TaxTMI 
TaxTMI 
2024 (2) TMI 920
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....ief facts of the case is that the assessee is a company engaged in the business of distribution of electricity. The assessee company filed its e-Return of Income on 26.10.2017 declaring Nil income after setting off unabsorbed depreciation loss to the extent of Rs. 36,26,50,987/, but a book profit of Rs. 136,80,76,197/-. The case was selected for scrutiny and assessment order u/s. 143(3) was passed on 30.12.2019 by making additions and disallowances in the assessment order as follows: 1 Addition on account of Govt. Grant Rs. 60,71,40,000/- 2 Consumer Contribution towards cost of capital asset Rs. 88,88,08,000/- 3 Disallowance of additional depreciation Rs. 49,52,66,000/- 4 Capitalization of interest on Capital work in progress Rs. 16,37,41,000/- 2.1. Similarly additions made on account of computation of book profit u/s. 115JB namely addition on account of [i] Govt. Grant of Rs. 60,71,40,000/- and [ii] Consumer Contribution towards cost of capital asset Rs. 88,88,08,000/-. Thus the Assessing Officer determined the total income under normal computation at Rs. 251,76,05,987/- and book profits u/s. 115JB at Rs. 286,40,24,194/-. 3. Aggrieved against the assessment order, th....
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....harging of interest under section 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 6.0 The appellant craves leave to add to, alter, delete or modify any of the ground of appeal either before or at the time of hearing of this appeal. 3.2. At the out set, the Ld. Counsel Sri. Mehul K. Patel appearing for the assessee submitted that the issues in the appeals are mostly covered by the Co-ordinate Bench decisions on identical issues in assessee's own case in ITA No. 2858/Ahd/2015 and Ors. dated 22.07.2022 relating to the Assessment Years 2010-11 to 2012-13 and ITA No. 553 to 555/Ahd/2020 and Ors. dated 17.02.2023 relating to the Assessment Years 2013-14 to 2015-16. Ld CIT DR Shri Kamlesh Makwana appearing for the Revenue also confirmed the same. 4. Ground no. 1: Confirming the addition of 15% Capital Grants as against 10% offered by the assessee. The Ld. Assessing Officer made addition of Rs. 60,71,40,000/- on account of Capital Grants and Subsidies and Consumers' Contribution of Rs. 88,88,08,000/- on the ground that the assessee should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the assessee. The Assessin....
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....e meted out to revenue grants and capital grants and held that revenue grants are to be taxed in entirety in the year of receipt and capital grant towards assets are to be reduced from "actual cost" of assets as per Explanation 10 below section 43(1). In the case of Dakshin Gujarat Vij Co. Ltd., after noting that grants were only towards cost of capital assets, CIT(A) had held that such grants ought to have been reduced from the cost of capital assets and by not doing so, extra depreciation @ 15% of grants had been claimed. Since 10% of the grants had already been offered as income by the assessee, in the decision in the case of Dakshin Gujarat Vij Co. Ltd., CIT(A) had directed addition to be made after reducing income already offered from 15% of the grants. The AO has made addition in the present case as per this appellate order. Hence following the same, the addition made by the AO is upheld and this ground of appeal is dismissed." However, at the vary onset of the proceeding, the Learned AR has taken us to the order passed by the Co-ordinate Bench in ITA No. 704/Ahd/2012 for A.Y. 2008-09 in assessee's own case where we find that the issue has been set aside to the file of the ....
