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TMI Blog2019 (11) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... on on goodwill Excess claim of depreciation on printer and scanner holding that same constitutes integral part of computer system for granting higher rate of depreciation - HELD THAT:- CIT(A) allowed the appeal of the assessee following the order of the ITAT, Hyderabad Bench in assessee s own case and also the decision of the ITAT, Kolkatta Bench in the case of Samiran Majumdar [ 2005 (8) TMI 293 - ITAT CALCUTTA-B] Computer consists of input devices, connecting wires, the CPU assembly along with memory and various data processing cards and output devices. It is not logical to treat one part of the computer for 60% depreciation and another part as plant and machinery - assessing officer is incorrect in denying proper depreciation on computer systems and he is directed to allow the same Claim made u/sec. 80IA for the steam generated out of steam and used for captive consumption - assessee claimed that the power generated using the steam is also eligible for deduction u/sec. 80IA of the act - HELD THAT:- Steam generated by the appellant and used for captive consumption in various processes is also entitled for the aforementioned deduction. The assessing officer is however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance required to be made is 0.5% of the investments which the Assessing Officer rightly disallowed. Therefore, we set aside the order of the ld.CIT(A) and uphold the addition made by the Assessing Officer. Computation of income as per normal provision after making the necessary adjustments of mark to market gains in respect of fluctuation for foreign exchange on acquisition of capital assets - HELD THAT:- In revenues appeal we, have upheld the order of the Ld.CIT(A) for making adjustments of the cost of asset on actual payment of loan. Accordingly we, direct AO to make necessary adjustments to the cost of the asset on actual payment basis and recompute the income after allowing the correct depreciation under the normal provisions. Thus, this ground of cross objection of the assessee is allowed. Carry forward of unabsorbed depreciation consequent to making adjustments to the cost of assets as a consequence to making adjustments under section 43A - Assessing Officer is directed to determine the correct unabsorbed depreciation and allow the same to be carried forward for the subsequent years Revised computation of income submitted by the company at the time of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of courts for their legitimate rights. Therefore, we, direct the Assessing Officer to allow the credit for the taxes paid/ TDS made while determining the tax liability Charging of interest u/sec. 234C and section 244 - HELD THAT:- The similar issue is involved in the A.Y. 2009-10 also. Charging correct interest on taxes payable and refund due is the statutory obligation of the Income-tax Authorities, therefore we direct the Assessing Officer to charge the interest correctly u/sec. 234C and allow the due interest against the amounts due to the assessee. Exemption of income under the normal provisions in respect of dividend income received by the assessee - assessee contended that the Assessing Officer did not allow exemption u/sec. 10(34) - HELD THAT:- Assessing Officer is directed to verify the claim of the assessee with regard to dividend income received and allow exemption u/sec. 10(34) of the Act after considering the disallowance u/s 14A of the act. Thus, this ground of cross objection raised by the assessee is allowed for statistical purpose. Not providing depreciation on assets capitalised vide assessment order dated 2008-09 - HELD THAT:- The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the cross objections by the assessee are directed against the separate orders of Commissioner of Income Tax (Appeals)-III, Hyderabad, all dated 08/10/2013 for the Assessment Years 2007-08 to 2009-10. Since facts and issues are common, all the appeals are clubbed and heard together and disposed of by way of this consolidated order. 2. The Revenue has raised 13 grounds of appeal in Form No. 36. Since the grounds raised by the Revenue are lengthy and argumentative, the Revenue has filed revised grounds of appeal vide petition dated 13/02/2019 and the ld.DR requested to take up the revised grounds for adjudication which are 6 in number. Accordingly, the revised grounds are taken up for adjudication. 3. For the sake of convenience, facts are taken from A.Y. 2007-08 which are common in all the pending appeals. 4. Ground Nos. 1 6 are general in nature, which do not require any specific adjudication, therefore same are dismissed. 