2021 (12) TMI 662 - AT - Income Tax

Acquiring Unn Sugar Complex - Determination of cost of asset - AO satisfied that the main purpose of transfer of such assets was for reducing the tax liability by the assessee by claiming depreciation with reference to enhanced cost - Submissions of the Ld. AR that for determination of cost of each asset separately, freehold land was valued as per circle rate prescribed by the UP Government, while the building and plant as well as machinery were valued as per report submitted by registered-valuer - HELD THAT - As from the records, it can be seen that the leasehold land valued as per market value prescribed by UP Government was substantially lower than the value assigned by stamp authority. There is no basis for adopting this value. The CIT(A) has categorically observed that the assessee adopted this value as balancing figure by allocating higher value to building. The total sale consideration as per the sale deed and as recorded in the books of accounts of the assessee are appears to be similar. The assessee allocated higher value to building and lower value to leasehold land. But there is no justification for the same given by the assessee The CIT(A) has given a detailed finding and there is no need to interfere with the findings of the CIT(A). Addition on account of provision of expenses - Assessee has paid State Advised Price (SAP) of ₹ 18.64 crores as per the Court order. The CIT(A) has rightly held that the same has to be allowed as a deduction during the assessment year under consideration. Therefore, the CIT(A) rightly directed the AO to verify whether this amount has been claimed during the assessment year 2013-14 and if not AO was directed to allow its deduction in the present assessment year. There is no need to interfere with the findings of the CIT(A) Addition made u/s 43B on account of interest on levy of sugar price for the season 1982-83 - HELD THAT - Since the Supreme Court order came in 2012, the claim is admissible in the Assessment Year under consideration as the same was a liability in A.Y. 2008-09. Therefore, there is no need to interfere with the findings of the CIT(A). Ground No. 2 of Revenue s appeal is dismissed CIT-A allowing the depreciation on boilers (a 80% rather than the allowed depreciation @ 15% by AO - HELD THAT - CIT(A) has given categorical finding based on the evidences produced before the CIT(A) as well as Assessing Officer. Ground No. 3 and additional ground are dismissed.

Summary

Issues:
1. Disallowance of expenses provision
2. Disallowance of interest on sugar price levy
3. Depreciation on boilers
4. Curtailing original cost of factory buildings
5. Disallowance of depreciation on certain fixed assets
6. Addition of Dharmada receipts and interest earned
7. Disallowance of depreciation on premises used for residential purpose

1. Disallowance of Expenses Provision:
The assessee and the Revenue filed appeals against the CIT(A)'s orders regarding the disallowance of expenses provision. The Assessing Officer disallowed a significant amount towards provisions of expenses, which was challenged by the assessee. The CIT(A) partly allowed the appeal, directing the AO to verify the deduction claimed during the relevant assessment year. The ITAT upheld the CIT(A)'s decision, emphasizing the need to allow the deduction as per the Court order.

2. Disallowance of Interest on Sugar Price Levy:
The Revenue contested the deletion of the addition made by the AO under section 43B of the IT Act regarding interest on the levy of sugar price for a specific season. The ITAT upheld the CIT(A)'s decision, stating that the claim was admissible for the assessment year under consideration, as it was a liability in the relevant year.

3. Depreciation on Boilers:
The dispute involved the allowance of depreciation on boilers at 80% instead of the 15% allowed by the AO. The ITAT upheld the CIT(A)'s decision, which allowed the higher depreciation rate, thereby dismissing the Revenue's appeal on this issue.

4. Curtailing Original Cost of Factory Buildings:
The controversy revolved around the original cost of factory buildings in the Unn Sugar unit, which was curtailed by the AO. The ITAT supported the CIT(A)'s decision, which found discrepancies in the valuation of assets and upheld the AO's action, dismissing the assessee's appeal on this ground.

5. Disallowance of Depreciation on Certain Fixed Assets:
The issue involved the disallowance of depreciation on certain fixed assets, including the refusal to accept additional depreciation under section 32(l)(iia) of the IT Act. The ITAT upheld the CIT(A)'s findings based on the evidence presented, dismissing the assessee's appeal on this matter.

6. Addition of Dharmada Receipts and Interest Earned:
The dispute centered on the addition of Dharmada receipts and interest earned on accumulated funds, which the AO treated as trading receipts. The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

7. Disallowance of Depreciation on Premises Used for Residential Purpose:
The Revenue raised concerns about the claim of depreciation at 5% for premises used for residential purposes. The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this issue.

Overall, the ITAT dismissed both the assessee's and the Revenue's appeals, upholding various decisions made by the CIT(A) on different issues raised in the case. The judgment provided detailed reasoning for each issue, ensuring a comprehensive analysis of the disputes and their resolutions.