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2017 (12) TMI 1121 - AT - Income TaxDisallowance u/s. 14A r.w. Rule 8D - Held that - We noted that the CIT(A) has given a clear cut finding of fact that investment of the assessee, which is amounting to ₹ 585 crores, is less than the assessee s capital reserve and accordingly following the decision in the case of CIT vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT) and CIT vs. HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT deleted the disallowance in respect of interest but directed the AO to compute 0.5% of the average investments and while computing the 0.5% of the average investments in the subsidiary company directed to exclude and dismissed the additional ground taken by the assessee for excluding from calculation of 0.5% of the average investment on which there is no tax free income is earned following the order of the CIT(A) for A.Y. 2010-11. The CIT(A) also following the order for A.Y. 2010-11 directed the AO to exclude while computing 0.5% of the average investment expenditure involved in administrate expenses. Expenditure on account of replacement of electricity meters - nature of expenditure - revenue or capital expenditure - Held that - After hearing the rival submissions we noted that this Tribunal in the case of the assessee for A.Y. 2010-11 confirmed the order of the CIT(A) deleting the said disallowance as the said issue has been decided in favour of the assessee by the decision of the Hon ble High Court in assessment years 2001-02, 2002-03, 2003-04, 2006-07, 2007-08 and 2008-09. Provisions of Section 115JB applicability to the assessee company as the Accounts of the assessee are prepared according to provisions of Electricity Supply Act - Held that - The assessee is following the accounting policies under the Electricity Supply act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II & III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II & 11 of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced.
Issues Involved:
1. Disallowance under Section 14A read with Rule 8D. 2. Replacement of electricity meters as capital or revenue expenditure. 3. Apportionment of head office expenses to various units for Section 80IA deduction. 4. Applicability of Section 115JB (Minimum Alternate Tax) to the assessee company. 5. Exclusion of disallowance under Section 14A from book profit under Section 115JB. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A read with Rule 8D: The assessee contested the disallowance computed under Section 14A, arguing that only investments yielding tax-free income should be considered. The CIT(A) in A.Y. 2010-11 had directed the AO not to consider interest expenses for disallowance under Rule 8D(2)(ii) and to exclude investments in subsidiary companies while computing the average investment under Rule 8D(2)(iii). The Tribunal upheld the CIT(A)’s decision, noting that the assessee's own funds exceeded the investments, thus no interest disallowance was warranted. The Tribunal remanded the issue back to the AO to ascertain investments giving rise to taxable and non-taxable income, following the Special Bench decision in ITA No. 502/Del/2012. 2. Replacement of Electricity Meters: The AO had treated the expenditure on replacement of electricity meters as capital expenditure, allowing depreciation instead. The CIT(A) and the Tribunal, following earlier decisions and the Bombay High Court’s ruling, held that such expenditure was revenue in nature as it was necessary for business operations and did not enhance the generation or distribution capacity. The Tribunal affirmed the CIT(A)’s order deleting the disallowance, consistent with previous rulings. 3. Apportionment of Head Office Expenses for Section 80IA Deduction: The AO had apportioned head office expenses to various units, reducing the eligible profit for Section 80IA deduction. The CIT(A) and the Tribunal, following earlier decisions, held that such apportionment was not warranted. The Tribunal upheld the CIT(A)’s order, noting that the issue was consistently decided in favor of the assessee in previous years, including A.Y. 2010-11. 4. Applicability of Section 115JB (Minimum Alternate Tax): The AO computed book profit under Section 115JB, which the assessee contested, arguing that its accounts were prepared under the Electricity Supply Act, not the Companies Act. The CIT(A) and the Tribunal, following earlier decisions, held that Section 115JB was not applicable as the assessee’s accounts were prepared under a regulatory framework different from the Companies Act. The Tribunal dismissed the Revenue’s ground, affirming the CIT(A)’s order. 5. Exclusion of Disallowance under Section 14A from Book Profit under Section 115JB: Given the Tribunal’s decision that Section 115JB was not applicable to the assessee, the issue of excluding the disallowance under Section 14A from book profit became moot. The Tribunal dismissed this ground as infructuous. Conclusion: The Tribunal dismissed the Revenue’s appeal and allowed the assessee’s appeal for statistical purposes. The Tribunal’s decisions were based on consistent application of earlier rulings and legal principles, ensuring that the assessee’s accounting practices under the Electricity Supply Act were appropriately considered.
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