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TMI Blog2018 (2) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded as admittedly the same were not made with a view to earn dividend income but rather made for the purpose of protecting the business interests arising out business compulsions and accordingly, to be treated as investment made as a measure of commercial expediency. This strategic investment would accordingly to be outside the ambit of the disallowance u/s 14A of the Act read with Rule 8D of the Rules. Disallowance of balance portion of additional depreciation - plant and machinery were put to use for a period of less than 180 days - during the year under appeal i.e. assessment year 2010-11, the assessee claimed further depreciation (i.e. balance 10% which is 50% of 20%) on this plant and machinery on the plea that it is entitled to get the balance depreciation this year also - Held that:- Decided in assessee’s own case for the assessment year 2007-08 [2015 (8) TMI 407 - ITAT KOLKATA] the benefits conferred on the assessee by way of incentive provision cannot be taken away by adopting an implied meaning to second proviso to section 32(1)(ii) of the Act. Since the second proviso to section 32(1)(ii) does not expressly prohibit the allowance of the balance 50% depreciation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in terms of section 43B(f) of the Act as the same was not paid within the due date of filing the return of income. The ld AO observed that the said decision has been stayed by the Hon ble Supreme Court and accordingly disallowed the provision for leave encashment on the ground that the same is allowable only on payment basis in terms of section 43B(f) of the Act, which was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us on the following grounds: I.T.A. No. 1766/Kol/2016 for Assessment year 2010-11 1. That on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in not holding that provision for leave encashment for ₹ 1,04,69,715/- is neither statutory liability nor contingent liability and therefore not to be considered for the purpose of computing disallowance u/s 43B(f) of the I.T. Act, 1961. 2. That without prejudice to ground no. 1, the ld. DCIT be directed to exclude a sum of ₹ 33,64,322/- being payment made on account of leave liability during the assessment year 2002-03 in case the department s appeal is allowed in their favour and deduction for provision made for leave liability is withdrawn. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court as stated supra. 2.2. With regard to ground no. 2 raised by the assessee for assessment year 2010-11 seeking deduction for actual payment made in the sum of ₹ 33,64,322/- on account of leave liability, the same also would be decided by the ld. AO based on the final outcome of the decision of Hon ble Supreme Court in the case of Exide Industries referred to supra. Accordingly, ground no. 1 2 for assessment year 2010-11 and ground no. 1 for assessment year 2011-12 raised by the assessee are allowed for statistical purposes. 3. Taxability of Entry Tax: Ground no. 3 of assessment year 2010-11 Ground no. 2 of assessment year 2011-12 The facts of Asst Year 2010-11 are taken up for adjudication and the decision rendered thereon would apply with equal force to Asst Year 2011-12 also except with variance in figures. The brief facts of this issue is that the ld. AO observed that the State government of Madhya Pradesh had granted certain fiscal incentive to the assessee company during the year . As per the said scheme, the amount of assistance was determined at 75% of total commercial tax (MPVAT + GST) deposited (net of tax rebate) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that notwithstanding anything contained in an)' other provision of this Act certain deductions are TO be only on actual payment. Any sum payable by The assessee by way of tax, duty, cess or fee, by whatever name called. under an)' law for the time being in force shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according 10 the method of accounting regularly employed by him) only in computing The income referred 10 in section 28 of that previous year in which such slim is actually paid by him. It further provides that for the purposes of clause (a), as in force at all material Times, any sum payable means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law was not payable under in the relevant period. 73. The Provisions of Income Tax Act, 1961 will over ride the provisions of any other Act being specifically provided in the Income Tax at/to allow the deduction only on the basis of payment although the relevant acts under which the cess is collected may provide to pay in the next year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enth Schedule 10 the Constitution. The National Housing Bank Act, 1987 has been enacted to promote housing finance institutions both at local and regional levels 10 provide financial and other support to such institutions which are covered under Entryry-45 of List-I- Union List of Seventh Schedule to the Constitution of India. There is no such provision in the National Housing Bank ACT [ha! it will override the Income Tax Act. Since the impugned orders are passed under the Income Tax Act, 1961, they are governed by the provisions of Income Tax Act, Therefore, the