TaxTMI 
TaxTMI 
2023 (8) TMI 1597
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.... of appeal raised by the Revenue reads as under: 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow the Guarantee fee after verification disregarding the applicable statutory provisions contained under S 37 of the I.T.Act which do not allow any expenditure of capital nature." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to treat the interest income/ miscellaneous receipts of Rs. 5648.08 lacs as business income instead of income from other sources without appreciating the fact that the receipt is not covered in clauses (i) to (vii) of S 28 of the Income tax Act under which such income is charged." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in by deleting the addition made on account of prior period income amounting to Rs. 0.48 lacs without accepting the fact that the assessee was following the mercantile system of accounting in which the expenses related to the prior period are not an allowable expense as the assessee company did not offer prior income." ....
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....eals) erred in deleting the addition of Rs. 42.86 lakhs made on account of disallowance of claim of cost of raising finance for specialized job as revenue expenditure. The ld.CIT(Appeals) erred in not appreciating the fact that as the result of this expenditure, the assessee had derived benefit of enduring nature, hence the expenditure is of capital nature." 3. As pointed out on behalf of the assessee, both the aforesaid grounds are covered in favour of the assessee in its own case concerning AY 2008-09 in ITA No. 704/Ahd/2012 order dated 12.06.2015. The relevant para of the order of the Tribunal is reproduced hereunder: "29. In the Revenue's appeal, the ground No. 1 of the appeal is directed against the order of the CIT(A) in deleting the addition of Rs. 50,90,96,000/- made on account of disallowance of claim of guarantee fees paid to Government of Gujarat. 30. Brief facts of the case are that the AO observed that the assessee paid guarantee fee of Rs. 5,69,35,000/- to the Govt. of Gujarat in consideration of guarantee issued by it for repayment of unsecured loan. Further, the assessee also claimed Rs. 21,61,000/- on account of cost of raising financ....
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....et. The assessee has certified that no new project was started or commissioned during the year for which above guarantee was paid, and the guarantee fees was in respect of loans for acquisition of capital assets, which were already put-to-use prior to 1.4.2007. The guarantee fees of Rs. 5,69,35,000/- is directed to be allowed as revenue expenditure, subject to verification by the AO of the certificate filed during the appellate proceedings i.e. there was no capital work-in-progress in respect of loans on which guarantee fees was paid. 33. Regarding cost of raising finance of Rs. 21.61 lakhs is concerned, the CIT(A) observed that the same was an allowable deduction and being revenue expenditure, following the decision in the case of India Cements Ltd. (supra) disallowance of Rs. 21,61,000/- was cancelled. 34. The DR supported the order of the AO, whereas, the AR of the assessee supported the order of the CIT(A) and submitted that the issue was now covered in favour of the assessee by the decision of this Tribunal in the case of assessee itself dated 8.5.2015 passed in ITA No. 1931/Ahd/2010, 2974/Ahd/2010 and 3004/Ahd/2010. 35. We find that the Tribunal in ....
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.... such payment to the GOG. In view of the totality of the circumstances, I am of the opinion that the AO was not justified in treating the payment of guarantee commission (Rs.8,39,04,550/-) as capital in nature. The addition is directed to be deleted. 6.2. I have considered the submissions of the ld.AR and the facts of the case. The jurisdictional Bench of ITAT has held in the case of Shri Rama Multi Tech vs. ACIT, 92 TTJ 568, that in determining the nature of expenditure incurred for obtaining loan, it is irrelevant to consider the purpose of loan. The amount spent on stamp duty, lawyer fees, etc. for obtaining loan secured by charge on its fixed assets is a revenue expenditure, because the transactions were entered into directly to facilitate the business of the company and payment of consultancy charges was made on ground of commercial expediency. In India Cements Ltd. vs. CIT, 60 ITR 52, the Supreme Court had also held that the expenditure incurred for securing the use of money for a certain period was revenue expenditure. In the instant case, the assessee has secured the loan by creating a charge (hypothecation of its assets). Hence the ratio of the above mentioned two cases wo....