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....nt to offset the cost of the capital assets purchased by the company. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT Vs. P.J. Chemicals Ltd., 121 CTR 201, wherein the decision of the Gujarat High Court in the case of CIT Grace Paper Industries P. Ltd., 83 CTR 1, which was affirmed by the Hon'ble Supreme Court by observing that the amount of subsidies and grants received by the assessee cannot be reduced from the cost of assets. It was further submitted that the subsidy received under scheme cannot be reduced from the actual cost of the assets by applying the provisions of section 43(1) of the Income Tax Act. The AO did not accept the submission of the assessee and held that the submission of the assessee that the grant was not capital in nature, is factually incorrect, and from the resolution, it was clear that the grant received from the State Government was in the nature of capital grant and it should have been reduced from the capital assets. The decisions quoted by the assessee are not applicable after insertion of Explanation 10 of section 43(1) of the Act, as they pertained to earlier years prior to insertion of Explanation 10 of section 4....
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....he rate of depreciation on land was zero percent, building was 5% and the plant & machinery was 15%, and hence, the disallowance at the uniform rate at 15% is not justified. 19. On the other hand, the DR argued and submitted that the order of the CIT(A) was correct, and he after appreciating the entire facts had reduced the disallowance from Rs. 30.97 crores to Rs. 18.93 crores. 20. We find that in the instant case, the CIT(A) held that excess depreciation claimed on account of capital grant comes to Rs. 18.93 crores being 15% of Rs. 176,62,04,718/-, i.e. Rs. 26,49,30,708/- minus Rs. 17,20,37,655/-, which amounts to Rs. 9,28,93,053/-, and 15% of Rs. 6427.94 lakhs amounting to Rs. 964.191 lakh. The submissions of the assessee before us is that the uniform rate of 15% adopted by the CIT(A) is not justified. As per provisions of section 43(1) of the Act, the capital grant should be reduced from the cost/WDV of the relevant asset, and thereafter the depreciation is to be calculated. Thus, the capital grant receipt in respect of asset, on which depreciation is allowable at the rate different from 15% should be worked out as per the applicable rate. The DR could not point out any mis....
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....he Ld. Assessing Officer and pass orders in accordance with law by giving proper opportunity to the assessee. 5.3. Thus this ground no.1 raised by the assessee is allowed for statistical purposes. 6. Ground no. 2: The assessing officer disallowed the claim of additional depreciation Rs..49,52,66,000/= on the ground that the assessee failed to submit the details and establish the genuineness of the expenditure. On further appeal before Ld. CIT(A), he held that that the assessee has given sample copies of bills before the AO, however, it is seen that the assessee is in the business of distribution of power, which is covered under section 32(1)(iia) of the Act. There are certain other conditions, which are required to be satisfied for claiming additional depreciation. Additional depreciation is not allowable on the items which are used for repairs and replacement, used machinery within or outside India. The assessee failed to file the required details as per section 32(1)(iia) of the Act, therefore the assessee is not entitled for the claim of additional depreciation. 6.1. Ld. counsel for the assessee submitted before us complete details were filed by the assessee before the Ld AO,....
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....ibution companies. This obviously must not be the intention of Legislature to provide benefit only to those States and deprive the other States from the benefits. In view of the above, we are entitled to claim additional depreciation.'' 6.2. Thus, the Ld Counsel pleaded that the assessee is entitled for additional depreciation on post amendment to section 32(1)(iia) of the Act. 6.3. Per contra Ld CIT DR appearing for the Revenue submitted as the earlier ground was set aside to the file of AO for verification. This ground may also be set aside to the file of Jurisdictional Assessing Officer for verifying the claim of additional depreciation. 7. We have given our thoughtful consideration and perused the materials available and record. Though Ld CIT(A) held that the assessee has not produced the details of additional depreciation before the AO, it is seen from the submissions made by the assessee vide its letters dated 04-12-2019 and 10-12-2019 [which are placed at Page No.2 & 17 of the Paper Book], detailed submissions on additional depreciation with Annexures were submitted by the assessee. But the lower authorities failed to consider the amended provisions of law and denied th....