contention of the petitioner that National Housing Bank ACI, 1987 overrides the Income Tax Act, 1961 is wholly untenable in law. 76. The appellant has not paid the entry lax under The Industrial Promotion Policy 2004 formulated by the State Government of Madhya Pradesh for the promotion of industry in the State and did not deposit with The State Govt. Entry tax was calculated based on hypothetical basis that if would amount ₹ 1,01,09,282/- at the lime of payment, (if would not had been exempted) to the State Govt. The appellant's claim that since the entry tax under The Industrial Promotion Policy 2004 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,000/- Baroda Agents Trading Co. Pvt. Ltd. 80,000/- 80,000/- Total dividend received 21,66,110/- ₹ 18,69,380/- The Ld. CIT(A) observed that the assessee had sufficient own funds and no part of borrowed funds were utilized for making investments and accordingly deleted the disallowance made under Rule 8D(2)(ii) of the Rules for both assessment years. In respect of disallowance made under the third limb of Rule 8D(2) of the Rules, the Ld. CIT(A) by placing reliance on the decision of this tribunal in REI Agro Ltd. reported in 144 ITD 141 held that only dividend bearing investments should be considered for working out the disallowance at 0.5% of average value of investments. Aggrieved, both the assessee as well as revenue are in appeal before us on the following grounds: I.T.A. No. 1766/Kol/2016 for Assessment year 2010-11(Assessee Appeal) 4. That on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in not deleting the entire disallowance of ₹ 92,10,000/- treated by ld. DCIT as expenses attribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the latest developments. The assessee was not able to upgrade its optic fiber manufacturing facility with the latest technology and as such entered into joint venture agreement with Furukawa Electronic Company Ltd., Japan on 11.04.2009 which resulted in formation of new joint venture company, Birla Furukawa Fiber Optics Ltd. The assessee sold the entire plant and machinery of its optic fiber unit to the new joint venture company in two phases during the months of February, 2010 and October, 2010. The proceeds of such sale in February, 2010 amounting to ₹ 13.48 crores were used for acquiring shares in the new joint venture company. The remaining amount of ₹ 8.93 crores was invested by the assessee in the joint venture company out of its own funds. In this regard, we find that the retained earnings of the assessee after distribution of dividend are as under: 31.03.2008 ₹ 10.77 crores 31.03.2009 ₹ 4,29 crores 31.03.2010 ₹ 20.38 crores The assessee had also enclosed Chartered Accountant s certificate to prove that the entire inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and machinery, the assessee claimed only 50% of additional depreciation u/s 32(1)(iia) of the Act in view of the second proviso to section 32(1) of the Act. Now during the year under appeal i.e. assessment year 2010-11, the assessee claimed further depreciation (i.e. balance 10% which is 50% of 20%) on this plant and machinery on the plea that it is entitled to get the balance depreciation this year also. The Ld. AO held that after allowing a portion of additional depreciation in assessment year 2009- 10, written down value has been worked out by the ld. AO and the same has been brought forward during the year under appeal as opening written down value, on which regular depreciation would be applicable to the assessee at the rates prescribed for plant and machinery. With these observations, he disallowed the remaining portion of unclaimed additional depreciation pertaining to assessment year 2009-10 (i.e. balance 10%) in the assessment and granted only regular depreciation. The Ld. CIT(A) by placing reliance on the decision of this Tribunal in assessee s own case for the assessment year 2007-08 to 2009-10 granted relief to the assessee and deleted the disallowance made thereon by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year under consideration i.e. the FY 2006- 07 relevant to this assessment year 2007-08. A bare reading of clause (iia) of section 32(1) of the Act w.e.f. the AY 2006-07, provides for allowance of additional depreciation equal to 20% of actual cost of new plant and machinery acquired and installed after March, 31st 2005 by an assessee engaged in the business of manufacture or production of any article or thing. Such additional depreciation is to be allowed as deduction u/s. 32(1)(iia) of the Act but second proviso to section 32(1)(ii) restricts the allowance of depreciation at 50%, if the plant and machinery is acquired during the previous year is put to use for a period of less than 180 days in that previous year. The second proviso specifically makes a reference to an asset referred to in clause (iia) of the said section 32(1) of the Act. And it is because of the second proviso assessee claimed only 50% additional depreciation for AY 2006-07 and accordingly, claimed the balance amount of additional depreciation in the immediately subsequent year i.e. the year under consideration AY 2007-08. We are in full agreement with the argument of Shri J. P. Khaitan, Senior Advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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