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2019 (6) TMI 1441 - AT - Income TaxDeduction u/s 80IA - enhancement of income of the appellant being allocation of head office expenses to Power Project at Akrimota Unit - HELD THAT - Taking into consideration the nature of expenditure we find some of them may not be directly linked with the concerned Power Project Unit at Akrimota; the share transfer fee seminar expense security expenses donation sundry balances telephone expenses ought not to have been allocated on the basis of the turnover to various units. They are neither required to be allocated to the Power Project Unit as well. We find no justification and/or rational as to how these expenses linked to the power project unit particularly. On the other hand though some of the expenditure pertain to the eligible unit but proper linkage has not been pointed out which should have been made by the Learned CIT(A) upon considering the concrete documents of such expenditure to the said power project unit. Neither it is ascertainable from the order that any verification during the appellate proceeding was made before enhancing the income of the assessee by reducing the allocation of head office expenses to the said unit. In that view of the matter we find it fit and proper to set aside the issue to the file of the Learned CIT(A) for verification of the same after going through the details of expenditure incurred by the head office in respect of Akrimota Power Project Unit and upon establishing linkage and/or nexus of such expenditure to that of the eligible Power Project Unit to pass the order in accordance with law keeping in view of the nature of expenditure as mentioned above. Therefore the Learned CIT(A) should give categorical finding in respect of the expenditure which cannot be allocated to Akrimota Power Project Unit after due verification of the supporting documents provided by the assessee - Assessee s appeal is allowed for statistical purposes. Disallowance u/s 36(1)(iii) - assessee could not prove nexus of interest of interest free loans given to others with interest free fund - CIT(A) in directing to make proportionate disallowance - HELD THAT - Only upon considering the similar details including details relating to the interest on fixed term loan pertaining to head office borrowing amounting to 9, 86, 301/- interest on Over Draft and other miscellaneous interest pertaining to head office amounting to 1, 60, 000/- and 7, 399/- for Mata s Madh which are general purpose interest expenditure the Learned CIT(A) came to a conclusion that the same cannot be attributed for specific purpose. The Learned CIT(A) worked out the interest expenditure to the tune of 11, 53, 706/- following the earlier decision taken by him in assessee s own case as for A.Y. 2010-11. The Learned CIT(A) further directed the Learned AO to re-compute the proportionate disallowance by taking the total interest expenditure at 11, 53, 706/- which in our considered view is without any ambiguity. Hence we find no infirmity in the order passed by the first appellate authority so far as to warrant interference. The question is accordingly answered in the affirmative i.e. in favour of the assessee and against the revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT - Since certain disallowance had already been made by the Learned CIT(A) u/s 36(1)(iii) of the Act it was also observed by the Learned CIT(A) that total disallowance should not exceed to the total interest expenditure of the said amount of 11, 53, 706/- which according to us without any infirmity and/or any error. So far as the administrative expenditure is concerned the fact that the assessee has not earned interest income in respect of investment of 29.20 crores has been rightly taken into consideration and therefore disallowance u/s 14A has been disregarded by the Learned CIT(A) Jurisdictional High Court in the case of Corrtech Energy Pvt. Ltd. 2014 (3) TMI 856 - GUJARAT HIGH COURT where it has held that if no exemption on account of income generated from investment has been claimed no disallowance u/s 14A should be made. It was further observed by the Learned CIT(A) that since the appellant itself made disallowance to the tune of 51, 66, 612/- on account of administrative expenses by taking 0.5% of the average value of investment no further disallowance on account of administrative expenditure is called for. The justification given by the Learned CIT(A) in our considered view is proper and does not warrant interference. Hence the same is upheld. In the result revenue s appeal is dismissed. Disallowance of depreciation - HELD THAT - Issue decided in favour of assessee as relying on own case for A.Y. 2001-02 Deduction u/s 80IA to be allowed.
