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TaxTMI 
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2025 (9) TMI 1368
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.... charges recovered on capital goods of Rs. 13,38,780/- are capital receipts and same shall not be reduced from the cost of assets for depreciation." 3. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing expenditure on jigs and fixture amount Rs. 16,91,36,986/-." 4. The appellant therefore, prayed that the order of the CIT(A) be set aside and that of the Assessing Officer be restored". 5. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary"." Assessee's appeal are as follows: ". On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not allowing deduction in respect of fines and penalties amounting to Rs 34,100/- 2 On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not allowing deduction in respect of proportionate premium on leasehold land written off amounting to Rs. 46,70,725/- 3. On the facts and in the circumstances of the case....
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....exempt income during the relevant previous year. (e) Without prejudice to the above grounds of appeal, the appellant prays that even if the disallowance is to be made under section 14A of the Act, the same ought not to be computed on those investments which are capable of earning taxable income. 8. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in making an addition of Rs. 28,13,755/- under section 92CA(3) of the Act in respect of the international transaction of export of machinery and tools. The appellant hereby reserves the right to add, to alter or amplify the above grounds of appeal." 2. The ld. AR brought to our notice that the assessee has raised following additional grounds "1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in taxing the entire export incentives amounting to Rs. 101,68,11,191 credited to Profit and Loss Account. 2. On the facts and in the circumstances of the case and in law, the appellant su....
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.... 6. Ld. Sr. Counsel submitted that Ground no. 1 raised by revenue has been considered by this Tribunal on identical facts and circumstances for A.Y. 2004-05 and 2005-06 vide order dated 17.02.2025. 6.1 Both the sides admitted that there is no change in the facts and circumstances. Reliance is placed on the following observation of this Tribunal for A.Y. 2005-06 wherein the issue has been considered as under: "Ground No. 3 16. Ground No.3 raised by the Revenue, which pertains to allowability on dies and moulds amounting to of expenditure INR.24,79,56,477/- written off during the relevant previous year, reads as under: "3. On the facts and circumstances of the case and in law, the Learned CIT(A). erred in directing the A.O. to treat expenditure on dies and moulds amounting to Rs. 24,79,56,477/-as revenue expenditure." 16.1. The relevant fact in brief are that the Assessee had claimed deduction for INR. 24,79,56,477/- as revenue expenditure being expenditure Incurred for purchase of dies and moulds during the relevant previous year. The Assessee accounted for the aforesaid expenses as capital expenses in the books of accounts. However, in the no....
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.... (e) AY 1998-99 (ITA No.8952/Mum/2004, dated 22/08/2023) (f) AY 1997-98 (ITA No.5030/Mum/2001, dated 13/04/2023) 16.5. We have perused the decision of the Tribunal in appeal preferred by the Revenue for the AY 2001-2002 [ITA No. 4372/Mum/2005, dated 23/02/2024]. The relevant extract of the aforesaid decision of the Tribunal reads as under: "12. With regard to Ground No. 3 which is in respect of allowing deduction in respect of expenditure incurred on dies and moulds as revenue expenditure. Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department. 13. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 14. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the Issue, the Coordinate Bench of the Tribunal in ITA.No. 5030/Mum/2001 dated 13.04.2023 held as under: "4. At the outset, with regard to Ground ....
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.... principle of consistency, the view taken by the Tribunal in A.Y. 1997-98 is respectfully followed, accordingly, ground raised by the revenue is dismissed. 16.6. Similarly, while deciding identical issue in appeal for the Assessment Year 1998-99 [ITA No. 8952/Mum/2004, dated 22/08/2023] it was held by the Tribunal as under: "16. Ground No.3 raised by the revenue relates to the disallowance of expenses incurred on Dies and Moulds amounting to Rs. 30.47 crores. The assessee treated the above said expenses as Capital in nature in the books of account, but claimed the same as revenue expenditure for income tax purposes. This is a recurring issue. The co-ordinate bench has decided this issue in favour of the assessee by confirming the decision rendered by Ld CIT(A) in holding that the expenditure incurred in purchase of dies and moulds are allowable as revenue expenditure in AY 1990-91. The said decision is being followed year after year. In AY 1997-98 also in ITA No.5030/Mum/2001 dated 13.04.2023, the Tribunal has upheld the identical decision taken by Ld CIT(A). Consistent with the view taken by the co-ordinate benches year after year, we confirm the order passed by ....
