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2019 (11) TMI 692 - AT - Income TaxDisallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D2 of the Rules while computing book profit under section 115JB - HELD THAT - CIT(A) noted that the AO has rightly disallowed expenses relatable to exempt income amounting to ₹ 2,03,95,311/- by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules, while computing book profit under section 115JB of the Act in view of provision of clause (f) of explanation (1) to section 115JB of the Act. We noted that this issue is squarely covered by the decision of special bench of this tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein, it is held that the provisions of section 14A read with Rule 8D of the Rules does not apply while computing book profit under section 115JB of the Act. Hence, respectfully following Special Bench decision in the case of Vireet investment (supra), we delete the disallowance and allow this issue of assessee s appeal. Disallowance u/s 14A - HELD THAT - We noted that the CIT(A) has categorically admitted that here is no satisfaction recorded in the assessment order while referring to the provisions of section 14A of the Act read with Rule 8D(2) of the Rules. We noted that this issue is squarely covered in favour of assessee and against Revenue by the decision of Supreme Court in the case of Maxopp Investment Ltd. vs. CIT 2018 (3) TMI 805 - SUPREME COURT . However, this issue also covered by the decision of Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Company Ltd vs. DCIT 2017 (5) TMI 403 - SUPREME COURT . As this issue is squarely covered in favour of assessee and against the Revenue, hence, we delete the disallowance only on the issue of non-recording of satisfaction for invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. Hence, this issue of assessee s appeal is allowed. Depreciation of UPS @ 15% treating the same as part of plant and machinery, as against the claim of depreciation of the assessee @ 60% as part of the computer - HELD THAT - Depreciation allowed at the rate of 60% on UPS Deduction u/s 80IA as certified in form No. 10 CCB in respect of infrastructure facility in the nature of Rail System developed, operated and maintained by assessee - HELD THAT - Additional grounds relating to Sale tax exemptions, income from receipt of sale of carbon credit which arising out of the accounts of the assessee are part of the proceedings of the assessment with regard to the accounts of the assessee including the audit report. Further, in regard to claim of deduction under section 80IA of the Act i.e. regarding infrastructure facility development, operated and maintained by the assessee in regard to the development of integrated Rail System between its system manufacturing plant and the nearest railway station of the Indian Railways for inward and outward movement of goods for efficient and cost effective transportation to and from various destination is also part of the audit report which is also part of the assessment records. In our view these additional grounds are to be admitted and to be adjudicated. Since, the below authorities have not gone into the details and verification of documents, these are admitted and set aside to the file of the AO for adjudication in term of the law. Hence, these three additional issues are admitted and the matter remanded back to the file of the AO.
Issues Involved:
1. Reimbursement of expenses under Section 40A(9) of the Income-tax Act. 2. Claim of depreciation under Section 32(1) read with Explanation 5. 3. Disallowance of expenses related to exempt income under Section 14A read with Rule 8D. 4. Depreciation rate applicable to UPS. 5. Treatment of sales tax exemption as capital receipt. 6. Treatment of income from sale of carbon credits as capital receipt. 7. Deduction under Section 80IA for infrastructure facility. Detailed Analysis: 1. Reimbursement of Expenses under Section 40A(9): The Revenue challenged the CIT(A)'s decision that reimbursement of expenses by the assessee to an institute running a school was not hit by Section 40A(9). The Tribunal confirmed that the issue was covered by its previous decision in the assessee's favor for AY 2000-01, where it was held that such reimbursement is not hit by Section 40A(9). The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal. 2. Claim of Depreciation under Section 32(1) read with Explanation 5: The Revenue contested the CIT(A)'s allowance of the assessee's claim for depreciation. The CIT(A) had followed the precedent set in earlier years, allowing the claim. The Tribunal noted that the issue was already decided in the assessee's favor for AYs 2008-09 and 2009-10, where the CIT(A)'s decision was upheld by the Tribunal. Thus, the Tribunal dismissed the Revenue's appeal on this issue. 3. Disallowance of Expenses Related to Exempt Income under Section 14A read with Rule 8D: The assessee contested the CIT(A)'s confirmation of the AO's disallowance of expenses related to exempt income under Section 14A while computing book profit under Section 115JB. The Tribunal referred to the Special Bench decision in ACIT vs. Vireet Investments, which held that Section 14A read with Rule 8D does not apply while computing book profit under Section 115JB. The Tribunal deleted the disallowance, allowing the assessee's appeal. 4. Depreciation Rate Applicable to UPS: The assessee contested the CIT(A)'s decision to allow depreciation on UPS at 15% instead of 60%. The Tribunal noted that in the earlier years, it had upheld the claim of depreciation at 60% for UPS. Consistently following its previous decisions, the Tribunal allowed the assessee's claim for depreciation at 60%. 5. Treatment of Sales Tax Exemption as Capital Receipt: The assessee raised an additional ground claiming that sales tax exemption availed during the year should be treated as a capital receipt. The Tribunal noted that similar additional grounds were admitted in earlier years and sent back to the AO for examination. Consistently, the Tribunal admitted the additional ground and remanded the issue to the AO for adjudication. 6. Treatment of Income from Sale of Carbon Credits as Capital Receipt: The assessee claimed that income from the sale of carbon credits should be treated as a capital receipt. The Tribunal noted the decision of the Karnataka High Court in CIT vs. Subhash Kabini Power Corporation Ltd., which held that such income should be treated as a capital receipt. The Tribunal admitted the additional ground and remanded the issue to the AO for adjudication. 7. Deduction under Section 80IA for Infrastructure Facility: The assessee raised an additional ground for deduction under Section 80IA for an infrastructure facility (Rail System). The Tribunal noted that similar claims were allowed in the case of Ultratech Cement Ltd. The Tribunal admitted the additional ground and remanded the issue to the AO for verification and adjudication. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, remanding certain issues to the AO for further examination and adjudication. The Tribunal upheld the CIT(A)'s decisions on the reimbursement of expenses and depreciation claims, while allowing additional grounds related to sales tax exemption, carbon credits, and Section 80IA deductions to be examined afresh by the AO.
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