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2018 (12) TMI 1882 - AT - Income TaxDisallowance made on account of replacement of meters - HELD THAT - Addition as consistently allowed by the ITAT and the Hon ble Bombay High Court in assessee s own case in assessee s favour. The CIT(A) after relying on these decisions of the Tribunal and the High Court have deleted the disallowance - Thus we do not find any reason to interfere in the order of CIT(A) for deleting disallowance on account of replacement of meters. Revised claim filed before the AO without filing revised return - revised claim with respect to long term capital gains earned on sale of units which was not accepted by the AO on the plea that assessee has not filed revised return of income - claim of carry forward of long term capital loss - HELD THAT - CIT(A) accepted assessee s claim by observing that the revised claim filed before the AO without filing revised return are required to be admitted in view of the decision of Pruthvi Brokers Shareholders Pvt. Ltd 2012 (7) TMI 158 - BOMBAY HIGH COURT . We found that all the facts and figures are very much available before the AO. Therefore the CIT(A) has verified assessee s claim wherein he found that since units were held for more than 12 months assessee was eligible for benefit of long term capital gain. Accordingly he directed the AO to exclude the amount from the total short term capital gain and to allow carry forward of long term capital loss after having the detailed observation - Detailed finding so recorded by CIT(A) are as per material on record which has not been controverted by bringing any positive material on record. We therefore do not find any reason to interfere in the findings of CIT(A). Disallowance u/s 14A - disallowance of interest under Rule 8D(2)(ii) - HELD THAT - CIT(A) has given relief with respect to the proportionate interest free funds alleged to be utilized for exempt investment. The CIT(A) has correctly relied on the judicial pronouncements of jurisdictional High Court in the case of HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT and Reliance Utilities Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT for reaching to the conclusion that no disallowance of interest is warranted in case assessee is having sufficient interest free funds. From the record we also observe that assessee was having sufficient free funds which was more than the investment so made. Accordingly following the decision of Jurisdictional High Court as mentioned by CIT(A) we do not find any infirmity in the order of CIT(A) for deleting disallowance of interest under Rule 8D2(ii) of the IT Act. With regard to the assessee s contention for excluding investment in subsidiaries while working out disallowance under Rule 8D(ii) find no merit in the action of CIT(A) and in so far as recently in the case of Maxoop Investment 2018 (3) TMI 805 - SUPREME COURT held that investment in subsidiary should not be excluded for working out disallowance under Rule 8D(2)(ii) of the IT Act. Accordingly we reverse the order of CIT(A) on this issue and upheld the order of AO. Computation of book profit of 115JB - HELD THAT - Issue under consideration is covered by the order of the ITAT in assessee s own case for the A.Y.2010-11 and 2011-12 wherein it was held that provisions u/s.115JB is not applicable to the electricity supply company. In the instant case the assessee has followed the accounting policies under the Electricity Supply Act and prepared its accounts in view of those very policies. Accordingly assessee did not prepare the accounts in accordance with Part II and Part III of schedule VI of the Companies Act as the same is not applicable hence provisions u/s.115JB were not applicable in assessee s case. No infirmity in the order of CIT(A).
Issues Involved:
1. Treatment of expenditure on replacement of electricity meters. 2. Allocation of head office expenses to specific units for deduction under section 80IA. 3. Exclusion of investments in subsidiary companies while calculating disallowance under section 14A read with Rule 8D. 4. Applicability of section 115JB (Minimum Alternate Tax) to an electricity/power generating and distributing company. 5. Rejection of revised capital gain claims without a revised return. 6. Disallowance under section 14A for expenses related to exempt income. Detailed Analysis: 1. Treatment of Expenditure on Replacement of Electricity Meters: The Assessing Officer (AO) disallowed the assessee's claim for deduction of Rs. 4,00,36,015/- spent on replacing old electricity meters, treating it as capital expenditure. The CIT(A) allowed the assessee’s claim, referencing consistent decisions by the ITAT and the Hon’ble Bombay High Court in favor of the assessee in earlier years. The Tribunal upheld the CIT(A)'s decision, following the precedent set by higher courts, and found no reason to interfere with the CIT(A)’s order. 2. Allocation of Head Office Expenses to Specific Units for Deduction under Section 80IA: The AO allocated head office expenses to Goa, Samalkot, and Windmill units, reducing the deduction under section 80IA. The CIT(A) deleted this allocation, relying on previous decisions by the Tribunal and the Bombay High Court, which had not admitted the Department’s appeals in similar cases. The Tribunal confirmed the CIT(A)’s order, noting that the issue was covered by previous favorable decisions for the assessee. 3. Exclusion of Investments in Subsidiary Companies while Calculating Disallowance under Section 14A read with Rule 8D: The AO included all investments capable of earning tax-free income for disallowance calculation under section 14A. The CIT(A) deleted the proportionate interest disallowance under Rule 8D(2)(ii), stating that the assessee had sufficient interest-free funds, following the jurisdictional High Court’s rulings. However, the Tribunal reversed the CIT(A)'s decision regarding the exclusion of investments in subsidiaries, citing the Supreme Court’s ruling in Maxopp Investment, which mandated including such investments for disallowance calculations. 4. Applicability of Section 115JB (Minimum Alternate Tax) to an Electricity/Power Generating and Distributing Company: The AO applied section 115JB to the assessee. The CIT(A) deleted this computation, referencing the ITAT’s decisions for earlier years, which held that section 115JB was not applicable to companies following the Electricity Supply Act’s accounting policies. The Tribunal upheld the CIT(A)’s order, confirming that the provisions of section 115JB were not applicable to the assessee. 5. Rejection of Revised Capital Gain Claims without a Revised Return: The AO rejected the assessee’s revised capital gain claims, citing the Supreme Court’s decision in Goetze India Ltd. The CIT(A) allowed the assessee’s claim, referencing the jurisdictional High Court’s ruling in Pruthvi Brokers & Shareholders Pvt. Ltd., which permitted appellate authorities to consider additional claims not made in the return of income. The Tribunal agreed with the CIT(A), noting that all relevant facts and figures were available before the AO and that the assessee was eligible for long-term capital gain benefits. 6. Disallowance under Section 14A for Expenses Related to Exempt Income: The AO disallowed Rs. 79,01,87,173/- under section 14A, considering all investments capable of earning tax-free income. The CIT(A) deleted the proportionate interest disallowance under Rule 8D(2)(ii), following the jurisdictional High Court’s rulings that interest-free funds were sufficient. The Tribunal upheld the CIT(A)’s decision on this point, confirming that no disallowance of interest was warranted due to sufficient interest-free funds. Conclusion: The Tribunal allowed both the assessee’s and the Revenue’s appeals in part, confirming the CIT(A)’s decisions where they aligned with higher courts’ precedents and reversing where the Supreme Court’s recent ruling applied. The order was pronounced on 27/12/2018.
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