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TMI Blog2015 (12) TMI 1825X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, are the same that were raised for the earlier AY i. e. disallowance made u/s. 14A and interest subsidy received under Technology Upgradation Fund Scheme (TUFS). In our opinion the grounds raised by it are legal in nature, therefore, same are being admitted. 2. Assessee-company, engaged in the business of manufacturing of Rayon, carbon black and insulators etc, filed its return of income on30. 09. 2008. The Assessing Officer(AO)has finalised the assessment, u/s. 143(3)of the Act, on 22. 03. 2010 determining the income of the assessee at Rs. 226, 91, 32, 020/-. ITA/3178/Mum/2012: 3. First Ground of Appeal is about deletion of unutilised modvat credit amounting to Rs. 12. 40 crores. We find that we have decided the identical issues against the AO, while deciding the appeal for earlier year(ITA/3703/M/11 & 3634/M/11, dtd. 24. 11. 2015)as under: 14. The First Ground of appeal is about deletion of modvat credit in closing stock. Representatives of both sides agreed that issue was decided against the AO by the order of the Tribunal delivered for A. Y. 2006-07 (ITA/8427&8483/Mum/10dt. 17/09/2014). The relevant portion of the order is as under : "9. The sole effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t could not be added back to the income of the assessee, that merely because the Modvat credit was an irreversible credit available to manufacturers upon purchase of dutypaid raw material, that would not amount to income which was liable to be taxed under the Act : income was not generated to the extent of the Modvat credit on unconsumed raw material ;(ii) that it was not permissible for the Assessing Officer to adopt the "gross method" for valuation of raw materials at the time of purchase and the "net method" for valuation of stock on hand. " Respectfully following the above decision Grounds no. 2, 1 and 1 for the AY. s. 2003-04, 2004- 05 and 2005-06 are decided against the AO. In light of the above discussion, effective ground of appeal is decided against the AO. " Following the above, we decide Ground No. 1 against the AO. 4. Next ground is about deleting the addition made on account of catalyst and treating the same as capital expenditure. During the assessment proccedings, the AO found that the assessee had claimed an expenditure of Rs. 6. 69 Crores on account of catalyst deployed in the plant. He directed the assessee to explain as to why the expenditure should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Year 1997-98. It was further submitted that irrespective of the fact that whether the expenditure is held to be revenue or capital, it is not in dispute that the spares and catalysts were a passive or active use during the whole of the year. U/s. 32 only two conditions are to be fulfilled for allowing depreciation i. e. , (a) ownership and (b) its use for the purpose of business. According to the proviso to Section 32, depreciation is to be restricted to 50% if it was acquired during the previous year and put to use for a period of less than 180 days. The assessee was not coming under the limitation according to the proviso. 6. the assessee further submitted that in fact the assessee had made the written submission running to 43 pages which, among other details contained the date of purchase, commercial description of the spare, number of pieces and total value against a particular entry. Out of the total spares for the financial year 1995-96, items that cost less than Rs. 5, 000/- totaled to Rs. 45, 30, 617/-. The assesse also furnished a copy of vouchers/bills covering value of Rs. l, 05, 93, 876/-. Originals were also submitted for verification. It was claimed that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every year of assessment even if no bill was received in a particular of assessment. As the assessee had failed to claim this expenditure in the earlier assessment year and having failed to discharge this duty of providing for a known expenditure, the assessee could not claim the electricity charges in the subsequent assessment years. Coming to the instant case of the assessee, on facts it is to be seen that the assessee changed the method and started capitalization of the spares and catalysts b cause of the change in the method of accounting standards as prescribed by the ICAI. Coming to the objection of the revenue as to how the spare parts were valued, it is always the case of the assessee that it was always valued at cost and it had never changed this method. One of the objection of the revenue was that there was no certificate nor evidence to show that these spa or catalysts had lost its commercial properties nor that the same had aged. At the time of hearing, we directed the assessee to produce certificate from the competent authority, which has now been placed on record. The revenue has again raised an objection on this. 22. Another objection of the revenue is that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. The next effective ground urged by the assessee before us is against the disallowance of interest u/s. 244A on advance tax, being self assessment tax, without taking into consideration the fact as also the law that the phrase 'unless the context otherwise requires' used in the beginning of the definition means that the phrase 'advance tax' and also other phrases defined in section 2(1) are capable of more than one meaning, and as such, self assessment tax would be regarded as 'advance tax' that qualifies for interest uls. 244A of the Act. " Respectfully, following the above order we confirm the order of the FAA and decide ground no. 2 against the AO. ITA/3033/Mum/2012: 5. First ground of appeal filed by the assessee is about upholding a disallowance of 19. 25 crores u/s. 14A of the Act. While deciding the appeal for the AY. 2007-08(supra), we have restored back the issue of disallowance to be made u/s. 14A to the file of the AO. Following the same, AO is directed to decide the issue afresh after affording a reasonable opportunity of hearing to the assessee. Additional Ground No. 1 and 2 also deal with the disallowance made u/s. 14A of the Act. Foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; in a situation where the ultimate recipient of such 'interest accrued but not due' could not have ascertained at the point of time when the provision is made" In the case under consideration, the assessee had made provisions but had not received the bills, that in the subsequent year the provisions made by it were offered for taxation. Considering these facts and following the orders of the Tribunal in the case of Mahindra & Mahindra Ltd. & Industrial Development Banking Company (supra), we decide ground no. 2 in favour of the assessee. " Following the above, ground no. 5 is decided in favour of the assessee . " Considering the above, second ground of appeal is allowed. 