2015 (11) TMI 1805 - AT - Income Tax

Disallowance of Depreciation in respect of jetties constructed by the assessee and used for the purpose of business - HELD THAT - As decided in own case 2012 (8) TMI 493 - ITAT MUMBAI we hold that the assessee is entitled to claim depreciation on the Jetty referred above. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to allow depreciation claimed by the assessee. Disallowance of lease rent - Claim allowed as relying on own case. Contribution of Stafff welfare expenses - No disallowance invoking the provisions of section 40A(9) Treatment of sales tax exemption received from the Gujarat Government as capital receipt Addition of Cenvat Credit - AO took the view that the value of cenvat credit lying unutilized at the close of the accounting period ought to have been included in the value of closing stock as per the provisions of section 145A - HELD THAT - As decided in own case 2012 (8) TMI 493 - ITAT MUMBAI we hold that if the closing stock to be increased on account of unutilised MODVAT credit the corresponding opening stock of that year is also to be increased as the Department has not disputed the fact that the purchases have been debited exclusive of the excise duty element i.e. by adopting net method of purchases. If the value of closing stock is increased by the MODVAT the purchases should also be increased by a similar amount. Therefore the issue is squarely covered in favour of the assessee Eligible deduction u/s 80IA - Captive power generation plant - HELD THAT - Assessing Officer will examine whether the submission of the assessee with respect to the rate taken is correct . If it is found that the rate charged by the suppliers is lower than the rate adopted for sale by the captive power generating units of the assessee such rate would be taken by the AO for computing the profits of the eligible business eligible for deduction u/s 80IA. However if the rate charged by the suppliers is the same as the rate adopted for sale by the captive power generating units of the assessee such rate adopted should be accepted for the purposes of working out the deduction u/s 80IA - Sec. 45 of The Electricity Act 2003 and submitted that the restriction with regard to the charges to be collection on supply of electricity shall be applicable only to a Distribution licensee and the said restrictions shall not apply to the Captive power generating units.

Summary

Issues Involved:
1. Disallowance of Depreciation on Jetties.
2. Addition of Unavailed Cenvat Credit.
3. Deletion of Disallowance of Staff Welfare Expenses.
4. Treatment of Sales Tax Exemption as Capital Receipt.
5. Deletion of Disallowance of Lease Rent Charges.
6. Deduction Claim under Section 80IA for Captive Power Generation Plant.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Jetties:
The assessee claimed depreciation of Rs. 1,44,71,000/- on jetties constructed at Narmada estuary, Dahej. The AO disallowed the depreciation, arguing that the rebate in wharfage/landing charges availed should reduce the asset's cost before claiming depreciation. The Ld. CIT(A) upheld this view. However, the Tribunal found that a similar issue had been decided in favor of the assessee in its own case for earlier years, holding that the expenditure on jetties constituted an intangible asset eligible for depreciation. Thus, the Tribunal directed the AO to allow the depreciation claimed by the assessee.

2. Addition of Unavailed Cenvat Credit:
The AO added Rs. 3,11,32,910/- to the value of closing stock, arguing that unutilized Cenvat credit should be included as per Section 145A. The Ld. CIT(A) confirmed this addition but allowed the duty/tax on an actual payment basis under Section 43B. The Tribunal, referencing its earlier decision and the jurisdictional High Court's rulings, held that if closing stock is increased by unavailed Cenvat credit, purchases should also be increased by a similar amount, resulting in no effect on profit. Therefore, the Tribunal directed the AO to delete the addition.

3. Deletion of Disallowance of Staff Welfare Expenses:
The AO disallowed Rs. 51,21,254/- contributed to various staff clubs under Section 40A(9). The Ld. CIT(A) deleted this disallowance, following decisions for earlier years. The Tribunal upheld this deletion, referencing its earlier decision in the assessee's favor for previous years.

4. Treatment of Sales Tax Exemption as Capital Receipt:
The AO treated Rs. 60,65,07,100/- received as sales tax exemption from the Gujarat Government as revenue receipt, following the Supreme Court's decision in Sahney Steels. The Ld. CIT(A) held it as a capital receipt, referencing the Special Bench decision in DCIT vs. Reliance Industries Ltd. and other Tribunal decisions. The Tribunal upheld the Ld. CIT(A)'s decision, noting consistency with earlier rulings in the assessee's favor.

5. Deletion of Disallowance of Lease Rent Charges:
The AO disallowed Rs. 34,51,96,415/- of lease rent, treating it as finance charges. The Ld. CIT(A) deleted this disallowance, following his earlier decisions. The Tribunal upheld this deletion, referencing its earlier decision and the Gujarat High Court's confirmation in the assessee's case.

6. Deduction Claim under Section 80IA for Captive Power Generation Plant:
The AO disallowed the deduction under Section 80IA, arguing that the market rate adopted by the assessee for power was incorrect. The Ld. CIT(A) allowed the deduction, referencing various case laws and Tribunal decisions. The Tribunal upheld this decision, noting that the rate used by the assessee was appropriate and consistent with earlier rulings.

Conclusion:
The Tribunal allowed the assessee's appeal for the assessment year 2005-06 and dismissed the Revenue's appeals for assessment years 2005-06 and 2006-07, consistently applying earlier favorable rulings in the assessee's own case across various issues.