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2022 (2) TMI 1220 - AT - Income TaxTP Adjustment - addition on account of adjustment in arms length price - AO while computing the total income of the assessee, made an adjustment in terms of provisions of section 92CA(1) on account of determination of arm's length price of international transaction entered into by the assessee - HELD THAT - Since the Ld. CIT(A) adjudicated the issue following his order for Assessment Year 2004-05 which has been adjudicated by the ITAT vide its order for the said year 2010 (9) TMI 1150 - ITAT AHMEDABAD as afore-stated, restoring the issue to the A.O. for fresh adjudication., the issue stands covered by the decision of the ITAT in the case of the assessee for Assessment Year 2004-05 as above. Accordingly, the issue is restored back to the A.O. to be decided in accordance with the direction of the ITAT in Assessment Year 2004-05. Disallowance of claim of depreciation made by AO reducing the depreciation claimed for the year under consideration by enhancing depreciation for A.Y. 2001/02 - HELD THAT - In view of the above, since admittedly identical issue stands decided against the assessee in the preceding year i.e assessment year 2004-05 2010 (9) TMI 1150 - ITAT AHMEDABAD the issue raised in the present ground stands squarely covered by the same following which we confirm the order of the Ld. CIT(A) upholding the disallowance of depreciation. Disallowance as per Rule 8D r.w.s. 14A(2) - Sufficiency of own funds - HELD THAT - We are aware of the proposition of law settled by the Hon ble Apex Court in the case of CIT (large tax buyer unit) vs. Reliance Industries Ltd. 2019 (1) TMI 757 - SUPREME COURT which was followed in another recent decision of the Hon ble Apex Court in the case of South Indian Bank Ltd 2021 (9) TMI 566 - SUPREME COURT to the effect that where there is a finding of fact that interest free funds available to the assessee was sufficient to meet its investment it will be presumed that the investments were made from such interest free funds. Therefore it is settled law that where sufficient own funds are available and the investments have been made out of mixed funds, no disallowance u/s. 14A is called for. In the facts of the present case, the assessee had canvassed the facts before the Ld. CIT(A) that it had own funds of 28,524.85 lacs and had generated cash of 4,770.83 lacs during the year. That in the past 10 years from 1995-96 to 2004-05, the assessee was having sufficient own funds ranging from 20,593 lacs to 20,011 lacs which was more than sufficient for making the impugned investments of ₹ 6902 lacs. Since these facts have remained uncontroverted by the Ld. CIT(A) as also the fact that the investments have been made out of mixed funds, we have no hesitation in holding that no disallowance of interest u/s. 14A was warranted in the impugned case. Disallowance of administrative expenses - assessee has contended that other than depositing cheques of dividend earned no other expense was incurred by the assessee - HELD THAT - The counter of the Revenue to the same we find does not address this contention of the assessee and is purely presumptive, that considering the huge amount of administrative expenditure incurred some amount must relate to the earning of exempt income. But at the same time considering the quantum of investment made, some amount of expenses must have been incurred in relation to maintaining the same and earning income therefrom. Considering the entire facts and circumstances therefore the disallowance of expenses with respect to administrative expenses is restricted to ₹ 1,00,000/-The balance disallowance of Rs,.13,00,410/- is directed to be deleted. Disallowance on account of writing off of irrecoverable balances - whether irrevocable balances written off by the assessee were capital or revenue in nature? - HELD THAT - There is nothing on record clarifying the exact purpose for which the expense was incurred. The assessee has claimed that the same related to the first installment paid in lieu of technical collaboration agreement entered into with a party namely M/s. Consultare Makaya Aso. Ltd. Besides this, the assessee has referred to the Government approval granted for making the payment. We have perused the contents of this document and except for stating that it relates to technical knowhow fees.,there is nothing else in the said document to bring out the exact nature of the payment.Even the Revenue, we find has no basis for treating the same as capital in nature. It goes without saying that the real test for determining whther the payment was revenue or capital in character entirely depends on the pupose for which it was incurred. The same can be determined from the technical collaboration agreement. In the absence of the same, the claim of either of the parties merits no consideration and it is not possible to adjudicate on the issue. We, therefore, considerate it fit to restore this matter to the Assessing Officer to determine the nature of the amount written off by the assessee from the contents of the technical collaboration agreement and any other document which he considers necessary. The A.O. is directed thereafter to adjudicate this issue in accordance with law. Needless to add, the assessee be granted due opportunity of hearing. Disallowance of deduction claimed for new power plant made by AO denying the benefit u/s 80IA - HELD THAT - We see no reason to interfere in the order of the Ld. CIT(A) who has followed the order of the ITAT in assessment year 2001-02 2016 (9) TMI 1625 - ITAT AHMEDABAD while denying the claim of deduction u/s. 80IA of the Act on new power plant. Disallowance of captive power plant denying the benefit u/s 80IA - whether for the purpose of computing profits earned by captive power plant for the purposes of claiming deduction u/s.80IA(4) of the Act, the credit for captive consumption of electricity is to be the selling price adopted by the State Electricity Board i.e. (GEB) or the purchase price of GEB? - HELD THAT - This identical issue, it has been pointed out to us by the Ld. Counsel for the assessee, has already been dealt with by the Jurisdictional High Court in the case of Gujarat Alkalies Chemicals Ltd. Alembic Ltd 2012 (3) TMI 267 - GUJARAT HIGH COURT - Decide in favour of assessee.
