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TMI Blog2018 (6) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... T:- As decided in own case [ 2012 (12) TMI 632 - ITAT CUTTACK] direct the AO to allow the claim of the assessee on account of interest on disputed Govt. duty (Electricity duty and water charges) and this ground of assessee is allowed Disallowance of additional depreciation u/s.32(1)(iia) - HELD THAT:- We find the issue is similar to the . [ 2018 (4) TMI 1754 - ITAT CUTTACK ] present facts and circumstances of the case, and we respectfully follow the above judicial precedence of this bench of the Tribunal and remit the matter to the file of AO for reconsideration of claim of additional depreciation u/s.32(1)(iia) of the Act. Accordingly, we allow this ground of assessee for statistical purposes. Disallowance u/s.14A - HELD THAT:- In various decisions, we find that the Tribunal has restored the disputed issue to the file of AO for re-examination and reverification and apply the provisions of Section 14A r.w.rule 8D and in the instant case, the issue being similar, we find that the AO has not complied with the mandatory requirement of Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules and we respectfully follow the above judicial decision of the Tribunal and remit the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses' incurred through appellant's Corporate Office is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That the aforesaid expenditure of ₹ 1,81,73,621/- is incurred by the assessee wholly and exclusively for the purpose of its business, sustaining of the disallowance by the learned CIT(Appeals) is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. c. That in similar facts and circumstances, in the past years, in appellant's own case, the Jurisdictional ITAT (Hon'ble ITAT Cuttack Bench, Cuttack) having held that the similar, aforesaid expenditure are fully allowable, the learned CIT (Appeals)'s order in not allowing the same is, arbitrary, erroneous and bad both on facts and in law. d. That the sustaining of the disallowance of ₹ 1,81,73,621/- under 'Peripheral Development Expenses' by the learned CIT(Appeals) by holding the same are in the nature of and charity and donations is on mis-appreciation of facts, arbitrary, erroneous and bad, both in the eye of law and on facts. e. That the learned CIT(Appeals) in holding that the aforesaid ₹ 1,81,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a provision and disallowable because the same is under dispute and no demand has been raised in respect thereof, is arbitrary, erroneous, and bad, both in the eye of law and on facts and legally untenable. 4. Disallowance of claim of Addl. Depreciation u/s.32(i)(iia) of the Act- ₹ 30,93,207/- a. That the learned CIT (Appeals) has mis-appreciated the facts and the sustaining of disallowance of ₹ 30,93,207/- under 'Additional Deprecation u/s.32(1)(iia) of the I.T Act is contrary to facts, erroneous and bad, both in the eye of law and on facts. b. That the acquisition and installation in respect 'New Plants' having been made after 01.04.2005, the claim of Addl. Depreciation of ₹ 30,93,207/- u/s.32(i)(iia) of the Act ought to be fully allowed. c. That the details in respect of Additions to 'New Plants' having been furnished, the. learned CIT(Appeals) holding that no purpose would be served in remanding the matter to the AO, is against the principles of natural justice, arbitrary, unjustified, erroneous and bad, both in the eye of law. d. That on the facts and in the circumstances the case, the learned CIT(Appeals) ought to have allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57,53,86,000/- gains booked in Profit and Loss Account, after indexation); and iii. the addition of ₹ 59,81,49,044/- as "Income from Business" by the learned CIT (Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That in the facts and circumstances of the case, the lower authority holding that the transactions of the assessee in mutual funds and shares and securities should be treated as business activities and income earned from that should be treated as income from business is contrary to facts, arbitrary, erroneous and bad in law, bad, both in the eye of law and on facts. c. That the assessee having maintained its accounts and disclosed the investments in the Balance sheet under long term investments and having rightly computed its income under the head Capital Gains i.e. Loss under Long term Capital Gains (loss) of ₹ 8,89,62,948/- (after indexation) and Short term Capital Gains of ₹ 4,55,26,088/-, the treatment of the aforesaid as 'Business income' and the addition of ₹ 59,81,49,044/- by the learned AO and the confirmation of the same by the learned CIT(Appeals) is based on irrelevant consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumina and Aluminum & Power Generation and filed its return of income for the assessment year 2013-2014 electronically on 28.09.2013 with total income of ₹ 825,55,04,003/- and under the provision of section 115JB of the Act at ₹ 619,50,19,389/- and the return of income was processed u/s.143(1) of the Act and subsequently, the case was selected for scrutiny under CASS and notices u/s.143(2) & 142(1) were issued. In compliance, the AR of the assessee appeared from time to time and filed written submissions and the Assessing Officer completed the assessment u/s.143(3) of the Act, dated 26.02.2016, inter alia, making additions/disallowances aggregating to ₹ 264,80,17,609/- under the following heads and assessed the total income of ₹ 1090,35,21,610/-:- i) Disallowance of Peripheral Development Expenses at ₹ 22,32,20,569/-; ii) Disallowance of claim of additional depreciation at ₹ 30,93,207/-; iii) Interest on disputed Govt. dues (Electricity Duty and Water charges) at ₹ 168,47,54,889/-; iv) Treating short term and long term capital gain as business income at ₹ 59,81,49,044/-; v) Disallowance u/s.14A of the Act at ₹ 5,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) after verifying the facts and considering the submissions made by the assessee in this regard granted the relief but restricted disallowance of peripheral expenditure to the extent of ₹ 1,81,73,621. Ld. AR submitted that this issue is covered in favour of the assessee by the earlier orders