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2020 (3) TMI 1463 - AT - Income TaxNature of expenditure - Expenditure incurred on facilities put up but ownership lying with others/statutory authorities - assessee incurred expenses on railway siding which is essential for loading, transportation and unloading of petrol / diesel / LPG wagons which are essential for carrying on the business of the assessee and the ownership vests with the railway authorities - capital expenditure v/s revenue expenditure u/s 37(1) - HELD THAT - The issue is covered by the decision of the coordinate Bench in assessee s own case for the assessment year 2006-07 2019 (10) TMI 1584 - ITAT MUMBAI wherein held that expenditure as incurred on construction of Railway Track and siding is revenue expenditure and not a Capital expenditure . The coordinate Bench has decided the identical issue in favour of the assessee in assessee s own cases pertaining to the earlier years - Decided in favour of assessee. Expenditure incurred on salary, dearness allowance, postage, travel and other expenses for various modernization and up-gradation of projects in appellants existing line of business - HELD THAT - The issue is covered by the decision of the coordinate Bench in assessee s own case for the assessment year 2006-07 2019 (10) TMI 1584 - ITAT MUMBAI Accounting Practices cannot be override section 56 or any other provisions of the Act. The assessee incurred expenses on various personnel/ employee in the project for supervision and monitoring the various project and marketing allocation and refineries which is certainly allowable as business expenditure u/s 37(1) of the Act. Expenses were made on account of salary, Dearness Allowance (DA), Conveyance Expenses, postal charges, bank charges, rent for housing accommodation, Motorcar etc. which is certain of revenue expenditure.Decided in favour of assessee. Deduction towards Post-retirement medical benefits and provision for Leave Encashment - HELD THAT - As decided in assessee s own case for the assessment year 2006-07 2019 (10) TMI 1584 - ITAT MUMBAI aside the matter to the file of AO to verify the Actuarial Valuation Report and allow the claims of the assessee in accordance with the this order. Accordingly, we allow this ground of appeal for statistical purposes. Nature of loss - loss on sale of oil bonds - revenue or capital loss - HELD THAT - The coordinate Bench has decided the identical issue in assessee s appeal pertaining to the AY 2006-07 2019 (10) TMI 1584 - ITAT MUMBAI applying the ratio of judgement of the Hon ble Apex Court in Patnaik Co Ltd 1986 (7) TMI 6 - SUPREME COURT decide the issue in favour of the assessee as held loss due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered on the last date of accounting year and it is deductible u/s 37(1) of the Act. Thus this ground of appeal in favour of the assessee. Disallowance u/s 43 or deduction u/s 37(1) - assessee had amortized an amount in P L account, which was part of premium on forward exchange contracts booked for the purposes of external commercial borrowings (ECB) taken for the purpose of meeting the cost of various projects under taken by the assessee, which had been amortized over the duration of the forward exchange contracts - HELD THAT - CIT(A) has partly allowed this ground of appeal by holding that provisions of section 43A are not attracted to the extent of assets acquired by the assessee within India, however, the grievance of the assessee is that the Ld CIT(A) has only allowed the depreciation on the expenditure treating the same as capital. The counsel has further pointed out that since as per the AS 11FEC is booked as revenue expenditure, the same is permissible deduction u/s 37(1) of the Act. Hence, in view of the facts and the circumstances we set aside this issue to the file of AO for deciding the issue afresh in the light of the submissions made before us after affording a reasonable opportunity of being heard to the assessee. Hence, we allow this ground of appeal of the assessee for statistical purposes. Addition of de-capitalized assets and thereby allowing depreciation - HELD THAT - CIT(A) has decided this ground of appeal in favour of the assessee holding that the A.O. cannot accept that portion, which suits the department in more collection of tax due to lesser claim of depreciation and deny corresponding claim of depreciation in reduction of book depreciation, which necessarily the appellant s has to do. We do not find any reason to interfere with the findings of the Ld. CIT(A) as the same is based on the settled principles of law and as per the evidence. Hence, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. Disallowance u/s 14A r.w.r 8D - CIT(A) restoring the issue of disallowance u/s 14A of the Act for recomputed the disallowance holding that the provisions of Rule 8D cannot be applied retrospectively - HELD THAT - Since, the findings of the Ld. CIT(A) are in accordance with the settled law, we uphold the order passed by the Ld. CIT(A) and dismiss this ground of appeal of the revenue. Deduction u/s 80IB in respect of VREP II unit - AO denied the same on the ground that VREP-II is only an extension of the old undertaking - CIT(A) allowed the same - HELD THAT - We notice that the Coordinate Bench has decided the identical issue in favour of the assessee in appeal filed by the revenue 2019 (10) TMI 1584 - ITAT MUMBAI in assessee s case pertaining to the assessment year 2006-07. Since the findings of the Ld. CIT(A) are in accordance with the decision of the coordinate Bench, we do not find any reason to interfere with the order of the Ld. CIT(A). Hence, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. Deduction u/s 80IB in respect of Silvasa New Blending Plant - AO denied the claim of the assessee u/s 80 IB(4) for the first time in AY 2006-07 on the ground that the activity at the blending Plant does not come within the ambit of manufacturing - HELD THAT - As decided in own case 2006-07 2019 (10) TMI 1584 - ITAT MUMBAI as noted that the end product manufactured by assessee as explain hereinabove is quite distinct and is a commercially different article than the major input rectified, which is fit for consumption / use for commercial use. That the changes made in input result in a new and different article is recognized in the trade as such. Hence, the assessee, in the instant case, satisfied the requirement, that it manufactured or produced an article or thing for the purpose of section 80-IB - Decided against revenue.
