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2020 (11) TMI 940 - AT - Income TaxDeduction u/s 80I 80 IA - whether as appellant is engaged in manufacture of LPG for which 80%(appx.)of gas was processed, the authorities below erred in holding that appellant is not an industrial undertakings engaged in manufacture or production of different article or thing? - disallowance of 50% of LPG profits on an estimated basis - HELD THAT - As decided in own case 2020 (10) TMI 1125 - ITAT DELHI issue in favour of assessee. Amortization of leasehold expenses - amortization of leasehold expenses paid by the assessee to various local government authorities for lease on rent. The AO was of the firm belief that the same is of capital in nature and hence, not allowable - HELD THAT - We find that this issue is no more res integra as the same has been decided against the assessee and in favour of the revenue by the Hon ble Delhi High Court in assessee s own case in assessment year 1997-98 2012 (11) TMI 325 - DELHI HIGH COURT - Since the issue has been decided against the assessee by the Hon ble Jurisdictional High Court, this ground is accordingly dismissed. Taxation of sales and interest income relating to new plan - As during the relevant previous year a new plant namely LPG plant at Pata was commissioned - HELD THAT - Assessee has rightly netted off the expenditure during trial run with the income of trial run and the balance has been rightly transferred to capital work in progress. We accordingly, direct the AO to delete the revenue of ₹ 15.09 crores from the head income from other sources Deduction of the provision of wage revision - HELD THAT - As decided in GAIL INDIA LTD. VERSUS CIT, DELHI-IV 2015 (4) TMI 152 - ITAT DELHI Provision for wages made towards impending pay revision, should be allowed as a deduction. The Ld. CIT(A) has not made any effort to prove that the quantum of provision made is unrealistic or imaginary. Under these circumstances we hold that the claim of the assessee is allowable Expenditure on new project - part of its business of exploration and production of gas, explores, on a regular basis, various business opportunities and possibilities for further developing the existing business - HELD THAT - There is no dispute that the assessee is engaged in the business of exploration, production and distribution of gas. In furtherance, of its business ONGC was engaged to collect seismtic data for different contract areas for which ONGC incurred expenditure of ₹ 35.80 lacs which was reimbursed by the assessee and claimed as expenditure - authorities below have erred in treating the same as being incurred in respect of new line of business as the same was very much for the existing business. A similar view was taken by the Tribunal in assessment year 1996-97 (Supra). Therefore, we find merit in the claim of the assessee and accordingly direct the AO to delete the addition Claim of expenditure of technical / consultancy fees in respect of newly commissioned plant - a new plant namely UP Petrochemicals Plant at Pata was commissioned - HELD THAT - Since the expenditure of ₹ 8.03 crores has been incurred after the commissioning of the plant and since this expenditure was necessary for the smooth functioning of the operation of assessee and the same had been incurred to overcome certain initial technical glitches. It is definitely of revenue in nature. We accordingly direct the AO to delete the addition of ₹ 8.03 crores. The ground allowed Disallowance made u/s. 14A - AO has applied the adhoc interest @12% per annum for computing the disallowance HELD THAT - AO has nowhere examined the availability of own funds with the assesee. In our considered opinion, if sufficient interest free funds are available and even if there are borrowed funds, the presumption would be that the investment have been made out of own funds. Our view is fortified by the decision of Reliance Utility and Power 2009 (1) TMI 4 - BOMBAY HIGH COURT . However, we are of the view that certain administrative expenses has to be disallowed for earning this exempt income. In our considered opinion, the disallowance of ₹ 5 lacs should meet the end of justice. Disallowance on account of foreign exchange fluctuations - HELD THAT - In the present case it is an admitted fact that the addition to the actual cost was made on account of exchange rate variation and not on account of acquisition of any capital fixed assets. In our considered opinion, the addition to the actual cost of fixed assets is amended by the provisions of section 43A - section 43A nowhere states that where the cost of fixed assets is increased on account of any exchange rate variation there is deemed acquisition of any fixed asset. Considering