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....ordinate Bench of this Tribunal in ITA No. 753/Ahd/2018 by common order dated 24.08.2022 in the case of Gujarat Energy Transmission Corporation Ltd. wherein it was held as follows: ".....8.1. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee with all his fairness submitted before us that the identical issue has been decided by the Coordinate Bench in assessee's own case in ITA Nos. 2885 & 2886/Ahd/2015 [cited supra]. On this aspect he has drawn our attention to Page 10 of the above order filed before us. However, by and under the order passed by the Hon'ble Orissa High Court in the case of Odisha Power Generation Corporation Ltd. vs. ACIT, Circle-2(2), Bhubaneswar & ors. in ITA Nos. 1, 2, 3 of 2015 and ITA Nos. 24 & 25 of 2009 the issue has been decided otherwise. A copy of the same has also been submitted before us by the Ld. Counsel appearing for the assessee. 8.2. On the other hand, the Ld. D.R. relied upon the order passed by the lower authorities. 9. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record and also gone through the ord....
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....ame to the file of the Assessing Officer by the Co-ordinate Bench of this Tribunal in ITA No. 753/Ahd/2018 by order dated 24.08.2022. The Ld. D.R. appearing for the Revenue has no objection in set aside the matter back to the file of the Assessing Officer for reconsideration. 5.2. After perusal of records, we find that the Co-ordinate Bench of this Tribunal held as follows: 4. We find that Coordinate Bench on the identical issue disposed of the ground by remitting the same to the file of the Ld. AO to adjudicate de novo with the following observation: "12. During the course of assessment, the Assessing Officer noticed that assessee company has shown prior period income of Rs. 130.05 lacs after adjustment of prior period expenses for Rs. 408.01 lacs. On query, the assessee has explained that all expenditure booked under this head crystallized in the hands of the company only during the year under consideration therefore same expenditure cannot be added back. The Assessing Officer has not accepted the submission of the assessee stating that assessee was following mercantile system of accounting in which the expenses related to the prior period were not an allowab....
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....er adjustments Rs. 30.75 crores'; 'other charges Rs. 79.34 lakhs'; 'depreciation under provided Rs. 7.86 crores' etc. are ostensibly vague and does not indicate the nature of claim with sufficient particularity obscure. We simultaneously note that assessee is a State Government Undertaking and its accounts are subjected to review by CAG and therefore it cannot be postulated that there was any deliberateness in not furnishing relevant details before the revenue authorities. The bonafides of the Assessee is also augmented by the facts that the Assessee has reported staggering carry forward losses in its returned income. Thus, there is no immediate tax advantage accrued to the assessee by the claim of impugned prior period expenses per se. We therefore deem it expedient to restore the issue back to the file of AO for examining the issue de novo after verifying facts as may be considered necessary and expedient in accordance with law. The AO shall bear in mind the ratio laid down by the Hon'ble Gujarat High Court in the case of Adani Enterprises Ltd. (supra) while adjudicating the issue. Needless to say, reasonable opportunity shall be provided to the assessee w....
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....der of his predecessor for the Assessment Year 2008-09 which was subsequently set aside by the ITAT for fresh adjudication. The relevant finding of the ITAT reads as under: "8. On the other hand, ld. DR supported the orders of lower authorities. 9. We have heard the rival contentions and perused the material on record. In these grounds raised by the assessee and the Revenue challenge the action of ld. CIT(A). We observe that an addition of Rs. 152.46 crores was sustained, made by ld. Assessing Officer which was sustained to Rs. 61.46 crores by ld. CIT(A) and, therefore, assessee has raised the ground against the sustained addition of Rs. 61.46 crores whereas Revenue has challenged the deletion of Rs. 91 crores out of the disallowance u/s 14A of the Act. 10. In ITA No. 1874/Ahd/2010 vide its order dated 20.6.2014 the Tribunal adjudicated the issue relating to disallowance u/s 14A and held as under :- 7. We have heard the rival submissions and perused the orders of lower authorities and materials available on record. The undisputed facts of the case are that the Assessing Officer found that the assessee has earned tax free dividend income of Rs 128....