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.... 2005-06, the Assessee recovered a sum of INR.1,52,846/- on account of penalty charges for breach of contractual obligations from suppliers of capital goods for delay in execution of orders. The aforesaid receipts were credited to the Profit & Loss Account. However, the same were excluded from the computation of income for tax purposes. During the assessment proceedings it was claimed by the Assessee that the aforesaid receipts were in the nature of capital receipts not liable to tax. However, the Assessing Officer rejected the aforesaid contention of the Assessee and held that the aforesaid receipts were liable to tax in the hands of the Assessee as the same were revenue in nature. 17.2. In appeal preferred by the Assessee, the CIT(A) held that the above receipts were capital in nature and the same should not be reduced from the cost of acquisition of the respective capital asset. 17.3. Being aggrieved, the Revenue is appeal before the Tribunal on this issue. 17.4. Having given thoughtful consideration to rival submissions and on perusal of record, we find that this is a recurring issue which has been decided in favour of the Assessee in preceding assess....
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....sessment order and para 3 of CIT(A)'s order and submitted that this issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1993-94 & 1994-95 (ITA No. 2739, 3175, 3491 & 3492/Mum/1999) on merits in favour of the assessee. 35. On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that this ground is covered by the decision of ITAT. 36. Considered the rival submission and material placed on record. We notice from the records that the identical issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1993-94 & 1994-95 (ITA No. 2739, 3175, 3491 & 3492/Mum/1999) on merits. For the sake of clarity, relevant portion of the decision in assessee's own for Assessment Year 1993-94 (ITA No. 3491/Mum/1999) is reproduced below:- 3. The first issue in this appeal filed by the revenue is against the deletion of an addition 22,80,791/- representing penalty charges received from machinery suppliers. Both the parties agreed that the issue is covered by the decision of this Tribunal in assessee's own case for the....
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....our of assessee holding penalty charges to be capital receipt. The aforesaid decision of the Tribunal has not been controverted by the Revenue, hence, following the same we uphold the findings of CIT(A) and dismiss ground No.2 in the appeal by Revenue." 12. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y.1996-97 is respectfully followed, accordingly, ground raised by the revenue is dismissed." 19. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in Α.Υ. 1997-98 is respectfully followed, accordingly, ground raised by the revenue is dismissed. 17.6. The Revenue has failed to bring on record any material to differentiate the above decisions of the Co-ordinate Benches of the Tribunal either in law or on facts. Therefore, respectfully following the same, we decline to interfere with the order passed by the CIT(A) on this issue. Accordingly, Ground No. 4 raised by the Revenue is dismissed" 7.2. Admittedly, the facts are identical for the year under consideration. The revenue has not been able to place any new su....
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....ibunal in assessee's own case and decided the issue in favour of the assessee and against the department. 21. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 22. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5030/Mum/2001 dated 13.04.2023 held as under:- "13. With regard to Ground No.(c) which is in respect of directing the Assessing Officer to allow deduction of Rs..2,36,37,738/- towards expenditure relating to purchase of jigs and fixtures, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department. 14. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 15. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1995-96. While deciding ....
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....fall under the category of "current repairs". We find that the present state of appellate proceedings is the second round of proceedings, since in the first round, this Tribunal had restored this issue to the file of the Id. CIT(A) for adjudication in the light of various judicial decisions relied upon by the assessee. We find that the expenditure Incurred on replacement of jigs and fixtures are basically toolling alds required in the production process and these items are part of the machinery in automobile industry. We find that these jigs and fixtures need to be constantly replaced due to constant wear and tear and also due to changes in the design of the part. It is not in dispute that the 'expenditure Incurred on jigs and fixtures at the time of first purchase together with the main plant and machinery was duly capitalised by the assessee at the time of first purchase for the purpose of Income Tax Act and depreciation claimed accordingly for the purpose of Income Tax Act. Later, whenever the said jigs and fixtures were replaced for the reasons stated supra, the assessee has been claiming the same as revenue expenditure for the purpose of Income Tax Act. We find that this a....
