2021 (11) TMI 85 - AT - Income Tax

Addition on account of repurchase of Foreign Currency Convertible Bonds (FCCB) - allocation of machinery under the head of depreciation @ 15% and 80% are to be allocated on pro data basis depending upon the WDV of the said block - whether CIT(A)-3, erred in law on facts in not directing the assessing officer, not to allocate the amount of difference of discount on buying back of FCCB and reducing a sum from the cost of assets, while computing depreciation in the absence of any such findings in the appellate order? - HELD THAT - As per RYAM SUGAR COMPANY LIMITED 1974 (3) TMI 10 - CALCUTTA HIGH COURT AO has no power to go beyond the direction of the competent authority while passing order giving effect. So far as the merit of the case is concerned the Ld. counsel has pointed out that the issue involved is covered in favour of the assessee by the order of the Hon'ble Supreme Court in the case of Tata Iron Steel Ltd. 1997 (12) TMI 5 - SUPREME COURT - However, we notice that the Ld. CIT(A) has passed the impugned order without taking into consideration the cases relied upon by the Ld. counsel. As alleged by the Ld. counsel the issue involved is also covered in favour of the assessee which has not been looked into by the authorities below. Under these circumstances, we deem it appropriate to restore the issue to the AO for passing order giving effect afresh to the appellate order passed by the Ld. CIT(A) in the first round of appeal. The Ld. DR has no objection in case the appeal is send back to the AO for fresh consideration. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Challenge to assessment order by the assessee against the CIT(A)'s decision.
2. Allocation of amount from repurchase of FCCB for depreciation calculation.
3. Disallowance of depreciation by AO and challenge by the assessee.
4. Jurisdiction of AO in giving effect to appellate orders.

Issue 1:
The assessee appealed against the CIT(A)'s order dismissing their appeal against the assessment order for the assessment year 2009-10, where the AO determined the income and made additions under normal provisions and section 115JB of the Income Tax Act, 1961.

Issue 2:
The dispute arose regarding the allocation of an amount from the repurchase of FCCB for depreciation calculation. The CIT(A) partially allowed the appeal, holding that a certain amount was not taxable, while confirming the addition of the remaining amount. The AO allocated the amount to machinery for depreciation, disallowing a portion of depreciation claimed by the assessee. The assessee challenged this allocation before the CIT(A in the second round, which was confirmed.

Issue 3:
The assessee contested the disallowance of depreciation by the AO, arguing that the AO exceeded jurisdiction by reducing the amount of depreciation despite no specific direction from the CIT(A). The assessee relied on legal precedents to support the argument that the AO must strictly follow appellate orders without going beyond the given directions.

Issue 4:
The Tribunal noted that the AO should adhere to the directions of the appellate authority while giving effect to orders. Citing relevant case laws, the Tribunal held that the AO cannot exceed the directions issued by higher authorities. The Tribunal found merit in the assessee's argument, referring to a Supreme Court judgment. Consequently, the Tribunal set aside the CIT(A)'s findings and remanded the issue to the AO for fresh consideration in line with the cases cited by the assessee.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, directing the AO to pass a fresh order after considering the legal precedents and giving the assessee an opportunity to be heard.