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....the impugned addition of Rs. 18796.82 lacs was made by the AO without having any discussion in respect of the applicability of Section 14A of the IT Act. Likewise, learned CIT(A) has also not discussed the applicability of the provisions of Section 14A of IT Act, however, after considering the merits of the case, deleted the addition. With this clarification, we have examined the facts and the issue as emerged from the corresponding assessment order passed u/s. 143(3), dated 26.12.2008. It was noted by the AO that the assessee had claimed a huge amount of interest expenditure of Rs. 19360.59 lacs, as per the following bifurcation. (Rs. in lacs) Particulars Amount Interest on Term Loans 8981.35 Working Capital 8184.50 Others 677.63 Bank Charges & Guarantee Fees 19435.13 591.65 Less: Interest Capitalized 74.54 19360.59 4.1 At the same time, it was also found by the AO that the assessee had made the investment of Rs. 5,47,709.74 lacs on which dividend earned was at Rs. 508.18 lacs. The AO's objection was that on one hand the assessee has diverted the huge funds towards such investment having exempted income and on the ot....
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....idiary companies as pan of the financial restructuring plan approved by the Government of Gujarat which was integral to the demerger. This was clearly commercially expedient for the appellant company. The business itself was viable only under the plan of restructuring, which required the company to have cross-holdings in the unbundled companies of GEB. In fact, the appellant became the holding company of the generating and transmission companies. Looking to the facts and circumstances of the case, I am of the opinion that there was no diversion of borrowed funds for non-business purposes. Accordingly, the addition of Rs. 18796.82 lacs is directed to be deleted." 6. With this factual background, we have heard both the sides. Learned DR has primarily placed reliance on a decision of respected Special Bench of ITAT Mumbai in the case of ITO V/s. Daga Capital Management Pvt. Ltd., 117 ITD 169 (Mum) (SB). Learned DR has also pleaded that in one of the assessment year, i.e., in A.Y. 2007-08 learned CIT(A) had sustained the same nature of addition. From the facts of the case, we have noted that there was restructuring according to which erstwhile GEB was demerged into seven diffe....
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....of the demerged company is transferred in a demerger scheme and as a result a resulting company comes into existence. The resulting company in consideration of such transfer of an undertaking ofthe demergerd company issues shares to the share holders of the demerged company. Therefore, the responsibility of the "resulting company" was also required to be ascertained by the AO. This is the first aspect, which was not examined by the AO and the order of the Revenue Authorities are silent on this subject. 6.3 Next question is about the huge amount of interest expenditure claimed by the assessee. The AO is required to examine first the correctness of the claim. Whether the interest on term loans, bank charges and guarantee fees were in respect of the business of the assessee. Thereafter, the AO is also required to give a clear finding about the borrowings made by the assessee on which the said interest was paid. The next step is that the AO has to examine the sources of the funds which were invested for earning the dividend income. If the source of such investment is out of the interest bearing borrowings, then only the question of disallowance of interest would arise, otherwi....
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....is concerned, first of all, we have to follow a latest decision of Hon'ble Bombay High Court pronounced in the case of Godrej & Boyce Mfg. Co.Ltd. Mumbai vs. Dy.CIT in Income tax Appeal No. 626 of 2010 and Writ Petition No. 758 of 2010 order dated 12/08/2010, { now reported as 328 ITR 81(Bom) } wherein the Hon'ble High Court has upheld the constitutional validity of section 14A of the I.T. Act, 1961 and held that the Assessing Officer should determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income and/or income from mutual fund which do not form part of the total income as contemplated U/S.14A of the I.T. Act, 1961. It has also been directed that the Assessing Officer can adopt a reasonable basis for effecting the apportionment. It has also been observed by the Hon'ble Court that while making that determination, the Assessing Officer should provide a reasonable opportunity to the assessee of producing its accounts and material having a bearing on the facts and circumstances of the case. 6.1. In this judgement at the end, the Hon'ble Court has also recapitulated the conclusion and pronounced that a....
