2015 (4) TMI 1282 - AT - Income Tax

Disallowance u/s. 40A(2)(b) - HELD THAT - We find that while deleting the disallowance made by A.O, ld. CIT(A) has noted that identical disallowance made by the A.O in earlier years was deleted by CIT(A) and order of ld. CIT(A) was also confirmed by Hon ble Tribunal 2010 (9) TMI 1204 - ITAT AHMEDABAD . Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) nor has brought any distinguishing feature of the case for the year under consideration with that of earlier years. We therefore find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed. Disallowance of claim u/s. 80IA - generation of power and income from steam - HELD THAT - Various judicial pronouncement referred to by the appellant clearly holds that steam is a form of power and therefore, while considering the profit of the captive power plant, the value of the steam is to be considered. Recent decision in D.C.W. Ltd V/s. A.C.I.T. MUM 2010 (1) TMI 939 - ITAT, MUMBAI case has held that steam generated in the power plant is nothing but the bye-product and has got the direct connection with the Industrial undertaking and is therefore, to be considered for the purpose of working out the profit of Industrial undertaking wherei as referred to the unreported decision of Madras High Court in the case of C1T V/s, TANFAC Industries Ltd. Therein the Madras High Court has also held that while working out the profit of Captive power plant, the value of the steam generated and used in the manufacturing process in other unit is to be taken into account. The SLP from the said decision has been dismissed by the Hon'ble Apex Court. In view of this decision, the disallowance cannot be made on the alleged and the imaginary intention of the legislature. If there is any ambiguity in law then only other tools of interpretation such as Finance Minister's speech etc. are to be referred to. Thus allow the deduction u/s. 80IA as claimed by the appellant. As such this ground of appeal is allowed.

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 4,11,50,043/- on depreciation in respect of unproved additions to various assets.
2. Admission of evidence in contravention of Rule 46A.
3. Deletion of disallowance of Rs. 14,03,005/- under section 40A(2)(b).
4. Deletion of disallowance of claim of deduction under section 80IA amounting to Rs. 1,56,87,215/-.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance on Depreciation:

During the assessment proceedings, the Assessing Officer (A.O.) disallowed depreciation of Rs. 4,11,50,043/- on the grounds that the Assessee could not produce bills for all additions to fixed assets. The Assessee contended that the bills were voluminous and could not be produced within the short timeframe provided. The Commissioner of Income Tax (Appeals) [CIT(A)] admitted additional evidence under Rule 46A, stating that the evidence was necessary for a proper disposal of the case and that the Assessee was not given sufficient opportunity to produce the bills initially. The CIT(A) found no major discrepancies in the additional evidence and directed the A.O. to verify the details and allow the depreciation accordingly. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any material to counter the CIT(A)'s findings.

2. Admission of Evidence in Contravention of Rule 46A:

The Revenue argued that the CIT(A) admitted additional evidence in violation of Rule 46A. The CIT(A) justified the admission of additional evidence, explaining that the Assessee was not given adequate time to produce the voluminous bills initially. The Tribunal found no illegality in the CIT(A)'s decision to admit additional evidence, as the evidence was essential for a fair resolution of the case. The Tribunal noted that the A.O. had an opportunity to examine the additional evidence during the remand proceedings and found no significant discrepancies.

3. Deletion of Disallowance under Section 40A(2)(b):

The A.O. disallowed Rs. 14,03,005/- out of Rs. 15,01,470/- paid by the Assessee to a sister concern, Jay Infra Trade Pvt. Ltd., under section 40A(2)(b), citing lack of justification for the payment. The CIT(A) noted that similar disallowances in earlier years were deleted by CIT(A) and upheld by the Tribunal. The CIT(A) found no new facts to support the A.O.'s disallowance and deleted it. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any new material to justify the disallowance.

4. Deletion of Disallowance of Claim under Section 80IA:

The A.O. disallowed the Assessee's claim of Rs. 1,56,87,215/- under section 80IA for generating power from steam, arguing that steam is not transmittable and cannot be considered as power. The CIT(A) relied on various judicial decisions, including a decision of the Madras High Court, which held that steam is a form of power and should be considered for the purpose of section 80IA. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any contrary binding decision to dispute the CIT(A)'s findings.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The Tribunal found no reason to interfere with the CIT(A)'s well-reasoned and detailed order, as the Revenue failed to provide any material to counter the CIT(A)'s findings. The appeal of the Revenue was dismissed in its entirety.