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TMI Blog2019 (2) TMI 1705X X X X Extracts X X X X X X X X Extracts X X X X ..... mounting to ₹ 2.32 lacs under normal computation of income and accordingly adjudicate the issue afresh as per the provisions of Law. Computation of income under the provisions of MAT - We note that the assessee has to take the profit as shown in its financial statement prepared as per the prescribed schedule under the Companies Act and make the addition and subtraction only of those items specified u/s 115JB. As such, there is no mention under the provision of MAT for making any adjustment on account of prior period expenses. On a specific query from the bench to the Ld. DR, regarding the claim of prior period expenses while computing book profit under section 115JB of the Act. The Ld. DR, has not advanced any argument on this aspect. Therefore, we are not inclined to concur with the view of the Ld. CIT(A). Accordingly, we reverse the order of the authorities below and direct the AO to delete the addition made by him while computing book profit u/s 115JB of the Act Increase in the amount of profit on account of MODVAT credit - HELD THAT:- There is no ambiguity that the assessee has been following the exclusive method of accounting. Thus, we can safely conclude th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RT] Determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - there is no mechanism given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the disallowance. Therefore in the given facts circumstances, we feel that adhoc disallowance will service the justice to the Revenue and assessee. We, therefore, are directing for the ad-hoc disallowance to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities - There may be number of ways in which installation of a computer may enhance and improve the efficiency - There is nothing on record to suggest that the computers were part of the plant and machinery - CIT(Appeals) and the Tribunal treating the same as simplicitor computers and granting depreciation at the rate prescribed under the law calls for no interference Decided against Revenue. - ITA No.688/AHD/2015, 937/AHD/2015 Asstt. Year: 2011-2012 - - - Dated:- 25-2-2019 - Shri Waseem Ahmed, Accountant Member And Ms Madhumita Roy, Judicial Member Assessee by: Shri Sunil Talati, A.R Revenue by: Shri Mahesh Kumar, CIT.DR ORDER Waseem Ahmed, The captioned cross-appeals have been filed at the instance of Assessee and Revenue against the common order of the ld. CIT(A) vide appeal No.CAB-1/87/2014-15 dated 30/01/2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to Assessment Year (AY) 2011-12. 2. First, we take up ITA No. 688/Ahd/2015 for A.Y. 2011-12, an appeal by the assessee. The assessee has raised the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roda, has erred in confirming deduction of ₹ 47,91,81,0007- claimed u/s 80IA of the Act. Your appellant submits that the necessary books of accounts have been maintained and all conditions laid down u/s 80IA are fulfilled. Hence there is no justification to confirm your appellant's claims by adopting the market rate of units other than rate adopted by your appellant. It is therefore submitted that the deduction u/s 80IA is rightly claimed by your appellant and hence the same be allowed now. 6. The Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, has erred in re-computing book profit u/s 115JB of the Act and increasing 'book profit' by making adjustment for notional expenditure incurred for earning the exempted income by invoking provisions of section 14A of the Act. 7. The Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, has erred in charging the interest u/s 234B/234C of the Act. It be held so now and same be deleted. Your appellant craves for leave to alter/amend/withdraw/modify any of the above grounds and/or to add any ground before hearing. 3. The interconnected issued raised by the assessee in the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the current year income. The Ld. CIT(A) subsequently confirmed the view taken by the AO. 11.1 Regarding the normal computation of income, a specific query was raised from the Bench to the Ld. AR, to substantiate his claim that the prior period expenses were added in the computation of income. But the Ld. AR failed to substantiate his claim by any documentary evidence. However, the Ld. AR, before us, pleaded that the matter could be remanded back to the AO for the limited purpose of verifying whether the assessee has made disallowance of prior period expenses in the computation of income. 11.2 The Ld. DR, did not raise any objection if the matter is restored to the AO for verification as discussed above. 