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2020 (7) TMI 567 - AT - Income TaxDisallowance u/s 14A read with Rule-8D - HELD THAT - As observed that the opening balance of investments was ₹ 85.67 Crores, and, thus, investments subjected to Rule-8D were not brought forward from earlier years. It was also observed by the CIT (A) that the AO could not demonstrate that loans were borrowed for making investments in dividend yielding assets only. We find no reason to interfere with this factual finding of the Ld. CIT (A). Assessee had submitted a computation before the AO wherein it was submitted that the disallowance, if any, could not exceed ₹ 8,34,934/- being the costs of treasury operations - As seen that neither the Assessing Officer nor the Ld. CIT (A) has commented on this computation of the assessee. Thus, apparently, the satisfaction, as contemplated and laid down in the case of Maxopp Investment Ltd. 2011 (11) TMI 267 - DELHI HIGH COURT to be recorded by the Assessing Officer is completely absent and, therefore, in absence of the required satisfaction, such disallowance could not have been made - since, the Ld. AR has argued that the disallowance may be restricted we, accordingly, restrict the disallowance and direct the AO to delete the remaining disallowance. Ground No.1 of the assessee s appeal stands partly allowed. Addition on account of interest on Income Tax Refund - HELD THAT - AR has fairly accepted that this amount is taxable in the hands of the assessee. However, while dismissing this ground of the assessee s appeal, we direct that should the interest amount vary subsequently depending on the outcome of the appeals before the Hon ble High Court and the Hon ble Apex Court, the AO should substitute such varied amount as the case may be. Capital subsidy received during the relevant assessment year from the written down value of the respective block of assets - HELD THAT - It is settled law that the taxation of subsidy, by whatever name called, is determined by the purpose for which the subsidy is granted and not the form/mode/manner in which the subsidy is received/disbursed. We find no reason to interfere with the findings CIT (A) on the issue that the impugned subsidy was a capital receipt. CIT (A) was not correct in directing the AO to reduce the amount of subsidy from the actual cost of fixed assets and, thereafter, allow depreciation on such actual costs so arrived that. We set aside the order of the Ld. CIT (A) on this issue and we direct the Assessing Officer to allow deprecation on the actual cost of assets without reducing the amount of subsidy there from. Thus Ground No.3 of the assessee s appeal stands allowed. Addition on account of license fee - HELD THAT - It is seen that this issue is covered in favour of the assessee by the following orders of the Hon ble High Court and the Tribunal rendered in assessee s case in the earlier Assessment Years. CIT-DR also could not controvert this fact. In view of the binding judicial precedents in asssessee s own case as enumerated above, we find no reason to interfere with the findings of the CIT (A) on the issue. Claim of depreciation in respect of UPS - 60% OR 15% - HELD THAT - UPS is to be considered as an integral part of the computers and depreciation is to be allowed @ 60%. Accordingly, in view of the settled legal position, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue also. See CIT vs. BSES Rajdhani Power Limited 2018 (2) TMI 299 - ITAT DELHI . Depreciation in respect of energy saving and pollution control equipment on the ground that it was not put to use - AO disallowed the claim of depreciation by alleging that the assessee has only established the factum of purchase of assets and not the condition of assets being put to use - HELD THAT - Provisions of Sec.32 do not mandate such requirement. To assume that having purchased and installed the energy saving devices and pollution control equipment but not putting the same to use is, thus, just a baseless surmise and conjecture which stands negated by the certificates from the Chartered Engineers. Therefore, it is our considered opinion that the Ld. CIT (A) was absolutely correct in holding that having installed the devices, the assessee had extensively put the assets to use for the purposes of business and that under the law, the assessee was not required to monitor the outcome of use of such items in its business. The Hon ble Delhi High Court in the case of CIT vs. Insilco Ltd. reported 2009 (2) TMI 31 - DELHI HIGH COURT had held that it would be more appropriate to understand the expression use as comprehending cases where the machinery is kept ready by the owner for its use in its business.
Issues Involved:
1. Disallowance of license fee 2. Disallowance under Section 14A 3. Addition of interest under Section 244A 4. Disallowance of depreciation on UPS 5. Addition of subsidy from Government of Goa 6. Disallowance of depreciation on energy saving and pollution control equipment Detailed Analysis: 1. Disallowance of License Fee: The Assessing Officer (AO) disallowed ?61,01,74,000/- on account of license fee paid by the assessee to its Associated Enterprise (AE), considering it excessive and not incurred for business purposes. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this disallowance, relying on previous orders of the Hon'ble High Court and the Tribunal in the assessee's favor. The Tribunal upheld CIT(A)'s decision, noting that this issue was consistently decided in favor of the assessee in earlier assessment years (1997-98 to 2008-09) by both the ITAT and the Delhi High Court. 2. Disallowance under Section 14A: The AO made a disallowance of ?39,25,411/- under Section 14A read with Rule 8D, which the CIT(A) reduced to ?32,93,106/-. The assessee argued that no expenditure was incurred to earn the exempt dividend income and that the AO did not record satisfaction regarding the correctness of the claim. The Tribunal found that the AO failed to record the required satisfaction as per the Delhi High Court's judgment in CIT vs. Maxopp Investment Ltd., and restricted the disallowance to ?8,34,934/- based on the assessee's computation. 3. Addition of Interest under Section 244A: The AO added ?8,01,12,224/- as interest received on income tax refunds. The CIT(A) upheld this addition. The assessee accepted the taxability of this amount but requested that the AO adjust the interest amount based on the outcome of pending appeals. The Tribunal directed the AO to adjust the interest amount accordingly. 4. Disallowance of Depreciation on UPS: The AO restricted the depreciation claim on UPS from 60% to 15%, which the CIT(A) deleted. The Tribunal upheld CIT(A)'s decision, noting that the Delhi High Court in CIT vs. BSES Rajdhani Power Ltd. had held that UPS is an integral part of computers and eligible for 60% depreciation. 5. Addition of Subsidy from Government of Goa: The AO treated the subsidy of ?25,00,000/- from the Government of Goa as revenue receipt, but the CIT(A) held it as capital receipt. The Tribunal agreed with CIT(A), noting that the subsidy aimed to promote industrialization in backward areas and was not meant to reimburse the cost of fixed assets. The Tribunal directed the AO to allow depreciation on the actual cost of assets without reducing the subsidy amount. 6. Disallowance of Depreciation on Energy Saving and Pollution Control Equipment: The AO disallowed ?33,90,330/- of depreciation, claiming the assets were not put to use. The CIT(A) deleted this disallowance, supported by certificates from Chartered Engineers confirming the assets' use. The Tribunal upheld CIT(A)'s decision, referencing the Delhi High Court's judgment in CIT vs. Insilco Ltd., which held that assets kept ready for use qualify for depreciation. Conclusion: The appeal of the assessee was partly allowed, and the Department's appeal was dismissed. The Tribunal upheld the CIT(A)'s decisions on most issues, providing detailed reasoning and referencing relevant judicial precedents.
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