2015 (10) TMI 172 - AT - Income Tax

Allowability of claim of deduction on account of write-off of Railway/Insurance claims - Held that - The claim of bad debt can be allowed only when the amount has been taken into account in computation of income in the earlier year. It has not been made clear as to how the amount claimed as deduction has been taken into account in the computation of income of earlier year. On account of shortages found in transportation of goods assessee must have made claim with the insurance agencies and railways. It is not clear whether the claim lodged by the assessee with railways/insurance had been declared as income in the year of the claim, because only in that case the assessee can make claim of bad debt in the subsequent year when the full claim is not received. Facts being not clear, the issue in our opinion requires fresh examination. We, therefore, set aside the order of CIT(A) and restore the matter to AO for fresh adjudication after necessary examination in the light of observations made above and after allowing opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes only. Rejection of the claim of the appellant of excluding 100% of the export profits from net profit while computing the book profit u/s. 115JB of the Act instead of 80% of the export profits - Held that - Facts in brief are that the assessee had deducted an amount of ₹ 74,74,754/- being dividend exempt u/s. 10(33) of the Act. In the computation of income u/s. 115JB, the assessee has reduced the above amount for computing its profits. During the course of assessment proceedings the assessee was asked as to why the above said amount should not be disallowed u/s. 14A of the Act. The assessee vide its letter dated 22/1/2004 stated that the company has not incurred expenditure for the purpose of earning of any income, which is exempt under the Act and hence, provision of section 14A will not be applicable in the case of the assessee. However, this claim was not found acceptable by the AO. According to the AO the said section came with retrospective effect from 1.4.1962 by the Finance Act, 2001, and clearly lays down that for the purpose of computation of total income no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which has not formed part of total income. Consequent to the insertion of above provision, expenses incurred towards exempt income are liable for disallowance under the above section and where expenses are not ascertainable, the same have to be determined and allocated towards the said income for disallowance. As the assessee did not provide the details about the interest amount referable to investment in tax free bonds etc., there is no option but to make proportionate allocation . The AO following the earlier orders for Assessment Years 1999-2000 and 2000-01 disallowed a sum of ₹ 31,17,643/- out of total interest expenses on proportionate basis as expenditure alleged to be incurred for earning dividend income. The ld. CIT(A) followed the order of his predecessor and allowed the ground of the assessee. Keeping in view the totality of facts and the circumstances the ld. Assessing Officer is directed to re-compute as per the decision of the Hon ble Supreme Court in Ajanta Pharma Ltd. vs. CIT (2010 (9) TMI 8 - SUPREME COURT) and decide afresh for which due opportunity of being heard to be provided to the assessee . Decided in favour of assessee for statistical purposes. Disallowance of HPSEB, being Electricity sub-station, transformer and transmission lines etc. near Gagal, not owned - Held that - We note that during the relevant year the assessee contributed ₹ 39,90,000/- to HPSEB for the aforesaid purposes for the cement plant of the assessee to ensure adequate and regular power supply. We find no infirmity in the conclusion drawn in the impugned as identically for Assessment Year 2000-01 to 1993-94 was decided in favour of the assessee . Our view finds support from the decision in CIT vs. Associated Cement Companies Ltd. (1988 (5) TMI 2 - SUPREME Court) and also National Organic Chemical Industries Ltd. (1993 (2) TMI 48 - BOMBAY High Court). Thus, this ground is decided in favour of the assessee . Disallowance of expenditure on temporary structure at customer site - Held that - We note that capital cost of RMC plant has been duly capitalized in the books and the temporary structures on site, which is not owned by the assessee has no relevance once the job at the site is over/completed. Identical view was taken for Assessment Year 2000-01, thus, in the absence of any contrary facts we find no infirmity in the conclusion drawn by the ld. CIT(A). Disallowance of contribution for compulsory afforestation to make up the forest area lost due to mining done by the assessee for the Gagal Cement Plant - Held that - In view of the decision in Gujarat Ambuja Cement Ltd. (2005 (6) TMI 486 - ITAT MUMBAI ) wherein reliance was placed upon the decision from Hon ble Apex Court in the case of Empire Jute Company Ltd. (1980 (5) TMI 1 - SUPREME Court ), the amount in question is held to be an allowable deduction u/s. 37(1) of the Act. Contribution to construction of stadium in Himachal Pradesh - Held that - This expenditure was incurred for commercial expediency to maintain good and healthy relation with local people/State Government which essential to run the large industrial unit. Therefore, we find no infirmity in the order more specifically when identically, for Assessment Year 2000-01 it was allowed in favour of the assessee. Provision for contingencies in computation of book profit u/s. 115JB - Held that - That in view of the amendment in sec.115 JB of the Act, the issue is covered against the assessee Profit on sale of fixed asset while making computation of book profit u/s. 115JB and sales tax subsidy are covered against the assessee.