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....ion in setting aside the matter back to the A.O. for fresh verification. 9. We have heard the rival submissions and perused the relevant material and the judgment of the Odisha High Court in the case of Odisha Power Generation Corporation Ltd. (cited supra). In view of the same, we find it proper to direct the A.O. to consider the issue afresh upon examining the same in regard to the heads of income after considering the facts of the case. 10. Treating miscellaneous receipts of Rs. 19,75,52,000/- as "income from other sources" instead of "business income". The assessee claimed that the above income has been arisen in the ordinary course of business and is exclusively attributable to the activities of the business. Therefore the above incidental income received from such activities should be considered as "business income" only. It is for this reason in the computation of total income under the head "Income from other sources", the assessee claimed Nil income. The assessee further drawn our attention to the balance sheet more particularly Schedule-19, Interest on staff loan and advances, Miscellaneous receipts, etc were shown. The above receipts of staff quarter charges, guest hou....
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....ce with law. 12. Treating receipt of Rs. 8,08,000/- sale of Scrapes as "income from other sources" instead of "business income". The assessee submitted that the company having fixed assets of Rs. 4579.13 crores as of 31-03-2016 which covered more than 1,36,000 Transformer centers, more than 50,000 KMs High Tension Lines and 49,849 KMs Low Tension Line network. For smooth functioning of business, the assessee company is continuously doing repair and maintenance of such assets. During the maintenance of such assets, scrap materials are credited to Stores and subsequently which are being sold through a Public Sector Undertaking, namely M/s. Metal Scrap Trade Corporation Ltd [MSTC], which are shown as income from sale of Scrap and the same is "business income" and not to be treated as "income from other sources". For the earlier assessment years the Ld AO has not made such disallowance, which is on the same set of facts, therefore requested to treat the sale of scrapes as 'business income' only. Per contra Ld CIT DR supported the orders passed by the lower authorities and requested to sustain the same. 12.1. We have given our thoughtful consideration and perused the materials availab....
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....ssessment Year 2017-18 in Paragraph 7 of this order. As similar disallowance is involved herein, this issue is set aside to the Ld. AO for fresh consideration. 20. Ground No. 3[a] the assessing officer treated interest income Rs. 73,51,000/- received on the loans and advances to staff loans as "income from other sources" instead of "business income". This identical ground has already been considered by us in ITA No. 330/Ahd/2023 for Assessment Year 2017-18 in Paragraph 9 of this order. As similar issue is being involved herein, this issue is set aside to the Ld. Assessing Officer for fresh consideration. (b) Treating miscellaneous receipts of Rs. 9,70,56,282/- as "income from other sources" instead of "business income". The assessee claimed that the above income has been arisen in the ordinary course of business and is exclusively attributable to the activities of the business. This identical ground has already been considered by us in ITA No. 330/Ahd/2023 for Assessment Year 2017-18 in Paragraph 11.2 of this order. As similar issue is being involved herein, this issue is set aside to the Ld. Assessing Officer for fresh consideration. [c] Treating receipt of Rs. 66,51,000/- sale....
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....as well as on the basis of the position of the debt and equity of the company for the respective year. It was explained that the total expenses capitalized during the year amounted to Rs.6899.28 lakhs as under:- Particulars Amt Rs. Lakhs Remarks Employee Benefits 5374.51 Note No. 30 Finance Cost 572.50 Note No. 31 Other Expenses 952.87 Note No. 32 Total 6899.88 25.1. Thus the assessee submitted that the amount of Rs. 6899.88 lakhs capitalized is in accordance with capitalization of directly attributable costs to bring the Property, Plant and Equipment into location and condition necessary for it to be capable of operating in manner intended by the management, as indicated in Notes to Accounts at Note No.1(c)16(b) at Page No. 34 & 35 of Annual Accounts. Accordingly, the assessee company is charging 15% towards Supervision Charges on capital assets and allocating between Employee and General Administration overheads and also capitalizing interest cost as and when applicable. In view of the above facts, the assessee claimed that no further disallowances out of the interest expenditure shown in the Profit & Loss Account are warranted. 25.2. However the Ld. AO ca....