2017 (5) TMI 10 - AT - Income Tax

Addition on account of interest received on delayed payments/ compensation - Held that - We find that the provision of Sec. 145A(b) of the Act is not applicable by the CBDT in its Circular for the year under consideration. It is because it has been clarified to be applicable with effect from AY 2010-11. Thus, the issue of impugned interest is duly covered by the judgment of Hon ble Supreme Court in the case of Rama Bai (1989 (11) TMI 2 - SUPREME Court). Accordingly, respectfully, following the precedent as above we hold that there is no infirmity in the order of the Ld. CIT(A). It is also important to note that the Revenue is at liberty to tax the impugned interest income in the respective assessment years as per the provisions of law. Accordingly, we uphold the same. Disallowance of the TDS credit - AO disallowed the same by observing that the corresponding income was offered to tax in the earlier year and therefore the amount of TDS which pertaining to the income which has been offered to tax in earlier year was not allowed - Held that - Form the facts of the case we find that the assessee has been following system to claim the benefit of TDS amount deducted by the party consistently and no disallowance has been made by the Revenue. Moreover the ld. DR has not brought anything on record anything contrary to the findings of ld. CIT(A). Thus in our considered view there is no defect in the order of ld. CIT(A). Besides the above we also find that the assessee has already shown income corresponding to the TDS of ₹ 51,615.00 in the earlier years which shows that the assessee has already suffered the burden of income tax in the earlier years without claiming the benefit of TDS. Indeed in this case the assessee has borne the burden of the tax out of his own fund. Moreover if the party has not deducted the TDS in the relevant year, there is no fault of the assessee. There is also no loss to the Revenue. Therefore we find no infirmity in the order of the Ld. CIT(A). Accordingly, we uphold the same. - Decided against revenue. Disallowance of additional depreciation u/s. 32(1)(iia) - AO disallowed the claim as the assessee is not engaged in any manufacturing activities - Held that - Instant issue is already covered by the decision in the sister concern of assessee in the case of CIT vs. G.S. Atwal & Co. 2001 (2) TMI 32 - CALCUTTA High Court held that after winning coal something that was not thee comes up, and it is, therefore, a production of coal. - Decided in favour of assessee

Summary

Issues Involved:
1. Taxability of interest received on delayed payments/compensation.
2. Allowance of TDS credit claimed by the assessee.
3. Disallowance of additional depreciation claimed by the assessee.

Issue-wise Detailed Analysis:

1. Taxability of Interest Received on Delayed Payments/Compensation:
The first issue raised by the Revenue pertains to whether the interest amount of ?10,58,25,030 received by the assessee on delayed payments should be taxed in the year it was received or in the years to which it pertains. The assessee argued that the interest pertains to the period from 28.11.1998 to 31.03.2008 and should be taxed in those respective years. The AO contended that the interest income crystallized in the year under consideration (2009-10) following the High Court's order dated 17.04.2008 and should be taxed in that year. The CIT(A) deleted the addition made by the AO, referencing the Supreme Court judgments in Rama Bai v. CIT and CIT vs. TNK Gobindarajualau Chetty, which held that interest on delayed compensation should be taxed in the years it accrued, not in a lump sum. The Tribunal upheld the CIT(A)'s decision, noting that the amendment to Section 145A(b) of the Act, which mandates taxing interest on compensation in the year of receipt, applies from AY 2010-11 onwards. Therefore, for AY 2009-10, the interest should be taxed in the years it pertains to, following the Supreme Court's precedent.

2. Allowance of TDS Credit Claimed by the Assessee:
The second issue revolves around the disallowance of TDS credit amounting to ?5,84,508/- claimed by the assessee. The AO disallowed the TDS credit on the grounds that the corresponding income was not offered to tax in the year under consideration. The assessee argued that the TDS was deducted on a mobilization advance received from TISCO and that the advance was adjusted against bills raised in subsequent years without further TDS deduction. The CIT(A) allowed the TDS credit, noting that the assessee had consistently followed this practice in previous years without disallowance. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had already shown the corresponding income in earlier years and had borne the tax burden, thus finding no fault in the CIT(A)'s order.

3. Disallowance of Additional Depreciation Claimed by the Assessee:
The third issue concerns the disallowance of additional depreciation amounting to ?3,25,63,383/- claimed by the assessee under Section 32(1)(iia) of the Act. The AO disallowed the claim, stating that the assessee was not engaged in manufacturing activities. The CIT(A) upheld the AO's decision, noting that the assessee, being a contractor, did not produce any article or thing. The assessee argued that it was engaged in mining activities, which qualifies for additional depreciation, citing the Tribunal's decision in the case of M/s Integrated Coal Mining Ltd. The Tribunal found merit in the assessee's argument, referencing the jurisdictional High Court's decision in CIT vs. G.S. Atwal & Co., which recognized mining as production. The Tribunal reversed the CIT(A)'s order and directed the AO to allow the additional depreciation, thus favoring the assessee.

Conclusion:
The Tribunal, after considering the submissions and relevant judicial precedents, upheld the CIT(A)'s decision on the taxability of interest and the allowance of TDS credit. It reversed the CIT(A)'s decision on the additional depreciation, directing the AO to allow the claim. The Revenue's appeal was dismissed, and the assessee's cross-objection was partly allowed.