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TMI Blog2012 (8) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... to the impugned assessment year as would apply with effect from AY 2008-09 and since the free reserves and share capital of the assessee company is substantially high as against the amount of investment in shares, therefore no disallowance u/s. 14A is required - in favour of assessee. Disallowance of depreciation on windmill - Held that:- AO following the order of his predecessor for AY 2004 - 05 has disallowed the claim of higher depreciation and made the addition which was reversed by the Tribunal and the CIT(A) while adjudicating the issue for Assessment Year 2005-06 has followed the order of the Tribunal in assessee’s own case for Assessment Year 2004-05 - no infirmity in the order of CIT(A) for allowance of claim - in favour of assessee. Disallowance towards amounts receivable from PCMC and Cenvat - Held that:- CIT(A) upheld the disallowance on the ground that Octroi and Central Excise/CENVAT which are sums payable by the assessee by way of tax, duty, cess or fee within the meaning of section 43B and therefore are allowable only for the previous year in which the same is actually paid irrespective of the previous year in which the liability to pay such sum was actually i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same the assessee replied as under : During the financial year 2004-05, we have scraped old (used) machineries which are not of any use for production. The scrap derived from oil scraped machineries used for melting, i.e. use of as input for our production. We require inputs of raw material such as pig iron, M.S. scrap, C.I. Boring etc. hence we used the scrap of old machineries for our meeting process. Quantity of machinery scrap was very less/negligible as compared to our total scrap require for production and is allowed as a deduction u/s.32(1)(iii). Hence we are not able to show separate production or yield derived from the machineries used as scrap in melting process (production). It is mixed up with our material/ingredients required for production. This scrap has not been recorded in to our stock record because, it was verified by the auditors as well as by the Management kept aside. As where possible during the year, it was used along with our other input scrap. 4. However, the AO was not convinced with the explanation given by the assessee and observed that the assessee has not been able to substantiate as to whether this scrap is either used in the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter carefully and have also perused the order of my predecessor, CIT(A)-III for A.Y. 2004-05. For that year, my predecessor held as below : I am inclined to accept Appellant s contention that deduction is allowable to the Appellant company in terms of the provisions of section 32(1)(iii) of the IT Act which mandates that deduction shall be the amount by which monies payable in respect of discarded machinery together with the amount of scrap value falls short of the written down value thereof. However neither from the assessment order and nor from the submission of the Appellant filed before me, I find any details to explain how the amount of Rs.15,32,399/- has been worked out as deductible under section 32(1)(iii) of the IT Act. Therefore, the assessing officer is directed to look into this aspect and allow deduction to the extent of monies payable for the discarded machinery together with the amount of scrap value falls short of the WDV of the discarded machinery. Decided accordingly. 14. I have also given careful consideration to the Appellant s submission regarding the use of scrap from discarded machinery for the purpose of own production and the effect thereof in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned D.R. that they have no objection if the matter is restored to the file of the AO for verification, we, in the interest of justice, deem it proper to restore the issue to the file of the AO. The AO shall decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground raised by the assessee as well as Revenue are accordingly allowed for statistical purposes. 7. Ground appeal No. 2 by the assessee reads as under : On the facts and in the circumstance of the case and in law the learned CIT(A) has erred in not allowing the disallowance u/s.14A of Rs. 25,411/- and Rs. 18,089/- which has been wrongly invoked by the assessing officer which needs to be deleted . 7.1. Facts of the case in brief are that during the course of assessment proceedings, the AO noted that the assessee has earned income from bonds and income by way of dividends of equity shares. He further noted that the assessee has debited interest to the profit and loss account at Rs. 15,72,683/-. The investment during Financial Year 2004-05 was Rs. 8,70,230/-. He therefore asked the assessee to explain as to why expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2 DTR (Bombay) 36 he submitted that provisions of rule 8D are applicable from Assessment Year 2008-09 onwards and are not applicable to Assessment Year 2005-06. He submitted that when no part of the borrowed fund has gone to meet the cost of investment, therefore, no disallowance u/s. 14A can be made. The learned counsel for the assessee also relied on the following decisions. (i) Harihar Finance Corporation Vs. ACIT vide ITA No. 38/PN/2004 for Assessment Year 2001-02 (ii) Auchtel Products Ltd., Vs. ACIT Vs. 3183/Mumbai/2011 order dated 30-04-2012. (iii) Maxopp investments Ltd. and other Vs. CIT, Delhi High Court. 11. The learned D.R. on the other hand strongly relied on the order of the CIT(A). 12. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. From the copy of the balance sheet, we find the investment during the impugned assessment year has gone down to Rs. 8,70,230 as on 31-03-2005 as against 49,12,275/- as on 31-03-2004. Similarly the share capital and free reserves of the assessee company whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B-Bench, relying on the decision in Poonawalla Finvest (supra) have clearly decided the issue in the Appellant s favour. As such, deferring to the decision of the superior judicial authority, I hereby hold that depreciation on civil construction transformer and DP, were also allowable at the rate applicable to the Windmill. 21. Accordingly, this ground is also decided in favour of the Appellant and is allowed . 15. After hearing both the sides, we find no infirmity in the order of the learned CIT(A). The AO following the order of his predecessor for Assessment Year 2004- 05 has disallowed the claim of higher depreciation and made the addition. The order of the AO has been reversed by the Tribunal and the learned CIT(A) while adjudicating the issue for Assessment Year 2005-06 has followed the order of the Tribunal in assessee s own case for Assessment Year 2004-05. Under these circumstances and in absence of any contrary material brought to our notice the ground raised by the Revenue is dismissed. ITA No. 1091/PN/2010 (By Assessee Assessment Year 2006-07) : 16. In Appeal No. 1 the assessee has challenged the order of the CIT(A) in confirming the disallowance of Rs. 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount paid in CENVAT is concerned, the AO observed that the payment of Rs. 19,25,905/- did not relate to the year in question. The entire transaction related to FY 1997-98 and the said expenditure has not been incurred wholly and exclusively for earning the income for AY 2006-07. She was of the view that under the mercantile system of accounting, the claim has to be made in the year in which the expenditure is incurred, and if an expenditure is not claimed in the right year, the right to claim the same is lost forever. For this propositions he relied on the decision of the Hon ble Madras High Court in the case of Devi Films Private ltd (1970) 75 ITR 301 and various other decisions. She further held that if any loss occurred on account of not following the provisions of the Central Excise Act, either because of negligence or otherwise, it is not an allowable deduction under the Income Tax Act. Accordingly, she disallowed the said amount of Rs. 19,25,905/-. 23. Before the CIT(A) the assessee made detailed submissions to justify the claim. As regards Octroi payment it was submitted that Octroi has to be paid as per law while transferring goods from one factory to another factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not allowable for the P.Y. relevant to A.Y. 2006-07 . 25.1 Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 26. The learned counsel for the assessee reiterated the same submissions as made before the AO and CIT(A) and submitted that the payments of Octroi deposit and Excise duty are not expenditure in its true and correct nature but were only deposits and are advances paid as deposits which are required to be made according to the rules of the various departments. These deposits are to be refunded after certain conditions and formalities. Further neither of these payments/deposits pertain to payment made in any one particular year. These are accumulated amounts which were paid towards Excise duty since October, 1997 onwards. He submitted that the deposits with PCMC against Octroi could not be claimed from PCMC since such goods were not received in time and continued to be shown in the balance sheet year after year as receivables. Similarly in the case of deposits against Excise duty, when the material sent for processing was received back, MODVAT/CENVAT which ought to have been claimed was not claimed due to negligence of the Accounts departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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