5. Ground No.2 is related to the depreciation on goodwill. The same issue involved for other assessment years i.e. A.Y. 2008-09 2009-10. During the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n goodwill had been rightly allowed by the assessing officer and that the CIT was not justified in invoking jurisdiction under section 263 of the Income Tax Act. Following is the operative part of the order of the honourable ITAT Hyderabad in this regard:- 12 In the present case, APPM had acquired 42,60,000 shares and transfer took place on 13/12/2000 and 14.12.2000 respectively. The transfer date of scheme of amalgamation was 1st October, 2000 and as on the date, APPM does not hold any shares on 1st October, 2000. When the final accounts for the year ended 31.3.2002 were drawn up, the amalgamation was completed in all respects though numbers as on 31.3.2001 which is the previous year relevant to the assessment year. For income tax purpose, a strict technical compliance is contemplated and the conditions stated above were not fulfilled, the amalgamation has to be considered under purchase method. To meet the conditions prescribed for pooling interest method, share holder representing 54,00,000 shares (90% of 60 lacs) would have been offered in APPM i.e. 18,00,000 shares of APPM could have been issued to, erstwhile shareholders of CPL in the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no good will in this case. Goodwill basically is reputation. There can be no sale of a goodwill without the business associated with that goodwill or the name. From that point of view, goodwill has no separate existence apart from business. One cannot sell the goodwill and retain the business that the goodwill represented, nor can one sell the business and retain the goodwill. Good will has no independent existence. It cannot subsist by itself. It must be attached to business. Reliance is placed on judgment of Calcutta High Court in the case of CIT Vs. Chunnilal Prabhudas Company (76 ITR 566). (Calcutta HC). In the case of CIT Vs.B.C. Srinivasa Setty(128 ITR 294) (SC)it was held that: Goodwill denotes the benefit arising from connection and reputation. The original definition by Lotd Eldon in Crullwell V. Lye (1810) 17 Ves.335 that goodwill was nothing more than the probability that the old customers would resort to the old places was expanded by Wood V.C. in Churton V. Douglas (1859) John 174 to encompass every positive advantage that has been acquired by the old firm in carrying on its busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 2006. The Pulp mill was operating at capacity of 425 tons per day. Before amalgamation after meeting the captive consumption of about 290TM per day in Unit APPM, the surplus is transferred to Unit CP to manufacture value added papers and to elevate the status of the Mill from a B grade to A grade one. Further, as an environmentally sound measure to dispose off black liquor generated in the Unit CP in the Rice Straw Pulping process, the assessee transferring the concentrated black liquor to unit APPM for firing in the Chemical Recovery Boiler, Since Unit APPM has the infrastructure to fire the black liquor to the boiler, the spent chemical are recovered back and steel is also generated as byproduct to meet the demand of process steam at Unit APPM. By this process, any pollution generated at the pulp in process is eliminated in unit CP. Further, the assessee got the Loyal Domestic customers like Sakal Papers (P) Ltd., Shree Krishna Newsprint(East Media), Bhubaneswar, Indo Global Commercial (P) Ltd., Nagpur, Ambica Papers (P) Ltd, Mumbai, SK Impex, Kolkata and Export Customers viz., Assudamal Sons HK Ltd., Vital Solutions, Hind Exports, Kunicka Holdings, Dinowic Pte Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on intangible assets. This issue is decided in favour of appellant. 7. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before this Tribunal. 8. We have heard both the sides, perused the material placed on record. 9. Since the issue is squarely covered by the decision of the ITAT, Hyderabad Bench in assessee s own case for the A.Ys. 2002-03 to 2006-07. Respectfully following the view taken by this Tribunal, we dismiss the appeal of the Revenue on this ground. 10. Ground No.3 is related to the excess claim of depreciation on printer and scanner holding that same constitutes integral part of computer system for granting higher rate of depreciation. The identical issue is involved in the A.Ys. 2008-09 2009-10 also. The Assessing Officer during the course of assessment proceedings found that the assessee has claimed the depreciation @ 60% on printers, UPS and other computer peripherals like network equipment/ installation treating the same in the block of computers. The assessee filed explanation stating that the front-end data entry units and the servers are the data processi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consists of input devices, connecting wires, the CPU assembly along with memory and various data processing cards and output devices. It is not logical to treat one part of the computer for 60% depreciation and another part as plant and machinery. Respectfully following the orders of the honourable ITAT referred to supra, I hold that the assessing officer is incorrect in denying proper depreciation on computer systems and he is directed to allow the same. The issue is decided in favour of the appellant. Since the case is squarely covered by the decisions cited (supra), respectfully following the view taken by the Tribunal in assessee s own case in the earlier assessment years, we uphold the order of the ld. CIT(A) and dismiss the appeal of the Revenue on this ground. 14 Ground No.4 is related to the claim made by the assessee u/sec. 80IA for the steam generated out of steam and used for captive consumption. The assessee claimed that the power generated using the steam is also eligible for deduction u/sec. 80IA of the act. During the course of assessment proceedings, the Assessing Officer found that the assessee has claimed the deduction u/sec. 