TaxTMI 
TaxTMI 
2023 (8) TMI 1597
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.... 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." 4. "On the facts and in the circumstances of the case and in law....
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....inance 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 finance under the head "cost of raising finance" as per the profit & loss account. 31. In reply to show cause notice to the assessee, the asse....
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....n 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 its order dated 8.5.2015 cited supra has held as under: "6. We have heard the rival submissions, perused the material available on record and gone through the orders of the autho....
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....pital 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 would squarely apply. Accordingly, it is held that the AO was not justified in making the disallowance of Rs. 45,24,582/-, which is directed to be deleted." 6.1 The ld.CIT(A) has followed the de....
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....l 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 order passed by the Hon'ble Orissa High Court in the case of Odisha Power Generation Corporation Ltd. (supra). It appears that the Hon'ble Orissa High Court while dealing with the issue the Court was pleased to observe as follows: "12. The Assessee offered an....
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....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 allowable expenses. Therefore, the prior period expenses amounting to Rs. 408.01 lacs was disallowed and added to the total income of the assessee. 13. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee stating that assessee has not ma....
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....ounts 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 while adjudicating the issue. Hence, all the contentions of the assessee are kept open. The issue raised as per Ground No. 4 is thus set aside to the file of AO in terms of directions noted above. As a result, Ground No. 4 is allowed for statistical purposes." In the light of the decision of Co-ordinate Bench as cited a....
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....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 1283.95 lakhs and that the assessee has claimed interest expenditure of Rs 18,325.41 lakhs. The assessee has not attributed any expenditure towards earning of exempt dividend income. Therefore, by invoking the section 14A read with Rule 8D he made disallowance of Rs 197.80 crores. We find that a similar issue had come up before this Tribunal in assessee's own case in the immediately p....
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....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 other hand borrowed huge funds of Rs. 3,46,272.51 lacs on which claimed interest of Rs. 19360.59 lacs. Therefore, the AO was of the view that the assessee had diverted the borrowed funds for earning exempted income. The assessee's contention was that the investment during the year was only Rs. 102.32 lacs and rest of the investment was made in the earlier years. According to the AO, if the assessee had not made such investment either in the year unde....
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....ircumstances 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 different companies. Post restructuring; the assessment year under consideration is the first year of operation of the assessee company. On one hand, those were the facts which were relied upon by the learned CIT(A). However, on the other hand, the AO has reproduced some of the replies of the assessee through which it was claimed that the said investment was not made by the assessee company out of the borrowed funds but from the consumers, contribution and subsidiaries. There was a re....
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....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, otherwise not. On the other hand, the claim of the assessee is that there were sufficient non interest bearing reserves or surplus available. The AO is required to investigate the correctness of the claim that whether the assessee had sufficient non interest bearing fund available and in what form those were utilized by the assessee. If the assessee is in a position to demonstrate that the non-interest bearing funds have actually been invested to earn exempted income then the assessee's claim is ....
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....nditure (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 finding is required whether the investment in shares is made out of own funds or out of borrowed funds. A nexus is required to be established between the investments and the borrowings. In section 14A of the Act expenditure incurred in relation to exempted income is to be disallowed only if the Assessing Officer is satisfied with the expenditure claimed by the assessee pertaining to the said exempt income. Rather, the Court was very specific that in case, no such exercise was carried out by the Assessing Officer ....
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....02-2003 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 relevant and germane. For this purpose and in light of our observations made earlier in this section of the judgment, we deem it appropriate and proper to remand the proceedings back to the Assessing Officer for a fresh determination. Conclusion: 74. Our conclusions in this judgment are as follows; i) Dividend income and income from mutual funds falling within the ambit of Section 10(33) of the Income Tax Act 1961, as was applicable for Assessment Year 2002-03 is not includible in computing the total income of the assessee. Consequently, no d....
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....sing 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 distinguishing features pointed out by the Departmental Representative, facts being identical, respectfully following the precedent we restore this issue back to the file of the Assessing Officer for adjudication afresh with the same directions as given by the Tribunal in the Assessment Year 2006-07 in the above quoted order. Needless to mention that he shall allow reasonable and proper opportunity of hearing to the assessee before adjudicating the issue. Thus, this ground is allowed for statistical purpose. 11. We further observe that Rule-8D of the IT Rules came into effect from Asst. Year 2008-09 with respect to prov....
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.... 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 accordance with this following formula : A x B C A = Amount of interest, other than the amount of interest which is directly attributable to the exempt income stated in (a) above. B = The average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the relevant accounting year. C = The average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the relevant accounting year. The term 'Total Assets' means total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decr....
