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2017 (8) TMI 1628 - AT - Income TaxDeduction u/s 80IA - disallowance of other income from the computation of profits and gains for the purpose of deduction - HELD THAT - Disallowance of other income from the computation of profits and gains for the purpose of deduction - HELD THAT - As relying on assessee s own case for the AYs 2007-08, 2008-09, 2009-10 2010-11 2017 (4) TMI 1530 - ITAT CHENNAI disallowance as made by the AO and as confirmed by the Ld.CIT(A) stands sustained. However, considering the alternate prayer of the assessee and also following decision of the Co-ordinate Bench of this Tribunal, the expenses in relation to the earning of the other income is estimated at 10% and the AO is directed to exclude 10% of the other income as expenses while computing the deduction u/s.80IA of the Act. In the result, Ground Nos.1 2 are partly allowed. Disallowance u/s 14A - HELD THAT - As decided in assessee s own case for the AYs 2007-08, 2008-09, 2009-10 2010-11 2017 (4) TMI 1530 - ITAT CHENNAI Rule 8D which came with effect from 24 th March, 2008, will be applicable only after the period 2008-09. Nevertheless, their Lordship has clearly noted that even prior to that year, A.O. was duty bound to compute disallowance under Section 14A by applying a reasonable method having regard to the facts and circumstances of the case. Therefore, despite the argument of learned A.R. that electricity bonds were taken under compulsion and there was no expenses incurred for earning the interest income, we are inclined to remit the issue back to the file of A.O. for consideration afresh. We, therefore, set aside the orders of the authorities below and remit on this aspect back to A.O. for consideration afresh in accordance with law. Additional depreciation in respect of the plant machinery - HELD THAT - On perusal of the decision of the Hon ble Supreme Court in the case of MP State Electricity Board 1968 (11) TMI 85 - SUPREME COURT and also the subsequent decision in the case of NTPC. 2002 (4) TMI 694 - SUPREME COURT , it has been held that electricity is goods. The Hon ble Orissa High Court in the case of Orissa power generation Corporation Ltd. 2015 (5) TMI 62 - ORISSA HIGH COURT has also held that generation of electricity is manufacture. This being so, as the assessee is in the business of manufacture of electricity and electricity are goods, we are of the view that the assessee is entitled to the claim of additional depreciation in respect of the plant machinery. In these circumstances, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue. In these circumstances, Ground Nos.2.1 to 2.3 of the Revenue s appeal stands dismissed. Allowability of Corporate Social Responsibility - CIT-A allowed claim - HELD THAT - On perusal of the provisions of Explanation-2 to Sec.37(i) clearly shows that the said Explanation has been introduced by the Finance Act, 2014 w.e.f. 01.04.2015 and consequently would be applicable from AY 2015-16 onwards. In these circumstances, we find no error in the findings of the Ld.CIT(A) on this issue, consequently finding of the Ld.CIT(A) on this issue stands confirmed. Ground of the Revenue s appeal stands dismissed. Depreciation on UPS - at 60% OR 15% allowed by the AO - HELD THAT - UPS being the integral part of the computer system, admittedly, is eligible for higher rate of depreciation at 60%. It is noticed that the Ld.CIT(A) had decided the issue by following the decision of the Hon ble Supreme Court in the case of CIT vs. BSES Rajdhani Power Ltd. referred to supra. This being so, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue. Depreciation at 15% in respect of the civil structures - HELD THAT - As fairly agreed by both the sides that this issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case for the AYs 2007-08, 2008-09, 2009-10 2010-11 2017 (4) TMI 1530 - ITAT CHENNAI as held that the civil structures made for drainage and water supply in the mines are to be treated as plant and entitled for higher rate of depreciation. Depreciation at 15% on building and electrical installations instead of 10% as applicable to buildings - HELD THAT - As this issue has been restored to the file of the AO for the earlier Assessment Years for readjudication on identical findings, the issue in this appeal also restored to the file of the AO for re-adjudication. Nature of expenditure - Treating the spares valued at more than ₹ 50.00 lakhs as Revenue expenditure instead of a capital. Surcharge recoverable from the State Electricity Board - assessee had not offered the surcharge recoverable by the assessee from the Electricity Board during the relevant AY on the belated settlement of power bill as such income - CIT(A) had allowed the same by following his predecessors orders - HELD THAT - As it is noticed that this issue was squarely covered by the decision of the Co-ordinate Bench of this Tribunal, respectfully following the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case, the findings of the Ld.CIT(A) on this issue stands reversed. However, as it has been submitted by the Ld.AR that the assessee has offered the said surcharge during the subsequent period to tax, the AO shall examine the assessee s claim as to whether the said surcharge has been offered to tax for the subsequent years and if it is found to have been offered to tax, the same is to be excluded from the income declared for these relevant Assessment Years. Revenue s appeal stands partly allowed for statistical purposes. Reopening of assessment - advance over burden removal expenditure and deduction u/s.80IA of the Act on the other incomes - HELD THAT - AR has not been able to show as to how both the issues had been examined by the AO in the course of the original Assessment Order. In any case, the denial of the deduction u/s.80IA of the Act in respect of the other incomes is the consequence of the decision of the Hon ble Supreme Court in the case of Liberty India Ltd. 2009 (8) TMI 63 - SUPREME COURT and consequently, we find no error in the re-opening. Consequently, Ground No.1(a b) stands dismissed. Deduction u/s.80IA of the Act in respect of the other incomes - Following the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case, we have already held that the assessee is entitled for deduction u/s.80IA of the Act of 10% as the estimated expenditure in respect of the other incomes. On identical findings, Ground Nos.2 3 of the assessee s appeal stands disposed of. Expenses on removal of the advanced over burden expenses - submission that the advanced over burden was an expenditure and the provisions of Sec.35E applied - HELD THAT - As relying on assessee's own case Expenditure on removing overburden in the continuous process of mining lignite from an old open cast mine is not expenditure for prospecting, etc. of minerals within the meaning of s.35E and also not capital expenditure but same is allowable revenue expenditure under s.37(1). Addition of financial assurance - HELD THAT - On perusal of the guidelines more specifically in Para No.7 which has been extracted above clearly shows that for financial assurance, the mining company is to open an Escrow with schedule bank with the Coal Controller Organization as the exclusive beneficiaries. This has not been examined by the AO. This being so, we are of the view that this issue to be restored to the file of the AO for re-adjudication and we do so. The AO shall examine and verify as to whether the said amount has been deposited in such Escrow account as has been prescribed in the guidelines. If there is such deposit in the Escrow account, then admittedly, the same is liable to be allowed. Further, also considering the submission of the Ld.AR that the assessee has offered this amount subsequently as its income in the subsequent Assessment Years, the AO is to verify as to whether any part of the balance expenditure claimed has been offered to tax in the subsequent years.
