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TMI Blog2019 (10) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... Cuttack Bench in the case of NALCO in the combined order has held that interest on disputed Electricity Duty are allowable u/s.37 of the Act and further the interest on Electricity Duty, even if a statutory liability, the same do not fall under the ambit of Section 43B of the Act and therefore, even if such interest is not paid the same is not to be disallowed under section 43B. Following the reasoning given hereinabove with regard to the interest on delayed payment of electricity bill, we direct the AO to allow interest on the water bill. Disallowance of provision for leave encashment u/s.43B - HELD THAT:- As decided in own case [ 2018 (6) TMI 1662 - ITAT CUTTACK] wherein the Tribunal has restored the issue to the file of AO to examine and allow the claim of the assessee. Disallowance u/s.14A r.w.Rule 8D - HELD THAT:- Assessing Officer has considered average total investment appearing on the first day and last day of the financial year, which in our opinion is not justified. These investments may also include such investments from which no exempt income would have been earned by the assessee. As is clear from the Rule itself, the average of only such investments have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Shri B.K.Mahapatra, AR For the Revenue : Shri Piyush Kolhe, CIT DR ORDER PER L.P.SAHU, AM: These are the cross appeals filed by the assessee and Revenue and cross objection by the assessee, against the order of the CIT(A)-1, Bhubaneswar, dated 21.12.2017 for the assessment year 2014-2015. 2. Since issues in both the appeals are common, they were heard together and disposed of by this common order. First we shall consider the grounds raised in assessee s appeal and facts narrated therein for the assessment year 2014-2015 in ITA No.106/CTK/2018 as under :- 1. That the order dated 21.12.2017 passed by the Learned Commissioner of Income Tax (Appeals) [in short CIT(Appeals) ], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against the principles of natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Disallowance of Interest on disputed Govt, duty (Electricity Duty and water charges -₹ 202,61,47,249/-, a. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous and bad in law. 4. Disallowance u/s. 14A ₹ 6,82,43,072/- a. That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in sustaining the disallowance of ₹ 6,82,43,072/- U/S.14A of the Act is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That in similar facts and circumstances, for the Asst. Year 2011-12, the learned predecessor CIT (Appeals) having fully deleted similar addition u/s. 14A of the Act, the order of the learned CIT (Appeals) in ignoring/not following the order and sustaining the disallowance of ₹ 6,82,43,072/- is unjustified, arbitrary, erroneous and bad in law. c. That the assessee having already added sum of ₹ 82,378/-u/s.14A of the Act in the computation of income (returned income), Rule 8D is not applicable and the sustaining of the addition of ₹ 6,82,43,072/- u/s.l4A of the Act is unjustified, arbitrary, contrary to facts, erroneous and bad in law. d. The appellant's computation of the aforesaid ₹ 82,378/- u/s. 14A of the Act is based on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new material evidence on record, is not justified and is erroneous in treating the aforesaid Short Term Capital Gains of ₹ 67,67,666/- and not accepting the Loss on Long term Capital Gains of ₹ 13,75,90,268/-and treating Rs.l 14,46,74,819/- as 'Business income' of the assessee and the addition of ₹ 114,80,58,652/- under Business Income is unjustified, arbitrary, contrary to facts, erroneous and bad in law. e. That without prejudice to Ground (a) to (d) above, in any case as per Board Circular which recognizes that an assessee can have two portfolios, one Investment and other trading, the ignoring and discarding of the aforesaid Loss under Long term Capital Gains of Rs.l3,75,90,268/- and the treatment of the aforesaid Gains including Short term Capital Gains of ₹ 67,67,666/-, as 'Business income' by the lower authorities is unjustified, arbitrary, contrary to facts, erroneous and bad in law. f. That on the facts and in the circumstances of the case, the CIT (Appeals) ought not have confirmed the action of the learned Assessing Officer in changing the 'Head of Income' as per the return of income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) after considering the submissions of assessee and findings of AO has partly allowed the appeal of the assessee. 5. Feeling aggrieved by the order of CIT(A), both the assessee and Revenue are in appeals before the Income Tax Appellate Tribunal. 6. Ground No.1 is general in nature. Ground No.2 : Disallowance of interest on disputed Govt. duty (Electricity Duty and water charges at ₹ 202,61,47,246/- 7. The AO in the assessment order stated that the payments of interest on such dispute of electricity duty and water charges are not ascertained liabilities, and, therefore, such unascertained liabilities are not allowable as business expenditure. The AO further noted that in the earlier years the issue is pending before the higher appellate stage and the matter has not yet been finalised, therefore, disallowed interest on disputed govt. duty and added to the total income of the assessee. In appeal, the CIT(A) observed that the amount is a provision and has been calculated on the basis of the enhanced electricity duty which itself is in dispute. Since the amount has not been arisen out of any demand raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2006-07 2007-08, wherein the Tribunal on merit allowed such interest after observing as under :- 6.1 With respect to the interest on electricity duty provided for by the assessee was in consequence to the preference and not claimed as prior period expenses on the basis of statutory auditors pointing out that the amount held by the assessee to be paid as statutory duty in a bank was for earning interest. Therefore, 