2021 (6) TMI 66 - AT - Income Tax

TDS u/s 194H - Disallowance u/s 40(a)(ia) on account of non-deduction of TDS on Bank Guarantee Expenses - HELD THAT - Assessee has paid guarantee commission charges of state bank of India for giving guarantee in favour of the seller of coal to the assessee. It is one of the banking services provided by the state bank of India to the assessee. It cannot be said to be a commission as intended to u/s 194H of the but it is in the nature of Bank charges charged by the bank for provision of services to the assessee. Honourable Bombay High Court in case of CIT TDS (1), Bombay versus Larsen and Toubro Ltd 2018 (12) TMI 991 - BOMBAY HIGH COURT wherein the honourable High Court while dealing with the case for assessment year 2010 11 and also the Notification No 56/2012 of CBDT which has been considered by several coordinate benches and held that same also applies to earlier period then the date of issue of notification, we hold that the assessee was not required to withheld any tax on bank guarantee charges paid to state bank of India and therefore no disallowance would have been made u/s 40 a (ia) of the act. So we confirm the order of the ld CIT (A) . In view of this ground number (1) of the appeal is dismissed. Disallowance of additional depreciation u/s 32 (1) (iia) - assessee has claimed the additional depreciation on the plant and machinery purchased for the power generation plant - HELD THAT - AO was of the view that the benefit is available only to those undertaking which are engaged in the business of manufacture or production of any article of thing. Generation of power according to him cannot be equated with the production of any article or thing. Further clause ii(a) , subsection (1) of Section 32 of the act was amended with effect from 1 April 2013 and therefore such additional depreciation could be allowed only with effect from 1 April 2013, thus the same was disallowed. Assessee challenged the same before the learned CIT A who allowed the claim of the assessee relying on the decision of the coordinate bench in case of NTPC versus Deputy Commissioner Of Income Tax 2012 (5) TMI 127 - ITAT DELHI where the coordinate bench after considering the several decisions including the decision of the honourable Supreme Court in case of impunity board wherein it was held that the electricity is a goods allowed the claim of the assessee - Therefore respectfully following the decision of the coordinate bench in assessee‟s own case we do not find any infirmity in the order of the learned CIT A in deleting the disallowance of additional depreciation. Disallowance on account of excess depreciation claimed on electrical installations by holding that electrical fittings‟ which are part of the block of furniture and fittings‟ as per the appendix I of The Income Tax Rules, 1962 as plant by ignoring amended subsection (3) of Section 43 - HELD THAT - We do not find that any such information exists on record that these electrical installations are for the purpose of operation of plant and machinery and to make the plant and machinery functional. The mere assertion by the learned CIT A they are plant and machinery without examining the proper details, the assessee cannot be granted depreciation at the rate of 15% classifying them as plant and machinery. According to us it is apparent that furniture and fittings includes electrical fittings only to the extent of wires, sockets, switches and other fittings and fan etc. We also cannot say in absence of any detail whether the electrical installation falls in this category or not. We set-aside this ground to the file of the learned assessing officer with a direction to the assessee to produce the details of addition of plant and machinery and to show that these are not electrical fittings as classified in note number 5 of appendix I (depreciation schedule). In view of this we set aside the ground number 3 of the appeal of the learned assessing officer back to the file of the learned assessing officer with a direction that after examining the details of the electrical installation and giving a proper opportunity of hearing to the assessee, the issue may be decided whether the electrical installations are furniture and fittings or plant and machinery. Thus, Ground no 3 is allowed with above directions. Disallowance on account of excess deduction claimed u/s 80 IA (8) - what is the market value in relation to goods or services for the purpose of working out eligible profit for deduction u/s 80 IA? - HELD THAT - The explanation to Section 8 provides that market value‟ mean the price that such goods or services would ordinarily fetch in the open market. Naturally, the taxes and duties are not at all fetched by such goods or services but are the levies of the government on transfer of such goods. The price of such goods can never include the government levy. This is the argument of the learned departmental representative. However when an issue has been decided by higher forum, we are duty-bound to follow the same, as judicial discipline demands, more particularly when in assessee‟s own case on identical facts and circumstances the issue was decided. It is apparent that this issue was raised by the learned assessing officer in assessment year 2009 10 and the coordinate bench after discussing this issue at length has taken a view in favour of the assessee.Therefore respectfully following the decision of the honourable Delhi High Court in assessee own case for assessment year 2009 10, we confirm the order of the ld CIT (A) and ground number 4 the appeal of the learned AO is dismissed. Disallowance of depreciation while calculating the profit 115JB - HELD THAT - AO has not discussed this issue at all in the assessment order and merely added back same while computing the book profit in the assessment order. As the issue is squarely covered in favour of the assessee by the order of the coordinate benches in assessee‟s own case for the earlier year we do not find any reason to deviate from the same where such addition has been deleted following the decision of the honourable Supreme Court in case of Apollo tyres Ltd 2002 (5) TMI 5 - SUPREME COURT . Thus we confirm order of the ld CIT (A) on this score. In view of this ground number 5 of the appeal of the learned assessing officer is dismissed.

