2011 (2) TMI 1429 - AT - Income Tax

Summary

Issues Involved:
1. Additional depreciation on windmill.
2. Deduction under section 80-IA for the new unit at Plant-II.
3. Combining profits and losses of all units for deduction under section 80-IA.
4. Addition under section 40(a)(ia) for non-deduction of TDS on commission paid to non-resident agents.
5. Disallowance under section 14A.

Issue-wise Detailed Analysis:

1. Additional Depreciation on Windmill:
The Revenue challenged the CIT(A)'s direction to allow additional depreciation on the windmill. Both parties agreed that the issue was covered by the Tribunal's earlier decision in the assessee's own case, which followed the jurisdictional High Court's ruling in Hi Tech Arai (321 ITR 477). The Tribunal confirmed the CIT(A)'s finding, allowing the additional depreciation on the windmill installed during the relevant period.

2. Deduction under Section 80-IA for the New Unit at Plant-II:
The Revenue contended that the assessee started production in Plant-II for the year ending 31.3.1995, making the assessment year 2007-08 beyond the ten-year period for deduction under section 80-IA. The assessee argued that significant machinery was installed only by 31.3.1998, and production began in the assessment year 1998-99. The Tribunal reviewed the annual reports and found that the imported machinery essential for production was used only in the year ending 31.3.1998. It concluded that the first year of manufacture for Plant-II was the assessment year 1998-99, confirming the CIT(A)'s decision to allow the deduction under section 80-IA for the assessment year 2007-08.

3. Combining Profits and Losses of All Units for Deduction under Section 80-IA:
The Revenue argued that all units fed into a common power grid, and profits and losses should be combined for deduction purposes. The Tribunal referred to its decision in Bannari Amman Sugars Ltd., where it was held that each power generating unit should be treated independently for section 80-IA deductions. The Tribunal confirmed the CIT(A)'s decision, allowing separate deductions for each unit.

4. Addition under Section 40(a)(ia) for Non-Deduction of TDS on Commission Paid to Non-Resident Agents:
The Revenue argued that the assessee failed to deduct TDS on commission paid to non-resident agents, justifying the addition under section 40(a)(ia). The assessee contended that the agents had no income arising in India and relied on CBDT circulars and the Supreme Court's decision in GE India Technology Centre P. Ltd. (327 ITR 456). The Tribunal, following the Supreme Court's ruling, held that no TDS was required as the commission was not chargeable to tax in India, confirming the CIT(A)'s deletion of the addition.

5. Disallowance under Section 14A:
The Revenue challenged the CIT(A)'s restriction of disallowance under section 14A to Rs. 10,000. The Tribunal noted that this issue was already addressed in the assessee's appeal (ITA No. 675/Mds/2010), where it was remanded to the Assessing Officer for re-adjudication. Consequently, the Tribunal also remanded this issue in the Revenue's appeal for re-adjudication by the Assessing Officer.

Conclusion:
The appeal of the Revenue (ITA No. 722/Mds/2010) was partly allowed for statistical purposes, and the appeals of the assessee (ITA Nos. 731 and 1168/Mds/2010) were allowed. The order was pronounced on 04/02/2011.