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the order of the honourable ITAT Hyderabad in the case of the appellant itself vide ITA number 311/HYD/09 and stated that the honourable ITAT had categorically held that deduction u/s 801A is to be provided both on the captive production and consumption of electricity as well as on steam. The appellant also referred to the order of the honourable ITAT Hyderabad in the case of Sirpur paper Mills with ITA 81/HYD/2011. 7.2 I have seen carefully the facts and evidence and I have also gone through all the aforementioned orders referred to by the appellant. With regard to generation of power in the form of electricity, which was directly used for captive consumption and in fact which replaced the power purchased by the appellant from the state Electricity Board, the various judgments are very clear on the issue. In the case of West Coast Paper Mills Ltd versus ACIT, the ITAT Mumbai bench vide their order(2006) 103 ITD 19 (Mum) has held that the assessee in question i.e. West Coast paper Mills was engaged in the manufacture and sale of paper and paper boards, etcetera. The assessee had four power generation units. However, all the power generated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted where there is a captive consumption of power generated by the assessee and transfer price has to be worked out on the basis of average price paid by the assessee during the year to the state Electricity Board minus extraneous charges such as electricity duty etc. However, in our opinion,, deduction u/s 801A under the Income Tax Act has to be computed after deduction of notional brought forward losses and depreciation of eligible business, even though they have been allowed to be set off against the other income in earlier years in view of the specific provisions of section 801A(5), as laid down by the Special Bench, Ahmadabad in the case of ACIT Vs. Mines Shares Finance Pvt. Ltd, (113 ITD 209). Hence, we direct the assessing officer to compute the deduction u/s 801A as laid down by provisions of the Income Tax Act, 1961. 7.5 From the aforementioned facts and evidence and also referring to the direct order of the honourable ITAT in the case of the appellant above, it is clear that the electricity generated by the appellant and consumed captively is eligible for deduction u/s 801A of the Income Tax Act. However, as hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders of the authorities below whether the turbo generators where powered by diesel or powered by steam or powered by any other by-products produced by the assessee in the course of its main activity of producing paper. But, nevertheless this would not by itself be sufficient to hold that the turbo generators were not an undertaking by itself eligible for claiming deduction under section 801A of the Act in respect of power generated there from used for captive consumption. Especially so, since steam based generating units, where steam was only an incidental output of main manufacturing activity, was held by the hon'ble jurisdictional High Court in the case of Tan fac Industries Ltd (supra) to be eligible for 801A deduction in respect of power generated and captively used. We are therefore of the opinion that the assessee is bound to succeed in these appeals. Its claim for deduction under section 80 IA of the Act has to be allowed in respect of its power generated from TG-3 Boiler 4 and TG-4 Boiler 5 units as well. 7.8 I have seen carefully the facts and evidence. Section 80IA permits tax holiday to an undertaking set up for the generation or generation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or application to work (as that of gravitation, running, wind, steam, electricity). Energy was also defined as ability of a matter to do work. 7.13 Comparing the work done by the steam with that of electrical energy, the Tribunal observed that both of them were capable of producing same end results. In the case of the assessee, a sugar manufacture, the assessee, instead of using the electric energy, used the thermal energy, the steam. Thus, both, electricity and steam were different forms of power. Before the Tribunal the assessee has also referred to the provisions in other parts of the Income- tax Act. Section 80E, before its deletion by the Finance Act, 1967, allowed tax holiday to certain specified industries, including those engaged in generation or distribution of electricity or any other form of power. Some other sections, where similar phrase was used were: 10(23f), 33B, 72A(7)(a)(3), 10(6), 10(5)(b), 32A and section 8ORRA. Tribunal agreed with the argument of the assessee that idea of not mentioning the word electricity in section 80IA(4)(iv) was only for the purpose that the legislature wanted to give the word power a wider meaning. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity generation and also about and also subject to the direction of carry forward losses etcetera as discussed supra, deduction u/s 8OIA is allowed to the appellant with respect to steam generation. 16 We have heard both the sides and perused the material placed on record. 