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....14A in assessment year 2002-2003. c) The decisions reported in Sridev Enterprises (supra), Munjal Sales Corporation (supra) and Radhasoami Satsang (supra) holding that there must be consistency and definiteness in the approach of the revenue would not apply to the facts of the present case, because of the material change introduced by Section 14A by way of statutory disallowance in certain cases. There, the decisions of the Tribunal in the earlier years would have no relevance in considering disallowance in assessment year 2002-2003 in the light of Section 14A of the Act. 73. For the reasons which we have indicated, we have come to the conclusion that under Section 14A(1) it is for the Assessing Officer to determine as to whether the assessee had incurred any expenditure in relation to the earning of income which does not form pan of the total income under the Act and if so to quantify the extent of the disallowance. The Assessing Officer would have to arrive at his determination after furnishing an opportunity to the assessee to produce its accounts and to place on the record all relevant material in support of the circumstances which are considered to be relevan....
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....and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; vii) The proceedings for Assessment year 2002-03 shall stand remanded back to the Assessing Officer. The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income / income from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case." 6.4 Due to the decision of the Hon'ble Bombay High Court, it is legally correct to refer this issue back to the stage of the AO to be decided de novo as per the guidelines of the Hon'ble Court. The outcome of the above discussion is that the "Additional Ground" raised by the Revenue may be treated as allowed but only for statistical purpose." 8. In the absence of any disti....
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....nditure in relation to income not includible in total income". Reading this Rule it is evident that the Rule provides for disallowance of not only direct expenditure incurred for earning the exempt income but also for disallowance of proportionate indirect expenditure. This is clearly contrary to the main objective with which S. 14A was enacted. 2.2 Broadly stated, the new Rule 8D provides as under : (i) The method prescribed in the Rule is to be applied only if the AO is not satisfied with : (a) The correctness of the claim of expenditure incurred for earning the exempt income made by the assessee or (b) The claim made by the assessee that no expenditure has been incurred for earning exempt income. (ii) The method prescribed in the Rule states that the expenditure in relation to income which does not form part of the total income shall be the aggregate of the following amounts : (a) The amount of expenditure directly relating to income which does not form part of total income. (b) In the case of interest on borrowed funds which is not directly attributable to any particular income or receipt, the amount computed in acc....
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....Total exempt income earned by assessee during the year stood at Rs. 249 crores. 13. We observe that ld. Assessing Officer has made disallowance u/s 14A of the Act without examining the facts referred above which were very crucial to reach at the final disallowance u/s 14A of the Act. There are series of judgments of the co-ordinate benches that the disallowance u/s 14A of the Act should not exceed the exempt income earned during the year and also decisions wherein the disallowance u/s 14A of the Act on account of interest expenditure are held to be incorrect if the assessee has sufficient equity and general reserve to cover the investments. 14. We are, therefore, of the view that applying the decision of the co-ordinate bench in assessee's own case in ITA No. 1874 & 1821/Ahd/2010 for Asst. Year 2007-08 is dated 20.6.2014 the matter is set aside to the file of Assessing Officer to examine the facts and figures of the case in the light of our observations made above in order to arrive at a final conclusion as to whether disallowance u/s 14A is to be made and if so, then the amount thereof which in no case should exceed the exempted income earned by assessee during t....
