2023 (5) TMI 538 - ITAT MUMBAI

Disallowance of additional depreciation u/s 32(1)(iia) - assessee to claim additional depreciation in subsequent year or years - HELD THAT:- The Hon’ble Tribunal [2019 (12) TMI 1299 - ITAT MUMBAI] held that on a literal reading of section 32(1)(iia), the additional depreciation is restricted to one time deduction and there is no explicit provision entitling the assessee to claim additional depreciation in subsequent year or years, when the additional depreciation was allowed in the year, when plant and machinery has been put to use. Therefore, we are of the considered view that it is illogical and irrational to presume so, when the legislation intention is to allow one time additional depreciation u/s 32(1)(iia) in a previous year in which plant and machinery is installed and put to use.

CIT(A) after considering relevant facts has rightly noted that there is no error in the findings recorded by the ld. AO in disallowances of additional deprecation on plant and machinery for second year. Therefore, we are of the considered view that the findings recorded by the Ld.CIT(A), while confirming additions made by the Ld. AO towards of additional depreciation in subsequent years is in accordance with law as enumerated under the provision of section 32(1)(iia) - Decided against assessee.

Disallowance U/sec 14A r.w.r 8(D)(2)(ii)&(iii) - HELD THAT:- As per decision of HDFC Bank Ltd [2016 (3) TMI 755 - BOMBAY HIGH COURT] and the disallowance u/s 14A r.w.r 8(D)(2)(iii) has to computed considering only investments which yield exempt income as held in the case of ACT Vs Vireet Investment Pvt Ltd [2017 (6) TMI 1124 - ITAT DELHI] Special Bench held that only those investments which yield exempted income are considered for computing the average value of investments in respect of computing the disallowance under rule 8D(2)(iii) of the IT Rules. AR demonstrated the details/chart of dividend income and investments in the mutual funds in the dividend yielding schemes. Thus find that the submissions of the Ld.AR are to be considered and direct the Assessing officer to recompute the disallowance u/s 14A r.w.r 8D(2)(ii) & (iii) as per the ratio of the decisions discussed above and allow this ground of appeal for statistical purposes.

TP Adjustment - bench marking the interest rate @7.11% as against @5.25% and @6.25% adopted by the assessee and TPO, in respect of interest on advance to AE and investment in cumulative preference shares - HELD THAT:- Welpsun Pipes Inc invested entire funds in the bonds of Arkansas CIT Government bonds at rate of @5.25% for availing fiscal benefit and on the Internal comparables, the AE has raised additional funds @4 to @4.25% further the TPO has added 3% as risk spread to @3.25% p.a being average cost of assessee’s funds in form of ECB and FCCB. Whereas the assessee’s objective was not to enter into any financial arrangement but to merely facilitate factor for Welpsun Pipe Inc as also no financial burden was incurred. The assessee has recovered the interest paid on borrowings and also earned a margin. Further interest paid on loan taken by Welpsun Pipe Inc. is less than @5.25% which is based on the Libor. the contentions of the Ld. AR has to be accepted. We found that the assessee has advanced loan at 5.25% and considering the factors, principles and evidences further addition on interest rate cannot be accepted and accordingly direct the TPO to exclude the increase component and allow this ground of appeal in favour of the assessee.

Disallowance u/s 14A and added to book profits u/s 115JB - HELD THAT:- The Hon’ble Supreme Court in the case of Apollo Tyres Ltd [2002 (5) TMI 5 - SUPREME COURT] held that powers of the AO to adjustments which are authorized under Sec. 115J/115B of the Act, the provisions of Sec. 14A cannot be imported while computing book profit u/s 115JB of the Act. We fallow the ratio of the judicial decisions and direct the AO to exclude the disallowance U/sec 14A of the Act in computing the book profits U/sec 115JB of the Act and allow the ground of appeal.

Receipt on account of excise duty benefits and sales tax incentives treated as capital receipt and reduction of capital value of backward area incentives from value of assets - HELD THAT:- As decided in assessee's own case [2019 (12) TMI 1299 - ITAT MUMBAI] we are of the considered view that there is no error in the findings recorded by the Ld.CIT(A), while deleting additions made by us Ld. AO towards sales tax incentives and excise duty benefits received by the assessee. Hence, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue.

Depreciation on fixed assets u/s 40(a)(ia) r.w.s37(1) of the Act in respect of capitalization of professions fees, expenditure, FCCB premium and FCCB expenditure - HELD THAT:- As in own case[2021 (7) TMI 1410 - ITAT, MUMBAI] expenditure was incurred for the A.Y 2005-06 and depreciation was allowed by the A.O. therefore for A.Y. 2007-08 is only consequential year of allowing the depreciation and the expenses falling U/sec 40(a)(ia) of the Act. Accordingly we follow the judicial decisions and dismiss the grounds of appeal of the revenue.

TP Adjustment - Corporate guarantee fees charged @ 1.5% by the assessee to its AE considered as ALP - HELD THAT:- AR supported the order of the CIT(A) on this issue and contended that the assessee has given a corporate guarantee to AE and which does not involve any cost and no bearing on profits. Further the income or loss or assets of the AE are outside the purview of the international transaction. The Ld. AR has relied on the judicial decisions and the assessee has accepted the charge @ 1.5%. Contra, the Ld. DR could not controvert the findings of the Ld. CIT(A) on this disputed issue with any new cogent material or information to take a different view, accordingly we uphold the decision of the CIT(A) and dismiss the ground of appeal of the revenue.

Unexplained investment in office property invoking the provisions of section 69B - Benefit of telescoping - Whether Appellant has explained the nature and source of cash payment satisfactorily and as such no part of payments remained unexplained? - HELD THAT:- As per the information, the cash has been generated in the hands of the group company and there is no investigation by the AO or nothing was brought on record to substantiate that the claim has been not utilized in the hands of the group company. Therefore considering the doctrine of the telescoping of the funds available for the purchase of property and the ratio of judicial decisions, we direct the AO to consider the amount has been generated in the hands of the group company as mentioned and also the cash balances were available. Accordingly, we direct the AO to allow the benefit of telescoping as discussed and allow the ground of appeal.