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2019 (7) TMI 1149 - AT - Income TaxDisallowance of expenditure u/s. 14 r.w. Rule 8D - assessee made suo-moto disallowance - while computing disallowance under Rule 8D(2)(iii) only these investments on which the assessee has earned dividend income should be considered - HELD THAT - We find merit in the submissions of assessee. The Special Bench of Tribunal in the case of ACIT Anr. Vs. Vireet Investment Pvt. Ltd. Anr. 2017 (6) TMI 1124 - ITAT DELHI has held that only those investments are to be considered for computing average value of investment which have yielded exempt income during the year. The ground raised by the assessee is allowed in principle. The issue is restored back to the file of AO to determine disallowance under Rule 8D in line with the decision of Special Bench of Tribunal (supra). Addition on account of liquidated damages - whether liquidated damages claimed by the assessee are in the nature of penalty for late delivery of Gensets, therefore, the said expenditure is not allowable? - HELD THAT - The issue is recurring in nature. Similar disallowance was made by the AO in the case of assessee in the past. The Tribunal in assessment years 2002-03, 2003-04, 2007-08 and 2008-09 has already considered this issue of liquidated damages/late delivery charges. The Co-ordinate Bench in assessment year 2008-09 2019 (3) TMI 1612 - ITAT PUNE has restored this issue back to the file of AO for fresh adjudication. Since, the nature of payment of liquated damages in assessment year under appeal is identical, we deem it appropriate to restore this issue to the file of AO to decide the issue on similar lines. Accordingly, ground No. 1 of the appeal by the Revenue is allowed for statistical purpose. Allowability of depreciation @ 60% on UPS and other allied items - HELD THAT - The depreciation @ 60% was allowed to the assessee on UPS and other allied items in preceding assessment years. No material has been placed on record by the Revenue to controvert the findings of Co-ordinate Bench in assessment year 2008-09. We find no reason to take contrary view. Hence, we uphold the findings of CIT(A) in allowing depreciation @ 60% on UPS and other allied items. Accordingly, ground No. 2 of appeal by the Department is dismissed. Disallowance u/s. 40A(2) on commission paid to Directors - HELD THAT - We observe that similar disallowance was made in assessee s own case for assessment years 2007-08 and 2008-09. The Co-ordinate Bench of Tribunal in appeal by the Revenue in assessment year 2008-09 2019 (3) TMI 1612 - ITAT PUNE upheld the findings of CIT(A) in deleting such disallowance. Since, the disallowance u/s. 40A(2) on the commission paid to the Directors has been consistently decided against the Revenue, and in the assessment year under appeal there is no distinguishing feature, we find no merit in the said ground by the Department. The ground No. 3 of the appeal is rejected for the parity of reasons given in assessment year 2008-09 in assessee s own case by the Tribunal. Accordingly, ground No. 3 of the appeal is dismissed. Set off of brought forward capital losses against Long Term Capital Gain of the current assessment year - HELD THAT - In assessment year 2007-08 similar disallowance was made by the AO. The CIT(A) granted relief to the assessee. In appeal before the Tribunal, the Department was unsuccessful in contesting the issue. No material has been placed on record by the Revenue to show any change in facts or distinguishing the nature of transactions in the assessment year under appeal. Respectfully, following the order of Tribunal, ground No. 4 of the appeal by the Revenue is dismissed. Deduction u/s. 80IA(4) - assessee has installed windmill and claimed deduction u/s. 80IA(4) - AO disallowed assessee s claim on the premise that the prior period losses of eligible business are required to be set off against the income from eligible business only - HELD THAT - Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT 2010 (3) TMI 860 - MADRAS HIGH COURT has held that loss or depreciation in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s. 80-IA. The Tribunal has been consistently following the law laid down by the Hon ble Madras High Court and similar view has been taken in the case of Poonawala Estate Stud Agro Farm Pvt. Ltd. Vs. ACIT 2010 (9) TMI 1080 - ITAT PUNE - Decided against revenue. Subsidy received under Government of Maharashtra Package Scheme of Incentive, 2001 - characterization of receipt - revenue or capital receipt - HELD THAT - After considering catena of judgments the Tribunal held that the incentive received by the assessee under Package Scheme of Incentive, 2007 is in the form of refund of Sales Tax and is a capital receipt not liable to tax. The Commissioner of Income Tax (Appeals) has granted relief to the assessee by following the aforesaid decision of Tribunal of INNOVENTIVE INDUSTRIES LIMITED VERSUS DCIT, 2017 (4) TMI 44 - ITAT PUNE . We find no reason to interfere with the findings of CIT(A). Accordingly, the same is upheld and the ground of the appeal is dismissed.
