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2022 (5) TMI 1265 - AT - Income TaxDisallowance of additional depreciation - proof of manufacturing of an article or thing - as per AO activity of power generation cannot be considered as manufacturing of an article or thing, so as to be entitled for additional depreciation - HELD THAT - Hon ble Supreme Court in the ease of CST Vs. M.P. Electricity Board, 1968 (11) TMI 85 - SUPREME COURT and in the case of State of AP Ors. Vs. National Thermal Power Corpn. Ltd. and Ors. 2002 (4) TMI 694 - SUPREME COURT has held that electricity is capable of abstraction, transmission, transfer, delivery, possession, consumption and use like any other movable property and thus qualifies to be goods . In view of the said decisions of the apex court, the coordinate bench of ITAT Delhi In appellant s own case for the immediately preceding year 2012 (5) TMI 127 - ITAT DELHI has also allowed the appellant s claim of additional depreciation - Decided in favour of assessee. Taxability of Income Tax Recoverable from State Electricity Boards (SEBs) - amount ascertained at the time of filing of return of income or at the amount recorded in the books of accounts - HELD THAT - The impugned addition made by the AO, with the view that, without incorporating the amount of tax liability in its Profit Loss account, reduction of the taxable profit has been rightly allowed by the ld. CIT(A). Addition on account of Pre-Commissioning Sales - Revenue challenged the action of the Ld. CIT(A) in allowing capitalization of pre-commissioning expenses, after being netted off with pre-commissioning sales and deleting the addition made by the AO on account of pre-commissioning sales - HELD THAT - Since, it has been consistently ruled in favour of the assessee by the Co-ordinate bench of Tribunal and Ld. CIT(A) since A.Y. 2003-04, and also accepted by the AO for all the subsequent years, we hereby decline to interfere with the order of the ld. CIT(A) on this issue. Addition u/s 14A - HELD THAT - Since, the facts of the assessee s case are similar to the facts involved in the case of DCIT, Circle-14(1), New Delhi Vs. Power Grid Corporation of India Ltd. 2011 (10) TMI 724 - ITAT DELHI . So, respectfully following the aforesaid referred to order dated 31.10.2011, we do not see any merit in this ground of the departmental appeal. In the result, the appeal of the department is dismissed. Addition on account of downward revision of Sales - HELD THAT - CIT(A) on similar issue for A.Y. 2007-08 and A.Y. 2008-09 has deleted the addition made by the AO on account of downward revision of sales. Notably, even the department has accepted this position as no addition in this respect has ever been made in any year post A.Y. 2008-09. Deduction u/s 80IA set off of losses - HELD THAT - We find that the issue under consideration already stands settled in favor of the appellant by various judicial precedents upto the level of the apex court. Hence the appeal of the assessee on this ground is allowed. Disallowance in respect of Road, Rail connectivity - HELD THAT - CIT(A) sustained the impugned addition holding that the Assessing Officer has very specifically observed that appellant has not furnished any details so as to establish its claim that expenditure was incurred as per business expediency of the appellant. Since, the purpose of expenditure and the allowability thereof has not been disputed by the revenue, we find that the addition has been made owing to non-furnishing of the details only. Hence, in the interest of justice, we direct the AO to examine the details with regard to the expenditure of Rs.8.89 Cr. The assessee shall submit all the required details to the AO to substantive the claim. Appeal of the assessee on this ground is allowed for statistical purpose. Amortization of premium paid on purchase of securities - HELD THAT - CBDT Circular No. 17 of 2008 dated 26.11.2008 (though issued for assessment of banks) provides for amortization of premium paid on purchase of securities, as the same is in line with the RBI guidelines, governing the assesses being banks. Having regard to the above said Circular and distinguishing the decision of the apex court in the case of Vijava Bank 1990 (9) TMI 5 - SUPREME COURT several coordinate benches of the Hon ble Tribunal have allowed deduction claimed on account of amortization of premium on purchase of securities, as in the facts of the appellant under consideration. - Decided in favour of assessee.
Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. Disallowance of additional depreciation. 3. Taxability of income tax recoverable from State Electricity Boards (SEBs). 4. Addition on account of pre-commissioning sales. 5. Disallowance under Section 14A of the Income Tax Act. 6. Downward revision of sales. 7. Deduction under Section 80IA – set off of losses. 8. Deduction under Section 80IA for steam turbine units. 9. Disallowance of expenses on assets not owned by the assessee. 10. Amortization of premium paid on purchase of securities. Issue-wise Detailed Analysis: 1. Deletion of Penalty Imposed under Section 271(1)(c): The Tribunal examined whether the CIT(A) was justified in deleting the penalty imposed by the AO under Section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) had reduced the penalty without considering the AO's findings. The Tribunal upheld the CIT(A)'s decision, noting that the penalty proceedings are independent and mere disallowance or addition does not automatically lead to the levy of penalty. 2. Disallowance of Additional Depreciation: The Tribunal addressed the Revenue's challenge regarding the CIT(A)'s allowance of additional depreciation on power generating equipment. The Tribunal referred to the Supreme Court's rulings that electricity qualifies as 'goods' and thus, the production of electricity is akin to manufacturing an article or thing. The Tribunal upheld the CIT(A)'s decision, citing consistent favorable rulings in similar cases and the Delhi High Court's decision in NTPC Sail Power Co. Pvt. Ltd. 3. Taxability of Income Tax Recoverable from SEBs: The Tribunal discussed the taxability of income tax recoverable from SEBs. The CIT(A) had allowed the assessee's claim based on prior appellate decisions and the Delhi High Court's quashing of reassessment proceedings for earlier years. The Tribunal upheld the CIT(A)'s decision, noting that the correct amount of tax recoverable from SEBs was ascertainable only at the time of filing the return of income. 4. Addition on Account of Pre-Commissioning Sales: The Revenue's challenge regarding the capitalization of pre-commissioning expenses netted off with pre-commissioning sales was addressed. The Tribunal noted that the issue had been consistently decided in favor of the assessee in prior years by both the CIT(A) and the Tribunal. The Tribunal upheld the CIT(A)'s decision, emphasizing the importance of judicial consistency. 5. Disallowance under Section 14A: The Tribunal examined the Revenue's challenge to the CIT(A)'s deletion of disallowance under Section 14A. The CIT(A) had relied on prior decisions, including those of the Tribunal, which found that no expenditure was incurred to earn tax-free income. The Tribunal upheld the CIT(A)'s decision, referencing consistent favorable rulings in similar cases. 6. Downward Revision of Sales: The Tribunal addressed the issue of downward revision of sales due to provisional billing pending final tariff determination by the CERC. The CIT(A) had upheld the AO's addition based on the Tribunal's prior decision. However, the Delhi High Court subsequently ruled in favor of the assessee, recognizing the provisional nature of the billing and the necessity of adjustments. The Tribunal followed the High Court's ruling and deleted the addition. 7. Deduction under Section 80IA – Set Off of Losses: The Tribunal discussed the disallowance of deduction under Section 80IA due to notional set off of brought forward losses from years prior to the initial assessment year. The Tribunal cited the Madras High Court's decision in Velayudhaswamy Spinning Mills, which held that only losses from the initial assessment year onwards should be considered. The Tribunal allowed the assessee's appeal, noting consistent favorable rulings and the CBDT's clarification. 8. Deduction under Section 80IA for Steam Turbine Units: The Tribunal addressed the disallowance of deduction under Section 80IA for steam turbine units of CCGPS. The Tribunal noted that the issue had been consistently decided in favor of the assessee in prior years and accepted by the Revenue for subsequent years. The Tribunal upheld the CIT(A)'s decision to allow the deduction. 9. Disallowance of Expenses on Assets Not Owned by the Assessee: The Tribunal examined the disallowance of expenses incurred on assets not owned by the assessee. The AO had disallowed the expenses due to non-furnishing of details. The Tribunal directed the AO to examine the details and allow the expenses if substantiated, emphasizing the importance of justice and proper examination of evidence. 10. Amortization of Premium Paid on Purchase of Securities: The Tribunal addressed the disallowance of amortization of premium paid on purchase of securities. The AO had disallowed the amortization based on the Supreme Court's decision in Vijaya Bank, which dealt with accrued interest. The Tribunal distinguished the case from Vijaya Bank and cited the CBDT's Circular allowing amortization of premium. The Tribunal allowed the assessee's appeal, referencing consistent favorable rulings in similar cases. Conclusion: The Tribunal allowed the appeals of the assessee and dismissed the appeals of the Revenue, upholding the CIT(A)'s decisions on various issues and emphasizing judicial consistency and proper examination of evidence.
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