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....ssment year. There is nothing placed on record by the revenue to take a different view. Respectfully following the consistent view, we do not find any reason to interfere on the decision of Ld. CIT(A) and the same is upheld. Accordingly, ground no. 3 raised by the revenue stands dismissed. Assessee's appeal 9. At the outset, the Ld. Sr. Counsel submitted that, Ground no. 1 is not praised due to smallness of the claim. 10. Ground no. 2 raised by the assessee is against the denial of deduction in respect of proportionate premium paid on leasehold land amounting to Rs. 46,70,725/-. 10.1. The appellant had taken a land on lease from Maharashtra Industrial Development Corporation ('MIDC') for setting up factory for a period of 99 years. The appellant had paid upfront premium for obtaining the land on lease and was required to pay nominal amount as lease rent each year for a period of 99 years. 10.2. The annual rent payable as per the lease agreement is extremely low and therefore cannot be considered as economical rent. Thus, premium paid is in effect advance rent paid by the appellant which ought to be apportioned for the period of the lease term. 10.3. Dur....
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....the said payment was nothing else but advance rent and, hence, allowable as revenue expenditure. After going through the lease agreement the Assessing Officer disallowed the claim holding that the assessee had acquired a benefit of enduring nature in the form of use of land for a period of 99 years; that the land in' had been transferred through a registered deed involving transfer of immovable property; and, thus, the assessee had acquired a fixed asset in the form of a parcel of land. The Tribunal held that the land in question was not acquired by the assessee and that merely because the deed was registered the transaction in question would not assume a different character. The Tribunal observed the lease rent was very nominal; by obtaining the land on lease the capital structure of the assessee did not undergo any change; the assessee only acquired a facility to carry on the business profitably by paying nominal lease rent. Therefore, the Tribunal allowed the assessee's claim. Held that, it was a case which warranted no interference. Even the Assessing Officer had recorded that the payment was for use of land. There was no legal infirmity committed by the Tribun....
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....o the extent in which the lease transaction is entered into by the assessee. The Ld. Sr. Counsel further submitted that in none of the above decisions the view taken by the Hon'ble Gujarat High Court in case of DCIT V. Sun Pharmaceutical Ind. Ltd (Supra) was not brought to the notice of the courts. The Ld. Sr. Counsel emphasize that in the present facts of the case the assessee had claimed the proportionate premium on leasehold land for the year under consideration and is ought to be allowed. We have perused the submission advanced in both sides in the light of records placed before us. 10.10. It is noted that, this Tribunal consistently followed the view taken by co-ordinate bench of this Tribunal for A.Y. 1995-96 in ITA No. 5493/MUM/1999 vide order dated 20.01.2021. It is noted that this Tribunal placed reliance on the decisions of Hon'ble Gujarat High Court in case of DCIT V. Sun Pharmaceutical India Ltd. (Supra) and various other judgements by High Court and this Tribunal. It is noted that this Tribunal held and observed as under: "Ground No. 6 Allowablity of deduction in respect of proportionate premium paid on leasehold land. 49. Ld. AR brought to our ....
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....sessee's ground on the reason that this issue has been decided against the assessee by the Ld. CIT(A) in the earller year. The Tribunal also in the A.Y. 2000-01 in ITA No.3314/M/2005 has dismissed the assessee's appeal on the following reasoning:- "6. Ground 2 relates to CIT (A)'s decision in confirming the disallowance of the assessee's claim of Rs 2,97,015/-u/s 35D. 7. During the assessment proceedings before us, the Ld AR stated that the said expenditure was incurred in connection with the issue of shares for increase in share capital. AO made disallowance basing on the apex court judgments in the case of M/s Brooke Bond India Ltd (225 ITR 798)(SC) and M/s Punjab State Industrial Development Corporation Ltd (225 ITR 792)(SC). The CIT (A) confirmed the action of the AO stating that the said expenditure should not be allowed as revenue expenditure. During the proceedings before us, Ld AR for assessee relied on various judgments including the jurisdictional High Court judgment in the case of Maharashtra Ugine and Steel Co Ltd (250 ITR 84) (Bom). After going through the said judgments, we find that the said jurisdictional High Court judgment relates to allow....