of the Tribunal. We have gone through the order of the Tribunal in assessee's own case in ITA No.343&392/CTK/2015 and other connected appeals, dated 23.04.2018 for the assessment years 2007-08 & 2008-09. Further ld. AR relied on the decision of Tribunal in assessee's own case in ITA No.352/CTK/2016 along with other connected appeals for the assessment year 2010-2011, 2011-12 & 2012-2013. The observations of the Tribunal in this regard are as under :- "8. We have heard rival submissions and perused the material on record. We find that the arguments of the ld. AR are supported with the evidence that the expenditure claimed by the assessee has been incurred wholly and exclusively for business purposes but the AO has to verify the claim as to whether the peripheral expenditure in the corporate office is for the particular area of the employees or as a whole. Since we have already decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w this ground of appeal for statistical purposes." From the above observations of the Tribunal, we find that the expenditure claimed by the assessee has been incurred wholly and exclusively for business purposes as envisaged by the assessee however, the AO has to verify the claim as to whether the peripheral expenditure in the corporate office is for the particular area of the employees or as a whole. Accordingly, we respectfully following judicial precedence and the order of the Tribunal and we restore this issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide the same on merits. This ground of appeal is allowed for statistical purposes. 10. Third ground of appeal is with respect to disallowance of interest on disputed Govt. duty (Electricity duty and water charges). The AO found that the assessee company has debited an amount of ₹ 168,47,54,889/- on account of interest on the disputed Government dues and others. The AO disallowed the claim of the assessee observing that similar claim of the assessee is pending before the higher appellate authorities and matter has not reached at its finality. On appeal, the CIT(A) confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, corresponding payment of interest was to be provided for. When the issue is subjudice, neither the assessee nor the Department may sit on the judgment to award interest. Therefore, interest being a period payment for the impugned year, has been provided for in the impugned Assessment year cannot be subjected to disallowance for claiming deduction u/s.37. The Assessing Officer after having applied his mind allowed the claim in the impugned Assessment Year on both these issues therefore cannot be thrust upon by the learned CIT holding a view other than the view which was legitimately accepted by the Assessing Officer but on the basis of arithmetical finding of the learned CIT which rather leans in favour of the assessee. 5. The issue under consideration are same, respectfully following the order of the Tribunal, we direct the AO to allow assessee's claim of interest insofar as assessee is also offering interest on the amount deposited in the bank account as per the direction of the Hon'ble High Court. When interest on such deposit is brought to tax, there is no reason for disallowing interest payable to Government for non-payment of such duty in Government account. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the AO disallowed the claim of additional depreciation. 13. On appeal, the CIT(A) observed that the ITAT has remanded this matter in earlier years to the AO for re-verification and allowance of the claim as per law, whereas the assessee claimed that all the relevant details could be produced, however, the CIT(A) observed that the decision of ITAT has no application in the year under consideration as the AO has already allowed the major part of the claim of additional depreciation and the relevant details could be filed by the assessee. Accordingly, the CIT(A) held that the assessee could not furnish the details of acquisition and installation and therefore the AO disallowed the additional depreciation, and confirmed the disallowance on account of additional depreciation. 14. Against the order of CIT(A), the assessee is in appeal before us. 15. Ld. AR submitted that the assessee is eligible for claim of additional depreciation and the assessee was also substantiated its claim before the lower authorities. Ld. AR further submitted that similar issue has been decided by this bench of the Tribunal in assessee's own case for the assessment years 2005-06 & 2006-07 in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the case whether any such plant and machinery acquired and installed after 1.4.2002 in the said plant by the assessee. Therefore, finding force in the contention of Id A.R. of the assessee, we restore this issue o the file of the AO for reconsideration in the light of above observation and allow the claim of additional depreciation u/s.32(1)(iia) on the plant and machinery acquired and installed after 1.4.2002 enabling the unit to become operative and capable of manufacturing RPU for commercial purpose." 27. Consistent with the view taken by the Tribunal in the preceding assessment year, we restore the matter to the file of the AO under similar observation for A.Y. 2006- 07. This ground is allowed for statistical purposes. However, we do not find merit in the contention of Id CIT(A) in arbitrarily disallowing the additional depreciation claimed in accordance with law without controverting facts as have been brought on record as per law and the directions of the Tribunal. The same is directed to be deleted for the assessment year 2005-06." Respectfully following the order of the coordinate bench of the Tribunal, we restore this matter to the file of the AO for fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes the investments in equity shares and long-term debt funds as well, income from which has not been claimed as exempt by the assessee. Ld. AR submitted that on similar circumstances for the assessment 2011-2012, the First Appellate Authority has deleted the additions made by the AO u/s.14A applying rule 8D. The Hon'ble Delhi High Court in the case of H.T. Media Ltd. v. Pr. CIT in ITA No. 548, 549/2015 dated 23.08.2017, wherein the Hon'ble High Court has held as under :- "32. The question regarding the failure of the AO to record his dissatisfaction with the correctness of the Assessee's claim regarding administrative expenses of ₹ 3 lakhs arises in ITA 349 of 2015. Mr Raghvendra Singh is not entirely right in his submission that there is no question framed about the failure by the AO to record his satisfaction. In ITA 349 of 2015, the question framed by this Court by the order dated 15th October 2015 is in fact in two parts: viz., (i) Whether the AO recorded a proper satisfaction in terms of Section 14A (2) and Rule 8 (D) of the Rules and (ii) in calculating the disallowance at 0.5% of average value of investments as per clause (iii) of Rule 8 D (2) of the Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter discussing Section 14A(1) read with Rule 8D and referring to the decision of the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd v. DCIT (supra), the AO simply stated that "in view of the facts and circumstances and legal position on the issue as discussed above, I am satisfied that the Assessee had incurred expenses to manage its investments which may yield exempt income, and Assessee grossly failed to calculate such expenses in a reasonable manner to ascertain to ascertain the true and correct picture of its income and expenses." 37. In the considered view of this Court, the above observations of the AO in the assessment order are of a broad general nature not with particular reference to the facts of the case on hand. 38. The Court is also unable to agree with Mr. Singh that on this aspect there are concurrent findings of both the CIT (A) as well as the ITAT. The CIT (A) disallowed the exempt expenses by merely repeating what the AO had stated about the cost that is built into so called 'passive' investments and simply recorded that the AO was bound to Rule 8D and, therefore, was justified in determining administrative costs at 0.5%. Here again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar, we find that the AO has not complied with the mandatory requirement of Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules and we respectfully follow the above judicial decision of the Tribunal and remit the disputed issue to the file of AO for re-examination and verification and to decide the issue on merits after complying the mandatory requirement of the provisions of Section 14A of the Act and this ground of appeal is allowed for statistical purposes. 23. Ground No.6 relates to treatment of short term and long term capital gain. The AO has treated the short-term and long-term capital gain earned by the assessee as business income of the assessee. The CIT(A) has affirmed the action of the AO by stating that the transactions are much higher than the closing balances in the balance sheet. Against the order of CIT(A), the assessee is in further appeal before the Tribunal. 24. Ld. AR before us submitted that the investments are mostly held for the purpose of earning income and not for trading and in the balance sheet it can be seen that most of the investments in MF are held for more than 1 year and accordingly is classified as long term investments. Ld. AR fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee on sale of shares. The assessee contended that the shares were in the nature of his investment and the income earned should be treated as long term capital gain. The Revenue contends that looking to the pattern of holding the shares, the frequency of transactions and other relevant considerations, the assessee was dealing in the business of buying and selling the shares and the income should be taxed as a business income and the Tribunal took the relevant facts into consideration and referred to the circular of the CBDT dated 29.2.2016 and held that the return should be taxed as capital gain, be it long term or short term, as the case may be, and not as a business income. 6. Whether to tax the income generated from the sale of shares as capital gain or business income is an issue of frequent dispute between the revenue and the assessees. The Courts in the past have had occasions to consider such issue and through judicial pronouncement various parameters have been laid down to check whether the sale of shares would lead to business income or capital gain. Despite several judicial pronouncements, the controversy did not subside. Each case would have to be considered individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities." 7. Two things emerge from this circular. One is that the CBDT desires to obviate the difficulties of the assessees and simultaneously to reduce the litigation. In paragraph 3 of the circular, certain parameters have been laid down. Clause (b) thereof in particular provides that in respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. In other words, the Revenue would not pursue this issue if the necessary ingredients are satisfied, only rider being the stand taken by the assessee in a particular year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of income. As the ld. AR submitted that the above issue is covered by the order of the coordinate bench of the Tribunal in the case of Baitarani Gramya Bank in ITA Nos.318 & 319/CTK/2013 for assessment years 2008-09 & 2009-10, wherein the Tribunal held as under :- "19.1 The DR also agreed with the submission of ld. AR of the assessee. In the circumstances of the case, we set aside the order of the CIT(A) and remit the matter to the file of the Assessing officer to re-adjudicate the issue in the light of the Hon'ble Supreme Court decision. Hence, this ground is allowed for statistical purposes. 20. In the result, appeal for the assessment year 2008-09 is partly allowed for statistical purposes." 29. We considering the ratio of the decision and the facts to the present case, remit this issue to the file of the AO to examine and allow the claim and this ground of appeal is allowed for statistical purposes." Respectfully following the order of the Tribunal and we restore this issue to the file of AO to examine and allow the claim of the assessee and we allow this ground of appeal of the assessee for statistical purposes." We follow the reasoning of the Tribunal and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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