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2017 (3) TMI 1871 - AT - Income TaxDepreciation on Plant Machinery - depreciation claimed by the assessee on the basis of letter of approval - HELD THAT - Since required certificate has been provided by the assessee which has been examined by the Ld. CIT(A), and only thereafter relief has been provided by him in line with earlier years orders which have been confirmed by the Tribunal. Ld. DR could not point out anything incorrect or wrong in the factual finding of the Ld. CIT(A). Under these circumstances, we do not find any justification to interfere in the order of the Ld. CIT(A) on this issue. Thus, ground 1 raised by the Revenue is hereby dismissed. Claim made u/s.32(2AB) - assessee had furnished only a certificate received from the Chartered Accountant and certain correspondence with Ministry of Science and Technology to claim the weighted deduction u/s 35(2AB). He was of the opinion that the assessee has not fulfilled the necessary conditions laid down in clause (i) to (v) of the above section and since no evidences were brought before him to show that the assessee had entered into an agreement with the prescribed authority - HELD THAT - During the course of hearing before us, Ld. Counsel stated that this issue is covered in favour of the assessee by the decisions of the Tribunal for earlier years. Though in the earlier years, this issue was sent back to the file of the AO for the limited purpose of verification of order of approval in form 3CM, but in the year under appeal, the said approval in form 3CM was filed before the lower authorities, and Ld.CIT(A) had granted relief after verifying the same. Therefore, no purpose would be served in sending the matter back to the file of lower authorities especially when nothing wrong has been pointed out in the findings of Ld. CIT(A). DR did not make any serious objection to the proposition. Under these circumstances, we find that the relief has been granted by the Ld. CIT(A) after verifying the requisite approval in proper form. Nothing wrong or contradictory has been brought before us by the Ld. DR. Thus, we do not find any need or justification to interfere in the order of the Ld. CIT(A). Therefore, the order of the Ld. CIT(A) is upheld. Thus, ground of the Revenue is dismissed. Disallowance u/s.36(1)(iii) - since the assessee failed to discharge the onus and did not satisfactorily demonstrate that only interest free funds were advanced as loans to sister concern, the AO disallowed proportionate interest @12% on the interest free loans advanced - HELD THAT - Issue decided in favour of assessee on detailed submissions were made by the assessee wherein it was inter-alia submitted that the assessee had sufficient funds to give these loans and in any case, these amounts were given for the purpose of business of the assessee. Nature of expenditure - addition on computer software - AO had found that the assessee had purchased MS Window and held that being a new software,the expenditure was to be capitalised - allowed depreciation of ₹ 9000/-(@30%) by making addition - HELD THAT - Software packages like MS Window 2008 were utility packages,that they were for regular business use, that such programmes help the assessee to carry-out the business more efficiently and did not enhance the value of profit making apparatus.Finally,deleting the addition made by the AO he held that the expenditure incurred by the assessee for purchasing software should be treated as revenue expenditure. Before us, the DR stated that the matter could be decided on merits. The AR relied upon the judgment of Asahi India Safety Glass Ltd. 2011 (11) TMI 2 - DELHI HIGH COURT - We find that the issue stands covered by the above order of the Hon ble Delhi High Court. Insurance claim - HELD THAT - We find that there was fire in the factory premises of Avinash Drugs Ltd. in AY 2005-06, that it made a claim before insurance company with regard to damage caused by fire, that during the AY.2009-10 Avinash Drugs Ltd. merged with the assessee,that it received insurance claim about damage to Plant Machinery and its vehicle.As the money received by the assessee was against the capital asset, therefore, same has to be treated in the nature of capital receipt.In our opinion, assessee had rightly reduced the said sum while computing the income for the year under consideration. As there is no legal or factual infirmity in the order of the FAA,so confirming the same, we dismiss last Ground of appeal,raised by the AO. Disallowance u/s 14A r.w.r.8D - HELD THAT - We direct the AO to delete the disallowance on account of interest and follow the direction of the Tribunal with regard to other disallowance.(0.5% disallwoance).First Ground of appeal is decided in favour of the assessee,in part. Disallowance of foreign exchange fluctuation - HELD THAT - We find that the assessee had availed foreign currency term loan from SBI and a loan by way of ECB,that it had claimed the loss arising on account of fluctuation in foreign exchange borrowings as revenue expenditure, that the FAA,while confirming the order of the AO,held that the loss claimed by the assessee was not revenue loss,but was capital loss.The issue of revenue/capital loss has been subject of extensive litigation. It is a fact that the loan from the SBI and the ECB was availed by the assessee for purchasing capital assets and the loss arising out of the fluctuation in foreign exchange was not relatable to circulating capital or stock in trade of the assessee.It is not the case of the assessee that borrowed amount for the purpose of import of capital goods was utilised for other purposes or that the loan amount had undergone a change and had assumed a new character.It was a plain and simple transaction of purchasing the capital goods,so any loss related with it has to be considered as capital loss.It is also found that the AO had allowed depreciation on the assets - In the case before us,the FAA has not held that the liability was contigent.He has given a categorical finding of fact of purchase of machinery i.e.capital asset. - Decided against assessee. Disallowance of additional depreciation u/s.32(1)(iia) - HELD THAT - We find that the issue stands covered in favour of the assessee by the judgment delivered by the Hon ble Karnataka High Court in the case of Rittal India Pvt.Ltd. 2015 (1) TMI 1248 - KARNATAKA HIGH COURT as held Additional depreciation allowable under section 32(1)(iia) of the Income-tax Act, 1961is a one-time benefit to encourage industrialisation and the relevant provisions have to be construed reasonably and purposively. The additional depreciation is allowed in the year of purchase and if in the year of purchase the assessee is eligible only for 50 per cent. depreciation, the balance 50 per cent. can be carried forward for the subsequent year. Disallowance u/s.40a(ia) - Prior period expenses - HELD THAT - We find that the AO or the FAA has not doubted the genuineness of incurring of expenditure, that the assessee had on its own disallowed the expenses in question in AY.2010-11,that taxes were deducted and paid before the due date i.e.the due date of filing of return of income as per the provisions of section 139(1)of the Act.Considering the peculiar circumstances and facts of the case,we direct the AO the allow the expenditure during the year under appeal. GOA-7 is decided in favour of the assessee. Wrong entry passed by Amarjyot Chemicals Limited (ACL) - HELD THAT - Before us,the AR stated that the assessee had not made any claim for credit, that the AO should be directed to verify the claim. The DR left the issue to the discretion of the Bench. After considering the available material,we are of the opinion that matter should be restored back to the file of AO for further verification.He is directed to afford a reasonable opportunity to the assessee and decide the issue afresh.Ground No.8 is decided in favour of the assessee,in part.