the facts in totality, we direct the AO to allow the claim of the assessee. Payment in connection with LAN/WAN - Allowable revenue expenses - HELD THAT - As relying on EMPIRE JUTE COMPANY LIMITED 1980 (5) TMI 1 - SUPREME COURT the said consultancy payment made by the assessee to EIL was to enhance the existing infrastructure of the assessee in IT segment. This was definitely for the benefit of the management to conduct the business of the appellant in the more efficient manner. We are therefore, of the considered view that such consultancy fee should be allowed as revenue expenditure and accordingly we direct the AO to do the same Expenditure on right of use - HELD THAT - Only the right to use of land is acquired by the Central Government and not by the appellant. The assessee is merely incurred the expenditure to obtain the right to use i.e. right to lay the pipeline and nothing more. No title or interest has been passed from the owners to the assessee. Therefore, on the given facts the said expenditure deserve to be allowed. We accordingly direct the AO to delete the impugned addition. The ground no. 12 is allowed. Additional grounds relating to claim of depreciation on the expenditure treated as capital in nature become infructuous. Disallowance of payment of tax under section 43B - HELD THAT - Assessee has claimed deduction of expenses aggregating to ₹ 7.95 crores out of the said payment tax amounting to ₹ 6.67 crores has been paid by the assessee before the due date of filing of return. Therefore, to this extent, no disallowance should be made as laid down by the Hon ble Supreme Court in the case of Allied Moto 1997 (3) TMI 9 - SUPREME COURT . We further find that assesee suo moto disallowed ₹ 1,19,56,547/- u/s. 43B of the Act, therefore, no further disallowance need to be made. This additional ground is accordingly allowed. Deduction on account of prior period adjustments - HELD THAT - We are of the view that when there is no revenue leakage whether the expenditure is allowed during the year under consideration or in the year of claim should not make any difference and even if such expenditure are allowed during the year and it will result into the adjustments being made in subsequent assessment years that will only increase unnecessary paper work and unnecessary pressure on the revenue as well as assessee. Being tax neutral and revenue neutral, we direct the AO to allow the expenditure in the year of its claim. The additional grounds are treated as allowed. Depreciation on Jamnagar-Loni-Pipeline and Gandhar LPG Plant - AO was of the opinion that the work of Jamnagar Loni Pipeline was completed after 31.3.2001 and the same was not ready and not put to use on or before 31.3.2001 - HELD THAT - Assessee has successfully commissioned the Jamnagar Loni Pipeline and the LPG Gas Processing Plant Gandhar and is very much eligible for claim of depreciation on the capitalised cost thereon. We accordingly, direct the AO to allow the depreciation of Jamnagar Loni Pipeline and Gandhar Plant. Disallowance of payment of penalty - HELD THAT - Facts on record show that this amount was capitalised alongwith cost of project and transferred to IEDC account as it was incurred before the completion of the project. However, the AO without applying his mind disallowed the same stating that penalty paid is not allowable expenditure. We are of the considered view that since the assessee has never claimed this amount of expenditure, there is no question of any disallowance. We accordingly, direct the AO to delete the addition. Prior period adjustments - AO was of the opinion that this being prior period expenditure cannot be allowed in the year under consideration - HELD THAT - Such disallowance and claim in the year of incurring the liability would add much add paper work and unnecessary rounds of assessment when the effect is tax neutral and revenue neutral. We accordingly direct the AO to allow the expenditure in this year. It is to avoid unnecessary ground work. Interest levied u/s. 234C - HELD THAT - As cheque no. 985562 dated 14.9.2001 was deposited and acknowledged by the Bank on 15.09.2001 which is the due date of payment for the advance tax. Merely because the amount was credited in the Government Treasury on 17.9.2001 since 16.09.2001 was a Bank Holiday, it cannot be considered that assessee has defaulted any payment of advance tax. On given facts, we direct the AO to delete the interest levied u/s. 234C Levy of interest u/s. 234D - HELD THAT - We are in the assessment year 2002-03 and section 234D was inserted in the Act w.e.f. 01.06.2003. Since the provisions is not applicable in the year under consideration, hence, there cannot be any levy of interest u/s. 234D.