11.3 Thus in the interest of Justice and fair play we are inclined to restore the impugned issue to the file of AO to verify whether the assessee has made the disallowance of prior period expenses amounting to ₹ 2.32 lacs under normal computation of income and accordingly adjudicate the issue afresh as per the provisions of Law. 11.4 Regarding the computation of income under the provisions of MAT, we note that the assessee has to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nutilized amount of CENVAT credit. The AO is required to include the excise duty element in the cost of purchases, sales and opening stock. The AO is accordingly directed to make adjustment in the values of opening stock, purchases as well as sales also and compute the net addition or relief to the appellant as the case may be. As per the AR of the appellant it is mentioned by the auditor in the audit report that there is no impact on the profit if net method (i.e. exclusive method) is followed. In view of this the AO is directed to verify from the audit report and relevant record of the appellant and find out whether as a result of following Inclusive Method as perfection 145A of the Act there is any impact on the net profit in its case for the year under consideration. If there is no impact on the net profit of the appellant as a result of following Inclusive Method (i.e. by including tine Cenvat in the opening stock, purchases, sales and closing stock), then the AO is directed to delete the addition of ₹ 5,31,03,250/-. However, if there is increase in the profit in the case of appellant as a result of following such Inclusive Method then the profit to the extent so increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g effect to the purchases. In this regard, we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of Pr.CIT vs. Gujarat Gas Company Ltd. In Tax Appeal No.90 of 2017 vide order dated 07/02/2017, wherein it was held as under:- 3.03. Now, so far as question No. [B] i.e. with respect to addition made by the A.O. on account of unutilized modvat/cenvat credit of ₹ 56,08,089/- is connected, it is required to be noted that the learned tribunal has taken note that with respect to modvat receivable account, there is corresponding less debit to the purchase account and hence to that extent there is already income offered for tax. If that be so, there was no question of further adding modvat/cenvat credit to the income of the assessee for the year under consideration. Under the circumstances, we see no reason to interfere with the impugned judgement and order passed by the learned tribunal so far as confirming the order passed by the learned CIT(A) deleting the addition made by the A.O. on account of unutilised modvat/cenvat credit of ₹ 56,08,089/-. We are in complete agreement with the view taken by the learned tribunal. 18.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission of the appellant have been considered. As regards the stand of the AO that the appellant having captive power plant is not eligible to claim deduction u/s 80IA, it is mentioned that the similar issue was involved in the case of appellant for AY 2009-10 and for AY 2008-09 also. The then Ld. CIT(A)-I, Baroda (i.e. my predecessor) vide his appeal order in appeal no. CAB-I/283/ilnl2 dated 31/08/2012 has decided the above issue in favour of appellant in respect of AY 2009-10. In view of the reasons as mentioned by the then Ld. CIT(A)-I, Baroda in para 7.2 of his appeal order dated 31/08/2,012 in respect of AY 2009-10, for the year under consideration also it is held that deduction u/s 80IA(4) is available to the appellant in respect ,of electricity generated by it for captive consumption, subject to fulfillment of other conditions u/s 80IA. 11.4 Regarding issue related to sale price to be adopted for computing profits derived by captive power plant, it is mentioned that this issue is fully covered by decision of the then Ld. CIT(A)-I, Baroda in appellant's own case in AY 2008-09. The then Ld. CIT(A)-I, Baroda (i.e. my predecessor) in his appeal order in appeal no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins to sub Section (8) of Section 80IA of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged ₹ 5.40 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section 80IA restricted the same to ₹ 5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessee under Section 80IA of the Act. This restriction was primarily on the basis that the rate of ₹ 5.40 ps. charged by Gujarat Electricity Board ( GEB for short) was inclusive of 8 paise per unit of electricity duty. This component of electricity duty the Assessing Officer discarded for the purposes of ascertaining market value of the electricity generated by the CPP Unit and supplied to its general unit. 4. CIT (Appeals) confirmed the view of the Assessing Officer on the same line of reasoning. The Tribunal, however, on further appeal by the assessee, reversed the orders passed by the Revenue authorities referring to and relying upon the decisions of other Tribunals. The Tribunal was of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld make no difference. This question is, therefore, not required to be considered. 