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2022 (7) TMI 1442 - AT - Income TaxCapital Grants Subsidies and Consumers Contribution - addition of 15% of Capital Grants as against 10% offered by assessee - HELD THAT - As decided in own case 2020 (11) TMI 301 - ITAT AHMEDABAD as per provisions of section 43(1) of the Act the capital grant should be reduced from the cost/WDV of the relevant asset and thereafter the depreciation is to be calculated. Thus the capital grant receipt in respect of asset on which depreciation is allowable at the rate different from 15% should be worked out as per the applicable rate. The DR could not point out any mistake in the above submission of the assessee which we find is in accordance with law. We therefore set aside the orders of the lower authorities on this issue and restore the matter back to the file of the AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset and applying the actual rate of depreciation which relate to these assets. Thus this ground of appeal of the assessee is allowed for statistical purpose . Correct head of income - Income as other income OR business income - interest on loans to staff and other advances - HELD THAT - As decided in the case of Odisha Power Generation Corporation Ltd 2022 (3) TMI 539 - ORISSA HIGH COURT no difficulty in accepting the submission of the Assessee that the interest received on advances and loans given to its employees are receipts in normal course of carrying its business and should be considered as income derived from its essential business activities. Likewise the late payment by GRIDCO for the electricity supplied is sought to be made up by GRIDCO by issuing bonds on which the Assessee earns interest. This also therefore has a direct nexus with the essential business activity of the Assessee. We find it fit and proper to direct the Ld. AO to consider the issue afresh upon examining the same in regard to the head of income upon considering the relevant evidence Disallowance of prior period expenses - HELD THAT - The Coordinate Bench in 2020 (11) TMI 301 - ITAT AHMEDABAD has set-aside the identical issue to the file of the Ld. AO. for de novo adjudication upon giving an opportunity of being heard to the assessee and upon considering the evidence which the assessee may choose to file at the time of hearing of the matter. This ground is allowed for statistical purposes. Nature of receipt - Guarantee fees paid to the Government of Gujarat - HELD THAT - As carefully considered the judgment passed by the Coordinate Bench in 2020 (2) TMI 1223 - ITAT AHMEDABAD While deciding the ground in favour of the assessee by upholding the order passed by the Ld. CIT(A) in the appeal preferred by the Revenue concluded where no such asset is created it would be indicative of an expenditure which was not capital in nature. Another test relates to the principle of enduring benefit . Enduring benefit may be in the form of long lasting use of an asset or the acquisition of a right to exploit certain commercial processes etc. In the instant case the assessee did not acquire any right to exploit a commercial technology or process and neither was the benefit enduring since the payment of guarantee commission was an annual charge. The benefit derived from payment of such commission thus lasted for exactly one year only. Such shortlived benefit cannot be categorized as enduring . Hence we are inclined to the view that the payment of guarantee commission was a revenue expenditure. Disallowance of claim of raising finance - HELD THAT - No reason to interfere of the order passed by the Ld. CIT(A) in deleting the disallowance of claim of cost of raising finance as relying on 2020 (2) TMI 1223 - ITAT AHMEDABAD . Loss due to pilferage shortage of material in transit etc. to be allowed as relying on own case 2015 (6) TMI 1096 - ITAT AHMEDABAD . MAT u/s 115JB - addition of Prior Period Expenses made while computing Book Profit computed u/s 115JB - HELD THAT - As relying on M/s. Ashirwad Hgiene Pvt. Ltd 2016 (1) TMI 1501 - ITAT CHANDIGARH no adjustment on account of prior period expenses is to be made in the net profit of the company for arriving at the book profits u/s 115JB of the Act. The appeal of the assessee is therefore allowed.
Issues Involved:
1. Addition of Capital Grants and Subsidies 2. Classification of Income as "Other Income" vs. Business Income 3. Disallowance of Prior Period Expenses 4. Initiation of Penalty Proceedings under Section 271(1)(c) 5. Charging of Interest under Sections 234B, 234C, and 234D 6. Deletion of Guarantee Fees Paid to the Government of Gujarat 7. Deletion of Disallowance of Cost of Raising Finance 8. Deletion of Disallowance of Loss Due to Pilferage and Shortage of Material in Transit 9. Deletion of Addition of Prior Period Income 10. Deletion of Addition of Prior Period Expenses while Computing Book Profit under Section 115JB Issue-wise Detailed Analysis: 1. Addition of Capital Grants and Subsidies: The assessee challenged the addition of 15% of Capital Grants and Subsidies as against 10% offered. The Tribunal remanded the issue back to the Assessing Officer (AO) for re-adjudication, directing the AO to verify the proportionate amount of grant relating to different assets and apply the actual rate of depreciation on those assets. 2. Classification of Income as "Other Income" vs. Business Income: The assessee contested the classification of Rs. 1,79,18,000/- as "Other Income" instead of Business Income. The Tribunal directed the AO to reconsider the issue in light of the Orissa High Court's decision in Odisha Power Generation Corporation Ltd. vs. ACIT, which held that interest income from advances to employees and other operational receipts should be considered as business income. 3. Disallowance of Prior Period Expenses: The assessee disputed the disallowance of prior period expenses amounting to Rs. 8,79,06,000/-. The Tribunal remanded the issue to the AO for fresh adjudication, instructing the AO to verify the facts and consider the expenses as per the Gujarat High Court's decision in Adani Enterprises Ltd. 4. Initiation of Penalty Proceedings under Section 271(1)(c): The ground relating to the initiation of penalty proceedings under Section 271(1)(c) was dismissed as not pressed by the assessee. 5. Charging of Interest under Sections 234B, 234C, and 234D: This ground was deemed consequential and no separate order was passed. 6. Deletion of Guarantee Fees Paid to the Government of Gujarat: The Revenue's appeal against the deletion of Rs. 3,38,64,000/- for guarantee fees paid to the Government of Gujarat was dismissed. The Tribunal upheld the CIT(A)'s decision, referencing a similar judgment in the assessee's own case for a previous year. 7. Deletion of Disallowance of Cost of Raising Finance: The Revenue's appeal against the deletion of Rs. 2,17,79,000/- for the cost of raising finance was dismissed. The Tribunal upheld the CIT(A)'s decision, citing a similar judgment in the assessee's own case for a previous year. 8. Deletion of Disallowance of Loss Due to Pilferage and Shortage of Material in Transit: The Revenue's appeal against the deletion of Rs. 1,10,91,000/- for loss due to pilferage and shortage of material in transit was dismissed. The Tribunal upheld the CIT(A)'s decision, referencing a similar judgment in the assessee's own case for a previous year. 9. Deletion of Addition of Prior Period Income: The Revenue's appeal against the deletion of Rs. 1,92,78,000/- for prior period income was dismissed. The Tribunal agreed with the CIT(A) that no further addition was required as the prior period expenses had already been added back. 10. Deletion of Addition of Prior Period Expenses while Computing Book Profit under Section 115JB: The Revenue's appeal against the addition of Rs. 7,10,85,000/- to the book profit under Section 115JB was dismissed. The Tribunal upheld the CIT(A)'s decision, stating that such additions are not provided for in the Explanation to Section 115JB. Conclusion: The appeals preferred by the assessee were partly allowed, and the appeals preferred by the Revenue were dismissed. The Tribunal's decisions were largely based on precedents set in the assessee's own previous cases and other relevant High Court judgments.
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