Issues Involved:
1. Deduction under sections 80I & 80IA. 2. Classification as an industrial undertaking. 3. Disallowance of LPG profits. 4. Amortization of leasehold expenses. 5. Taxation of sales, interest, and miscellaneous income. 6. Provision for wage revision. 7. Expenditure on new projects. 8. Expenditure on consultancy for newly commissioned plant. 9. Disallowance under section 14A. 10. Depreciation on account of exchange rate variation. 11. Consultancy payment for LAN/WAN. 12. Expenditure on the right of use. 13. Foreign exchange variation on revenue account. 14. Disallowance of penalty. 15. Prior period adjustments. 16. Interest under sections 234C and 234D. Detailed Analysis: 1. Deduction under sections 80I & 80IA: The tribunal allowed the assessee's appeal for deduction under sections 80I & 80IA, following its earlier decisions in the assessee's own case for the assessment years 1996-97, 1997-98, and 1998-99. 2. Classification as an industrial undertaking: The tribunal held that the assessee, engaged in the manufacture of LPG, qualifies as an industrial undertaking engaged in the manufacture or production of an article or thing, allowing the related grounds. 3. Disallowance of LPG profits: The tribunal allowed the assessee's appeal, confirming that the disallowance of 50% of LPG profits was not justified. 4. Amortization of leasehold expenses: The tribunal dismissed the assessee's appeal, following the Delhi High Court's decision in the assessee's own case for the assessment year 1997-98, holding the amortization of leasehold expenses as capital in nature. 5. Taxation of sales, interest, and miscellaneous income: The tribunal allowed the assessee's appeal, directing the AO to delete the revenue of ?15.09 crores from the head 'income from other sources' and to net off the expenditure during the trial run with the income of the trial run. 6. Provision for wage revision: The tribunal allowed the assessee's appeal, directing the AO to delete the addition of ?11.18 crores, following the tribunal's earlier decisions in the assessee's own case. 7. Expenditure on new projects: The tribunal allowed the assessee's appeal, directing the AO to delete the addition of ?35.80 lakhs, holding that the expenditure was incurred for exploring new business opportunities in the existing line of business. 8. Expenditure on consultancy for newly commissioned plant: The tribunal allowed the assessee's appeal, directing the AO to delete the addition of ?8.03 crores, holding that the expenditure was revenue in nature as it was incurred after the commissioning of the plant. 9. Disallowance under section 14A: The tribunal partly allowed the assessee's appeal, directing the AO to restrict the disallowance to ?5 lakhs, noting that sufficient interest-free funds were available, and only administrative expenses should be disallowed. 10. Depreciation on account of exchange rate variation: The tribunal allowed the assessee's appeal, directing the AO to allow the claim of depreciation and revenue loss, following the Supreme Court's decision in the case of Woodword Governor. 11. Consultancy payment for LAN/WAN: The tribunal allowed the assessee's appeal, directing the AO to allow the consultancy payment of ?29.16 lakhs as revenue expenditure, following the Supreme Court's decision in the case of Empire Jute Co. Ltd. 12. Expenditure on the right of use: The tribunal allowed the assessee's appeal, directing the AO to delete the addition of ?32.06 lakhs, holding that the expenditure was incurred for obtaining the right to use land for laying pipelines, not for acquiring any title or interest in the land. 13. Foreign exchange variation on revenue account: The tribunal allowed the assessee's appeal, directing the AO to allow the claim of revenue loss on foreign exchange variation, following the Supreme Court's decision in the case of Woodword Governor. 14. Disallowance of penalty: The tribunal allowed the assessee's appeal, directing the AO to delete the addition of ?1,98,248, noting that the amount was capitalized and not claimed as an expenditure. 15. Prior period adjustments: The tribunal allowed the assessee's appeal, directing the AO to allow the prior period expenses in the year of claim, noting that it would be tax neutral and avoid unnecessary paperwork. 16. Interest under sections 234C and 234D: - Section 234C: The tribunal allowed the assessee's appeal, directing the AO to delete the interest, noting that the cheque for advance tax was deposited on time but credited after the due date due to a bank holiday. - Section 234D: The tribunal allowed the assessee's appeal, directing the AO to delete the interest, noting that the section was inserted after the assessment year under consideration. Conclusion: The tribunal partly allowed the appeals for the assessment years 2000-01, 2001-02, and 2002-03, providing relief to the assessee on various grounds while dismissing others.
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