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2014 (4) TMI 431 - AT - Income TaxDeletion of disallowance of Deduction u/s 80IA(4) of the Act Held that - As decided in assessee s own case for the previsous assessment years , it has been held that the deduction u/s 80IA(4) of the Act is allowed on captive power plant, where the profit was calculated on the basis of market rate of power unit on captive power plant production of unit thus, the deduction u/s 80IA is allowed on the basis of market rate of power unit computing the profit from the eligible unit u/s. 80IA(4) Decided in favour of Assessee. Disallowance u/s 14A of the Act Interest and other expenses incurred in relation to exempted income of dividend and tax free interest Held that - The decision in Godrej and Boyce Mfg Co. Ltd. 2010 (8) TMI 77 - BOMBAY HIGH COURT Rule 8D is not applicable retrospectively and applicable for A.Y. 08-09 - reasonable disallowance is to be made by the AO after analyzing the borrowed fund used for the business purposes, non-business purposes and interest paid and also other disallowance for under the administrative head - the assessee did not supply the information called for by the AO at the time of assessment - the issue cannot be decided at this level the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue. Allowability of adjustment under Explanation to section 115JB of the Act Wealth tax liability Held that - As decided in assessee s own case for the previsous assessment years , the decision in JCIT vs. Usha Martin Industrial Ltd. 2006 (12) TMI 171 - ITAT CALCUTTA followed Decided against Revenue. Deduction u/s 80HHC of the Act Book profits u/s 115JB of the Act Held that - The AO rightly held that that assessee had claimed deduction u/s. 80HHC while calculating its book profit u/s. 115JB by filing revised e-return - deduction u/s.80HHC was not available under the normal provisions of the IT Act w.e.f. 01.04.2005 - The assessee gave reasonable opportunity of being heard on the issue, which was afforded by the assessee - After considering the assessee s reply, no deduction was allowed - The amendment made u/s 115JB is effective from 01.04.2005 and as per item no. iv of Explanation 1, the deduction u/s. 80HHC is not allowed and is to be reduced from 115JB profit thus, the order fo the CIT(A) set aside Decided in favour of Revenue. Disallowance u/s 14A for computing profit u/s 115JB of the Act Held that - As the issue has been set aside to the AO for re-computation of disallowance u/s. 14A, however, for making adjustment u/s. 115JB, in M/s. Essar Teleholdings Ltd. Versus The DCIT, Mumbai 2013 (5) TMI 116 - ITAT MUMBAI it has been held that, provisions of sub-Section 2 & 3 of Section 14B cannot be imported into Clause (f) of the Explanation to Section 115JB of the Act - As per Clause (f) of Explanation 1 to Section 115JB refers to amount debited to the P&L account, which can be added back to the book profit while computing the book profit u/s. 115JB - adjustment made by the AO is not as per law Decided against Revenue. Addition of provision for doubtful debts Computation of book profits u/s 115JB of the Act Held that - The decision in CIT vs. Yokogawa India Ltd. 2011 (8) TMI 766 - KARNATAKA HIGH COURT followed - provision made for bad debt cannot be added back in accordance with Explanation (c) to Section 115JB(1) as same is not an ascertained liability - the provision for bad debt has been analyzed and as per Section 36(1)(vii), the assessee has to show net of the provision for bad debt in the balance sheet - Even Explanation (c) has been inserted retrospectively, then no increase can be made u/s. 115JB or 115JA - The amendment came by the Finance Act, 2008 w.e.f. 01.04.2001 - The assessee had made provisions for bad debt in earlier year and added back in the computation of income of that year and actual bad debt had been claimed by debited the provision for bad debt and claimed u/s. 36(1)(vii) of IT Act thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee.
