2011 2005-06 Assessee Allowed partly for statistical purpose 10 625/Mum/2009 2005-06 Revenue Allowed partly for statistical purpose 11 3553/Mum/2011 2006-07 Assessee Allowed partly for statistical purpose 12 3501/Mum/20....
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....n the area mentioned in item (b) of column (3). Cases or Classes of cases 5 (a) In the case of companies registered under Companies Act, 1956, with the name beginning with any of the alphabet A or B or C or D or E or For G or H. (b) in the case of an individual, who is a managing director or a director or a manager or a secretary in the Companies mentioned in item (a) above. (c) public financial institutions as defined under section 4A of the Companies Act, 1956 with the name beginning with any of the alphabet A or B or C or D or E or F or G or H or 1. 000008 Document 2 2. AddLUL.CIT (a) Areas within Range-3(2) the limits of Ward Municipal Corporation of Greater Mumbai of and bearing the a) Persons referred to in Item (a) of Column No. (5), being Companies registered under the Companies Act, 1956 and having registered Office in the area mentioned item (a) of column (3). (a) In the case of companies registered under Companies Act, 1956, with the name beginning with any of the alphabet I or J or K or Lor Mor N or Oor Postal ....