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Govt. duty (Electricity duty and Water Charges. Thus, ground No.2 of appeal of the assessee is allowed. Ground No.3 : Disallowance of provision for leave encashment u/s.43B of the Act at ₹ 21,97,37,131/- 9. During the course of assessment proceedings, the AO observed that the provision for leave encashment has not been added back to the income as per the provisions of Section 43B. Therefore, the AO relying on the decision of Hon ble Kolkata High Court in the case of Exide Industries Ltd. 292 ITR 470 added the unpaid liabilities to the total income of the assessee. In appeal, the CIT(A) upheld the same. 10. Before us, ld. AR submitted that the issue is squarely covered by the decision of the Tribunal in assessee s own case in ITA No.211/CTK/2017, order dated 29.06.2018, and drew our attention to para 28 of the aforesaid order, wherein the Tribunal has restored the issue to the file of AO to examine and allow the claim of the assessee. The relevant observations of the Tribunal read as under :- 28. We have heard rival submissions and perused the material available on record. We find that the Tribunal in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the claim of the assessee. Ground No.3 is allowed for statistical purposes. Ground No.4 : Disallowance u/s.14A of the Act at ₹ 6,82,43,072/- 11. Invoking the provisions of Section 14A r.w.Rule 8D, the AO has made the disallowance of ₹ 6,82,43,072/- by observing that the disallowance suo-moto made by the assessee is very less compared to the administrative and employee cost devoted to earn the exempt income. In appeal, the CIT(A) has confirmed the disallowance as there may not be any direct expense and that the assessee has not made any interest payments related to earning of exempted dividends and accordingly, the only way disallowance can be computed proportionately as per Rule 8D(2)(iii) of I.T.Rules. 12. Ld. AR before us submitted that the assessee has already added the sum of ₹ 82,378/- in the computation of income with the (return of income) u/s.14A of the Act in respect of expenses incurred relating to its exempted income and Rule 8D is not applicable. Ld. AR further submitted that this issue has been decided by the Tribunal in ITA No.211/CTK/2016 along with other connected appeals, order dated 29.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rage of only such investments have to be taken into account, which yielded the income not forming part of the total income. Therefore, the AO was required to work out the average of such investment, the income from which did not form part of the total income instead of total value of investment. For this view, our stand is fortified by the decision of Special Bench in the case of ACIT vs. Vireet Investment (P) Ltd., (2017) 82 Taxman.com 415 (Delhi Trib.)(SB). None of the parties before us, however, have laid any details to examine as to which of the investments have yielded such income which did not form part of the total income. We, therefore, restore the matter back to the file of the Assessing Officer for calculating the disallowance u/s. 14A read with Rule 8D afresh, in the light of observations made in the body of this order above. Accordingly, ground No.4 is allowed for statistical purposes. Ground No.5 : Treatment of Short Term Capital Gains of ₹ 67,67,666/- and not accepting Loss under Long Term Capital Gains of ₹ 13,75,90,268/- and treating the same as Business income and the addition under Business income of ₹ 114,80,58,652/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated 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 individually leading to long drawn litigations. The CBTD therefore in order to reduce th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 2011-12 with the following observations: The appellant company submitted that the majority of the plant and machinery installed in a manufacturing plant like theirs; are commissioned in the premises of the appellant company and are not tailor-made, rather assembled in their premises over a period and commissioned on a specific date. Since date of acquisition of the individual components running in to thousands of numbers and construction and commissioning of the plant itself running over years together, date of acquisition is construed to be the date-put-to-use. The appellant further submitted that additional depreciation has been claimed rightly on the additions to its plants and not in respect of individual machinery as per the provisions of the act. The appellant further submitted full details of plants acquired and installed and the summary statements of particulars of purchase order. The appellant had given an example of the account of work in progress where capitalization has already been made for assets acquired before F/Y. 2005-06. The appellant company emphasized that the assets for which the additional depreciation are claimed have been acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds :- 1. The order of the Ld. CIT(A) is erroneous on facts and in law. 2. On the facts and the circumstances of the case and in law, ld. CIT(A) is not justified in deleting the addition of ₹ 11,35,37,207/- made by the AO towards 'disallowance of loss on revaluation of non-moving stores and spares' when the assessee, during the assessment proceedings, could not explain properly, the method adopted for valuation of non moving stores and spares at the rate of 5% of the original cost. 3. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceedings. 21. The sole ground raised in appeal of Revenue is relating to disallowance of the loss claimed on account of re-valuation of non-moving stores and spares. Further the ld. DR submitted that the CIT(A) is not justified in deleting the addition made by the AO towards 'disallowance of loss on revaluation of non-moving stores and spares' when the assessee, during the assessment proceedings, could not explain properly, the method adopted for valuation of non moving stores and spares a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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