Issues Involved:
1. Disallowance of other income for deduction under section 80IA. 2. Disallowance under section 14A. 3. Additional depreciation on plant and machinery. 4. Expenses claimed under Corporate Social Responsibility (CSR). 5. Depreciation on UPS and electrical installations. 6. Treatment of spares as revenue expenditure. 7. Surcharge recoverable from State Electricity Board. 8. Reopening of assessment. 9. Expenses on removal of advanced overburden. 10. Mine closure expenses. Issue-wise Detailed Analysis: 1. Disallowance of Other Income for Deduction under Section 80IA: The assessee included various incomes such as interest from employees, miscellaneous income from sales, and penalties as profits for deduction under section 80IA. The AO disallowed these, stating they were not derived from the business. The CIT(A) upheld the disallowance except for handling charges. The Tribunal, referencing the Supreme Court's decision in Liberty India Ltd. and its own earlier judgments, confirmed the disallowance but allowed 10% of the other income as expenses while computing the deduction. 2. Disallowance under Section 14A: The issue of disallowance under section 14A was restored to the AO for re-adjudication, following the Tribunal's earlier decision in the assessee’s own case. The AO was directed to compute the disallowance by applying a reasonable method. 3. Additional Depreciation on Plant and Machinery: The AO denied additional depreciation, claiming the assessee's activities did not constitute manufacturing. The CIT(A) allowed the claim, referencing Supreme Court decisions that generation of electricity is manufacturing. The Tribunal upheld the CIT(A)'s decision, confirming the assessee's entitlement to additional depreciation. 4. Expenses Claimed under Corporate Social Responsibility (CSR): The AO disallowed CSR expenses, citing Explanation-2 to Section 37(i). The CIT(A) allowed the expenses, noting the explanation applied from AY 2015-16 onwards. The Tribunal confirmed the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. 5. Depreciation on UPS and Electrical Installations: The CIT(A) allowed 60% depreciation on UPS, treating it as part of the computer system, and 15% on civil structures used in mining operations. The Tribunal upheld these decisions, referencing the Supreme Court and its own earlier rulings. For electrical installations, the issue was remitted to the AO to differentiate between installations for mining activities (15% depreciation) and those for buildings (10%). 6. Treatment of Spares as Revenue Expenditure: The CIT(A) treated spares valued over ?50 lakhs as revenue expenditure, following the jurisdictional High Court's decision in the assessee’s own case. The Tribunal upheld this treatment. 7. Surcharge Recoverable from State Electricity Board: The AO taxed the surcharge receivable, considering it accrued income. The CIT(A) reversed this, but the Tribunal restored the AO's decision, emphasizing the certainty of recovery under the tripartite agreement. The AO was directed to verify if the surcharge was offered to tax in subsequent years and adjust accordingly. 8. Reopening of Assessment: The assessee challenged the reopening of the assessment, claiming it was based on a change of opinion. The Tribunal found no error in the reopening, noting the original assessment did not fully examine the deduction under section 80IA and followed the Supreme Court's decision in Liberty India Ltd. 9. Expenses on Removal of Advanced Overburden: The AO disallowed these expenses, applying Section 35E. The CIT(A) allowed them, referencing the Tribunal's earlier decision treating such expenses as revenue expenditure. The Tribunal upheld the CIT(A)'s decision. 10. Mine Closure Expenses: The AO disallowed mine closure expenses, considering them as provisions. The CIT(A) allowed them. The Tribunal restored the issue to the AO to verify if the expenses were deposited in an Escrow account as per guidelines and if any amounts were offered to tax in subsequent years. Conclusion: The Tribunal provided detailed rulings on each issue, often referencing its own earlier decisions and those of higher courts. The decisions were a mix of upholding the CIT(A)'s orders and remanding issues back to the AO for further verification.
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