Issues Involved:
1. Depreciation on Plant & Machinery 2. Disallowance under Section 32(2AB) 3. Interest Disallowance under Section 36(1)(iii) 4. Addition on Computer Software Purchase 5. Addition on Insurance Claim 6. Disallowance under Section 14A 7. Foreign Exchange Fluctuation Loss 8. Additional Depreciation under Section 32(1)(iia) 9. Disallowance under Section 40(a)(ia) 10. Alleged Wrong Entry by Amarjyot Chemicals Limited 11. Depreciation on Assets Purchased from Pravin Metal Corporation Issue-wise Detailed Analysis: 1. Depreciation on Plant & Machinery: The AO challenged the allowance of ?2.53 crores depreciation on Plant & Machinery. The Tribunal referenced a previous decision for AY 2008-09, where the issue was resolved in favor of the assessee due to the approval from DSIR. The Tribunal upheld the CIT(A)’s decision to allow the depreciation, as the required certificate was provided and verified. Thus, this ground was decided against the AO. 2. Disallowance under Section 32(2AB): The AO disallowed ?72.37 lakhs claimed under Section 32(2AB). The Tribunal noted that in AY 2008-09, the issue was decided in favor of the assessee, where the necessary approval in Form 3CM was provided and verified by the CIT(A). The Tribunal found no reason to interfere with the CIT(A)’s order and dismissed the AO’s ground. 3. Interest Disallowance under Section 36(1)(iii): The AO disallowed ?1.79 crores interest on loans advanced to subsidiary companies. The Tribunal referenced decisions for AY 2008-09 and 2007-08, where it was established that the assessee had sufficient funds to advance loans and the loans were for business purposes. The Tribunal upheld the CIT(A)’s decision and dismissed the AO’s ground. 4. Addition on Computer Software Purchase: The AO capitalized the purchase of MS Windows software for ?30,000, allowing depreciation of ?9,000 and adding ?21,000. The CIT(A) treated the expenditure as revenue, referencing the Delhi High Court's decision in Asahi India Safety Glass Ltd. The Tribunal upheld the CIT(A)’s decision, dismissing the AO’s ground. 5. Addition on Insurance Claim: The AO added ?15.03 lakhs received as an insurance claim to the assessee's income. The CIT(A) held that the claim was for damage to Plant & Machinery and treated it as a capital receipt, reducing it from the WDV of Plant & Machinery. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the AO’s ground. 6. Disallowance under Section 14A: The AO disallowed ?1.86 crores under Section 14A r.w.r. 8D. The Tribunal referenced its decision for AY 2008-09, directing the AO to delete the disallowance on account of interest and to exclude investments in subsidiary/group companies while computing the disallowance. The Tribunal partly allowed the assessee's ground. 7. Foreign Exchange Fluctuation Loss: The AO treated the foreign exchange fluctuation loss of ?11.86 crores as a capital loss. The CIT(A) upheld this, stating the loss was related to capital assets. The Tribunal agreed, noting the loss was not related to circulating capital or stock in trade, and confirmed the CIT(A)’s order, deciding against the assessee. 8. Additional Depreciation under Section 32(1)(iia): The AO disallowed 10% additional depreciation of ?1.85 crores on machinery purchased in AY 2008-09. The CIT(A) upheld this, but the Tribunal referenced the Karnataka High Court's decision in Rittal India Pvt. Ltd., allowing the balance 50% depreciation to be carried forward. The Tribunal decided in favor of the assessee. 9. Disallowance under Section 40(a)(ia): The AO disallowed ?7.83 lakhs for non-deduction of TDS on prior period expenses. The CIT(A) upheld this, but the Tribunal found the expenses were genuine and TDS was paid before the due date. The Tribunal directed the AO to allow the expenditure, deciding in favor of the assessee. 10. Alleged Wrong Entry by Amarjyot Chemicals Limited: The AO added ?25,036 based on AIR information. The assessee provided an affidavit from ACL stating the TDS was inadvertently deducted. The Tribunal directed the AO to verify the claim and decide afresh, partly allowing the assessee's ground. 11. Depreciation on Assets Purchased from Pravin Metal Corporation: The Tribunal noted that this issue was set aside to the AO in earlier years. The Tribunal directed the AO to decide the issue afresh, following the directions given in earlier orders, partly allowing the assessee's ground. Conclusion: The appeal filed by the assessee was partly allowed, and the appeal of the AO was dismissed. The Tribunal provided detailed directions on each issue, ensuring consistency with earlier decisions and legal precedents.
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