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....t. 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 the year under appeal. It is needless to mention that ld. Assessing Officer shall allow reasonable and sufficient opportunity of hearing to the assessee before adjudicating the same. These grounds of assessee and the Revenue are allowed for statistical purposes. 15. Now we take ground No. 3 of assessee's appeal which reads as below :- 3.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the enhancement of Book Profit computed under section 115JB of the Income Tax Act, 1961 by Rs. 61,45,72,000/- on account of disallowance made under section 14A of the Income Tax Act, 1961. 16. At the outset ld. AR submitted that this ground relates to the disallowance under section 14A of the Act due to which book profit u/s 115JB was enhanced by ld. Assessing Officer and th....
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....e 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 in assessee's own case in ITA No. 1777/Ahd/2009 & 2028/Ahd/2009 for A.Y. 2006-07. 16.3. We have further considered the order passed by the Chandigarh Bench in the case of M/s. Ashirwad Hgiene Pvt. Ltd. vs. ITO in ITA No. 72/Chd/2014 for A.Y. 2010-11 while deciding the issue in favour of the assessee the Coordinate Bench was pleased to observe as follows: "In the present case the undisputed fact is that the Net Profit shown in the profit & loss account has been arrived at after reducing the prior period expenses. As discussed above, this Net Profit, is in compliance with Schedule-VI Part-II of the Companies Act and the prescribed Accounting Standard, i.e. AS-5. No adjustment, on account of prior period expenses, is required to be made to the same. Moreover, even as per Explanation-1 to section 115JB, no adjustment on account of prior period expenses is required to be made to the net....
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....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 part of AS-12 reads as under:- 10. Presentation of Grants of the nature of Promoters, contribution 10.1 Where the government grants are of the nature of promoters' contribution, i.e., they are given with reference to the total investment in an undertaking or by way of contribution towards its total capital outlay (for example, central investment subsidy scheme) and no repayment is ordinarily expected in respect thereof, the grants are treated as capital reserve which can be neither distributed as dividend nor considered as deferred income. 17.3. The relevant Office Note needs special mention here:- Sub: Allocation of FRP Grant as Share Capital contribution to subsidiaries. At the Board Meeting held on 29.06,2009, Board approved to allocate the FRP grant of Rs. 250 crores being given by Govt. of Gujarat to GUVNL for system strengthening as Share Capital contribution from GUVNL to subsidiaries. Board further authorized MD....
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....ion: 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 order dated 22.07.2022 which is followed in ITA No. 412/Ahd/2018 wherein it was held as follows: 6. We have heard the rival contentions and perused the material on record on this ground. In the case of Malayala Manorama Co. Ltd v. CIT [2008] 169 Taxman 471 (SC), the facts were that in the profit and loss account for the relevant assessment year, the assessee had debited depreciation at the rates prescribed by the Income-tax Rules, 1962. However, the Assessing Officer was of the view that for purposes of section 115J, depreciation should have been calculated in terms of the Companies Act, 1956 and Schedule XIV thereof. Accordingly, he disallowed the assessee's claim of depreciation charged at the rates prescribed by the Income-tax Rules. The Commissioner (Appeals) as well as the Tribunal allowed the assessee's claim and directed the Assessing Officer to allow the claim of depreciation as per the Income-tax Rules for the purposes of computing the book profit under section 115....
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....nder 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 (Appeals) allowed claim of assessee holding that depreciation provided under Companies Act was minimum but there was no bar to higher depreciation being claimed by assessee and, thus, for purposes of section 115J, depreciation actually debited could be allowed. The High Court held that in view of Supreme Court decision in Apollo Tyres Ltd. v. CIT [2002] 122 Taxman 562, Commissioner (Appeals) was justified in holding that the assessee is eligible to claim higher rate of depreciation and Income Tax Act. The Delhi ITAT in the case of HAL Offshore Ltd [2019] 108 taxmann.com 390 (Delhi - Trib.) held that where depreciation provided in profit and loss account is at same rate as provided for purpose of profit and loss account being laid before Annual General Meeting (AGM), no addition could be made to assessee's income on ground that while calculating total income as per section 115JB, assessee had adopted rate of depreciation as per Income-tax Act instead of Companies Act in profit and loss ....
