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TMI Blog2013 (11) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer, the assessee submitted as under:- "During the year under consideration, expansion of the existing steel plant and pellet plant were going on. Certain portion of the administration expenses incurred by the Company had been apportioned to the capital Work In Progress of these expansion projects as expenditure during construction period. Since these represent revenue In nature and incurred for the purpose of the expansion of the existing business of the company, these expenditure had been claimed so In the computation of Income. These expenses had not been incurred for starting any new business. This project was a part of existing business and therefore expenditure incurred was for the existing business. In view of the facts, we had claimed the revenue expenses Incurred for the said expansion. Further, we would like to submit that the treatment in the books of accounts Is not decisive of the nature of transaction. Particular deduction for an expense depends upon the provision of law and not on the nature of entries in the books. Since the aforesaid expenses were incurred for the expansion of existing business and revenue in nature therefore we were eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.: He, thus, held that in view of the proviso to section 36(1)(iii), interest and other expenses, up to the date of asset is first put to use, are to be capitalized. Accordingly, he also confirmed the addition made by the Assessing Officer. 8. Before us, the learned Counsel, Mr. Vijay Mehta, on behalf of the assessee, submitted that similar issue had arisen in assessee's own case in the earlier years viz. 1994-95, 1996-97, 1998-99 to 2000-01 and 2001-02 to 2004-05 and in all these years, the Tribunal has held that the expenditure incurred for expansion of business or increase in capacity for existing plant should be treated as revenue expenses. He also clarified that the assessee has not claimed the entire interest and, therefore, the proviso to section 36(1)(iii) is not applicable in assessee's case. 9. On the other hand, learned Departmental Representative strongly relied upon the findings of the Assessing Officer and the learned Commissioner (Appeals). 10. We have heard the rival contention and perused the relevant material available on record. On a perusal of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 686; & (v) Kwality Biscuits Ltd. Vs CIT, [2000] 243 ITR 519. 13. Before us, the learned Counsel for the assessee submitted that it is not a case whether provisions of section 234B is applicable or not or that the assessee is liable for the advance tax for the purpose of book profit under section 115JB but whether the assessee can be expected to pay any advance tax on account of future amendment which has been brought in the statute with retrospective effect. He submitted precisely this issue is answered by the Hon'ble Calcutta High Court in Emami Ltd. v/s CIT, [2011] 337 ITR 470 (Cal.). He also submitted that in the other case of sister concern, the Tribunal has decided this issue in favour in Essar Investments Ltd. v/s CIT, ITA no.6444/Mum./2011, after following the decision of Hon'ble Calcutta High Court. 14. Learned Departmental Representative, on the other hand, relied on the order passed the learned Commissioner (Appeals).6223691728 15. We have heard the rival contention and also perused the relevant findings of the authorities below. There is no quarrel with the proposition that the provisions of section 234B and 234C are mandatory in nature once it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in amended provision of s. 115JB and then filed its revised return of 31st March, 2003 declaring its business income as nil but the book profit under s. 115JB as Rs. 20,63,65,711. The AO accepted such return of income but imposed interest under ss. 234B and 234C of the Act amounting to Rs. 44,00,937 and Rs. 11,78,960 respectively. In our opinion, the amended provision of s. 115JB having come into force w.e.f. 1st April, 2001, the appellant cannot be held defaulter of payment of advance tax. As pointed out earlier, on the last date of the financial year preceding the relevant assessment year, as the book profit of the appellant in accordance with the then provision of law was nil, we cannot conceive of any "advance tax" which in essence is payable within the last day of the financial year preceding the relevant assessment year as provided in ss. 207 and 208 or within the dates indicated in s. 211 of the Act which inevitably falls within the last date of financial year preceding the relevant assessment year. Consequently, the assessee cannot be branded as a defaulter in payment of advance tax as mentioned above. At this stage, we may profitably rely upon the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay interest in terms of s. 234B and s. 234C of the Act for default in making payment of tax in advance which was physically impossible. We, therefore, partly allow the appeal by answering the first question in the affirmative and against the assessee and the second and the third questions in the negative and against the Revenue. The order passed by the Tribunal is, thus, set aside to the extent indicated above." Thus, we hold that no interest under section 234B can be levied on account of such retrospective amendment in section 115JB and, accordingly, this ground is treated as allowed. 16. In the third ground, the assessee has challenged the disallowance of levy of encashment of Rs. 2,45,46,516, by invoking the provisions of section 43B. 17. The assessee, in the computation of income, has added back leave encashment expenses of Rs. 2,45,46,516, being expenses incurred during the year but not paid before the due date of filing of return of income for the assessment year 2007-08 i.e., 31st October 2007. Before the Assessing Officer, it was submitted that such a disallowance is not covered by the provisions of section 43B and various case laws were relied upon incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department filed appeal against order of the Tribunal before the Hon'ble Bombay High Court and Hon'ble High Court vide its order dated 22.3.2010 (reported in 324 ITR 263) admitted the appeal on the issue of leave encashment as question of law and said appeal is pending. Ld A.R. further submitted that SLP before the Hon'ble Apex Court against the order of Hon'ble Calcutta high court in the case of Exide Industries Ltd (supra) is still pending. Ld A.R. further submitted that Kolkata Benches of. the Tribunal vide