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TMI Blog2019 (3) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, while admitting the new claim as raised by the assessee, the issue stand remitted back to the file of Ld. AO for adjudication on similar lines as in assessee s own case [2018 (12) TMI 396 - ITAT MUMBAI]. Disallowance of obsolete store and spares - AO, treat the same as capital expenditure and did not constitute stock-in-trade - deduction u/s 42 could be allowed to the assessee for capital expenditure as and when the same are certified by the Auditors - HELD THAT:- The undisputed fact that emerges are that the assessee incorporates the assets, liabilities, income expenditure arising from unincorporated joint venture operations based on the audited statement on line-to-line basis and to the extent of its participating interest in the unincorporated joint venture. The obsolete stock / spares have clearly been identified by the operator of the two blocks under question and the assessee has claimed the deduction of the same to the extent of its own share therein as computed in the manner. Undisputedly, these are old inventories as identified by the operator, which are found to be obsolete and no longer usable for the blocks. This being the case, both the authorities, in our op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by applying Rule 80 of the Rules, which action has been confirmed by the CIT(A), be deleted and the disallowance offered by the Appellant under section 14A of the Act be restored. c) The appellant submits that the disallowance under section 14A should be restricted to INR 5,32,236 which is arrived as per a scientific method factoring costs directly allocable of the concerned employees and common corporate costs such as electricity, rent, travelling expenses, etc. and estimated time spent. It is therefore submitted that necessary directions may be given to the DCIT to restrict the disallowance under section 14A to INR 5,32,236. d) Without prejudice to our contention that the disallowance under section 14A should be restricted as per the scientific method, the investment in Nagarjuna Oil Corporation Limited, being Strategic Investment should be excluded for the purpose of computation of disallowance under section 14A read with rule 8D and the disallowance should be restricted to INR 61,47,743. It is therefore submitted that necessary directions may be given to the DCIT to restrict the disallowance under section 14A to INR 61,47,743. 2) Computation of Book Profits under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee. The same upon confirmation by first appellate authority vide impugned order dated 30/09/2013 is under appeal before us. 3. The Ld. Sr. Counsel appearing for Assessee [AR], at the outset, drew our attention to the order of this Tribunal in assessee's own case for AY 2008-09 & 2009-10, ITA Nos. 4887,5571,4914/Mum/2012, 2469/Mum/2013 dated 28/09/2018 [68 ITR (Trib) 38 Mumbai] and pleaded for similar directions in this year. Although Ld. DR supported the impugned order, however, fairly conceded that all the aspects have already been delved upon by the Tribunal in assessee's own case. 4. We have carefully considered the same and find that all the aspects of disallowance u/s 14A has exhaustively been considered by the co-ordinate bench in assessee's own case. For ease of reference, the operative part of the order could be extracted in the following manner: - 27. We have considered rival submissions and perused materials on record. The first contention of learned Authorized Representative is, the Assessing Officer has not recorded satisfaction before rejecting the disallowance made by the assessee. As could be seen from the assessment order, the assessee has alloca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to verify the claim of the assessee and exclude the investment made in Nagarjun Oil Corporation from the average value of investment if it has not yielded any exempt income during the relevant previous year. As regards the final submission of the learned Authorised Representative that disallowance made under section 14A r/w rule 8D cannot be added to the book profit under section 115JB of the Act, we find merit in the said submissions. As held in the Special Bench decision of the Tribunal, Delhi Bench, in Vireet Investment Pvt. Ltd. (supra) computation under clause-(f) of Explanation-1 of section 115JB of the Act is to be made without resorting to computation as contemplated under section 14A r/w rule 8D. In view of the aforesaid, we restore the issue of disallowance under section 14A r/w rule 8D to the Assessing Officer for de novo adjudication keeping in view our observations herein above and only after affording due opportunity of being heard to the assessee. The grounds are allowed for statistical purposes. Facts & circumstances being pari-materia the same, respectfully following the same, the grounds qua disallowance u/ 14A are disposedoff in the following