Summary

Issues Involved:

1. Disallowance of ?8,27,715/- u/s 40(a)(ia) for non-deduction of TDS on Bank Guarantee Expenses.
2. Disallowance of ?6,85,662/- on account of additional depreciation claimed u/s 32(1)(iia).
3. Disallowance of ?62,96,880/- on account of excess depreciation claimed on electrical installations.
4. Disallowance of ?6,87,99,634/- on account of excess deduction claimed u/s 80IA(8).
5. Disallowance of ?69,89,846/- on account of depreciation while calculating Book Profit u/s 115JB.

Issue-wise Detailed Analysis:

1. Disallowance of ?8,27,715/- u/s 40(a)(ia) for non-deduction of TDS on Bank Guarantee Expenses:

The assessee did not deduct TDS on bank guarantee charges paid to the State Bank of India, leading to a disallowance by the AO based on Section 194H. The CIT(A) deleted the disallowance, applying CBDT Notification No. 56/2012 retrospectively, which was contested by the AO. The Tribunal upheld the CIT(A)'s order, referencing the Bombay High Court's decision in CIT vs. Larsen and Toubro Ltd., which clarified that bank guarantee charges are not in the nature of commission and thus not subject to TDS under Section 194H. Consequently, the Tribunal confirmed that the assessee was not required to deduct TDS on bank guarantee charges, dismissing the AO's appeal on this ground.

2. Disallowance of ?6,85,662/- on account of additional depreciation claimed u/s 32(1)(iia):

The AO disallowed additional depreciation on the grounds that power generation does not qualify as manufacturing or production of an article or thing, and the relevant amendment was effective from 01.04.2013. The CIT(A) allowed the claim, relying on the ITAT's decision in NTPC vs. DCIT, which recognized electricity as goods. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in favor of the assessee by earlier decisions in the assessee's own case. The Tribunal confirmed that the assessee was entitled to additional depreciation on power generation assets, dismissing the AO's appeal on this ground.

3. Disallowance of ?62,96,880/- on account of excess depreciation claimed on electrical installations:

The AO categorized electrical installations as "furniture and fittings," allowing only 10% depreciation instead of 15% applicable to plant and machinery. The CIT(A) allowed the higher depreciation rate, treating electrical installations as integral to plant and machinery. The Tribunal remanded the issue to the AO for verification, instructing to determine if the electrical installations were indeed part of the plant and machinery or fell under "furniture and fittings." The Tribunal allowed the AO's appeal on this ground with directions for further examination.

4. Disallowance of ?6,87,99,634/- on account of excess deduction claimed u/s 80IA(8):

The AO reduced the deduction claimed by excluding government levies from the sale price of power transferred to other units. The CIT(A) restored the original deduction, referencing the ITAT and High Court decisions in similar cases, which accepted the rate charged by SEBs as the market price. The Tribunal upheld the CIT(A)'s order, following the Delhi High Court's decision in the assessee's own case, confirming that the market price for power could include government levies. The Tribunal dismissed the AO's appeal on this ground.

5. Disallowance of ?69,89,846/- on account of depreciation while calculating Book Profit u/s 115JB:

The AO added back depreciation computed under the Income Tax Act, which was not debited in the profit and loss account as per the Companies Act. The CIT(A) deleted the addition, following the Supreme Court's decision in Apollo Tyres Ltd., which held that adjustments to book profit should align with the Companies Act. The Tribunal upheld the CIT(A)'s decision, noting that similar additions were deleted in earlier years in the assessee's own case. The Tribunal dismissed the AO's appeal on this ground.

Conclusion:

The Tribunal dismissed the AO's appeals on grounds 1, 2, 4, and 5, upholding the CIT(A)'s deletions of disallowances. For ground 3, the Tribunal remanded the issue to the AO for further verification. The appeal was partly allowed, with detailed directions for further examination of specific issues.