order dated 30.1.2012 in I.T.A. Nos.1376 & 1377/Kol/2010 and I.T.A. No.858/Kol/2011 in the case of S.R. Batliboi & Associates vs. DCIT by following its earlier decision in the case of DCIT vs. M/s. Ernst & Young Pvt Ltd. in I.T.A. No.1787/Ko//2008 had set aside the orders of authorities below on this point and restored back to the file of AO for adjudication afresh as per decision of Hon'ble apex Court in the case of Exide Industries(supra). Ld A.R. submitted that issue involved could be set aside to the file of AO with the direction to decide the same in the light of decision of Hon'ble apex Court in the case of Exide Industries (supra) or in the light of decision of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal commercial borrowings from foreign bank. It was submitted before the Assessing Officer that the company had approval from CBDT for exemption of this interest free income chargeable to tax in India under section 10(5)(iv)(c) as per the certificate dated 11th March 1997. The Assessing Officer held that the certificate of CBDT only approves the rate of interest and does not grant exemption from TDS. He also held that similar issue has been dealt by the Assessing Officer in the assessment order for the assessment year 2000-01 to 2006-07. Accordingly, he made the disallowance of Rs. 25,91,319 under section 40(a)(ia). 25. Before the learned Commissioner (Appeals), detail submissions were made which has been dealt with by the learned Commissioner (Appeals) at Page-3. The learned Commissioner (Appeals), following the appellate order for the assessment year 2006-07, held that there is no requirement for deducting the TDS on such interest and, therefore, no disallowance under section 40(a)(i) can be made. 26. Before us, it has been pointed out that this very issue has come up for consideration before the Tribunal in the earlier years for the assessment years 2001-02 to 2004-05, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant certificates the CBDT Foreign Tax Division vide letter dated 12.03.1997 granted the approval under section 10(15)(iv)(c). Therefore, the contention of assessee now made at the time of payment of interest does not survive as the issue of utilization of the funds was already examined by the CBDT at the time of granting exemption. As already stated once the interest income is not taxable in the hands of recipient and was exempted by the Govt. of India, question of TDS on the interest paid by assessee does not arise. Therefore, the ground has no merit and accordingly rejected. Thus, following the aforesaid decision, we also hold that once the interest income is not taxable in the hands of the recipient and was exempted by the Government of India, then there is no question of TDS on the interest paid and consequently, no disallowance under section 40(a)(i) is called for. Thus, ground no.1, raised by the Revenue is treated as dismissed. 29. Ground no.2, relates to disallowance of Rs. 23.24 crores in respect of depreciation claimed on WDV on plant and machinery. 30. Before us, it has been admitted by both the parties that the issue is squarely covered by the decision of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. But the waiver of loan by the lender in the current year cannot be treated as if that lender has met the portion of the cost of the plant and machinery acquired much before in an earlier year. Assessee relied upon the following decisions: i) CIT v Cochin Co. (P) Ltd (1990) 184 ITR 230 (Ker.) ii) CIT vs. Tata Iron & Steel Co. Ltd (1998) 231 ITR 285 (SC). 45. It was the contention that the waiver of loan cannot be reduced from the WDV of plant & machinery, thus the disallowance of depreciation by AO by reducing the waiver of loan from the cost of the plant and machinery is against the law. Assessee has pleaded for deletion of the disallowance of depreciation of Rs. 81,04,05,885. 46. The learned CIT (A) considered the issue and held as under: "3.5 I have perused the facts of the case. I find that the decisions relied upon by the appellant are directly on the issue under consideration and therefore in the facts of the appellant's case the disallowance of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 43(6) takes place, viz., when a particular asset is sold, discarded or destroyed in the previous year (other than the previous year in which first brought in use). Even in that event, the amount by which the moneys payable in respect of that particular building, machinery, etc. together with the amount of scrap value is to be deducted from total written down value of the 'block asset'. * It is thus clear from the aforesaid provisions that the only way by which the written down value on which depreciation is to be allowed as per the provisions of section 32(1)(ii) can be altered is as per the situation referred to in section 43(6)(c)(i) A and B. Neither was there purchase of the relevant assets during the previous year nor was there sale, discarding or demolishing or destruction of those assets during the previous year. Thus, the recourse by the revenue to those provisions on the facts and circumstances of the instant case, it is held, cannot be sustained. * The issue is than examined from the provisions of section 43(1) and Explanation 10 thereto. Waiver of loan cannot fall within scope of any of expressions 'subsidy or reimbursement' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee, are allowed. Respectfully following the Coordinate Bench, we uphold the order of the CIT (A) which is according to the law on the issue. Therefore, we are of the opinion that there is no merit in the Revenue ground and accordingly ground is rejected." 31. Keeping in view the aforesaid decision of the Tribunal in assessee's own case, similar directions are issued in this year also. Accordingly, the ground no.2 raised by the Revenue is treated as dismissed. 32. Ground no.3, relates to deletion of Rs. 16.85 lakhs under section 14A to the extent of 5% of the exempted dividend income. 33. The learned Commissioner (Appeals) has observed that the Assessing Officer has strongly relied upon the decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, (2010), 328 ITR 081 (Bom.) and has invoked Rule 8D for making the disallowance. It was contended before him that Rule 8D is only applicable from the assessment year 2008-09 and not for the prior years. The learned Commissioner (Appeals) agreed with the contention of the assessee and following the decision of the Tribunal, Mumbai Bench, in VIP Industries, ITA no.7242/Mum./2008, restr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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