9911796707
TMI Blog2015 (2) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided against the assessee. Restriction on allowance u/s 43B - Held that:- In the present case, the contribution to the approved gratuity fund cannot be allowed. Being so, the Commissioner of Income-tax (Appeals) is justified in disallowing the same. The claim of the assessee that for invoking the provisions of section 43B, actual payment is to be allowed. This argument of the assessee is totally misconstrued. Only the expenditure relevant to the assessment year under consideration is to be allowed. Being so, we do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against assessee. Alternative claim that in the event of disallowance, it should be considered as part of the income from tea business - relied on the judgment of Karimtharuvi Tea Estates Ltd. v. State of Kerala [1962 (11) TMI 44 - SUPREME COURT] - Held that:- If the assessee claimed as expenditure relevant to the tea business, then, it should be considered as income of the tea business only. Disallowance of provision made for dearness allowance - the liability is unascertained and is to be treated as contingent liability - Held that:- If this amount is claimed as relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A plain reading of sub-section (4), clause (iv) makes it clear that deduction under section 80-IA will be available under clause (iv) to an undertaking which fulfils all the three conditions laid out in sub- clauses (a), (b) and (c) of the clause, i.e., the undertaking must have been set up for the generation or generation and distribution of power during the specified period ; it should have started transmission or distribution by laying network of new lines during the specified period ; and it must undertake substantial renovation and modernisation of the existing network of transmission or distribution lines during the specified period. In the instant case, the assessee-company was incorporated for growing, manufacturing and sale of tea. Incidental business is non tea operations such as growing, trading and sale of spices, etc., and letting out of Bungalows. Power related business is not among the main or ancillary businesses of the assessee company. The assessee is purchasing power from KSEB and distributing the same. To be eligible for deduction under this clause, the assessee must be an undertaking which has been set up for the generation or generation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down that substantial renovation and modernisation means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the April 1, 2004. The Commissioner of Income-tax (Appeals) stated that although the assessee has claimed to have done substantial renovation after April 1, 2004 however the assessee has not been able to satisfy conditions laid down in Explanation to section 80-IA(4)(iv) as the amount spent for renovation and modernisation is not shown to be more by 50 per cent. of the book value of such plant and machinery as on April 1, 2004. Since the assessee has not been able to show that it has spent such amount on the renovation and modernisation, the Commissioner of Income-tax (Appeals) held that the assessee is not entitled for deduction under section 80-IA and accordingly confirmed the addition of ₹ 58,91,000 made by the Assessing Officer. Against this the assessee is in appeal before us. 5. The learned authorised representative submitted that the Commissioner of Income-tax (Appeals) erred in confirming the disallowance of deduction under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neration and distribution of power during the specific period and it should have started transmission or distribution by laying network of new lines during the specified period and it must undertake substantial renovation and modernisation of the existing network of transmission or distribution lines during the specified period. 7. According to the learned Departmental representative in the instant case, the assessee-company was incorporated for growing, manufacturing and sale of tea and incidental business is non-tea operations such as growing, trading and sale of spices, etc., and letting out of bungalows. According to the learned Departmental representative power related business is not among the main or ancillary business of the assessee-company. The learned Departmental representative submitted that the assessee has been purchasing power from the Kerala State Electricity Board and distributing the same. To be eligible for deduction under this clause, according to the learned Departmental representative the assessee must be an undertaking which has been set up for the generation or generation and distribution of power, satisfying all the clauses and mere distribution of powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said plant and machinery related to electricity transmission of the erstwhile Tata Tea Ltd. was acquired by the assessee-company with effect from April 1, 2005 which shows that the plant and machinery were part of the business of Tata Tea Ltd. which has been splitted up and acquired by the assessee-company and hence, the assessee-company was not eligible for deduction under section 80-IA. 10. The learned Departmental representative submitted that the assessee- company was not formed by the transfer to a new business of machinery or plant previously used for any purpose. According to the learned Departmental representative the Tata Tea Ltd. had established the said plant and machinery for transmission and distribution of electricity long back and has been using since then. The learned Departmental representative submitted that the plant and machinery acquired by the assessee-company had been installed long back and which has been using continuously by Tata Tea Ltd. According to the learned Departmental representative even if the assessee-company claimed to have started a new business, it does not fulfil the eligibility conditions and hence not eligible for 80-IA deduction. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April,1993 and ending on 31st March, 2010. (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2010 : Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution ; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2010. Explanation-For the purposes of this sub-clause, 'substantial renovation and modernisation' means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent. of the book value of such plant and machinery as on the 1st day of April, 2004. 14.1. Further, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been acquired from Tata Tea Ltd., it cannot be said that the book value appearing in the books of Tata Tea Ltd. as on April 1, 2004 relates to the assessee-company. Being so, in our opinion the assessee has not complied with the provisions of section 80-IA(4)(iv)(c) of the Income-tax Act. Further, we make it clear that income so increased on disallowance of deduction under section 80-IA(4)(iv) of the Income-tax Act, is to be considered as income from plantation of tea only. With this observation, we reject this ground raised by the assessee. 15. The next ground is with regard to disallowance of gratuity contribution made to the approved trust in excess of the amount debited in the profit and loss account. 16. The brief facts of the issue are that the Assessing Officer has disallowed this amount as this amount was not certified by the auditors and was claimed only in the computation of total income. The Assessing Officer's observations are as follows : The assessee-company claimed gratuity of ₹ 72,15,856 in the computation without disclosing in the audited balance sheet and profit and loss account. The assessee has claimed the same as deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Against this, the assessee is in appeal before us. 20. We have heard the parties and perused the record. Admittedly, the assessee has paid to the gratuity contribution in excess of the amount debited to profit and loss account and the expenditure was not relatable to the assessment year under consideration and each assessment year is independent assessment year and only expenditure relating to that assessment year is to be claimed as business expenditure actually incurred by the assessee and for determining the income of the assessee, incurring of expenditure should be wholly and exclusively laid down for the purpose of business of the assessee. In the present case, the contribution to the approved gratuity fund cannot be allowed. Being so, the Commissioner of Income-tax (Appeals) is justified in disallowing the same. The claim of the assessee that for invoking the provisions of section 43B, actual payment is to be allowed. This argument of the assessee is totally misconstrued. Only the expenditure relevant to the assessment year under consideration is to be allowed. Being so, we do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is amounted to double disallowance. Hence the addition to the extent of ₹ 2,41,05,985 was confirmed by the Commissioner of Income-tax (Appeals). 26. The Commissioner of Income-tax (Appeals) also observed that since the amount was only a provision created in the accounts, the same cannot be treated as derived from growing and manufacturing of tea and it would acquire that character only at the point when it is actually paid to the plantation workers. Thus the Commissioner of Income-tax (Appeals) held that the provision in the nature of contingent liability would be added back in the central income. Against this, the assessee is in appeal before us. 27. We have heard both parties and perused the record. We find that the assessee has not shown any reason for not pressing this ground before the lower authorities. Hence, this ground is rejected. 28. The assessee has made an alternative claim that on disallowance, and adding back to the income of the assessee, it should be treated as income from tea business so as to apply the provisions of section 33AB read with rule 8 of the Income-tax Rules. As discussed in earlier para with regard to gratuity payment, if this amount is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
