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2020 (2) TMI 830 - AT - Income TaxNotice u/s. 143(2) - Non issuing mandatory notice u/s 143(2) on the second revised return of income - HELD THAT - AO has assumed valid jurisdiction in this case by issue of proper notice u/s. 143(2) of the Act within the time contemplated by law. The original return u/s. 139(1) of the Act has not been treated as non est and the revised return is only for the purpose of certain errors and mistakes in the original return. In such circumstances, there is no requirement of law to issue a notice u/s. 143(2) of the Act with reference to revised return. We derive support for the aforesaid conclusions from the decision of Vinod Kumar Khatri v. DCIT 2015 (11) TMI 1140 - DELHI HIGH COURT . We are therefore of the view that there is no merit in grounds No.1 2 raised by the assessee and accordingly the said grounds are dismissed. Nature of receipt - subsidy grant from the State Govt. - revenue or capital receipt - HELD THAT - The admitted factual position as it emanates from the order of AO and the CIT(Appeals) is that the assessee did not file a copy of the scheme under which subsidy was received by assessee. In the absence of details of the scheme, it is not possible to decide the question, whether the subsidy is capital or revenue in nature. Since the burden was on the assessee to show that the subsidy received was capital receipt not chargeable to tax and since the assessee failed to do so, we uphold the order of CIT(Appeals) on this issue and dismiss grounds 4 5. Rejection of the claim of assessee for grant of weighted deduction u/s. 35(2AB) - HELD THAT - As we have already mentioned that the approval for grant of recognition to the prescribed authority was made by the assessee only on 12.5.2011 and not at any time during the relevant previous year. We are of the view that the order of CIT(Appeals) should be upheld on this basis. We may also mention a similar claim has been made by the assessee in AY 2011- 12 which is also being decided in this common order and in that year the assessee would be entitled to the benefit of deduction u/s. 35(2AB) as the approval was received on 12.5.2011 during the previous year relevant to AY 2011-12. We will discuss this issue while deciding the relevant ground of appeal for AY 2011-12. As far as AY 2010-11 is concerned, we are of the view that there is no merit in grounds No.6 to 10 and consequently they are dismissed. Deduction u/s. 80IA of the Act in respect of income derived from power generation out of 4 windmill units - allocation of proportionate expenses relating to windmills on the basis of turnover, particularly when the assessee had not maintained separate books of accounts in respect of windmills - HELD THAT - Revenue has not disputed the fact that neither the operating maintenance expenses, employee cost and other finance administrative expenses nor the claim of depreciation, is attributable to the windmill unit and this finding of fact remains uncontroverted. The question of allocation of expenses therefore will not arise for consideration at all. We therefore find no merit in ground No.1. Higher depreciation on internal road laid for approach to windmills - HELD THAT - These grounds are related to the profits of the windmill unit for which deduction u/s. 80IA was claimed by assessee. It is not in dispute before us that identical issue was raised by revenue in assessee s own case for AYs 2008-09 2009-10 find that the road in question are not the proper roads constructed for the purpose of transportation or any other use, but these are operating condition for generation of power. Accordingly, when the roads in question are integral part of the installation work of the wind-mill, the same is eligible for depreciation applicable on the wind-mill. In view of the above facts and circumstances of the case, we do not find any reason to interfere with the impugned order of the CIT(A) Brought forward (notionally) the losses of the earlier years in respect of the eligible business to set it off against the income of the current year in terms of the provisions of Section 80IA(5) - HELD THAT - It is not in dispute before us that in AY 2008-09 in assessee s own case similar issue had come up for consideration and this Tribunal held that the brought forward losses of the earlier years need not be set off against the income of the current year on which deduction u/s. 80IA of the Act was to be allowed to the assessee. Addition made towards notional interest on interest free loan given to the Associated Enterprise - HELD THAT - Special Bench of ITAT Kolkata in the case of Instrumentariam Corporation Ltd. v. ADIT (IT) 2016 (7) TMI 760 - ITAT KOLKATA held that interest-free loans are subject to the provisions of section 92 of the Act and the ALP of such transaction have to be determined. We are of the view that the conclusion of the CIT(Appeals) that the provisions of section 92 of the Act were not attracted, cannot be sustained. We, however, remand the question of determination of ALP to the AO/TPO, who shall in accordance with the provisions of section 92 refer the question of determination of ALP interest to the TPO, only with regard to rate of interest to be adopted in adopted in determining the ALP of the interest payment. Claim for deduction u/s. 10B - HELD THAT - Assessee s declaration for opting out of provisions of section 10B for AYs 2008-09, 2009-10 2010-11 was not mentioned in Form 3CD filed before the AO. In our view, this is purely a technical objection. The Assessee has given declaration opting out of the provisions of Sec.10B of the Act for the relevant AYs and copies of those declarations are placed relating to appeal for AY 2011-12. Once the assessee opts out of provisions of section 10B for a particular year, then the losses/unabsorbed depreciation in that year will not be considered while allowing deduction u/s. 10B of the Act for the eligible period when deduction is claimed in a subsequent AY. In view of the above legal position, we find no merit in the ground No.8 raised by the revenue. Accordingly the same is dismissed.