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....ion of capital grant of Rs. 47.17 crore (c) Addition of Rs. 5.75 crore being excess depreciation (d) Disallowance u/s. 14A 7.1. (a) Prior Period Expenses, this issue is decided in favour of the assessee in the case of Gujarat energy Transmission Corporation Ltd. in ITA No. 852/Ahd/2018 by order dated 24.08.2022 wherein it was held as follows: 16.1. The brief facts leading to the issue is this that the Ld. AO made addition of Rs. 1,24,73,000/- to the Book Profit under Section 115JB of the Act on account of prior period expenses is also added back to the book profit of the assessee. 16.2. Before the First Appellate Authority the assessee submitted that in assessee's own case for A.Y. 2012-13 the Ld. CIT(A) has deleted the addition. In that view of the matter considering the order dated 22.09.2015 passed by his predecessor, the Ld. CIT(A) hold that the said addition cannot be made to the Book Profit as this item has not been mentioned in any of the Clauses of the Explanation to Section 115JB of the Act. He, therefore, directed the Ld. AO to delete such addition. He has further relied upon the order dated 15.04.2011 passed by the Co-ordinate Bench....
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.... 7.2. The Ld. D.R. appearing for the Revenue could not contravent the above decision of this Tribunal. Thus the ground raised by the Revenue is devoid of merits and the same is rejected and addition on this account is deleted. 7.3. (b) Addition of capital grant of Rs. 47.17 crores: This issue is also decided in favour of the assessee in the case of Gujarat energy Transmission Corporation Ltd. in ITA No. 852/Ahd/2018 by order dated 24.08.2022 wherein it was held as follows: "....17.1. The assessee company has received capital grant of Rs. 2969.47 lacs which was transferred to the Reserve & Surplus account. The Id. Principal CIT was of the view that the same should have been reduced from the cost of assets and since the same has not been done, the company has claimed excess depreciation thereby offering lesser Book Profits. 17.2. We find that the ld. Principal CIT has ignored the fact that the grant in question was received in terms of the Financial Restructuring Plan from the Government and the company has accounted Government Grants in terms of the mandatory Accounting Standard (AS)-12 on "Accounting for Government Grants" prescribed by the ICAI. The relevant ....
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....contribution to GETCO directly (without routing through GUVNL). Thus, GETCO is already having Equity Share Capital contribution to the tune of Rs. 238.20 crores in addition to consumer's contribution of Rs. 87 crores whereas in case of GSECL whose equity requirement is substantially higher than that of GETCO, they have been given only Rs. 60.77 crores as Equity Share Capital contribution from GUVNL. Considering the above position, it is proposed to allocate entire FRP grant of Rs. 250 crores to GSECL as Equity Share Capital contribution from GUVNL for their projects. 17.4. Considering the accounting treatment in the light of the Accounting Standard-12, we do not find any error on facts or in law. Therefore, to this extent the findings of the Id. Principal CIT are reversed. 7.4. Respectfully following the same, this ground of appeal raised by the Revenue is hereby dismissed and the addition is deleted. 7.5. Addition of Rs. 5.75 crores being excess depreciation: The Ld. Counsel submitted that this issue of excess depreciation is decided in favour of the assessee in the case of Kansara Popatlal Tribhuvan Metal Pvt. Ltd. vs. PCIT in ITA No. 1057/Ahd/2015 by ....
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.... decide to claim higher depreciation on basis of a bona fide technological evaluation and proper disclosure is to be made by way of a note forming part of annual accounts. The Tribunal further held that, in instant case, proper disclosure was made by way of a note to annual statement of accounts and rates claimed on basis of income-tax records were based on bona fide information of Board of Directors as contained in aforesaid minutes of meeting of Board of Directors. In appeal, the High Court held that the Tribunal was right in holding that depreciation worked out by assessee on basis of income- tax records and debited to profit and loss account was not violative of provisions of Companies Act and ITAT has not erred in cancelling order passed by Commissioner under section 263 of the Act. Again, in the case of CIT Ludhiana v. Sona Woollen Mills (P.) Ltd. 2007] 160 Taxman 22 (Punjab & Haryana), assessee claimed depreciation as per provisions of income tax Act for computing quantum of income under section 115J. The Assessing Officer rejected claim of assessee on ground that depreciation for purposes of section 115J was permissible as per Schedule XIV of Companies Act. The Commissioner....
