2023 (9) TMI 892 - HC - Income Tax

Revision u/s 263 - CIT observed that, excess depreciation claimed on windmill @80% as prescribed under IT Act instead of the rate of 15.33% for a continuous plant as per companies Act for the purpose of calculation of book profit u/s 115JB - ITAT held that assessment order was not erroneous and prejudicial to the interests of the Revenue - HELD THAT - As decided by ITAT 2022 (8) TMI 618 - ITAT AHMEDABAD relying case of HAL Offshore Ltd 2019 (9) TMI 896 - ITAT DELHI held that where depreciation provided in profit and loss account is at same rate as provided for purpose of profit and loss account being laid before Annual General meeting (AGM), no addition could be made to assessee s income on ground that while calculating total income as per section 115JB, assessee had adopted rate of depreciation as per Income-tax Act instead of Companies Act in profit and loss account. As in the case of Deccan Tools Industries (P.) Ltd 2014 (11) TMI 49 - ANDHRA PRADESH HIGH COURT held that where for purpose of section 115J, assessee claimed depreciation at rates provided under Income-tax Rules, action of AO in redrawing profit and loss account and adopting rates prescribed under Companies Act, was totally unauthorized. We are of the considered view that in the instant facts, PCIT erred in facts and law in holding that the assessment order was erroneous and prejudicial to the interests of the revenue. Addition u/s 40A - On applicability of Sec. 40A(2) (b), a specific query was raised by the Assessing Officer and when answered, the Assessing Officer had accepted payments. Therefore, exercise of revisional jurisdiction was not warranted.bTribunal has observed that once the Assessing Officer had passed an order after carrying out the verification such cannot be held to be erroneous and prejudicial to the revenue. In the case of Shreeji Prints (P) Ltd. 2021 (9) TMI 108 - SUPREME COURT confirmed the view of the High Court which had held that since the Assessing Officer had made inquiries and accepted the genuineness a plausible view so taken could not be held to be erroneous and prejudicial to the revenue. Decided against revenue.

Summary

Issues:
1. Challenge to the order of the Income Tax Tribunal dated 22.07.2022 in ITA 1057/AHD/2015 for A.Y 2010- 2011.

Depreciation Claim Issue:
The appellant contested the order, arguing that the ITAT erred in not finding the assessment order erroneous regarding the excess depreciation claimed on a windmill at 80% instead of the prescribed rate of 15.33% for a continuous plant under the Companies Act for calculating book profit u/s 115JB of the IT Act. The Principal Commissioner of Income Tax-2 had exercised powers under Sec. 263 of the Act, contending that the depreciation claimed was excessive based on the Companies Act's prescribed rate. The ITAT relied on various decisions supporting the appellant's position, concluding that the assessment order was not erroneous in this regard.

Related Party Payments Issue:
The appellant also challenged the assessment order concerning the determination of fair market value u/s 40A(2)(b) of the Act for payments made to related parties. The appellant argued that the Assessing Officer failed to verify if the payments were at fair market value, as required by the Act. The ITAT held that since the Assessing Officer had made inquiries and accepted the genuineness of the payments, the order could not be deemed erroneous and prejudicial to the revenue, citing the decision in the case of Principal Commissioner of Income Tax, Surat-2 vs. Shreeji Prints (P) Ltd.

In conclusion, the High Court dismissed the Tax Appeal, finding no merit in the challenges raised by the appellant on both the depreciation claim and related party payments issues, based on the reasoning provided by the ITAT and relevant legal precedents.