Issues Involved:
1. Disallowance of expenditure incurred on facilities put up but ownership lying with others/statutory authorities. 2. Disallowance of establishment expenses charged to capital work in progress. 3. Disallowance of provision for post-retirement medical benefits. 4. Disallowance of provision for leave encashment. 5. Treatment of loss on sale of oil bonds as capital loss. 6. Disallowance of premium on forward exchange contract incurred for repayment of external commercial borrowings. 7. Allowance of depreciation on decapitalized assets. 8. Disallowance under section 14A as per rule 8D. 9. Deduction under section 80IB in respect of VREP-II unit. 10. Deduction under section 80IB in respect of Silvassa new blending plant. Issue-wise Detailed Analysis: 1. Disallowance of Expenditure on Facilities (Rs. 8,20,74,865/-): The assessee challenged the disallowance of expenditure incurred on putting up facilities such as Railway Siding, the ownership of which lies with others/statutory authorities. The Tribunal noted that this issue was identical to the ground raised by the assessee for the AY 2006-07, which had been decided in favor of the assessee. The Tribunal followed the earlier decision and set aside the findings of the CIT(A), allowing the expenditure as claimed by the assessee. 2. Disallowance of Establishment Expenses (Rs. 31,22,94,793/-): The assessee contested the disallowance of establishment expenses charged to capital work in progress. The Tribunal observed that this issue was also identical to a ground raised for the AY 2006-07, which had been decided in favor of the assessee. Following the earlier decision, the Tribunal set aside the findings of the CIT(A) and allowed the expenditure as claimed by the assessee. 3. Disallowance of Provision for Post-Retirement Medical Benefits (Rs. 59,00,000/-): The assessee challenged the disallowance of the provision for post-retirement medical benefits. The Tribunal noted that this issue had been set aside to the file of the AO for fresh determination in the AY 2006-07. Following the earlier decision, the Tribunal set aside the matter to the AO to verify the actuarial valuation report and allow the claims accordingly. 4. Disallowance of Provision for Leave Encashment (Rs. 28,30,00,000/-): The assessee contested the disallowance of the provision for leave encashment. The Tribunal noted that this issue had been set aside to the AO for reconsideration in the AY 2006-07. Following the earlier decision, the Tribunal set aside the matter to the AO to verify the actuarial valuation report and allow the claims accordingly. 5. Treatment of Loss on Sale of Oil Bonds (Rs. 20,02,40,600/-): The assessee challenged the treatment of loss on the sale of oil bonds as a capital loss. The Tribunal observed that this issue was identical to a ground raised for the AY 2006-07, which had been decided in favor of the assessee. Following the earlier decision, the Tribunal set aside the findings of the CIT(A) and allowed the loss as a revenue loss. 6. Disallowance of Premium on Forward Exchange Contract: The assessee contested the disallowance of the premium on forward exchange contracts incurred for repayment of external commercial borrowings. The Tribunal noted that the CIT(A) had partly allowed the ground by holding that the provisions of section 43A are not attracted to the extent of assets acquired within India. However, the Tribunal set aside the issue to the AO for fresh determination in light of the submissions made. 7. Allowance of Depreciation on Decapitalized Assets (Rs. 3,29,87,815/-): The revenue challenged the CIT(A)'s direction to allow depreciation on decapitalized assets. The Tribunal upheld the findings of the CIT(A), noting that the AO cannot accept only the portion that results in more tax collection and deny the corresponding claim of depreciation reduction. 8. Disallowance under Section 14A as per Rule 8D (Rs. 21,30,55,096/-): The revenue contested the CIT(A)'s restoration of the issue of disallowance under section 14A to the AO. The Tribunal upheld the CIT(A)'s findings, noting that the provisions of Rule 8D cannot be applied retrospectively. 9. Deduction under Section 80IB in Respect of VREP-II Unit: The revenue challenged the CIT(A)'s allowance of deduction under section 80IB for the VREP-II unit. The Tribunal noted that this issue had been decided in favor of the assessee for the AY 2005-06 and 2006-07. Following the earlier decisions, the Tribunal upheld the CIT(A)'s findings and dismissed the revenue's appeal. 10. Deduction under Section 80IB in Respect of Silvassa New Blending Plant: The revenue contested the CIT(A)'s allowance of deduction under section 80IB for the Silvassa new blending plant. The Tribunal noted that this issue had been decided in favor of the assessee for the AY 2006-07. Following the earlier decision, the Tribunal upheld the CIT(A)'s findings and dismissed the revenue's appeal. Conclusion: The assessee's appeal was partly allowed, and the revenue's appeal was dismissed. The Tribunal's decisions were largely based on the precedent set in the assessee's own cases for earlier assessment years.
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