4. This was followed in case of CIT v. Shah Alloys Ltd. in Tax Appeal No. 2093/2010. This was reiterated in Tax Appeal No.1646/2010 in case of ACITv. Pragati Glass Works (P.) Ltd. (order dated 30.1.2012), in which following observations were made 7. To our mind, Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting ₹ 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT(Appeals) in terms recorded that ₹ 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included ₹ 4.17 per unit which was the cost of electricity generation and ₹ 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of ₹ 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered on number of occasions by the Court and held against the Revenue. Questions are answered against the Revenue. Both the tax appeals are therefore, dismissed. 25.1 As the issue is covered in favor of the assessee by the Hon ble Jurisdictional High court as discussed above. Thus respectfully following the same we reverse the order of Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 26. The last issue raised by the assessee in the ground no. 6 is that the Ld. CIT(A) erred in making the addition of the disallowances made u/s 14A of the Act while computing book profit u/s 115JB of the Act. 27. The assessee in the year under consideration has shown exempted income amounting to ₹ 7,80,28,458/- and ₹ 71,16,003/- which was claimed as exempt income u/s 10(34) and the proviso to section 28(va)(ii) respectively. 27.1 The assessee while determining income under the normal computation of the income has made the disallowance of ₹ 2,14,40,870/- as per the provision of section 14A r.w Rule 8D of Income-tax Rule. However, the assessee did not make any disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred arid claimed as deduction, there can be no question of any hypothetical disallowance under section 14A. In this regard the support is drawn from the decision of Hon'ble ITAT, Mumbai Bench 'D', 37 Taxmann.com 128. In view of this the above ground of appeal no. 11 the appellant is dismissed. 30. Being aggrieved by the order of the Ld. CIT(A) assessee is in appeal before us. 31. The Ld. AR, before us, submitted that the amount disallowed under normal computation of income in relation to exempted income cannot be imported while determining the book profit u/s 115JB of the Act. 32. On the other hand Ld. DR submitted that the disallowance needs to be made as per clause f of explanation 1 to section 115JB of the Act in relation to exempted income. Therefore the AO has rightly disallowed the amount of ₹ 2,14,40,870/- while determining book profit u/s.115JB of the Act. 33. We have heard the rival contention and perused the materials available on record. It is settled law that the amount of disallowance made by the AO u/s 14A of the Act cannot be imported while determining the profit u/s 115JB of the Act. In this regard, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act. Given above, we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). 33.5 Now the question arises to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we also note that there is no mechanism given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the disallowance. Therefore in the given facts circumstances, we feel that adhoc disallowance will service the justice to the Revenue and assessee. We, therefore, are directing for the ad-hoc disallowance to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - on computers installed in the factory premises, without appreciating that the computers are office appliances only whether installed in factory or office and liable for depreciation as applicable to plant and machinery. 5 On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in deleting the addition/disallowance of ₹ 2,32,000/- made in 'book profit' on account of prior period expenses completely disregarding with the decision of the Hon ble High Court of kerala in the case of Shree Bhagwathy Texiles vs. Assistant Commissioner of Income-tax [2011] 199 TAXMAN 14(ker.) 6. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. 36. The issue raised by the Revenue is that the Ld. CIT(A) erred in deleting the addition made by the AO for ₹ 14.51 lacs on account of lease rent paid in respect of capital asset. 37. The assessee in the year under consideration has claimed the expense of ₹ 14.51 lacs on account of lease rent for the property taken on lease from Gujarat Industrial Development Corporation for 99 years. The assessee further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the ease of Sun Pharmaceutical Industries Limited (supra) as well as decision of the Hon'blc Supreme Court in the case of Madras Auto Services Pvt. Limited (supra), we are of the opinion that the learned Tribunal has committed an error in distinguishing the aforesaid decisions and not applying the same to the facts of the case on hand. Considering the aforesaid two decisions, it is to be held that the aforesaid lease rent was deductible as revenue expenditure and the learned Tribunal has erred in holding that ₹ 3,36,224/- after amortization of lease rent paid for the land is capital expenditure. Under the circumstances, considering the aforesaid two decisions of the Hon'ble Supreme Court in the case of Madras Auto Services Pvt. Limited (supra) and the decision of this Hon'ble Court in the ease of Sun Pharmaceutical Industries Limited (supra) the question no. 2 in Tax Appeal Nos. 778 and 779 of 2013 and sole question no. 1 in Tax Appeal No. 780 of 2013 is required to be answered in favour of the assessee and against the revenue. 