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....e 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 Commissioner of Income Tax vs. Gujarat Fluorochemicals Ltd [Tax Appeal No. 28 of 2019 decided on 17th June 2019] has dismissed the appeal filed by the Revenue by holding as under: "22. The third question proposed by the revenue is in context with the adjustment made on account of the disallowance under section14A in computing the book profit. In this context, the findings recorded by the ITAT are as follows: ......................................... 23. We take notice of the fact that in context with the third proposed question, the ITAT placed reliance on the following decisions: (1) CIT Vs. Alembic Ltd. (Tax Appeal No. 1249/2014) (2) CITI Vs. Gujarat State Fertilizers & ChemicalsLtd. (2013) 358 ITR 323 24. The issue is squarely covered and in our opinion, no error could be said to have been committed by the ITAT in taking the view that no addition in the book profit can be made on the basis of the calculations worked out under section 14A of the Act." 7.8. Respectfully following the above judicial precedent, the ground ....
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....made under that section by treating the interest paid (excluding interest on term loans) as being attributable to the dividend income.. 6.0 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 IT Act. 7.0 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. 8.0 The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. 10. Ground No. 1: Disallowance of guarantee fees paid to Govt. of Gujarat. This issue we have already held in this common order at Para 3 to 3.4 that the guarantee fees is held to be revenue in nature. Thus the ground raised by the Assessee is hereby allowed. 11. Ground No. 2: Addition of Rs. 47.17 crores being 15% of yearend balance of capital grant. The Ld. Counsel for the assessee submitted that this issue was remanded back to the file of the A.O. with specific direction by the Co-ordinate Bench of this Tribunal in Gujarat E....
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....dy available to the assessee company was given at page No. 7 of the assessment order totaling to the amount of Rs. 1,03,081.53 lacs out of which the assessee has taken to profit and loss account grant amounting to Rs. 12,868.89 lacs. However, the Assessing Officer has computed the disallowance at 15% of the total grant yearend balance of Rs. 1,03,081.53 lacs which worked out at Rs. 15,462.22 lacs. Accordingly, the remaining amount of Rs. 25,93,63,950/- was added back to the income of the assessee. 5. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee by referring that similar addition was upheld by his predecessor in the case of the assessee for assessment year 2009-10. 6. During the course of appellate proceedings before us, the ld. counsel has contended that similar issue arised in assessee's own case for assessment year 2008-09 and the Hon'ble ITAT Ahmedabad vide ITA No. 704/Ahd/2012 for assessment year 2008-09 has remanded the matter back to the file of Assessing Officer directing him to work out the disallowance by taking the rate of depreciation applicable on various assets financed through impugned capital g....
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....or reimbursement (by whatever name called) is not to be included in the "actual cost of asset" to the assessee. Accordingly, depreciation is to be allowed only after making necessary adjustment in "written down value"/"actual cost" of block of assets in accordance with Explanation 10 below section 43(1). In the case of Dakshin Gujarat Vij Co. Ltd. for A.Y.200607 referred to by the Assessing Officer, CIT(A) distinguished the treatment to be 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 t....
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.... Further, the grant was given to the holding company, GUVNL and then it was allocated to the assessee company, one of the subsidiary companies. The assessee was not entitled to an amount beyond a certain limit, even if it is spent large amount on purchase of fixed assets. Further, the grant was not with reference to any particular fixed assets. It was further submitted that the resolution sanctioning the grant no where indicated that the grant was meant 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....
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....tion, therefore, worked out to Rs. 9.289 crores plus Rs. 9.641 crores i.e. Rs. 18.93 crores. Thus, instead of net addition of Rs. 30,97,61,800/- made by the AO, addition of Rs. 18.93 crore was directed to be made on this count. 18. Before us, the AR of the assessee argued that uniform rate of 15% cannot be applied for making disallowance. He submitted that the grant should be apportioned according to the value of the asset given in the balance sheet. He argued that the 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% ofRs.6427.94 lakhs amounting to Rs. 964.191 lakh. The submissions of the....
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...., this issue is remitted back to the file of the Assessing Officer for fresh adjudication by giving proper opportunity to the assessee. Thus Ground No. 2 filed by the Assessee is allowed for statistical purpose. 12. Ground Nos. 3, 4 & 5 raised by the assessee are identical issues to the Ground Nos. 2, 3 & 4 raised by the Revenue, the same are also disposed of accordingly as held in Para 4 to 6.2 of this common order. 13. Ground Nos. 6, 7 & 8 are initiation of penalty proceedings u/s. 271(1)(c) and charging of interest u/s. 234B & 234C of the Act which are consequential in nature and does not require specific adjudication. 14. In the result, the appeal filed by the Assessee in ITA No. 3125/Ajhd/2015 is partly allowed. ITA No. 849/Ahd/2018 (Revenue's appeal relating to A.Y. 2014-15) 15. The Ground of appeal raised by the Revenue in ITA No. 849/Ahd/2018 is relating to A.Y. 2014-15 reads as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in by directing the AO to work out the revised disallowance u/s. 14A r.w.r. 8D by excluding the interest paid on term loan subject to verification that claim of interest was in relation to term loan....