Issues Involved:
1. Addition on account of adjustments to the Arm's Length Price. 2. Disallowance of depreciation. 3. Disallowance under Section 14A of the Income Tax Act. 4. Disallowance of writing off irrecoverable balances. 5. Disallowance of deduction under Section 80IA for a new power plant. 6. Reduction in deduction under Section 80IA for a captive power plant. Detailed Analysis: 1. Addition on Account of Adjustments to the Arm's Length Price: The issue pertains to an addition of ?2,70,80,490/- made by the Assessing Officer (AO) due to adjustments to the Arm's Length Price (ALP) of transactions with Associated Enterprises (AE) under Section 92CA of the Income Tax Act. The CIT(A) upheld the AO's decision by following the order from the previous assessment year (2004-05). The ITAT, in its order for the assessment year 2004-05, had set aside the issue to the AO for fresh adjudication. Consequently, the ITAT in the present case also restored the issue back to the AO for fresh adjudication following the same directions. 2. Disallowance of Depreciation: The disallowance of depreciation amounting to ?2,66,83,892/- was due to the AO allowing depreciation in the assessment year 2001-02, which the assessee had not claimed. The AO computed the depreciation on a reduced Written Down Value (WDV) due to the depreciation allowed in 2001-02. The CIT(A) upheld the AO's decision, noting that the ITAT had confirmed the AO's action in the assessment year 2001-02. The ITAT, acknowledging that the issue was covered against the assessee by its own order in the preceding year, confirmed the disallowance of depreciation. 3. Disallowance under Section 14A: The AO disallowed ?14,00,410/- under Section 14A read with Rule 8D for expenses related to earning exempt income. The CIT(A) confirmed the disallowance, despite acknowledging that Rule 8D was not applicable for the assessment year in question. The ITAT noted that the assessee had sufficient own funds for making the investments and, therefore, no disallowance of interest was warranted. The ITAT restricted the disallowance of administrative expenses to ?1,00,000/- and directed the deletion of the balance disallowance of ?13,00,410/-. 4. Disallowance of Writing Off Irrecoverable Balances: The assessee claimed a write-off of ?16,26,668/- as irrecoverable balances related to a technical collaboration agreement. The AO treated the expenditure as capital in nature and disallowed the claim. The CIT(A) upheld the AO's decision. The ITAT found that the exact nature of the payment was unclear and restored the matter to the AO to determine the nature of the amount written off from the technical collaboration agreement and adjudicate the issue accordingly. 5. Disallowance of Deduction under Section 80IA for New Power Plant: The assessee was denied a deduction of ?4,90,84,017/- under Section 80IA for a new power plant, as the claim had been consistently denied by the department and upheld by the ITAT in the assessment year 2001-02. The ITAT noted that the High Court had set aside the ITAT's order in the Miscellaneous Application, restoring the original order which denied the deduction. The ITAT upheld the CIT(A)'s decision to deny the deduction. 6. Reduction in Deduction under Section 80IA for Captive Power Plant: The AO reduced the deduction claimed under Section 80IA for the captive power plant by ?3,35,59,689/- by adopting a lower rate for the credit of electricity generated. The CIT(A) upheld the AO's decision. The ITAT, however, noted that the issue was covered by the Jurisdictional High Court's decision in favor of the assessee, which allowed the credit for captive consumption at the selling price adopted by the State Electricity Board. The ITAT allowed the assessee's claim for deduction under Section 80IA for the captive power plant. Conclusion: The ITAT provided a detailed analysis of each issue, restoring some matters for fresh adjudication and confirming or allowing claims based on precedents and factual findings. The judgment ensures that the assessee is given due consideration and opportunity to present its case, adhering to legal principles and established jurisprudence.
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