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....JB of the Act, 1961 also added addition made under Section 14A of the Act, 1961 to the book profit. 5 The assessee being aggrieved by the addition made by the Assessing Officer under Section 14A while computing book profit of the assessee under Section 115JB of the Act, 1961 preferred an appeal before the CIT(A). The CIT(A), however, deleted addition made in the book profit on the ground that no addition could have been made in view of the decision of this Court in the case of Alembic Ltd (Tax Appeal No. 1249 of 2014) and the provisions of sub-sections (2) and (3) of Section 14A cannot be made applicable to clause (f) of Explanation to Section 115JB of the Act, 1961. 6 The Revenue, therefore, went in appeal before the Tribunal and the Tribunal relying upon the decision of the Special Bench of the ITAT in the case of ACIT vs. Vineet Investment vide 165 ITD 27 (Delhi) and the decision in Alembic Ltd upheld the order passed by the CIT(A). 7 The issue as to whether the addition made under Section 14A of the Act, 1961 while computing book profit under Section 115JB of the Act, 1961 is no more res integra. Accordingly, this Court in the case of Principal Commis....
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....ady taxed as income in earlier year. The Commissioner of Income Tax (Appeals) has not considered the provisions of section 43(1) of the IT Act and has wrongly considered the grant as being received for meeting the cost of Fixed Assets. 3.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the action of Assessing Officer in treating the interest income amounting to 456,05,000/- as Income from Other Sources as against the Business Income and thereby disallowing the claim of set off of business losses of earlier years against the said income. 4.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the disallowance of prior period expenses amounting to 248,000/- without appreciating the fact that such expenditure crystallized during the year and that the same has never been claimed in earlier years. 5.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the invoking of provisions of section 14A of the IT Act. The learned Commissioner (Appeals) has restricted the disallowances made under that section by treating the interest paid (excl....
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....istance in the form of Government grants and the benefit from the same is accrued to the assessee for over a long period of time therefore the amount is written back every year @ 11.75% of the yearend balance and the same was shown as income as per the accounting policy of the company. It was further submitted that up to financial year 2011-12 the assessee company has written back such amount as income @ 10% of the yearend balance. The Assessing Officer has not accepted the submission of the assessee and stated that the subsidy grant received from the state government was in the nature of capital grant and it should have been reduced from the capital asset as per explanation 10 of section 43(1) of the Act. The Assessing Officer has further stated that the government of Gujarat provide capital grant to GUVNL and GUVNL further passes the grant to its subsidiary i.e. assessee company which was involved in transmission of power and stated that in the case of M/s. Dakshin Gujarat Vij Co. Ltd. the issue has been confirmed by the ld. CIT(A) @ 15%. grant to offer for the P & L A/c. out of every yearend balance. The detailed break-up of the balance government grant/subsidy available to the ....
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....nsumers' Contribution on the ground that the appellant should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the appellant. 13. The Learned AO finalized the issue by making an addition of Rs. 24,17,88,400/- which was, in turn, confirmed by the Learned CIT(A) and added to the total income of the assessee. While confirming the addition, the Learned CIT(A) observed as follows: "6.3 I have considered the submissions. It has been accepted by the appellant that the grants were for capital purpose and for capital projects specified by the Government. In Schedule-3 of the printed balance sheet as on 31.3.2009, it is clearly mentioned that grants were towards cost of capital assets. Appellant's contention that the grants were not actually for meeting cost of assets is therefore not at all tenable. After insertion of Explanation 10 below section 43(1) by the Finance (No.2) Act, 1998 w.e.f. 1.4.1999, decisions relied upon by the appellant in the case of P. 3. Chemicals etc. are no longer applicable and cost of assets met directly or indirectly by the Central Government or State Government in the for....