Issues Involved:
1. Enhancement of income by allocation of head office expenses to Power Project at Akrimota Unit. 2. Disallowance under section 271(1)(c) of the Income Tax Act. 3. Proportionate disallowance under section 36(1)(iii) of the Income Tax Act. 4. Disallowance under section 14A read with Rule 8D of the Income Tax Rules. 5. Depreciation on Multi Metal Project. 6. Deduction under section 80IA of the Income Tax Act. Issue-wise Detailed Analysis: 1. Enhancement of Income by Allocation of Head Office Expenses to Power Project at Akrimota Unit: The assessee challenged the enhancement of income by ?6,63,71,309 due to the allocation of head office expenses to the Power Project at Akrimota Unit, which is eligible for deduction under section 80IA. The Commissioner of Income Tax (Appeals) [CIT(A)] noted that common expenditures incurred at the head office, which were not unit-specific, should be allocated to the units owned by the appellant in proportion to the turnover. The CIT(A) issued a show-cause notice, and despite the assessee's contention that expenses were accounted for in the power project's books, the CIT(A) reduced the deduction by allocating head office expenses. The Tribunal found that some expenses might not be directly linked to the Power Project Unit and set aside the issue to the CIT(A) for verification of the details of expenditures incurred by the head office in respect of the Akrimota Power Project Unit. 2. Disallowance under Section 271(1)(c) of the Income Tax Act: The assessee challenged the order under section 271(1)(c) related to the reduction of the deduction claimed under section 80IA by ?6,63,71,309. Since the main issue was set aside for verification, this appeal was dismissed as infructuous. 3. Proportionate Disallowance under Section 36(1)(iii) of the Income Tax Act: The revenue challenged the CIT(A)'s order directing proportionate disallowance of ?47,83,671 under section 36(1)(iii). The assessee argued that the advances to sister concerns were for business purposes and funded by interest-free funds. The CIT(A) found that the interest expenses were directly related to specific projects and excluded from the disallowance. The Tribunal upheld the CIT(A)'s order, noting that the assessee had sufficient interest-free funds to cover the advances and that the disallowance should be based on the actual interest expenditure not directly related to specific projects. 4. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules: The revenue challenged the deletion of disallowance of ?42,90,471 under section 14A read with Rule 8D. The assessee contended that investments were made from interest-free funds, and the CIT(A) accepted this, noting that the interest expenses were directly related to specific projects and should not be considered for disallowance. The Tribunal upheld the CIT(A)'s order, emphasizing that the disallowance should not exceed the actual interest expenditure not directly allocable to specific uses and that administrative expenses related to investments without exempt income should not be disallowed. 5. Depreciation on Multi Metal Project: The revenue challenged the deletion of disallowance of ?5,00,000 depreciation on the Multi Metal Project at Ambaji. The Tribunal noted that the issue was covered in favor of the assessee by earlier Tribunal decisions in similar cases, where it was held that depreciation should be allowed even if the project was non-functional during the year. The Tribunal upheld the CIT(A)'s order, allowing the depreciation claim. 6. Deduction under Section 80IA of the Income Tax Act: The revenue challenged the deletion of disallowance of ?31,15,94,168 claimed under section 80IA. The CIT(A) held that the initial assessment year for the purpose of section 80IA is the year in which the assessee makes the claim for the first time, not the year of commencement of the eligible business. Losses and depreciation from years prior to the initial assessment year, which were already absorbed, should not be notionally brought forward. The Tribunal upheld the CIT(A)'s order, citing consistent judicial precedents and the CBDT circular clarifying the interpretation of the initial assessment year. Conclusion: The Tribunal allowed the assessee's appeals for statistical purposes and dismissed the revenue's appeals, upholding the CIT(A)'s orders on all contested issues. The Tribunal emphasized the importance of proper verification and adherence to judicial precedents in determining the allocation of expenses and the computation of deductions under the Income Tax Act.
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