9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 618 - AT - Income TaxRevision u/s 263 - Claim of depreciation on Windmill - MAT computation - assessee had purchased windmill and claimed depreciation @ 80% on the same under the Income Tax Act - PCIT was of the view that depreciation claimed @ 80% by the assessee while computing books profits under section 115JB of the Income Tax Act is not permissible and instead, the assessee should have claimed depreciation @ 15.33% as per the Companies Act for the purpose of calculation of book profits under section 115JB - HELD THAT - As decided in SONA WOOLLEN MILLS P. LTD. 2006 (10) TMI 99 - PUNJAB AND HARYANA HIGH COURT the assessee is eligible to claim higher rate of depreciation and Income Tax Act. The Delhi ITAT in the case of HAL Offshore Ltd. 2019 (9) TMI 896 - ITAT DELHI held that where depreciation provided in profit and loss account is at same rate as provided for purpose of profit and loss account being laid before Annual General Meeting (AGM), no addition could be made to assessee's income on ground that while calculating total income as per section 115JB, assessee had adopted rate of depreciation as per Income-tax Act instead of Companies Act in profit and loss account. The Andhra Pradesh High Court in the case of Deccan Tools Industries (P.) Ltd. 2014 (11) TMI 49 - ANDHRA PRADESH HIGH COURT held that where for purpose of section 115J, assessee claimed depreciation at rates provided under Income-tax Rules, action of Assessing Officer in redrawing profit and loss account and adopting rates prescribed under Companies Act, was totally unauthorized. Thus we are of the considered view that in the instant facts, PCIT erred in facts and law in holding that the assessment order was erroneous and prejudicial to the interests of the revenue so far as ground number 3 of the assessee's appeal is concerned. Excessive payment to related party or not - Payments for job work not verified by AO at fair market value under section 40A(2)(b) - In the case of CIT v. Indo Saudi Services (Travel) (P.) Ltd. 2008 (8) TMI 208 - BOMBAY HIGH COURT the Bombay High Court held that where revenue was not in a position to point out how assessee evaded payment of tax by alleged payment of higher commission to its sister concern, since sister concern was also paying tax at higher rate, disallowance of alleged excess commission paid to sister concern was not justified. In view of the above decisions, as applied to the assessee set of facts, Ld. PCIT in the 263 proceedings has held that the assessment order is erroneous and prejudicial for the reason that the assessee has not been able to bring on record comparable cases in order be able to substantiate that the payment is not unreasonable or excessive as per provisions of section 40A(2) (b) - Such onus cannot be cast upon the assessee to prove that payment made is not excessive/unreasonable by bringing on record instances of comparable cases. As held by various Courts/Tribunals, the onus is on the revenue to record reasons why payment by the assessee is excessive/unreasonable so as to invoke provisions of section 40A(2)(b) of the Act. For the foregoing reasons, in our view, PCIT has erred in facts and law in holding that the order is erroneous and prejudicial to the interests of the revenue, so far as ground number 9 of the assessee's appeal is concerned.
Issues Involved:
1. Legality of the order passed by the Principal Commissioner of Income Tax (CIT). 2. Examination of whether accounts are for 13 months or 12 months. 3. Claim of depreciation on windmill while computing book profit under section 115JB. 4. Furnishing of details of valuation of closing stock. 5. Non-furnishing of details of stock hypothecated to the bank. 6. Increase in the sale of scrap. 7. Break-up of SS sheet cost W.I.P. and SS FG in quantity terms. 8. Valuation of closing stock of raw material excluding transportation and finance costs. 9. Verification of related party payments under section 40A(2)(b). Detailed Analysis: 1. Legality of the Order Passed by Principal Commissioner of Income Tax (CIT): The assessee contended that the order passed by the CIT was illegal and should be quashed. However, this was a general ground, and specific arguments were not pressed in this appeal. 2. Examination of Whether Accounts are for 13 Months or 12 Months: The CIT had raised concerns about whether the accounts were for 13 months or 12 months. The assessee argued that it was clear from the records, and the revision on this ground should be canceled. This issue was not pressed in this appeal. 3. Claim of Depreciation on Windmill: The assessee purchased a windmill for Rs. 4,20,25,000/- and claimed an 80% depreciation under the Income Tax Act. The CIT contended that the depreciation should be 15.33% as per the Companies Act for calculating book profits under section 115JB, resulting in an excess depreciation claim of Rs. 2,75,00,917/-. The assessee argued that the AO had raised a query and received a response, thus the issue was examined. The Tribunal, citing various precedents, held that the assessee could claim higher depreciation as per the Income Tax Rules, and the CIT erred in holding the assessment order as erroneous and prejudicial to the revenue. Ground number 3 of the assessee's appeal was allowed. 4. Furnishing of Details of Valuation of Closing Stock: The CIT noted that the details of the valuation of closing stock were not furnished before the AO. The assessee argued that this was a mere change of opinion and the revision on this ground was illegal. This issue was not pressed in this appeal. 5. Non-Furnishing of Details of Stock Hypothecated to the Bank: The CIT raised the issue of non-furnishing details of stock hypothecated to the bank. The assessee contended that the revision on this ground was illegal. This issue was not pressed in this appeal. 6. Increase in the Sale of Scrap: The CIT observed a six-fold increase in the sale of scrap and considered it a ground for revision. The assessee argued that this was a mere change of opinion, and the revision was illegal. This issue was not pressed in this appeal. 7. Break-Up of SS Sheet Cost W.I.P. and SS FG in Quantity Terms: The CIT noted that no break-up of SS sheet cost W.I.P. and SS FG in quantity terms was filed or examined by the AO. The assessee argued that the revision on this ground was illegal. This issue was not pressed in this appeal. 8. Valuation of Closing Stock of Raw Material Excluding Transportation and Finance Costs: The CIT raised concerns about the valuation of closing stock of raw material excluding transportation and finance costs. The assessee argued that the revision on this ground was illegal. This issue was not pressed in this appeal. 9. Verification of Related Party Payments under Section 40A(2)(b): The CIT observed that the AO did not verify the fair market value of payments made to related parties under section 40A(2)(b). The assessee argued that the onus to prove unreasonableness was on the AO, not the assessee. The Tribunal, citing various precedents, held that the onus was on the revenue to demonstrate that the payments were unreasonable or excessive. Ground number 9 of the assessee's appeal was allowed. Conclusion: The Tribunal allowed ground numbers 3 and 9 of the assessee's appeal, holding that the CIT erred in facts and law. The other grounds were not pressed, and the matter was restored to the AO for fresh adjudication. The appeal was partly allowed.
|