Summary

Issues:
1. Disallowance of Railways/Insurance claims written off by the assessee.
2. Claim of depreciation on Captive power Plant.
3. Deduction u/s. 80IA/IB.
4. Deduction u/s.115JB.
5. Exclusion of export profits from net profit u/s. 115JB.
6. Disallowance of expenditure under section 14A.
7. Disallowance of contribution for compulsory afforestation.
8. Contribution to construction of stadium in Himachal Pradesh.
9. Subsidy received from Government of West Bengal.
10. Provision for contingencies in computation of book profit u/s. 115JB.
11. Profit on sale of fixed asset in book profit calculation u/s. 115JB.
12. Sales tax subsidy in book profit calculation u/s. 115JB.

1. Disallowance of Railways/Insurance claims written off by the assessee:
The dispute revolved around the allowability of deduction for write-off of Railway/Insurance claims related to cement transportation. The Tribunal set aside the order of the CIT(A) and directed fresh examination by the AO to determine if the claim was admissible in the year under consideration. The Tribunal highlighted the necessity for clarity on how the claimed amount was treated in earlier years for proper assessment.

2. Claim of depreciation on Captive power Plant:
The assessee did not press this ground, leading to its dismissal as not pressed.

3. Deduction u/s. 80IA/IB:
The ground related to this deduction was not pressed by the assessee and was dismissed accordingly.

4. Deduction u/s.115JB:
Similarly, the grounds regarding deductions u/s.115JB were not pressed and dismissed as not pressed.

5. Exclusion of export profits from net profit u/s. 115JB:
The Tribunal allowed this ground for statistical purposes, directing the AO to re-compute the deduction based on relevant legal precedents.

6. Disallowance of expenditure under section 14A:
The Tribunal allowed this ground for statistical purposes, instructing the AO to re-compute the disallowed amount in accordance with applicable legal decisions.

7. Disallowance of contribution for compulsory afforestation:
The Tribunal allowed this ground, citing relevant legal precedents, and held the contribution as an allowable deduction under section 37(1) of the Act.

8. Contribution to construction of stadium in Himachal Pradesh:
The Tribunal upheld the allowance of this expenditure for maintaining good relations with local authorities, following a similar decision for the previous assessment year.

9. Subsidy received from Government of West Bengal:
The Tribunal found no issue with the direction of the CIT(A) regarding the subsidy received, aligning with a previous Tribunal decision.

10. Provision for contingencies in computation of book profit u/s. 115JB:
The Tribunal decided against the assessee on this ground due to an amendment in the relevant section, as pointed out by the ld. DR.

11. Profit on sale of fixed asset in book profit calculation u/s. 115JB:
The Tribunal ruled against the assessee on this ground, as the issue was covered against their favor.

12. Sales tax subsidy in book profit calculation u/s. 115JB:
Similar to the previous ground, the Tribunal decided against the assessee on this issue as well.

Final Decision:
The Tribunal partly allowed the appeals for statistical purposes and directed further examination on additional grounds raised by the Revenue related to the application of sec. 115JB on book profit. All additional grounds were restored to the Assessing Officer for fresh consideration.