2019 (11) TMI 1387 - AT - Income Tax

Additional depreciation - AO disallowed the claim holding that the assets on which additional depreciation is claimed by the assessee was neither new nor brought into existence in the year under consideration - HELD THAT - Jurisdictional tribunal s order in Gloster Jute Mills Ltd. 2017 (3) TMI 1807 - ITAT KOLKATA has decided the issue in assessee s favour that the impugned additional depreciation claim is not allowable in case of new plant and machinery only. Coupled with this it further emerges that hon ble Madras high court s decision in the very assessee s case M/s Brakes India Ltd. vs. DCIT 2017 (4) TMI 511 - MADRAS HIGH COURT has reversed the tribunal s non-jurisdictional bench s decision hereinabove. We hold in this factual and legal backdrop that the CIT(A) s findings under challenge deleting the corresponding additional depreciation disallowance by quoting section 32(1)(iia) in the twin assessment years (supra) deserves to be confirmed. TP Adjustment - corporate guarantee s arm s length price s adjudication made by the Assessing Officer as per the Transfer Pricing Officer s order - HELD THAT - We find no merit in Revenue s instant grievance since various judicial precedents Tega Industries Ltd. vs. DCIT 2016 (9) TMI 1456 - ITAT KOLKATA Bharti Airtel Ltd. vs. Addl. CIT 2014 (3) TMI 496 - ITAT DELHI take note of the foregoing legislative amendment to hold that a corporate guarantee is not an international transaction u/s 92B of the Act. We decline the Revenue s instant grievance. Provision for leave encashment disallowance u/s 43B(f) - lower authorities have treated the same as a contingent liability being a mere provision only - HELD THAT - It transpires during the course of hearing the hon ble jurisdictional high court s decision in the case of Exide Industries Ltd. vs. UOI 2007 (6) TMI 175 - CALCUTTA HIGH COURT had quashed the very statutory provision itself as ultra vires. We therefore direct the Assessing Officer to keep this issue in abeyance for a fresh decision in view of their lordships final call in the above stated lis. This former substantive ground is accepted for statistical purposes. Education cess disallowance made u/s 40(a)(ii) - HELD THAT - It emerges that the same is no more res integra as hon ble Rajasthan high court s decision in Chambal Fertilizers Ltd. vs. DCI 2018 (10) TMI 589 - RAJASTHAN HIGH COURT has considered the CBDT circular issued long back dated 18.05.1967 that the expression tax does not include cess. We therefore go by their lordships view to delete the impugned educational cess disallowance

Summary

Issues Involved:
1. Additional Depreciation Claim
2. Corporate Guarantee as an International Transaction
3. Provision for Leave Encashment Disallowance
4. Education Cess Disallowance

Issue-wise Detailed Analysis:

1. Additional Depreciation Claim:
The Revenue's appeals for the assessment years 2007-08 and 2008-09 sought to revise the Assessing Officer's action declining the assessee's additional depreciation claims of ?10,37,81,969/- and ?58,89,93,448/-, respectively. The CIT(A) allowed these claims, stating that the Act does not specify the period in which additional depreciation should be allowed and that the benefit should be available in subsequent years as well. The CIT(A) relied on various judicial precedents, including the jurisdictional Tribunal's decision in DCIT vs. Gloster Jute Mills Limited, which held that additional depreciation is not restricted to the initial year of installation. The Tribunal upheld the CIT(A)'s findings, noting that the statutory provision does not impose a restriction that additional depreciation will be allowed only in one year or on the written down value. The Tribunal dismissed the Revenue's appeals on this issue.

2. Corporate Guarantee as an International Transaction:
For the assessment year 2008-09, the Revenue contended that the CIT(A) erred in deleting the assessee's corporate guarantee's arm's length price adjudication of ?2,35,40,061/-. The Revenue argued that a corporate guarantee amounts to an international transaction as per section 92B Explanation inserted by the Finance Act 2012. However, the Tribunal found no merit in the Revenue's grievance, citing various judicial precedents that held a corporate guarantee is not an international transaction under section 92B of the Act. The Tribunal dismissed the Revenue's appeal on this issue.

3. Provision for Leave Encashment Disallowance:
The assessee's cross-objection for the assessment years 2007-08 and 2008-09 included a provision for leave encashment disallowance of ?1,40,24,677/- under section 43B(f) of the Act. Both lower authorities treated it as a contingent liability. The Tribunal noted that the jurisdictional high court's decision in Exide Industries Ltd. vs. UOI had quashed the statutory provision as ultra vires, and the apex court's SLP on this matter was still pending. Therefore, the Tribunal directed the Assessing Officer to keep this issue in abeyance pending the final decision from the apex court, accepting this ground for statistical purposes.

4. Education Cess Disallowance:
The assessee's cross-objection also sought to delete the education cess disallowance of ?1,93,40,697/- made under section 40(a)(ii) of the Act. The Tribunal referred to the Rajasthan high court's decision in Chambal Fertilizers Ltd. vs. DCIT, which considered a CBDT circular stating that the expression "tax" does not include cess. Following this precedent, the Tribunal deleted the impugned educational cess disallowance, allowing this ground in the assessee's favor.

Conclusion:
The Tribunal dismissed the Revenue's appeals (ITA No.472 & 474/Kol/2018), dismissed the assessee's former cross-objection (CO.64/Kol/2018) as infructuous, and partly allowed the latter cross-objection (CO.66/Kol/2018) in the terms discussed above. The order was pronounced in the open court on 22.11.2019.