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....the ground No. 2 filed by the Revenue is hereby dismissed. 18. Ground No. 3: Treatment of interest income/miscellaneous receipts as held by the A.O. as "income from other sources" whereas claimed by the assessee as "business income". This issue is also considered by us in this common order at Para 4 to 4.2, wherein we have set aside the issue to the file of the Ld. CIT(A) for reconsideration. Respectfully following the same, this ground is set aside to the file of Ld. CIT(A) for reconsideration and pass order in accordance with law. Thus Ground No. 3 raised by the Revenue is allowed for statistical purpose. 19. Ground No. 4: Deletion of additions while computing book profit u/s. 115JB of the Act on the following counts: (a) Prior period expenses of Rs. 722.74 lacs (b) Excess depreciation of Rs. 6222.00 lacs (c) Capital Grants and subsidies amounting to Rs. 47,17,19,100/- (d) Disallowance u/s 14A Rs. 1,26,44,689/- (e) Liquidated Damages 4980 Lacs 19.1. The Ld. CIT(A) considered the above issue and held as follows: "...My predecessor vide order dated 21.08.2015 in the case of the appellant itself in AY 2012-13 contained in Appeal No. CAB-1/301/14015 after relying upon th....
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....he addition of Liquidated Damages of Rs. 49.8 crores from the computation of book profit u/s. 115JB of the Act. The Ld. D.R. could not place any contrary view against the findings of the Ld. CIT(A), therefore we have no hesitation in deleting the above addition and this ground raised by the Revenue is hereby dismissed. 20.1. Per contra, the Ld. Counsel appearing for the assessee relied upon the Hon'ble Supreme Court Judgment in the case of Apollo Tyres Ltd. reported in 255 ITR 273 wherein it was held that once the books of accounts are certified by the Chartered Accountant, Assessing Officer cannot disturb book profit except the item specifically mentioned in Explanation to Section 115JB of the Act. 20.2. We have given our thoughtful consideration and perused the materials available on record. We find that legally valid ground raised by the assessee in deleting the addition of liquidated damages from the computation of book profit u/s. 115JB of the Act on the ground that none of the issue covered in Explanation 1 of Section 115JB(2) of the Act. Since liquidated damages is not covered in the item specified under Explanation to Section 115JB(2) of the Act, the Ld. CIT(A) is deletin....
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....d commercial operation of the power plant, the assessee paid by way of liquidated damages as per contractual obligation which is allowable expenditure u/s. 37 of the Act. 21.3. The Ld. Counsel relied upon Co-ordinate Bench decision of this Tribunal in the case of ACIT Vs. Hitachi Hi-Rel Power Electronics Limited in ITA No. 2035/Ahd/2012 dated 10-09-2015 wherein it is held as follows: "......5. We have heard the rival contentions and perused the material on record and gone through the orders of authorities below. There is no dispute with regard to the fact that the goods were required to be supplied during the normal course of business. It is not disputed by the Revenue that as per contract, in case assessee fails to deliver the goods in time, assessee was required to pay penalty on such delay. Now the question is whether assessee is entitled to get deduction of such payments made in pursuance of the contract or not. This fact is not disputed by the Assessing Officer that goods were required to be supplied by the assessee. Therefore, supply of goods is business of assessee. In a commercial contract, if assessee fails to comply with time limit, he would be liable to pay penalty to....
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....med 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 (excluding interest on term loans) as being attributable to the dividend income. 2.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the disallowance of prior period expenses amounting to 27,22,74,000/-without appreciating the fact that such expenditure was already disallowed in the Return of Income for the year under consideration. The learned Commissioner of Income Tax(Appeals) failed to appreciate that the Assessing Officer had disallowed/ added the amount of 7,22,74,000/- twice - one on account of Prior Period Expenses and other on account of Prior Period Income. Thus the additions on account of Prior Period Income have been deleted but the additions on account of Prior Period Expenses which were already disallowed have been confirmed resulting into double taxation. 3.0 The Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed additions of 247,17,19.100/- being 15% of the year-end balance of Capital Grants amounting to 31427.94 l....