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2013 (9) TMI 363 - AT - Income TaxExemption u/s 10(23G) infrastructure capital company - exemption of interest income - investment in bonds of SSNNL and GIPCL - Held that - Following Gujarat Power Corpn. Ltd. Versus ACIT 2010 (11) TMI 626 - ITAT, Ahmedabad and VBC Ferro Alloys Ltd. v. Asst. CIT 2005 (9) TMI 253 - ITAT HYDERABAD-B - Explanation 2 to section 10(23G), as introduced by the Finance Act, 1999 was declaratory and had to be construed as retrospective as it was retroactive in nature - Therefore, the assessee was entitled to exemption u/s. 10(23G) in respect of the investments made prior to 1-6-1998 - the assessee was entitled to exemption under section 10(23G) of the Income-tax Act - there was no reason to take a contrary view in the present year - Decided in favour of assessee. Disallowance u/s 35E extraction and production of mineral - Held that - No serious argument was made regarding eligibility of the assessee for deduction under section 35E and a clear finding was given by the authorities below that the assessee was not eligible for deduction under section 35E because the assessee had not fulfilled the required conditions - the learned authorised representative could not controvert these findings of the authorities below and hence, the aspect was decided against the assessee - the only argument raised was that deduction should be allowed under section 37(1) of the Income-tax Act - No deduction was allowable in the present year because even if the expenditure were to be debited in the profit and loss account, the same had to be considered in the credit side of the profit and loss account also as closing stock of work-in-progress and there will be no resultant deduction in the present year there was no merit in this ground of the assessee - Decided against Assessee. Disallowance of Deduction u/s 35D - increase in share capital - fee paid to Registrar of Companies - stamp fee - in connection with the extension of the industrial undertaking or setting up of a new industrial undertaking - Held that - The findings of the AO were not controverted by the CIT (Appeals) or by the learned authorised representative by showing that the assessee was fulfilling the requirements of subsections (1) and (2) of section 35D of the Act and we have also discussed that in the name of rule of consistency, mistake cannot be perpetuated and, therefore, we hold that the learned Commissioner of Income-tax (Appeals) was not justified in deleting the disallowance made by the Assessing Officer under section 35D - We, therefore, reverse the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore that of the Assessing Officer Decided in favour of Revenue. The disallowance was made by the Assessing Officer by giving a specific finding that the assessee was not fulfilling the conditions imposed under subsections (1) and (2) of section 35D - Regarding the rule of consistency followed by the learned Commissioner of Income-tax (Appeals) in deleting this disallowance - the view taken by the Assessing Officer in the earlier year was a possible view then there may be a case for taking the same view in the present year as per the rule of consistency - But if the view taken in the earlier year was not a possible view then a mistake cannot be perpetuated in the name of consistency. - Decided against the assessee. Disallowance of Depreciation on Leased Assets Held that - Following Indusind Bank 2012 (3) TMI 212 - ITAT MUMBAI - Principal portion of lease rent had to be excluded from the income and depreciation was not allowable to the lessor in case of financial lease - there was no serious argument was made by the assessee regarding the allowability of deduction on account of depreciation of leased assets and hence, this ground of the assessee was rejected in all the three years. Disallowance of Rates and Taxes - Held that - The assessee was claiming deduction of this expenditure under section 37 - As per the provision of section 37(1), business expenditure not in the nature of capital expenditure or personal expenditure was allowable - But before this, one more condition was to be fulfilled that the business for which the expenditure is incurred has been set up and commenced - the land was purchased for the proposed joint venture power project and none of the power projects has commenced business - the rates and taxes before commencement of production in a project was a capital expenditure - Even if it does not enhance the value of the land in question then also it cannot be allowed as revenue expenditure because the business had not commenced and therefore, it was a preoperational expenditure Decided in favour of Assessee.
