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2016 (11) TMI 1705 - AT - Income TaxAssessment u/s 153C - proof of seized documents as belonging to assessee - HELD THAT - From the material seized, though there was a reference to the name of the assessee-firm, equally there are names of other parties on the same documents. There is nothing to indicate that these documents were disclaimed by NKG in whose case search was conducted. The AO has not referred to any material to indicate that the assessee is the owner of those seized documents. Therefore, we hold that the AO was not justified in exercising jurisdiction u/s 153C of the Act. Hence, the assessments made pursuant to issue of notice u/s 153C are hereby cancelled. Additional depreciation u/s. 32(1)(iia) - assessee as engaged in manufacturing or production of coal which is production activity - AO held that assessee is not engaged in any production / manufacturing activity and therefore the additional depreciation is not available for the deduction u/s 32(1)(iia) - whether the activity of extraction of coal amounts to the production? - CIT-A allowed deduction - HELD THAT - As decided in GS. ATWAL AND CO. (GUA). 2001 (2) TMI 32 - CALCUTTA HIGH COURT the point that the assessee is still not an industrial undertaking even though it might be engaged in production of coal is, in our opinion, also to be decided against the Revenue. Under the definition of an industrial undertaking given under s. 33B, Explanation mining activity would bring in the assessee within the definition of an industrial undertaking. But we need not import the definition of another section to the present one, although ordinarily the definition given in one section in an Act can be used for the purposes of another section unless the context indicates otherwise. So far as the assessee is concerned, an undertaking it certainly is. We have found no facts from which we can opine that the assessee is not an industrial undertaking. Ordinarily speaking if a manufacturing activity or an article producing activity is carried on, an undertaking carrying on such activity is to be classed as an industrial one. It might be small scale or large scale, that does not matter much. Even if an undertaking is manufacturing or producing articles, but is still not to be classed as an industrial one for this, clear indications have to be given as to why this difference should be made in case of the undertaking in question, so that it stands out from the general category. - Decided against revenue. Excess depreciation claim - AO opined that the machine has been used in the year under consideration for less than 180 days - HELD THAT - We find that the machine was put to use with effect from 02.10.2009 as evident from the Delivery Inspection Report, the Service Report of Volvo India Pvt. Ltd. and also from the report of Heavy earth moving machine. In the background of the above discussion and precedent we do not find any infirmity in the order of Ld. CIT(A) and according we uphold the same. This ground of Revenue is dismissed. Addition on account of festival celebration expense - allowable business expenses or not? - assessee has claimed festival celebration expense on its completion of 50 years of existence - HELD THAT - The assessee celebrated its Golden Jubilee in Maysore where all the stockholder of the assessee-company, such as principals, founders, suppliers, banners, employees were also invited - the Golden Jubilee festival was celebrated on the completion of its flagship Ravi Udyog it came into existence in 1972 to 1973 and the flagship company was the strategic partners of the assessee-company. The expenses were incurred wholly and exclusively for the purpose of business of assessee. There is no denial that expenditure was incurred by the appellant. The AO has brought no evidence on record to show that any part of the expenditure under consideration was bogus or of capital nature or incurred for the purpose other than wholly and exclusively for the purposes of the business of the appellant. Under the circumstances no justification of disallowance made by the AO especially, when the expenditure was supported by bills and vouchers - Decided against revenue.
Issues Involved:
1. Condonation of delay in filing Cross Objections (COs). 2. Validity of proceedings under section 153C of the Income Tax Act. 3. Eligibility for additional depreciation under section 32(1)(iia) of the Act. 4. Excess depreciation claim. 5. Disallowance of festival celebration expenses. 6. Disallowance under section 14A read with Rule 8D. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing COs: The assessee filed COs with a delay of 1036 days, attributing the delay to inadvertent errors by the accountant handling tax matters. The Departmental Representative raised no objections. The Tribunal deemed it fit to condone the delay and admitted the COs. 2. Validity of Proceedings Under Section 153C: The assessee challenged the initiation of proceedings under section 153C on the grounds that no satisfaction was recorded, and no incriminating documents were found during the search. The CIT(A) dismissed these objections, stating that the AO had recorded satisfaction and that the seized documents belonged to the assessee. The Tribunal, however, found that the documents were working papers of another group (NKG) and did not belong to the assessee. The Tribunal held that the AO did not establish that the documents belonged to the assessee, thus invalidating the proceedings under section 153C. Consequently, all related assessments were canceled. 3. Eligibility for Additional Depreciation Under Section 32(1)(iia): The Revenue contended that the assessee, engaged in coal mining, was not involved in manufacturing or production, thus not eligible for additional depreciation. The CIT(A) allowed the claim, referencing jurisdictional High Court decisions that considered coal mining as production. The Tribunal upheld the CIT(A)'s decision, affirming that the assessee's activities amounted to production, making it eligible for additional depreciation. 4. Excess Depreciation Claim: The AO disallowed full depreciation on an excavator, arguing it was used for less than 180 days. The CIT(A) found that the machine was commissioned and used from October 1, 2009, supported by third-party evidence. The Tribunal upheld the CIT(A)'s decision, granting full depreciation as the machine was used for more than 180 days. 5. Disallowance of Festival Celebration Expenses: The AO disallowed 50% of festival expenses, questioning the claim of celebrating 50 years of existence. The CIT(A) found the expenses were for a Golden Jubilee celebration of a flagship company and were supported by bills and vouchers. The Tribunal upheld the CIT(A)'s decision, noting the AO did not establish the expenses as non-business related. 6. Disallowance Under Section 14A Read with Rule 8D: The AO disallowed interest expenses related to tax-exempt investments. The CIT(A) upheld this disallowance. The Tribunal, referencing various decisions, noted that strategic investments in group companies should not attract disallowance under section 14A. The Tribunal directed the AO to exclude such investments from disallowance calculations, and the assessee's appeal was allowed. Conclusion: The Tribunal allowed the assessee's COs and appeals regarding the validity of section 153C proceedings, additional depreciation, and festival expenses. It also directed the AO to reconsider disallowance under section 14A for strategic investments. Revenue's appeals were dismissed, and the assessee's appeals were allowed or dismissed as not maintainable based on the specific grounds.
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