Issues Involved:
1. Deletion of addition on account of disallowance of claim of deduction u/s. 80IA(4) for captive consumption in COGEN Plants. 2. Deletion of disallowance u/s. 14A towards interest and other expenses incurred in relation to exempted income. 3. Adjustment of wealth-tax liability under clause (c) of the Explanation below section 115JB. 4. Allowance of deduction u/s. 80HHC from the book profit u/s. 115JB. 5. Allowance of disallowance made by the Assessing Officer u/s. 14A for the purpose of computing book profit u/s. 115JB. 6. Addition of provision for doubtful debt for computing the book profits u/s. 115JB. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Disallowance of Claim of Deduction u/s. 80IA(4) for Captive Consumption in COGEN Plants: The Revenue challenged the deletion of an addition of Rs.10,08,27,649/- on account of disallowance of deduction u/s. 80IA(4) for electricity produced for captive consumption in COGEN Plants. The Assessing Officer (A.O.) had disallowed the deduction based on the decision of the ITAT Chennai in the case of Chettinad Cement Corporation Ltd., which held that deduction u/s. 80IA is not available for captive power plants. The CIT(A) deleted the addition, relying on the ITAT's decision in the case of Alembic Ltd., where the deduction was allowed based on the market rate of electricity supplied by Gujarat Electricity Board (GEB). The ITAT confirmed the CIT(A)'s order, noting that the issue was already decided in favor of the assessee in previous years by the ITAT Ahmedabad Bench. 2. Deletion of Disallowance u/s. 14A towards Interest and Other Expenses Incurred in Relation to Exempted Income: The Revenue contended the deletion of disallowance of Rs.14,91,000/- u/s. 14A towards interest and other expenses related to exempted income. The A.O. disallowed the amount based on the argument that the assessee had significant borrowings and had not provided details of the source of funds used for acquiring shares. The CIT(A) allowed the appeal, following the decision in the assessee's favor in the preceding year. The ITAT set aside the issue to the A.O. for re-calculation of disallowance, directing the A.O. to consider the assessee's arguments and provide a reasonable opportunity of being heard. 3. Adjustment of Wealth-Tax Liability under Clause (c) of the Explanation below Section 115JB: The Revenue appealed against the CIT(A)'s decision to negate the adjustment of wealth-tax liability of Rs.7.50 lacs under clause (c) of the Explanation below section 115JB. The A.O. had added back the wealth-tax provision to the book profit, considering it an unascertained liability. The CIT(A) allowed the appeal based on the ITAT Kolkata Special Bench's decision in Usha Martin Industrial Ltd. The ITAT confirmed the CIT(A)'s order, noting that the issue was already decided in favor of the assessee in previous years by the ITAT Ahmedabad Bench. 4. Allowance of Deduction u/s. 80HHC from the Book Profit u/s. 115JB: The Revenue challenged the CIT(A)'s direction to allow the deduction u/s. 80HHC of Rs.12,56,36,909/- from the book profit u/s. 115JB. The A.O. had denied the deduction based on the amendment to section 80HHC, which disallowed deductions for assessment years starting from 1st April 2005. The CIT(A) set aside the issue to the A.O., directing him to recompute the book profit after allowing the deduction of profit u/s. 80HHC. The ITAT, however, confirmed the A.O.'s order, noting that the amendment to section 115JB was effective from 1st April 2005, and the deduction u/s. 80HHC was not allowed. 5. Allowance of Disallowance Made by the Assessing Officer u/s. 14A for the Purpose of Computing Book Profit u/s. 115JB: The Revenue appealed against the CIT(A)'s decision to allow the disallowance made by the A.O. u/s. 14A for computing book profit u/s. 115JB. The A.O. had added back the disallowed amount to the book profit as per clause (f) of Explanation 1 of section 115JB. The CIT(A) deleted the addition, and the ITAT confirmed the CIT(A)'s order, noting that the provisions of section 14A could not be imported into while computing book profit u/s. 115JB. 6. Addition of Provision for Doubtful Debt for Computing the Book Profits u/s. 115JB: The assessee challenged the addition of provision for doubtful debt of Rs.3,00,51,177/- for computing the book profits u/s. 115JB. The A.O. had added back the provision for doubtful debt, considering it an unascertained liability. The CIT(A) confirmed the addition, citing the amendment to section 115JB, which mandated adding back provisions for diminution in the value of any asset. The ITAT set aside the issue to the A.O., directing him to decide the matter based on the Karnataka High Court's decision in CIT vs. Yokogawa India Ltd., which held that provision for bad debt cannot be added back as it is not an ascertained liability. Conclusion: The ITAT partly allowed the Revenue's appeal and set aside certain issues to the A.O. for re-adjudication, while confirming the CIT(A)'s orders on other issues. The assessee's cross-objection was allowed for statistical purposes.
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