2021 (12) TMI 750 - AT - Income Tax

Disallowance u/s 14A r.w.r.8D - HELD THAT - We find that the assessee own funds are far more that the investments in tax free securities. We note that assessee own funds were ₹ 512.65 Cr whereas the investments in tax free securities were 17.27 Cr. The ld CIT(A) has passed the order after following the decisions of jurisdictional High Court in the case of Reliance Utilities Ltd 2009 (1) TMI 4 - BOMBAY HIGH COURT and HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT .Therefore, we do not find any infirmity in the order of ld CIT(A) and accordingly the ground is dismissed by upholding the order of ld CIT(A) on this issue. Deduction of u/s 80-IA in respect of profits and gains derived from undertaking engaged in generation of power in the form of steam - HELD THAT - We are inclined to restore the same to the file of the AO to decide the same after affording a reasonable opportunity to the assessee.

Issues Involved:
1. Disallowance of depreciation claimed under Rule 5(2)
2. Disallowance of weighted deduction under Section 35(2AB)
3. Disallowance of interest on advances given to a subsidiary
4. Disallowance under Section 14A read with Rule 8D
5. Depreciation on unrealized foreign exchange loss
6. Additional depreciation under Section 32(1)(iia)
7. Addition of disallowance under Section 14A to book profit under Section 115JB
8. Deduction under Section 80-IA for profits from power generation
9. Treatment of fertilizer subsidy and export incentives as capital receipts

Detailed Analysis:

1. Disallowance of Depreciation Claimed Under Rule 5(2):
The Revenue contested the deletion of an addition of ?41,85,150 on account of depreciation claimed under Rule 5(2), arguing that the assessee did not produce the required DSIR certificate. The Tribunal noted that the issue was already decided in favor of the assessee in a previous assessment year (ITA No. 4943/Mum/2017 for AY 2011-12). Following the precedent, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

2. Disallowance of Weighted Deduction Under Section 35(2AB):
The Revenue challenged the deletion of an addition of ?3,60,92,087, asserting that the assessee failed to produce necessary agreements and an incomplete Form 3CL. The Tribunal found that this issue had also been resolved in the assessee's favor in earlier proceedings (ITA No. 4943/Mum/2017 for AY 2011-12). The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

3. Disallowance of Interest on Advances Given to Subsidiary:
The Revenue objected to the deletion of an addition of ?1,99,34,904 related to interest on loans to a subsidiary, arguing that the existence of interest-free funds did not justify the interest-free loans. The Tribunal noted that this issue had been previously decided in favor of the assessee (ITA No. 4943/Mum/2017 for AY 2011-12). The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

4. Disallowance Under Section 14A Read with Rule 8D:
The Revenue challenged the deletion of an addition made under Section 14A read with Rule 8D. The Tribunal observed that the assessee's own funds exceeded investments in tax-free securities, referencing decisions in Reliance Utilities Ltd. vs. CIT and HDFC Bank Ltd. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

5. Depreciation on Unrealized Foreign Exchange Loss:
The Revenue contested the allowance of depreciation on unrealized foreign exchange loss, arguing it was not allowable under Section 43A. The Tribunal noted that this issue had been decided in favor of the assessee in earlier proceedings (ITA No. 4943/Mum/2017 for AY 2011-12). The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

6. Additional Depreciation Under Section 32(1)(iia):
The Revenue objected to the allowance of additional depreciation of ?1,89,51,631, arguing it should only be allowed in the year of purchase. The Tribunal found that this issue had been resolved in favor of the assessee in earlier proceedings (ITA No. 5077/Mum/2017 for AY 2011-12). The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

7. Addition of Disallowance Under Section 14A to Book Profit Under Section 115JB:
The assessee contested the addition of disallowance under Section 14A to book profit under Section 115JB. The Tribunal noted that this issue had been decided in favor of the assessee in earlier proceedings (ITA No. 5077/Mum/2017 for AY 2011-12). The Tribunal set aside the CIT(A)'s order, allowing the assessee's ground.

8. Deduction Under Section 80-IA for Profits from Power Generation:
The assessee contested the denial of deduction under Section 80-IA for profits from power generation. The Tribunal noted that this issue had been restored to the AO for fresh consideration in earlier proceedings (M.A. 256/Mum/2020 arising out of ITA No. 5077/Mum/2017 for AY 2011-12). The Tribunal restored the issue to the AO for fresh consideration, allowing the ground for statistical purposes.

9. Treatment of Fertilizer Subsidy and Export Incentives as Capital Receipts:
The assessee contested the treatment of fertilizer subsidy and export incentives as taxable receipts. The Tribunal noted that this issue had been restored to the AO for fresh consideration in earlier proceedings (M.A. 256/Mum/2020 arising out of ITA No. 5077/Mum/2017 for AY 2011-12). The Tribunal restored the issue to the AO for fresh consideration, allowing the ground for statistical purposes.

Conclusion:
The appeals of the Revenue were dismissed, and the cross objections of the assessee were allowed for statistical purposes.

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