2017 (10) TMI 1206 - AT - Income Tax

Disallowance of amortization of premium on leasehold land - Held that - As decided in assessee in own case for previous AY the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts. The saving in expenditure was a saving in revenue expenditure in the form of rent. Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure. Moreover, assessee in the present case did not get any capital asset by spending the said amounts. The assessee, therefore, could not have claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure. - Decided in favour of assessee. Disallowance u/s. 14A read with Rule 8D. - Held that - As decided in assessee in own case for A.Y 2004-05 & 2005-06 addition need to be deleted.- Decided in favour of assessee. Calculating the book profit under section 115JB and disallowance under section 14A - Held that - Recently the Special Bench of Delhi Tribunal in ACIT Vs. Vireet Investment Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI held that computation under Clause-(f) of Explanation-1 to section 115JB(2) of the Act is to be made without resorting to computation as contemplated u/s 14A r.w. Rule 8D of the Act. We may note that lower authority was not having the benefit of decision of Special Bench while passing the order impugned in the present appeal. Income from Oil Bonds to be taxed as Business Income - Held that - Considering the decision of Co-ordinate Bench in assessee s own case wherein the similar ground of appeal was restored to the file of CIT(A), hence, keeping in view, the principle of consistency, this ground of appeal is also restored to the file of ld. CIT(A) to decide it afresh, with similar directions. In the result, this ground of appeal is allowed for statistical purpose. Contribution to Rajiv Gandhi Institute of Petroleum Technology - Held that - The contribution was made by assessee as per the directive of Ministry of Petroleum and Natural Gas. Rajiv Gandhi Institute of Petroleum Technology is an organization set up by Government of India for promoting quality and excellence in education and research in the area of Petroleum and Hydrocarbon. The Institute is providing education relating to the research leading to award of Bachelors, Master and Doctoral degree and Engineering Technology, Management, Science and Arts in the area of Petroleum and Hydrocarbon besides other innovative research and development for the benefit of Oil, Gas and Petrochemical Industry. The receipt of contribution placed by assessee contains the reference of certificate of exemption under section 80G, granted to Rajiv Gandhi Institute of Petroleum Technology vide letter no. 58-59/130/19/2006-07/IT/A-A-1/Luck/126/121. The assessee has already declared income for the AY under consideration, the assessee has contributed ₹ 1.55 Crore only to the said institute. We therefore direct the AO to allowed the deduction of the said contribution under section 80G

Issues Involved:

1. Disallowance of amortization of premium on leasehold land.
2. Disallowance under Section 14A read with Rule 8D.
3. Non-admission of additional grounds of appeal.
4. Treatment of net loss on sale of oil bonds.
5. Calculation of book profits under Section 115JB.
6. Tax treatment of interest income from oil bonds.
7. Disallowance of prior period expenditure.
8. Deduction for contribution to Rajiv Gandhi Institute of Petroleum Technology.

Detailed Analysis:

1. Disallowance of Amortization of Premium on Leasehold Land:
The Tribunal allowed the assessee's appeal regarding the disallowance of ?1,57,59,706 for the assessment year (AY) 2006-07 and ?1,71,56,704 for AY 2007-08. The Tribunal referenced its own decisions in the assessee's cases for AY 2004-05 and 2005-06, where it was held that the leasehold premium amortized by the assessee corporation was in the nature of compensation to landlords, thus allowable as revenue expenditure. This was consistent with the Bombay High Court's judgment in CIT-3 Vs. Reliance Industrial Infrastructure Ltd.

2. Disallowance under Section 14A Read with Rule 8D:
The Tribunal allowed the assessee's appeals for AY 2006-07 and 2007-08, referencing its own decisions in the assessee's cases for AY 2002-03, 2003-04, 2004-05, and 2005-06. It was held that the disallowance under Section 14A was not applicable as per the rules for the relevant assessment years.

3. Non-Admission of Additional Grounds of Appeal:
The Tribunal admitted the additional grounds of appeal for AY 2006-07 and restored the matter to the CIT(A) for verification and adjudication on the merits. This included the claim regarding the loss on oil bonds as a business loss, which was allowed by the Tribunal in the assessee's cases for AY 2004-05 and 2005-06.

4. Treatment of Net Loss on Sale of Oil Bonds:
For both AY 2006-07 and 2007-08, the Tribunal restored the matter to the CIT(A) to verify the facts and allow the claim in accordance with the law, referencing the decisions in the assessee's cases for AY 2004-05 and 2005-06. The Tribunal emphasized the principle of consistency in adjudicating similar issues.

5. Calculation of Book Profits under Section 115JB:
The Tribunal restored the matter to the AO for AY 2006-07 to pass the order in accordance with the law after considering the Special Bench decision in ACIT Vs. Vireet Investment Pvt. Ltd., which held that computation under Clause-(f) of Explanation-1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D.

6. Tax Treatment of Interest Income from Oil Bonds:
The Tribunal restored the matter to the CIT(A) for both AY 2006-07 and 2007-08, directing re-adjudication in light of the Bombay High Court's decision in Mangalore Refinery & Petrochemical Ltd. and the Tribunal's own decisions in the assessee's cases for AY 2004-05 and 2005-06.

7. Disallowance of Prior Period Expenditure:
For AY 2007-08, the Tribunal allowed the appeal, referencing its decision in the assessee's case for AY 2002-03. The Tribunal held that prior period expenses were allowable, especially when they constituted a minuscule percentage of the turnover.

8. Deduction for Contribution to Rajiv Gandhi Institute of Petroleum Technology:
For AY 2007-08, the Tribunal directed the AO to allow the deduction under Section 80G, recognizing the contribution of ?1,55,00,000 as related to the business of the assessee and beneficial for the petroleum industry. The Tribunal emphasized the role of the Institute in promoting research and development in the sector.

Conclusion:
The Tribunal's decisions consistently favored the assessee, allowing or restoring most of the contested disallowances and claims for re-adjudication based on principles of consistency and relevant judicial precedents. The appeals were partly allowed, with specific directions for the lower authorities to follow established legal principles and prior decisions in the assessee's own cases.

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