2021 (2) TMI 895 - AT - Income Tax

Disallowance of deduction u/s 80-IA - other income shown by the assessee was not eligible for deduction - AO was of the view that assessee being in the business of generation and distribution of power, it shall be eligible for deduction only from profits earned from that business and not from other income - HELD THAT - As decided in own case A.Y. 2010-11 2019 (5) TMI 1664 - ITAT DELHI If the amounts are not paid at the proper time and interest is awarded or paid for such delay, such interest is only an accretion to the assessee's receipts from the contracts. It is obviously attributable and incidental to the business carried on by him. It would not be correct, as the Tribunal has held, to say that this interest is totally de hors the contract business carried on by the assessee. It is well settled that interest can be assessed under the head 'Income from other sources' only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as 'Income from other sources - we are of the considered view that the disallowance made while computing the deduction allowable u/s 80-IA of the Act is not justified. MAT Computation u/s 115JB - unascertained liability - interest to beneficiary states, which may have to be paid in case of reduction in tariff as a result of revision order - HELD THAT - As relying on own case 2018 (3) TMI 1589 - PUNJAB AND HARYANA HIGH COURT we hold that the AO was not justified and in not allowing the claim as unascertained liability. We therefore, direct the AO to treat the amount as ascertained liability for the purpose of computing income under normal tax provisions and also for the purpose of computing book profits u/s 115JB. Thus the grounds of the assessee are allowed. Disallowance made u/s 14A read with Rule 8D - HELD THAT - We find that identical issue arose for A.Y. 2012-13 2020 (3) TMI 1308 - ITAT DELHI and the Co-ordinate Bench of Tribunal held that AO was not justified in disallowing the expenditure by invoking the provision of Section 14A r.w.r 8D of the Act. Computing the book-profit in respect of depreciation claimed on amortization of land - HELD THAT - As relying on assessee's own case n A.Y. 2012-13 2020 (3) TMI 1308 - ITAT DELHI direction of CIT(A) in deleting the disallowance confirmed.

Summary

Issues Involved:
1. Non-allowance of deduction under Section 80-IA of the Income Tax Act.
2. Addition of ?14.34 crores on account of provision of interest to beneficiary states due to tariff reduction.
3. Deletion of addition of ?32.92 crores made under Section 14A of the Act.
4. Deletion of disallowance of ?4.07 crores in computing book profit under Section 115JB for depreciation claimed on amortization of land.

Issue-wise Detailed Analysis:

1. Non-allowance of Deduction under Section 80-IA:
The assessee, a Government of India Enterprise engaged in the generation of electricity, claimed deductions under Section 80-IA for five power stations. The AO disallowed ?6,45,37,576/- under "Other Income" as it was not directly related to the business of power generation. The CIT(A) upheld this disallowance. However, the ITAT found that similar issues in previous years (2010-11 to 2012-13) were decided in favor of the assessee, citing various judicial precedents. Thus, the ITAT directed the AO to allow the deduction under Section 80-IA, overturning the CIT(A)'s decision.

2. Addition of ?14.34 Crores for Provision of Interest:
The AO added ?14.34 crores to the income, treating it as an unascertained liability. The CIT(A) upheld this view. The ITAT, however, noted that similar issues in earlier years had been decided in favor of the assessee by the Punjab & Haryana High Court, which held that such provisions, made as per CERC guidelines, were ascertained liabilities. The ITAT directed the AO to treat the amount as an ascertained liability, allowing the assessee's claim under both normal provisions and Section 115JB.

3. Deletion of Addition under Section 14A:
The AO disallowed ?32.92 crores under Section 14A, read with Rule 8D, for expenses related to earning exempt income. The CIT(A) deleted this addition, following precedents from earlier years. The ITAT upheld the CIT(A)'s decision, noting that the AO had not recorded any dissatisfaction with the assessee's claim that no expenditure was incurred to earn exempt income. The ITAT also referenced the Special Bench decision in ACIT vs. Vireet Investments Pvt. Ltd., which supported the assessee's position.

4. Deletion of Disallowance of ?4.07 Crores in Computing Book Profit:
The AO added ?4.07 crores to the book profit under Section 115JB, arguing that depreciation on amortization of land was not allowable. The CIT(A) deleted this addition, referencing decisions in earlier years. The ITAT upheld the CIT(A)'s decision, citing consistent rulings in the assessee's favor from the Punjab & Haryana High Court and the ITAT for previous years.

Conclusion:
The ITAT allowed the appeal of the assessee and dismissed the appeal of the Revenue, directing the AO to recompute the deductions and additions as per the detailed findings and judicial precedents referenced. The judgment emphasizes the importance of consistency in tax rulings and adherence to established legal principles.