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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 ..... mmissioner of Income Tax (Appeals) - 16, Mumbai ("the CIT (A)") erred in upholding the action of the Additional Commissioner of Income Tax, Range 8(1), Mumbai ("A.O.") in disallowing 80% depreciation on the Uninterrupted Power Supply ("UPS") on the ground that, the UPS is not an energy saving device but instead an energy supply device. The Appellant prays that the depreciation of Rs 574,579/- as claimed by the Appellant 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on interest free/concessional loans to subsidiary company amounting to Rs.6.64 lakhs, without appreciating the facts and circumstances of the case and in law." 4. It may be mentioned here that all the grounds raised by the assessee in respect of Assessment Year 2007-08 are common to grounds raised in respect of Assessment Year 2006-07. The facts relating to the Assessment Year 2006-07 will be taken into consideration and the decision taken thereon will equally be applicable in respect of the grounds related to Assessment Year 2007-08. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands deleted. Ground number 3 is allowed." For other years the above decision was followed by the Tribunal. 6. After hearing both the parties, respectfully following the above mentioned decisions of the Tribunal in assessee's own case, we decide this issue in favour of the assessee and allow the ground no.1 of both the appeals filed by the assessee. 7. Apropos ground no2 of assessee's appeal for both Assessment Years and ground no.2 of the revenue's appeal for Assessment Year 2006-07, the facts for Assessment Year 2006-07 are that the assessee had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Years 2003-04 and 2004-05 that the interest on opening balance of the loans and advances which were coming from earlier years, cannot be disallowed and such plea of the assessee is supported by the judgment et of the Hon'ble High Court of Karnataka in the case of Commissioner of Income-tax v. Sridev Enterprises reported in 192 ITR 165 in which it has been held that in case of loans and advances which 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the loans/ advances were coming from the earlier years in which there were no disallowances and therefore no disallowance could be made in respect of opening balances. The assessee has also raised plea of commercial expediency on the ground that loans and advances had been given to the concern which was a 100% subsidiary of the assessee company and therefore the same had to be treated for the purposes of business of the assessee. 2.6.4 We have carefully considered the various aspects of the matter. We find 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. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on payment basis from A.Y.2003-04. The Assessing Officer has made estimated disallowance out of the claim made on payment basis on the ground that part of the payments made may relate to earlier year when these were allowed on actuarial basis. The Assessing Officer has made disallowance on estimate which cannot be sustained. Only the payment which had actually been allowed earlier can be disallowed. In - our view matters require fresh examination and disallowance has to be restricted to the amounts allowed in the earlier year. We therefore set aside the order of CIT(A) and restore the issue to the file of Assessing Officer for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee." For Assessment Year 2005-06, the aforesaid decision has been followed 15.2 It was submitted by the ld AR of the assessee that similar directions may be issued for these years also. 15.3 On the other hand, the ld DR has relied upon the order passed by the Assessing Officer 16. After hearing both the parties, we find that this issue is covered by the abovementioned decisions of the Tribunal. Therefore, respectfully following the decisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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