Issues Involved:
1. Validity of assessment order without issuing a mandatory notice under section 143(2) of the Act. 2. Treatment of subsidy grant from the State Government as capital receipt. 3. Rejection of claim for weighted deduction under section 35(2AB) of the Act. 4. Allocation of proportionate expenses relating to windmills. 5. Claim for higher depreciation on internal roads for windmills. 6. Set-off of brought forward losses against current year’s income under section 80IA(5). 7. Addition towards notional interest on interest-free loan to Associated Enterprise. 8. Claim for deduction under section 10B of the Act. Detailed Analysis: 1. Validity of Assessment Order Without Issuing a Mandatory Notice Under Section 143(2) of the Act: The assessee argued that the assessment order was invalid as the Assessing Officer (AO) did not issue a mandatory notice under section 143(2) on the second revised return. The Tribunal found that the AO had already assumed valid jurisdiction by issuing a notice under section 143(2) on the original return within the stipulated time. The Tribunal distinguished this case from the cited decision of IDEB Buildcon P. Ltd., where the revised return was not taken into account. Thus, the Tribunal upheld the validity of the assessment order. 2. Treatment of Subsidy Grant from the State Government as Capital Receipt: The assessee claimed the subsidy received from the State Government should be treated as a capital receipt and not taxable. However, the Tribunal upheld the order of the CIT(Appeals), noting that the assessee failed to provide details of the scheme under which the subsidy was received. Consequently, the subsidy was not treated as a capital receipt. 3. Rejection of Claim for Weighted Deduction Under Section 35(2AB) of the Act: The assessee's claim for weighted deduction under section 35(2AB) was rejected because the approval from the prescribed authority was obtained only from 1.4.2011. The Tribunal upheld this rejection for AY 2010-11, distinguishing it from other cases where approval was obtained within the relevant year. However, for AY 2011-12, the Tribunal allowed the deduction as the application for approval was made during the relevant previous year. 4. Allocation of Proportionate Expenses Relating to Windmills: The revenue argued that expenses related to windmills should be allocated based on turnover since separate books of accounts were not maintained. The Tribunal found that the CIT(Appeals) correctly deleted the allocation of expenses, noting that the department did not dispute the factual findings for earlier years, and no separate allocation was necessary. 5. Claim for Higher Depreciation on Internal Roads for Windmills: The assessee claimed higher depreciation on internal roads used for windmills. The Tribunal upheld the CIT(Appeals) decision allowing higher depreciation, citing previous Tribunal decisions that roads integral to windmill operations are eligible for higher depreciation rates. 6. Set-off of Brought Forward Losses Against Current Year’s Income Under Section 80IA(5): The revenue contended that brought forward losses should be set off against the current year's income for deduction under section 80IA. The Tribunal upheld the CIT(Appeals) decision, following the Karnataka High Court ruling in Anil H. Lad, which stated that once losses are set off against other income in earlier years, they should not be notionally carried forward for computing deduction under section 80IA. 7. Addition Towards Notional Interest on Interest-Free Loan to Associated Enterprise: The AO added notional interest on interest-free loans to the subsidiary. The Tribunal, referring to the Special Bench decision in Instrumentariam Corporation Ltd., held that such interest-free loans are subject to transfer pricing provisions. The matter was remanded to the AO/TPO to determine the arm's length price (ALP) of the interest. 8. Claim for Deduction Under Section 10B of the Act: The AO denied the deduction under section 10B, arguing that the assessee did not file the necessary declaration for opting out in earlier years. The Tribunal found that the assessee had filed the required declarations and upheld the CIT(Appeals) decision allowing the deduction, noting that the objection regarding the declaration in Form 3CD was technical and not substantive. Conclusion: - Assessee’s appeal for AY 2010-11 was dismissed. - Assessee’s appeal for AY 2011-12 was allowed. - Revenue’s appeal for AY 2010-11 was partly allowed for statistical purposes. - Revenue’s appeal for AY 2011-12 was dismissed.
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