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2018 (4) TMI 1059 - AT - Income TaxAllowability of prior period expenses - Held that - We hold that the allowability of prior period expenses had to be made based on the finding that no deduction was claimed in the earlier years after recording the finding that the said expenditure had indeed been crystallized during the year. However, the method of accounting followed by the assessee also needs to be taken into consideration for the same. These findings are conspicuously absent in the orders of the lower authorities and accordingly we deem it fit and appropriate ,in the interest of justice and fair play, to remand the issue of prior period expenses to the file of the ld AO, for denovo adjudication and decide the same in accordance with law. Long term capital gain - Held that - We find that the assessee had filed details of computation of long term capital loss of ₹ 20,17,000/- in the memo of income and the same was also furnished before the ld AO in the course of assessment proceedings. There is absolutely no discussion made by the ld AO in his assessment order with regard to this issue - AO having added the long term capital loss of ₹ 20,17,000/- under the head income from business had also proceeded to separately add the redemption value of bonds of ₹ 1,30,00,000/- without understanding the facts. The veracity of the computation of long term capital loss of ₹ 20,17,000/- was not verified by the ld AO. No finding is also given by the ld AO with regard to carry forward of long term capital loss of ₹ 20,17,000/- to subsequent years in the assessment order. Hence we deem it fit and appropriate, in the interest of justice and fairplay, to remand this issue to the file of the ld AO , for denovo adjudication Disallowing judicial expenses - Held that - Whether the liability at all would arise or not on the assessee would depend on the final outcome of the appeals pending. Hence the liability is contingent upon happening of a future event. Hence it could be safely concluded that the assessee had made provision for contingent liability which is not allowable as deduction. Hence we hold that the same had been rightly disallowed by the ld AO with regard to M/s Jai Balaji Industries Ltd. With regard to refund of EMD to M/s N.R.Sponge Pvt Ltd CITA had categorically held that the assessee had not offered to tax the sum of ₹ 11,12,000/- by forfeiture of EMD by crediting the same to profit and loss account. This finding has not been controverted by the assessee before us. Hence we hold that there is no need for making a separate provision for a pre-existing liability in the books of assessee, eventhough the same has been stated to be paid by the assessee on 27.6.2012 , ie. during the financial year 2012-13 relevant to Asst Year 2013-14. Accordingly, no relief is granted to the assessee in this regard. Disallowance of depreciation on intangible asset - Held that - The payments made to Government of Orissa for afforestation charges for obtaining the mining lease, would squarely fall under the category of licences or even any other business or commercial rights of similar nature as per the definition of intangible assets u/s 32 of the Act, thereby eligible for claim of depreciation u/s 32 of the Act. It is not in dispute that pursuant to this payment, and pursuant to other plant and machineries kept ready for use, the assessee would start its mining operations, the moment the mining lease has been granted by the Government of Orissa, Accordingly , we hold that the assessee is eligible for depreciation
Issues Involved:
1. Verification of 'Prior Period Expenses' and 'Long Term Capital Gain' claims. 2. Allowability of judicial expenses. 3. Disallowance of Income Tax Depreciation and Deduction under Section 35CCB. Issue-wise Detailed Analysis: 1. Verification of 'Prior Period Expenses' and 'Long Term Capital Gain' claims: Revenue Appeal (ITA No. 1860/Kol/2016 for Asst Year 2009-10): The primary issue was whether the CIT(A) was justified in directing the AO to verify claims regarding 'Prior Period Expenses' of ?4,22,561/- out of total expenses claimed of ?8,57,822/- and 'Long Term Capital Gain' of ?1,30,00,000/-. The tribunal agreed with the revenue's argument that the CIT(A) does not have the power to direct the AO to verify certain facts while disposing of an appeal. The power to set aside to the AO had been withdrawn by the Finance Act, 2001, effective from 1.6.2001. Consequently, the tribunal allowed the revenue's appeal. Assessee Cross Objection (CO No. 69/Kol/2016 for Asst Year 2009-10): The assessee contended that the CIT(A) did not provide an independent finding on the allowability of prior period expenses of ?8,59,822/-. The tribunal found that the assessee had submitted details of prior period expenses, but the AO had not verified them. The tribunal remanded the issue back to the AO for a fresh adjudication, allowing the assessee's ground for statistical purposes. Regarding the long-term capital gain, the assessee argued that the AO had incorrectly added the redemption value of bonds of ?1,30,00,000/- without understanding the facts. The tribunal noted that the AO had not recorded any findings on this issue and remanded it back to the AO for a fresh adjudication, allowing the assessee's ground for statistical purposes. 2. Allowability of Judicial Expenses (ITA No. 1929/Kol/2016 & ITA No. 1901/Kol/2016 for Asst Year 2012-13): The assessee claimed judicial expenses aggregating to ?8,70,00,000/- due to liabilities arising from arbitration awards and court orders. The AO disallowed these expenses, considering them contingent liabilities. The CIT(A) upheld the AO's decision, stating that the liabilities were contingent as the assessee had appealed against the arbitration awards, and the refund of EMD was a pre-existing liability not requiring a separate provision. The tribunal agreed with the CIT(A) that the liabilities to M/s Jai Balaji Industries Ltd were contingent and rightly disallowed. Regarding the EMD refund, the tribunal upheld the CIT(A)'s finding that it was a pre-existing liability and not allowable as a revenue expenditure. Thus, the tribunal dismissed the assessee's ground. 3. Disallowance of Income Tax Depreciation and Deduction under Section 35CCB (ITA No. 1929/Kol/2016 & ITA No. 1901/Kol/2016 for Asst Year 2012-13): Revenue Appeal: The AO disallowed ?15,99,45,025/- claimed under Section 35CCB and ?18,05,01,102/- as depreciation, arguing that the assessee had no mining operations during the year. The CIT(A) deleted the disallowance under Section 35CCB but upheld the disallowance of depreciation on intangible assets. Assessee Appeal: The assessee contended that the AO had misunderstood the claim under Section 35CCB, which was not made by the assessee. The tribunal found that the assessee had not claimed any deduction under Section 35CCB, and the AO had erred in relying on the tax audit report. The tribunal upheld the CIT(A)'s decision to delete the disallowance under Section 35CCB. Regarding depreciation, the tribunal noted that the assessee had kept its assets ready for use, and the payment of afforestation charges was a commercial right eligible for depreciation. The tribunal allowed the depreciation on both tangible and intangible assets, including the opening WDV and additions during the year, thereby allowing the assessee's ground. Conclusion: - The revenue's appeal for Asst Year 2009-10 was allowed. - The assessee's cross objection for Asst Year 2009-10 was allowed for statistical purposes. - The assessee's appeal for Asst Year 2012-13 was partly allowed. - The revenue's appeal for Asst Year 2012-13 was dismissed.
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