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TMI Blog2012 (12) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... all under the head of’ Automatic Voltage Controller’ eligible for claiming 100% depredation on UPS - in favour of assessee. Disallowance of interest on loan given to subsidiaries - Held that:- Finding substance in the submission of the assessee that no disallowance could be made in respect of the opening balances of loans and advances which were coming from earlier years and in which there were no disallowance as supported by the judgment in case of Sridev Enterprises (1991 (1) TMI 52 - KARNATAKA HIGH COURT) in which it was held that in case loans and advances were being carried forward from earlier years in which there was no disallowance, no disallowance could be made in respect of the opening balance in the current year as the nature and status of the advances on the first day of the current year remained the same as the nature and status of the advances on the last day of preceding year - A categorical finding has been given by the AO that the average interest cost for the AY 2006-07 and 2007-08 are 4.86% and 4.72 % respectively. The assessee had charged @ 6% interest from its subsidiary, therefore, the assessee has charged more interest rate than the average interest rate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant on UPS be allowed. 2 On the facts and in the circumstances of the case and in law, the CIT (A) erred in partly upholding the action of the AC by disallowing interest expenditure of Rs 3.03 lacs out of the total interest disallowed by the AC of Rs 6.64 lacs on the alleged ground that such expenditure was not incurred for the purpose of business. The Appellant prays that balance interest of Rs 3.03 lacs be deleted. 3 On the facts and in the circumstances of the case and in law, the CIT (A) erred in partly upholding the action of the AC in disallowing an amount of Rs 25.59 lacs on adhoc basis in respect of leave encashment expenses claimed by the Appellant on actual basis on the alleged ground that the said expenses would have been claimed in the earlier years an the basis of actuarial valuation and this amounts to double deduction. II ITA No. 8549/Mum/2010 (Assessment Year 2007-08)(by the assessee) 1. DISALLOWANCE OF DEPRECIATION @ 80% ON UPS AMOUNTING RS. 4,72,596/- On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) - 16, Mumbai ( the CIT (A) ) erred in upholding the action of the Addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. 5. Ground no.1 of assessee s appeal for the Assessment Year 2006-07 and 2007- 08 is regarding depreciation on UPS being energy saving device. It is the case of the assessee that the UPS employed by it being an energy saving device is entitled for higher depreciation @ 80% as against the claim of the revenue that the same is not an energy saving device; but an energy supply device. The impact of this disallowance is the lesser depreciation of Rs. 5,74,579/- and for Assessment Year 2007-08, the said amount is Rs. 4,72,596/-. It is the case of the ld AR that this issue is covered by the decision of the Tribunal in assessee s own case for the Assessment Year 2002- 03 in ITA No. 2792/M/2006; for Assessment Year 2003-04 in ITA No.1071/M/2007; for Assessment Year 2004-05 in ITA No.5569/M/2007 and for Assessment Year 2005-06 in ITA No.6964/M/2008, copies of these orders are enclosed in the paper book at pages 1 to 22; 23 to 47 and 48 to 67 respectively. For the sake of convenience, the observations of the Tribunal in respect of the Assessment Year 2002-03 deciding the issue are reproduced below: 13. We have heard the rival contentions. Short question is whether UPS is a Automat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced certain interest free loans and loans at subsidised rates to its associated concerns, the details of which are as under: Interest free loan Rs. 342.65 lacs Subsidised loan (interest @ 6%) Rs. 1205.04 lacs 7.1 It was noticed by the Assessing Officer that the assessee had charged interest @ 10.25% on another loan of Rs. 2043.41 lacs given to another 100% subsidiary namely M/s International Tobacco Company Ltd. The Assessing Officer also noticed that the average cost of the assessee regarding the interest on the funds borrowed by it was @ 4.86%. It was also noticed that the interest free loans of Rs. 342.65 lacs to Kashyap Metals Allied Industries was an old loan which was prior to the insertion of sec. 372A of the Companies Act. Noting all these facts, the Assessing Officer has come to a conclusion that the interest free and subsidised loan, which bears interest @ 6%, the interest receivable by the assessee, if computed at the average cost of 4.86%, then the interest which should have been received by the assessee would amounts to Rs. 75.22 lacs and the assessee had received only a sum of Rs. 68.58 lacs. Thus, the balance disallowance that is amounts to Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on the first day of the current year remained the same as the nature and status of the advances on the last day of the preceding year. Therefore, he pleaded that to the extent it relates to Rs. 342.65 lacs, no disallowance can be made as per the decision of the Tribunal in respect of Assessment Year 2003-04 and 2004-05. 11. So far it relates to the remaining amount of Rs. 1205.04 lacs for Assessment Year 2006-07 and Rs. 1543.09 lacs for Assessment Year 2007-08, being loans on subsidised interest rate on which the assessee charged interest @ 6% per annum, it was submitted by the ld AR that no disallowance should be made as the average cost of interest bearing funds is only 4.86% and 4.72 % for Assessment Year 2006-07 and 2007- 08 respectively. He has submitted that the ld Assessing Officer while making the disallowance has included the amount of Rs. 342.65 in both the years and made the disallowance. Therefore, the ld AR has pleaded that the disallowance sustained by the ld Commissioner of Income Tax (Appeals) should be deleted. 11.1 On the other hand, the ld DR has relied upon the order passed by the Assessing Officer and pleaded that the disallowance was rightly made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening balances of loans and advances which were coming from earlier years and in which there were no disallowance. The plea of the assessee is supported by the judgment of Hon ble High Court of Karnataka in case of Sridev Enterprises (supra) in which it was held that in case loans and advances were being carried forward from earlier years in which there was no disallowance, no disallowance could be made in respect of the opening balance in the current year as the nature and status of the advances on the first day of the current year remained the same as the nature and status of the advances on the last day of preceding year. In the earlier year there were no disallowances which meant that the revenue was satisfied that loans and advances were give from own funds. Therefore respectfully following the judgment of Hon ble High Court of Karnataka in case of Sridev Enterprises (supra) we hold that no disallowance of interest will be made in respect of the opening balances as on the first day of assessment year involved. 13 Now the question remains in respect of subsidised loan advanced by the assessee to its sister concerns on which interest @ 6% has been charged. 13.1 A categoric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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