17 An identical issue has come up before this Tribunal in the first year of claim i.e. 2004-05 and the ITAT allowed the appeal of the assessee in ITA Nos.311 to 313/Hyd/2009 for the A.Ys. 2004-05 to 2006-07. In addition to the above, ld.AR relied on the decision of the ITAT, Bombay Bench in the case of ACIT-15(2)(1) Vs. M/s Krystal Colloids Pvt. Ltd. in ITA No.3170 3172/Mum/16, dated 31/07/2018. Ld.AR also relied on the following decisions on the issue of captive consumption:- a) West Coast Paper Mills Ltd., Vs. ACIT [(2006) 103 ITR 19 (Mum.) (ITAT)] b) Tamilnadu Petro Products Ltd. Vs. ACIT [(2011) 338 ITR 643 (Mad. HC)] c) CIT Vs. Orissa Cement Ltd., [(2002) 254 ITR 412 (Delhi HC)] 18 Since the issue is squarely covered by the decision of the coordinate bench of the Hyderabad tribunal in assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the following case laws relied on by the assessee:- a) DCIT Vs. Andhra Petrochemicals Ltd. [(2010) 123 ITD 89 (Visakhapatnam ITAT) b) Lanco Kondapalli Power Ltd., Vs. JCIT [(2014) 50 taxmann.com 442 (Hyderabad ITAT) c) K.L. Hitech Secure Print Ltd., Vs. JCIT [(2015) 61 taxmann.com 449 (Hyderabad ITAT) d) Honda Siel Power Products Ltd. Vs. JCIT [(2007) 165 Taxman 307 (SC)] e) MFAR Hotels Resorts Ltd., Vs. ACIT [(2019) 105 taxmann.com 335 (Cochin ITAT) f) Svitzer Hazira (P) Ltd. Vs. DCIT [(2017) 85 taxmann.com 91 (Mumbai ITAT) g) SCM Garments (P) Ltd., Vs. DCIT [(2015) 59 taxmann.com 395 (Chennai ITAT) The coordinate Bench of ITAT, Chennai in the case of SCM Garments (P) Ltd.,(supra) considered the identical issue and held that any loss or gain arising out of foreign currency fluctuation during any previous year shall be deducted or added from the actual cost of the asset of asset on actual payment or repayment of loan. The ITAT, Visakhapatnam Bench in the case of Andhra Petrochemicals Ltd., (supra) expressed the view that the ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he one who would decide where to invest, at what time and also would not be in charge of the portfolio. For that, senior level people would be involved in terms of their time spent an effort made to manage the portfolio. There would be other employees from accounts etc who have to be involved in this exercise. Therefore, keeping in view all the circumstances, it would be appropriate to disallow ₹ 8 lakhs out of the expenses claimed under section 14A of the Income Tax Act. This ground stands partly allowed. 27. Against the order of the ld. CIT(A), the Revenue is in appeal before this Tribunal. 28. As per Rule 8D(2)(iii), the disallowance required to be made is 0.5% of the investments which worked out to ₹ 8,32,000/- against the addition, confirmed by the ld. CIT(A) for ₹ 8,00,000/, the difference was only ₹ 32,000/-. In the instant case, the assessee has not disputed with regard to earning of income u/sec. 14A of the Act. As per Rule 8D(2)(iii), the disallowance required to be made is 0.5% of the investments which the Assessing Officer rightly disallowed. Therefore, we set aside the order of the ld.CIT(A) and uphold the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to file the revised return of income as provided u/sec. 139(4) of the Act within one year from the end of the relevant assessment year. There is no provision in the Income-tax Act to file the revised computation of income reducing the income returned by the assessee during the pendency of income tax proceedings after expiry of the time limit allowed under the act. The second revised return was filed beyond the time limit allowed under the act as observed from the assessment order. Therefore the Assessing Officer did not consider the revised computation of income which was beyond the limitation allowed under the Act. The said ground was not raised before the ld.CIT(A) and the assessee did not file any petition for admission of additional ground, therefore, this ground raised by the assessee in this cross objection is not maintainable, hence, dismissed. 34. Ground No.2 of cross objection is related to the computation of normal income after giving effect to the foreign exchange gain or loss after making necessary adjustments u/sec. 43A of the Act. The assessee requested for making necessary adjustments in depreciation schedule and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for the 2008-09 is partly allowed. C.O.No. 15/VIZ/2016 A.Y.2009-10 38. Ground No.1 is related to exemption of income under the normal provisions in respect of dividend income received by the assessee. The assessee contended that the Assessing Officer did not allow exemption u/sec. 10(34) of the Act. On verification, it is found that this was due to not claiming the dividend income as exempt while filing the revised return of income by the assessee. The Assessing Officer is directed to verify the claim of the assessee with regard to dividend income received and allow exemption u/sec. 10(34) of the Act after considering the disallowance u/s 14A of the act. Thus, this ground of cross objection raised by the assessee is allowed for statistical purpose. 39. Ground No.2 is related to not providing depreciation on assets capitalised vide assessment order dated2008-09. The Assessing Officer disallowed the sum of ₹ 1,27,47,572/- which was claimed as revenue expenditure by the assessee. However as per the computation of income, it is seen that the Assessing Officer had allowed the depreciation ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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