Issues Involved:
1. Disallowance of expenditure under Section 14A read with Rule 8D. 2. Deletion of addition on account of liquidated damages. 3. Allowability of higher depreciation rate on UPS and allied items. 4. Disallowance under Section 40A(2) for commission paid to Directors. 5. Set off of brought forward capital losses against Long Term Capital Gain. 6. Deduction under Section 80IA(4) for windmill power generation. 7. Nature of subsidy received under the Package Scheme of Incentive, 2001. Detailed Analysis: 1. Disallowance of expenditure under Section 14A read with Rule 8D: The assessee contested the disallowance of ?2,37,05,448 under Section 14A. The assessee had earned dividend income of ?12,62,52,672 and made a suo-moto disallowance of ?5,00,000. The Assessing Officer (AO) made a disallowance of ?2,42,05,448 under Rule 8D. The assessee argued that only those investments yielding tax-free income should be considered under Rule 8D(2)(iii). The Tribunal found merit in this argument and restored the issue to the AO for re-computation in line with the Special Bench decision in the case of Assistant Commissioner of Income Tax & Anr. Vs. Vireet Investment Pvt. Ltd. & Anr. 2. Deletion of addition on account of liquidated damages: The Revenue challenged the deletion of ?12,96,830 as liquidated damages. The Tribunal noted that similar issues in previous years were restored to the AO for fresh adjudication. Following the precedent, the Tribunal restored this issue to the AO for verification. 3. Allowability of higher depreciation rate on UPS and allied items: The Revenue contested the allowance of 60% depreciation on UPS and allied items. The Tribunal upheld the CIT(A)'s decision, noting that similar depreciation was allowed in previous years and no new material was presented to alter this finding. 4. Disallowance under Section 40A(2) for commission paid to Directors: The AO disallowed 20% of the increased commission paid to Directors, invoking Section 40A(2). The CIT(A) deleted this disallowance, and the Tribunal upheld this decision, noting that similar disallowances in previous years were consistently decided against the Revenue. 5. Set off of brought forward capital losses against Long Term Capital Gain: The Revenue argued that the set-off of brought forward capital losses was a tax avoidance scheme. The Tribunal dismissed this ground, noting that similar issues in previous years were decided in favor of the assessee and no new distinguishing facts were presented. 6. Deduction under Section 80IA(4) for windmill power generation: The AO disallowed the deduction under Section 80IA(4), arguing that losses from eligible business should be set off against the income from eligible business only. The Tribunal upheld the CIT(A)'s decision, citing the Hon'ble Madras High Court's ruling in Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax, which held that losses already absorbed against other business profits cannot be notionally brought forward. 7. Nature of subsidy received under the Package Scheme of Incentive, 2001: The Revenue argued that the subsidy received was a revenue receipt. The Tribunal upheld the CIT(A)'s decision, which treated the subsidy as a capital receipt following the Tribunal's decision in Innovative Industries Limited Vs. DCIT, where similar subsidies were considered capital in nature. Conclusion: The appeal of the assessee is allowed for statistical purposes, and the appeal of the Revenue is partly allowed for statistical purposes. The Tribunal restored certain issues to the AO for fresh adjudication while upholding the CIT(A)'s decisions on other matters based on precedents and consistent findings in previous assessment years.
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