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....rom the audited financial accounts of the assessee placed at page 14 of the paper book that the assessee has capitalized the leasehold land in the schedule 5 to the fixed assets. In schedule 12, the assessee has written off the amount of leasehold premium proportionately for the year under consideration. The same has been substantiated by the Note 17 at page 27 that reads as under: "17. Amount written off against leasehold land - Rs 4,670,725/- Proportionate premium for the year on leasehold land amounting to Rs 4,670,725/- was debited to Profit and Loss Account. In the return of income out of abundant caution no deduction was claimed for said expenses. It is submitted that leasehold premium is in effect advance rent and as such the proportionate write off is an allowable deduction following the ratio of the decision of the Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs CIT (225 ITR 802) and decision of the Commissioner of Income Tax (Appeals) in our own case from Assessment Year 1991-92 onwards" In fact we noted that there is no loss to the revenue and the assessee has treated the entire premium as capital asset. Since the same is....
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....and the audited financials clarifies the position. 11.5. On the contrary, the ld. DR relied on the order passed by authorities below. We have perused the submission advanced in both sides in the light of records placed before us. 11.6 It is noted that, the assessee claimed deduction of Rs. 86,24,198/- during the year under consideration as the said amount was crystalized and the liability accrued during the year. It is noted that the auditor reported the same in the tax audit report the relevant fact in respect of the same. There is no dispute that the amount of Rs. 86,24,198/- became due upon receipt of the invoices during the year under consideration and had to be paid. As the amount been crystalized during the year under consideration upon receipt of invoices, it was correctly debited to the profit and loss account by the assessee. We therefore do not find any reason to uphold the addition made by the authorities below and the same is directed to be deleted. Accordingly, ground no. 3 raised by the assessee stands allowed. 12. Ground no. 4 raised by the assessee is not pressed and therefore dismissed as infructuous. 13. Ground no. 5 raised by the assessee is ....
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....nue expenditure, the Assessing Officer is directed to reverse the depreciation of INR.1,13,80,393/-granted to the Assessee in respect of the same." 13.3. There is nothing on record brought out by the revenue contrary to the above observation by this Tribunal. Respectfully following the aforesaid view, the claim of the assessee to treat the software expenses as revenue in nature is allowed. Accordingly ground no. 5 raised by the assessee stands allowed. 14. Ground no. 6 raised by the assessee is against adjusting unobserved depreciation and accumulated losses of the years prior to initial assessment year, while computing the amount eligible for deduction u/s. 80IA of the Act. 14.1. Ld. Sr. Counsel submitted that the initial assessment year for the purpose of allowing deduction u/s. 80IA must be considered as the first year in which the assessee exercises its option to claim deduction under the said section and not the first year in which the unit started generating power. It is submitted that assessee exercised the option for the first time in its 6th year of operation and therefore the unabsorbed depreciation and accumulated losses of the earlier years cannot be notiona....
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.... of Hon'ble Madras High Court in the case of M/s Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT (340 ITR 477) (Madras High Court) which was confirmed by the Hon'ble Supreme Court ((2016) 244 Taxman 58 (SC). On perusal of the aforesaid judgment of the Hon'ble Madras High Court we find that, inter alia, following substantial questions of law was raised for consideration: "(c) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in saying that unabsorbed depreciation of earlier years before the first year of claim, which has already been absorbed, could be notionally carried forward and taken into consideration for computation of deduction under section 80-IA? 12.6. Answering the above question of law in favour of the Assessee, the Hon'ble High Court held as under: "17. From a reading of sub-section (1), it is clear that it provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), i.e., referred to as the eligible business, there shall, in accordance with and subject to the provisions ....
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....igible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in subsection does not contemplates to bring set off amount notionally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. 19. In the present cases, there is no dispute that losses incurred by the assessee were already set off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee exercised the option under section 80-IA(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in Tax Case No. 918 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a court cited supra considered the scope of sub-section (6) of section 80-1, which is the corresponding provision of sub-section (5) of section 80-IA. Both are similarly worded and, therefore, we agree entirely with the Div....