7. Next ground is about disallowance of Rs. 2. 07 crores u/s. 43B(f), being provision made for leave salary. The AR and the DR agreed that identical issue was stands decided in favour of the assessee by the Tribunal by earlier years orders. We find that the Tribunal had dealt the issue as under, while deciding the appeal for the AY. 2006-07(ITA/8427 & 8483/Mum/10 dt. 17/09/2014): "4. Ground no. 4 deals with disallowance of Rs. 1. 73 crores, made u/s. 43B(f) of the Act, being provision made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee . 8. Ground No. 4 deals with reduction of deduction u/s. 80IA on account of allocation of HO expenses, amounting to Rs. 26. 64 lacs. The AR and the DR, before us, agreed that the issue stands decided in favour of the assessee by the order of the Tribunal for the AY. 2006-07 (supra). We are reproducing the relevant portion of the said order and same reads as under: "5. Next ground is about reduction of deduction, amounting to Rs. 31. 32 Lakhs on account of allocation of Head Office (HO) expenses. During the assessment proceedings, the AO found that the assessee had claimed deduction, u/s. 80IA of the Act, in respect of Power Plant of Rayon Division (17. 31 Crores) and Power Plant at Hitech Carbon and Chemical (Rs. 5. 79 Crores), that it had not apportioned any HO expenses in respect of the above units. He directed the assessee to explain the reason for not considering the HO expenses in working the profits of the above units. In its reply, dated 18. 11. 2008, the assessee relied upon the judgments of Sterling Foods (237 ITR 579) and Pandian Chemicals Ltd. (262 ITR 278) delivered by the Hon'ble Supreme Court. It was argued that the HO expenses did not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses to 100% export oriented unit and; ii) by Rs. 32, 289/- on account of allocation of expenses of another division namely, Global Export & Marketing to 100% export oriented unit and iii) by Rs. 25, 943/- on account of interest income earned by 100% export oriented unit; and the CIT(A) has erred in confirming the above disallowance. The learned AO be directed to increase the exemption u/s. 10B and reduce the total income and reduce the book profit u/s. 115JB accordingly. " 20. We find that an identical issue has been considered by the Tribunal in the case of Grasim Industries in ITA Nos. 5630/M/02 & 1865/M/03. The Tribunal in the case of Procter & Gamble Hygiene & Health Care Ltd. in ITA Nos. 1499/M/05 and 1500/M/05 have again considered a similar issue at para-54 of its order directed the AO not to reduce the claim of deduction u/s. 80IB of the Act by allocating Head Office expenses to profits derived from eligible units. Respectfully following the decision of the Tribunal mentioned hereinabove, we direct the AO not to reduce the claim of deduction by allocating Head office expenses, expenses of Rayon Division and interest income. Ground No. 9 is allowed. " Respectfull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of ESPO in favour of the assessee in following manner. 11. 3 We, therefore, sum up the position that the discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w. r. t. the market price of shares at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/ lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act. The question before the special bench is thus answered in affirmative by holding that discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head 'Profits and gains of business or profession'. Following the above decision of the Special Bench, we decide ground no. 6 in favour of the assessee. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraphs 9. to 9. 3 dealing with the issue and same read as under: "9. Ground No. 10 is with regard to sale of certified emission reduction (CER) Rs. 6, 95, 29, 718/- treated as revenue receipts and liable to tax and to treat the same as capital receipt not chargeable to tax. 9. 1. During the assessment proceedings vide its letter dt. 25. 3. 2009 the assessee submitted it had received Rs. 6. 95crores on sale of CER, that out of abundant caution it had offered the amount as taxable income, that the amount in question was in the nature of capital receipt and was not liable to tax. The AO rejecting the claim of the assessee held that CER was generated in the process of business, that it was not a capital receipt, that same was liable to tax. 9. 2. During the appellate proceedings before the FAA, the assessee contended that CER were a type of emission unit issued by the clean development mechanism executive board for emission reduction, that carbon credit was generated by using advanced technology that reduced the carbon emission in environment, that the income was generated by the co. by selling the points in the market, that it was capital receipt and was not chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for 95-96 the Tribunal had dealt with the sales tax/Vat subsidy. It had no occasion to deal with the interest subsidy received under the TUFS. We find that neither the AO nor the FAA had any occasion to decide the nature of the interest subsidy of TUFS while passing the assessment order or deciding the appeal for the year under consideration. We are of the opinion that in the interest of justice the matter should be restored back to the File of FAA for fresh adjudication . The FAA will afford a reasonable opportunity of hearing to the assessee. " Following the above, third additional ground is restored back to the file of FAA for fresh adjudication. CO/96/Mum/13 14. First ground in the CO is about deletion of Rs. 12. 40 crores under the head modvat credit and Ground No. 2 is about expenditure with regard to catalyst . We have, while dealing with the appeal of the AO, decided the issue against the AO and in favour of the assessee. Therefore, both the grounds are allowed for statistical purposes. As a result, appeal filed by the AO stands dismissed. Appeal of the assessee is partly allowed. CO of the assessee is allowed for statistical purposes. Order pronounced in the open c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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