manner: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by treating each oil well as a single undertaking was done away with. The aforesaid factual and legal position has not been disputed by the assessee which is evident from the submissions made by the assessee before the Assessing Officer. In fact, because of insertion of explanation to section 80IB(9) of the Act, the assessee never raised the issue of claim of deduction under section 80IB(9) of the Act in the appeal filed before the learned Commissioner (Appeals). Thus, the Departmental Authorities never had the occasion to examine assessee's claim of deduction vis-a-vis the ratio laid down by the Hon'ble Gujarat High Court in Niko Resources Ltd, which in any case of the matter was delivered after disposal of appeal by learned Commissioner (Appeals). Moreover, the aforesaid decision of the Hon'ble Gujarat High Court has been challenged by the Department, before the Hon'ble Supreme Court and while admitting the SLP of the Department the Hon'ble Supreme Court has passed the following order: - "O R D E R Delay condoned. Issue notices on the special leave petitions as also on the prayer for interim relief returnable after 10 weeks. Mr. Shashibhushan P. Adgaonkar, Ms. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Jurisdictional High Court, the Tribunal would have been bound by the law declared therein. However, the legal position is different when the decision declaring a provision in the statute as ultra vires is by a non-jurisdiction High Court, whose decision is not binding but has persuasive value. In this context we may refer to the following decisions:- i) Comptroller of Estate Duty v/s Shri Ashok Kumar M. Parikh, [1990-] 186 ITR 212 (Bom.); and ii) Taylor Investment Co. (India) Ltd. v/s CIT, [1998] 232 ITR 771. 15. Moreover, it is not disputed that the aforesaid decision of the Hon'ble Gujarat High Court has been challenged by the Department before the Hon'ble Supreme Court and the Hon'ble Supreme Court has directed all High Courts not to decide the pending appeals on identical issue till the issue is decided by them. Though, the aforesaid direction of the Hon'ble Supreme Court is to the High Courts, however in our view, as a matter of propriety neither the Tribunal nor the Departmental Authorities should also decide the issue either in favour or against the assessee, but, should wait for the decision of the Hon'ble Supreme Court on the issue. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 54.18 Lacs in the Profit & Loss Account as provision towards stores & spares of drilling equipment. The Ld. AO, treating the same as capital expenditure and also in view of the fact that the spares did not constitute stock-in-trade, opined that the deduction of the same was not allowable to the assessee. It was also observed that deduction u/s 42 could be allowed to the assessee for capital expenditure as and when the same are certified by the Auditors. 8.2 The Ld. first appellate authority, examining the claim on the threshold of Section 42, confirmed the disallowance by observing that the assessee had already claimed joint venture expenditure to the extent of its own share and therefore, separate deduction u/s 42, in that respect, could not be allowed to the assessee. 9.1 The Ld. Sr. Counsel explaining the nature of the same submitted that the assessee was engaged in the business of prospecting, extraction and production of crude oil and natural gas and entered into Production Sharing Contracts [PSC] with Government of India along-with other joint venture companies for various blocks. In order to manage the operations of the blocks, one of the Joint Venture Member was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal valuation of inventories by the operator and accordingly the assessee's shares towards obsolete stock i.e. 21%, in Indian Rupees works out to ₹ 14.40 Lacs, which has been claimed by the assessee. Similarly, as regards CB-OS/2 Block, the concerned operator i.e. Cairn Energy India PTY Ltd, vide their letter dated 22/02/2010, identified the obsolete stock and quantified the same at USD 8,55,409. Most of the said spares and stores were purchased more than 10 years ago and the same are similarly identified after carrying out technical valuation of the inventories by the operator. Accordingly, the assessee's shares in the same i.e. 10% comes to ₹ 39.77 Lacs which has been claimed. It has further been submitted that each well has its own specification and the drilling material cannot be used in any other well and further, using old inventories could put the drilling operations at risk with significant financial implications. Therefore, under commercial prudence and also in view of the industry practice, the old inventories were written off as per the decision taken by the assessee during impugned AY. Lastly, it has been submitted that the operator on a periodic basis, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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