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....The brief facts of the case are that on verification of subsidies and grants, the AO observed that the assessee has shown deferred government grants, subsidies, contribution at Rs. 7305.70 lakhs as on 1.4.2007 and the assessee had shown Rs. 15941.67 lakhs at the end of the year i.e. as on 31.3.2008. On show cause by the AO to explain the treatment in accounts of the subsidy, grants the assessee stated that during the year capital grant received from Government of Gujarat and other. The assessee submitted that in order to improve various functions associated with the generation, transmission and distribution of electricity, and also because the PSUs connected with power section were making consistent losses, the Government decided to introduce reforms in the direction of State PSUs. Accordingly, under the provision of Gujarat Electricity Industrial (Reorgnisation & Regulation) Act, 2000, the erstwhile GEB was split into seven companies, for the purpose of financial restructuring plan, and the approval was accorded to provide some financial/capital support to GUVNL. The grant was given in terms of the power reforms for the overall development of the power sector. Such grant was not g....
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....n the opening balance of grants ofRs.73,05,70,492/-, and the grants received during the year was Rs. 103,56,34,2267-, aggregating to Rs. 176,62,04,718/-. As these grants were towards cost of capital assets, 15% of the same should have been reduced from the depreciation claimed on account of making adjustment in the 'actual cost' of assts as per Explanation 10 below section 43(1). Since the assessee has already offered for tax, 10% of the opening balance of grants plus grants received during the year under these three heads of Schedule-3 grants, such amount offered for tax was to be reduced from the excess depreciation to be disallowed at the rate of 15% of Rs. 176,62,04,718/- i.e. Rs. 26,49,30,708/-. The net disallowance on this count worked out Rs. 26,49,30,7087- minus Rs. 17,20,37,655/-, the amount already offered for taxation i.e. Rs. 9,28,93,053/-. Since no portion of grant of Rs. 6427.94 lakhs being capital grant for capital support appearing in Schedule-2 of the balance sheet as on 31.3.2008 was offered as income nor it was reduced from the cost of assets, 15% of the same i.e. Rs. 964.191 lakh needed to be disallowed as excess depreciation claimed in respect of the sa....
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....cation of the same and to pass order upon verification of the proportionate amount of grant relating to different assets and upon applying the actual date of depreciation relates to those assets. Hence, this ground of appeal preferred by the assessee is allowed for statistical purposes." After considering the above cited decisions of Co-ordinate Benches of the ITAT in the case of the assessee itself we restore this issue to the file of Assessing Officer for re-adjudication as directed above after verification of the proportionate amount of grant relating to different assets and upon applying the actual rate of depreciation relates to those assets, therefore, this ground of appeal is allowed for statistical purposes. " 7.1. Relying upon the observation and the decision taken by the Coordinate Bench and in order of consistency, we find it fit and proper to remand the issue to the file of the Ld. AO for re-adjudication of the same and to pass orders upon verification of the proportionate amount of grant relating to different assets and upon applying the actual rate of depreciation relates to those assets and to pass orders accordingly. This ground of appeal preferred....
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....profit: Prior period expenses of Rs. 722.74 lacs Excess depreciation of Rs. 6222.00 lacs Capital Grants and subsidies amounting to Rs. 47,17,19,100/- Disallowance u/s 14A Rs. 1,26,44,689/- Liquidated Damages 4980 Lacs 5. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the fact that the issue of liquidated damages, in the case of assessee itself is decided in four of Revenue in the A.Y. 201314 and earlier years. 6. The appellant craves leave to add to, amend or alter the above grounds as may be deemed 16. Ground No. 1: Disallowance u/s. 14A read with Rule 8D. This issue is already set aside to the file of the Assessing Officer for fresh consideration vide Para 6 to 6.2 of this common order for the earlier Assessment Year 2012-13. For the present Assessment Year 2014-15 also, the issue of disallowance u/s. 14A r.w. Rule 8D is set aside to the file of the Assessing officer for fresh consideration, however by giving adequate opportunity to the assessee. Thus Ground No. 1 raised by the Revenue is partly allowed. 17. Ground No. 2: Guarantee Fees. This issue is also considere....
