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2023 (9) TMI 100 - AT - Income TaxDisallowance of royalty payment to ONGC - Crystallization of liability - correct year of assessment - AO held that since the payment of royalty has accrued in assessment year 2010-11 as per mercantile system of account, it has to be allowed in assessment year 2010-11 and as liability got crystallized by virtue of Government of India letter dated 26th July, 2011, falling in financial year 2011-12 relevant to assessment year 2012-13, therefore, it cannot be allowed in the impugned assessment year - HELD THAT - FAA endorsed the view of AO by holding that the claim could have been allowed either in assessment year 2010-11 on accrual basis or in assessment year 2012-13, wherein, the liability got crystallized. Thus, it is very much clear that they have not disputed assessee s claim that the cost of royalty has to be allowed. However, the dispute is only with regard to the timing. We direct the Assessing Officer to allow assessee s claim in assessment year 2012-13, wherein, the liability got crystallized. This ground is partly allowed. Disallowance of amortization of facility management fee - As per AO and FAA since the entire facility management fee was paid in assessment year 2010-11 for due diligence process for admissibility of the loan facility and it is not connected to the utilization of the loan, therefore, it cannot be amortized over the tenure of the loan - HELD THAT - We direct the AO to verify the facts relating to assessment year 2010-11 2023 (1) TMI 1284 - ITAT DELHI and in case such deferment has been allowed in assessment year 2010-11, then he has to allow it in the impugned assessment year. Or else, he is directed to allow the entire expenditure in assessment year 2010-11. Ground is partly allowed. Disallowance of claim of additional depreciation - HELD THAT - Tribunal in order 2023 (1) TMI 1284 - ITAT DELHI has held that in view of explanation 5 to section 32(1) AO has to compute additional depreciation irrespective of the fact whether the assessee has claimed it or not. Accordingly, the Tribunal has upheld the decision of the Assessing Officer with regard to allowance of claim of additional depreciation. The aforesaid decision of the Coordinate Bench squarely applies to the facts of the present appeal. Accordingly, we uphold the decision of the departmental authorities on the issue. Ground raised is dismissed. Addition expenses on exploration and development - non-deduction of tax u/s 40(a)(i)/40(a)(ia) - HELD THAT - As parties have agreed that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessment years 2010-11, 2013-14, 2014-15, 2015-16 and 2016-17. Having considered rival submissions, we find, while deciding identical issue in assessee s own case in assessment years 2010-11, 2013-14 and 2014-15, 2023 (1) TMI 1284 - ITAT DELHI the Tribunal has upheld the deletion of similar disallowance made by the Assessing Officer. Exploration and development expenditure - Disallowance on the reasoning that it was claimed purely on estimate basis without any actual evidence - HELD THAT - We find, while considering identical issue in Revenue s appeal arising in assessment years 2010-11, 2013-14 and 2014-15 2023 (1) TMI 1284 - ITAT DELHI the Tribunal has upheld the deletion of disallowance. Identical view was reiterated by the Tribunal while deciding Revenue s Appeal in assessment years 2015-16 and 2016-17 as well in the order referred to above. Addition being part of exploration and development cost in head office expenditure covered u/s 44C for the Rajasthan block - HELD THAT - The issue is squarely covered by the decisions of the Tribunal in assessment years 2010-11, 2013-14, 2014-15 2023 (1) TMI 1284 - ITAT DELHI 2015-16 and 2016-17 2023 (6) TMI 1303 - ITAT DELHI We find, while deciding identical issue in assessee s own case in assessment years, noted above, the Tribunal has upheld the decision of learned Commissioner (Appeals) in deleting the disallowance.
Issues Involved:
1. Disallowance of royalty payment. 2. Disallowance of amortization of facility management fee. 3. Disallowance of claim of additional depreciation. 4. Deletion of addition expenses on exploration and development for non-deduction of tax. 5. Deletion of disallowance of exploration and development expenditure. 6. Deletion of addition of exploration and development cost in head office expenditure. Summary: Issue 1: Disallowance of Royalty Payment The assessee, a non-resident entity engaged in oil and gas exploration, claimed a royalty payment of Rs. 48,58,52,650/- to ONGC. The Assessing Officer disallowed the claim, stating it pertained to a previous financial year and that the liability crystallized in a later year. The Commissioner of Income Tax (Appeals) upheld this view. The Tribunal directed the Assessing Officer to allow the claim in the assessment year 2012-13 when the liability crystallized. Issue 2: Disallowance of Amortization of Facility Management Fee The assessee claimed Rs. 27,26,07,627/- towards amortization of facility management fees. The Assessing Officer disallowed the claim, arguing the fee was paid in a previous year and should not be amortized. The Commissioner (Appeals) upheld this decision. The Tribunal directed the Assessing Officer to verify if deferment was allowed in the earlier year and to allow it accordingly. Issue 3: Disallowance of Claim of Additional Depreciation The assessee's claim for additional depreciation of Rs. 23,42,39,488/- was disallowed, with the Tribunal upholding the decision based on previous rulings in similar cases for the assessee in earlier assessment years. Issue 4: Deletion of Addition Expenses on Exploration and Development for Non-Deduction of Tax The Revenue challenged the deletion of Rs. 416,08,19,616/- for non-deduction of tax. The Tribunal found that similar disallowances in previous years were deleted and upheld the Commissioner (Appeals)'s decision to delete the disallowance. Issue 5: Deletion of Disallowance of Exploration and Development Expenditure The Revenue's challenge to the deletion of Rs. 172,29,15,802/- was dismissed by the Tribunal, following consistent decisions in previous years where similar disallowances were deleted. Issue 6: Deletion of Addition of Exploration and Development Cost in Head Office Expenditure The Revenue's challenge to the deletion of Rs. 13,75,92,378/- was dismissed, with the Tribunal following its consistent view in earlier rulings that upheld the deletion of similar disallowances. Conclusion: The assessee's appeals were partly allowed, and the Revenue's appeals were dismissed, with the Tribunal following consistent precedents in similar cases.
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