Issues Involved:
1. Disallowance of claim under section 10(23G) of the Income-tax Act, 1961. 2. Disallowance under section 35E of the Income-tax Act, 1961. 3. Disallowance of deduction claimed under section 35D of the Income-tax Act, 1961. 4. Disallowance of depreciation on leased assets. 5. Disallowance of expenses under rates and taxes. Detailed Analysis: 1. Disallowance of Claim under Section 10(23G): The first issue pertains to the disallowance of the claim under section 10(23G) of the Income-tax Act, 1961, raised by the assessee for the assessment years 2003-04 and 2004-05. The assessee claimed exemption of interest income from SSNNL and GIPCL bonds. The Assessing Officer (AO) denied the exemption, stating that the assessee did not provide necessary evidence of government approval for SSNNL bonds and did not qualify as an infrastructure capital company. The Commissioner of Income-tax (Appeals) upheld the AO's decision. However, the Tribunal found that this issue was already decided in favor of the assessee in the assessment year 2001-02, where the Tribunal had held that the assessee was entitled to exemption under section 10(23G). No new facts were presented to warrant a different decision, so the Tribunal allowed the assessee's claim for all three years. 2. Disallowance under Section 35E: The second issue involves the disallowance under section 35E for the assessment years 2003-04, 2004-05, and 2005-06. The AO disallowed the claim, stating that the assessee did not meet the conditions under section 35E, as there was no evidence of commercial production. The Commissioner of Income-tax (Appeals) upheld this decision. The Tribunal agreed with the authorities below, stating that the assessee did not fulfill the required conditions of section 35E and rejected the assessee's alternative claim under section 37(1) due to lack of evidence that the expenses were recovered from the buyer. This ground was rejected for all three years. 3. Disallowance of Deduction Claimed under Section 35D: The third issue relates to the disallowance of deduction claimed under section 35D for the assessment years 2003-04, 2004-05, and 2005-06. The AO disallowed the claim, arguing that the expenses were not related to the extension of the industrial undertaking or setting up a new industrial unit. The Commissioner of Income-tax (Appeals) allowed the deduction based on the principle of consistency, as it was allowed in previous years. The Tribunal reversed this decision, stating that the earlier allowance was a mistake and could not be perpetuated. The Tribunal held that the assessee did not fulfill the conditions of section 35D and restored the AO's disallowance for all three years. 4. Disallowance of Depreciation on Leased Assets: The fourth issue concerns the disallowance of depreciation on leased assets for the assessment years 2003-04, 2004-05, and 2005-06. The Tribunal noted that this issue was covered by the Special Bench decision in the case of Indusind Bank, which held that the principal portion of lease rent should be excluded from income and depreciation is not allowable to the lessor in the case of a financial lease. The Tribunal rejected the assessee's claim for depreciation and upheld the exclusion of the principal portion of lease rent from income for all three years. 5. Disallowance of Expenses under Rates and Taxes: The fifth issue involves the disallowance of expenses under rates and taxes for the assessment year 2005-06. The AO disallowed the expenses, stating that they were capital expenditures related to land for a proposed power project that had not commenced business. The Commissioner of Income-tax (Appeals) deleted the disallowance, but the Tribunal reversed this decision, agreeing with the AO that the expenses were pre-operational and thus capital in nature. This ground was allowed in favor of the Revenue. Cross-Appeal for Assessment Year 2006-07: The grounds raised by the assessee for the assessment year 2006-07 were similar to those in previous years, and the Tribunal decided them on similar lines: - Ground No. 2 regarding section 35E was rejected. - Ground No. 3 regarding depreciation on leased assets was rejected. - Ground No. 4 regarding interest under section 234D and withdrawal under section 244A was deemed consequential and required no separate adjudication. Cross-Objection by Revenue for Assessment Year 2003-04: The Revenue's cross-objection regarding the claim under section 10(23G) was dismissed, as the Tribunal had already decided this issue in favor of the assessee. Conclusion: The Tribunal's order resulted in partly allowing the appeals of the Revenue, partly allowing the appeals of the assessee for the assessment years 2003-04 and 2004-05, and dismissing the appeals of the assessee for the assessment years 2005-06 and 2006-07. The cross-objection by the Revenue was dismissed.
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