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.... u/s 115JB and accordingly, the AO is directed to delete the same." 20. (a) We have considered Prior Period Expenses in Para 7.1 & 7.2 of this common order thereby deleted the addition. Therefore this ground is devoid of merit and hereby dismissed. 20. (b) We have considered excess depreciation in Para 7.5 & 7.6 of this common order, wherein we deleted the adjustments made by the Assessing officer. Respectfully following the same, This ground raised by the Revenue is hereby dismissed. 20. (c) Capital Grant and Subsidies: This issue is also considered by us in Para 7.3 & 7.4 of this common order. Respectfully following the same, this ground of appeal raised by the Revenue is hereby dismissed. 20. (d) Disallowance u/s. 14A r.w. Rule 8D: The addition made on this account was deleted by us vide Para 7.7 & 7.8 of this common order, respectfully following the Jurisdictional High Court Judgment in assessee's own case for the Assessment Year 2010-11. Therefore the adjustment made on this account is hereby dismissed and the ground raised by the Revenue is hereby dismissed. 20. (e) Liquidated Damages: The Ld. CIT(A) held that disallowance of Liquidated Damages is not covered i....
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....tedly, the AO has not dubted genuineness of the expenses incurred on account of liquidated damages and he has disallowed the same only on account of having been incurred for breach of law. On proper appreciation of factual position, I find that in the terms of Purchase Power Agreement (PPA) with Gujarat Urja Vikas Nigam Ltd. (GUVNL) the scheduled date for commercial operation of Ukai Unit No. 6 was not achieved and undoubtedly, the operation started only on 8th June, 2013. Accordingly, As per Clause 4.7 of PPA, the appellant was liable for liquidated damages for the delay. Undisputedly, the liquidated damages had been paid to GUVNL for violation of terms and conditions of the above mentioned contract. Thus, it emerges that the liquidated damages were incurred for breach of contractual obligations being a commercial transaction and not for breach of any law. Hence, I hold that the provisions of Explanation below Section 37(1) are not attracted in the case of the appellant. Therefore, the disallowance made by the AO on this account is directed to be deleted." 21.1. The Ld. D.R. appearing for the Revenue could not able to contravent the above observations of the Ld. CIT(A) on bring....
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....n and perused the materials available on record. It is seen that the liquidated damages of Rs. 49.8 crores were paid by the assessee for breach of contractual obligations in late commencement of power production by the assessee. The Ld. CIT(A) has considered the Purchase Power Agreement (PPA) with Gujarat Urja Vikas Nigam Ltd. (GUVNL) that the scheduled date for commercial operation of Ukai Unit No. 6 was not achieved, but whereas the commercial operation started only on 8th June, 2013. As per the contractual obligation under Clause 4.7 of PPA, the assessee was liable to pay liquidated damages for the delay. This liquidated damages is neither violation of any provisions of law or any Act nor prohibited under the law. As per the contractual obligation entered between the parties, this liquidated damages was paid by the assessee, which in our considered opinion, the provisions of Explanation to Section 37(1) are not attracted and the addition made on this account is liable to be deleted. Thus the ground raised by the Revenue is devoid of merit and the same is hereby rejected. 23. In the result, the appeal filed by the Revenue in ITA No. 849/Ahd/2018 is partly allowed. ITA No. 7....
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....years against the said income. 5.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has dismissed the ground relating to the initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. 6.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the charging of interest under section 234B and 234C of the Income Tax Act, 1961. 25. Ground No. 1: Disallowance u/s. 14A read with Rule 8D. This issue is already set aside to the file of the Assessing Officer for fresh consideration vide Para 6 to 6.2 of this common order for the earlier Assessment Year 2012-13. For the present Assessment Year 2014-15 also, the issue of disallowance u/s. 14A r.w. Rule 8D is set aside to the file of the Assessing officer for fresh consideration, however by giving adequate opportunity to the assessee. Thus Ground No. 1 raised by the Assessee is partly allowed. 26. Ground No. 2: Though the assessee claimed that the Prior Period Expenses amounting to Rs. 27.22 crores was disallowed by the assessee itself in the Return of Income. However this issue was set aside to the file of the Assessing Officer i....