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....ich have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-1 for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view. 21. The standing counsel appearing for the Revenue is unable to bring to our notice any relevant material or any compelling reason or any contra judgment of other courts to take a different view. He only relied heavily on the Memorandum explaining the provisions in the Finance (No. 2) Bill, 1980, [1980] 123 ITR (St.) 154 to support this case and the same reads as follows: "Clause 30(iii). In computing the quantum of 'tax holiday' profits in all cases, taxable income derived from the new industrial units, etc., will be determined as if such units were an independent unit owned by a taxpayer who does not have any other source of income. In the result, the losses, depreciation and investment allowance of earlier years in respect of the new industrial undertaking, ship or approved hotel will be taken into account in determining the quantum of deduction admissible under the new secti....
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.... year under consideration, following income was claimed as exempt by the assessee u/s. 10 of the Act- a. dividend received of Rs. 37,29,77,083/- exempt u/s. 10(34) of the Act. b. income from unit of Rs. 36,994,564/- exempt u/s. 10(35) of the Act. c. interest on tax free bonds exempt u/s. 10(15) of the Act of Rs. 10,94,86,697/-. 15.1. He submitted that, the assessee in the revised return computed disallowance of Rs. 23,89,438/- considering the expenses debited to the profit and loss account. The Ld. Sr. Counsel submitted that, investment was made out of assessee's own fund on 31.03.2007. It is submitted that assessee has Rs. 55,343 million as reserve and surplus, whereas the borrowed funds amounts to Rs. 16,254 million. It is thus submitted that no interest disallowance therefore could be made in the hands of the assessee as assessee has sufficient interest free own funds to make the investments. The Ld. AR placing reliance on page 51 of the paper book submitted that, a working of disallowance u/s. 14A was provided in which no fault was found by the Ld. AO. It is submitted that the suo-moto disallowance made by the assessee is on a reasonable basis taki....
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....n Indonesia. The assessee used transactional net margin method (TNMM) to bench mark this transaction. It is submitted that in the transfer pricing study report, the assessee regarded that it is following cost plus 25%. However, in actual the margin earned by the assessee was cost plus 14.01%. 16.2. Assessee also submitted that the comparable companies selected to determine the arm's length price earned only 2.18% and therefore the transaction of the assessee was treated to be at arm's length. 16.3. The Ld. TPO after considering the submissions of the assessee was of the opinion that assessee could not earn the margin as per the transfer pricing study report and therefore made adjustment of Rs. 28,13,755/- being, difference between the margin earned by the assessee and the margin claimed as per transfer pricing report. Aggrieved by the order of the Ld. AO, the assessee preferred appeal before the Ld. CIT(A) who upheld the adjustment made. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before this Tribunal. 16.4. The Ld. Sr. Counsel submitted that assessee wrongly mentioned the margin of the transaction at cost plus 25% in the transfer pricing study report....
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....or the purpose of income-tax. Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before this Tribunal. 17.1 The Ld. Sr. Counsel submitted that the assessee has been consistently accounting for the export benefit on the basis of exports made by it. The Ld. Sr. Counsel submitted that, this issue has been considered by the co-ordinate bench of this Tribunal for various assessment year as under: a) ITATAY 2006-07 (ITA No. 5299/Mum/2010, b) ITATAY 2005-06 (ITA No. 1223/Mum/2010, c) ITATAY 2004-05 (ITA No. 6838/Mum/2008, d) ITATAY 2003-04 (ITA No. 1496/Mum/2007, e) ITATAY 2002-03 (ITA No. 3043/Mum/2010, f) Excel Industries Limited [2013] 358 ITR 295 (SC) g) United, Phosphorous Ltd ITA No. 1866 of 2013 (HC)" 17.2. On the contrary the Ld. DR relied on the order passed by authorities below. We have perused the submission advanced in both sides in the light of records placed before us. 17.3 It is noted that this Tribunal in preceding assessment years decided the issue by observing as under: "10.5. We have given thoughtful consideration to the rival submissions. It emerges that identical issue h....
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....s or utilization of the DEPB as the case may be. The Ld. AO is directed to consider the claim of the assessee based on the real income theory as observed by Hon'ble Supreme Court in case of CIT(A) V. Excel industries Ltd. reported in (2013) 38 taxmann.com 100. For the sake of clarity the same is reproduced as under: "27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic." Accordingly, the additional grounds raised by the assessee stands partly allowed for stati....