3. In the result, appeal is allowed. Question is answered in favour of the assessee. Judgment of the Tribunal to that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as revenue expenditure and therefore the above further ground of appeal of the appellant is not required to be adjudicated upon. 48. Being aggrieved by the order of the Ld. CIT(A) Revenue is in appeal before us. 49. Both Ld. AR, and Ld. DR, before us, relied on the order of the authorities below as favorable to them. 50. We have heard the rival contentions and perused the materials available on record. At the outset, we find that the impugned issue is covered in favor of the assessee in its case by the Judgment of Hon ble Gujarat High Court in Tax appeal no. 577 of 2016 vide order dated 01/08/2016. The relevant extract of the order is reproduced below: 3. Though three different questions are framed, the issue is single viz. the correctness of the decision of the ITAT in deleting addition of ₹ 4.67 crores made on account of expenses incurred for replacement of remembering cells- II. The Revenue would contend that the expenditure is capital in nature and therefore, was not allowable deduction. 4. Both sides agreed that lists issue in case of this very assessee for earlier assessment years came up for consideration before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 20/01/2014 in appellant's case for AY 2007-08 has dismissed the Departmental appeal holding that the CIT(A) and Tribunal has not committed any error in this respect. In view of this legal position, it is held that for the year under consideration also the appellant is entitled to claim depreciation @ 60% on Chlorine Tonner instead of 15%. Thus, the ground of appeal no.7 of the appellant is allowed. 54. Being aggrieved by the order of Ld. CIT(A) the Revenue is in appeal before us. 55. Both the parties before us relied on the order of authorities below as favorable to them. 56. We have heard the rival contentions and perused the material available on record. At the outset, we find that the impugned issue is covered in favor of the assessee in its case by the Judgment of Hon ble Gujarat High Court in Tax appeal no. 942 of 2013 vide order dated 20/01/2014. The relevant extract of the order is reproduced below: 6. Having heard learned counsel for the parties and having perused the materials on record, we see no reason to interfere. Admittedly the toners are being used for storage and transportation of chlorine gas generated in the plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be really adding words to the statute which is not permissible. Accordingly, the Division Bench of the Delhi High Court held that gas cylinders are entitled to depreciation at 100 per cent. B. Learned counsel for the assessee also stated that till the stage of Assessment Year 2004-05 such claim of the assessee for higher depreciation was even accepted by the Revenue. 9.Under the circumstances, we do not find that the CIT(Appeals) and the Tribunal committed any error in this respect. Such question, therefore is not required to be considered. 56.1 As the fact of the case are identical to the fact as discussed above therefore respectfully following the same we do not find any reason to disturb the findings of Ld.CIT (A). Hence the ground of appeal of Revenue is dismissed. 57. The next issue raised by the Revenue is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹ 7,20,949/- on account of additional depreciation on the computers installed in the factory premises. 58. The assessee during the year under consideration has claimed additional depreciation on the computers purchased during the year and installed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the computers shouldbe treated either as office appliances failing which they would form part of the plant and machinery. In either case, right of depreciation would be 208 and not 608 as claimed by the assessee. The assessee carriedthe matter in appeal. CIT (Appeals) reversed the decision of the Assessing Officer. In further appeal by the Revenue before the Tribunal, decision of the CIT(Appeals) was confirmed in following terms :- 50. We have heard both the parties in our opinion, the Ld CIT(A) has correctly analyzed the facts and decided the issue in the light of applicable law. It cannot be said as a universal proposition of law that computers are always used only in offices and not for manufacturing activities. The finding of fact recorded by the Ld CIT(A) has not been rebutted before us. We are in agreement with the view taken by the Ld. CIT(A) in this regard. His order in this behalf therefore confirmed. GroundNo. 2 taken by the Department is dismissed. 11. We cannot find any fault with the observations of the Tribunal while confirming the view of CIT(Appeals) that there cannot be universal preposition of law that computers are used only in offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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