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TMI Blog2020 (2) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... osition as it emanates from the order of AO and the CIT(Appeals) is that the assessee did not file a copy of the scheme under which subsidy was received by assessee. In the absence of details of the scheme, it is not possible to decide the question, whether the subsidy is capital or revenue in nature. Since the burden was on the assessee to show that the subsidy received was capital receipt not chargeable to tax and since the assessee failed to do so, we uphold the order of CIT(Appeals) on this issue and dismiss grounds 4 5. Rejection of the claim of assessee for grant of weighted deduction u/s. 35(2AB) - HELD THAT:- As we have already mentioned that the approval for grant of recognition to the prescribed authority was made by the assessee only on 12.5.2011 and not at any time during the relevant previous year. We are of the view that the order of CIT(Appeals) should be upheld on this basis. We may also mention a similar claim has been made by the assessee in AY 2011- 12 which is also being decided in this common order and in that year the assessee would be entitled to the benefit of deduction u/s. 35(2AB) as the approval was received on 12.5.2011 during the previous year re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise - HELD THAT:- Special Bench of ITAT Kolkata in the case of Instrumentariam Corporation Ltd. v. ADIT (IT) [ 2016 (7) TMI 760 - ITAT KOLKATA] held that interest-free loans are subject to the provisions of section 92 of the Act and the ALP of such transaction have to be determined. We are of the view that the conclusion of the CIT(Appeals) that the provisions of section 92 of the Act were not attracted, cannot be sustained. We, however, remand the question of determination of ALP to the AO/TPO, who shall in accordance with the provisions of section 92 refer the question of determination of ALP interest to the TPO, only with regard to rate of interest to be adopted in adopted in determining the ALP of the interest payment. Claim for deduction u/s. 10B - HELD THAT:- Assessee s declaration for opting out of provisions of section 10B for AYs 2008-09, 2009-10 2010-11 was not mentioned in Form 3CD filed before the AO. In our view, this is purely a technical objection. The Assessee has given declaration opting out of the provisions of Sec.10B of the Act for the relevant AYs and copies of those declarations are placed relating to appeal for AY 2011-12. Once the assessee opts out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is aspect. The grievance projected by the Assessee in grounds 2 3 before the Tribunal is that since the assessee had filed a second revised return on 28.2.2012, the AO ought to have issued a notice u/s. 143(2) of the Act on this revised return of income and failure to do so renders the order of assessment invalid. In this regard, the ld. counsel for the assessee placed reliance on the decision of ITAT Bangalore Bench in the case of DCIT v. IDEB Buildcon P. Ltd., ITA No.317/Bang/2013 for the AY 2009-10 , order dated 18.7.2014. In the aforesaid decision, the AO did not take cognizance of return of income and proceeded to frame assessment on the basis of original return. The Tribunal held that since the revised return was filed within time, the AO ought not to have framed the assessment with reference to original return of income. This order of Tribunal was taken in appeal by the revenue to the High Court in ITA No.507/2014, but the Hon ble Karnataka High Court vide order dated 2.2.2016 dismissed the appeal at the admission stage. The ld. counsel for the assessee placing reliance on the aforesaid decision submitted that the 2nd revised return was filed on 28.2.2012 and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. In the absence of details of the scheme, it is not possible to decide the question, whether the subsidy is capital or revenue in nature. Since the burden was on the assessee to show that the subsidy received was capital receipt not chargeable to tax and since the assessee failed to do so, we uphold the order of CIT(Appeals) on this issue and dismiss grounds 4 5. 7. Grounds 6 to 10 raised by assessee are with regard to rejection of the claim of assessee for grant of weighted deduction u/s. 35(2AB) of the Act. The admitted position u/s. 35(2AB) of the Act is that approval of prescribed authority on the scientific research on in house R D facility is required to be obtained. It is also the admitted position that the assessee obtained the approval from the prescribed authority w.e.f. 1.4.2011. The assessee had made application to the prescribed authority for grant of approval on 12.5.2011 and the date of approval of the scientific research by the prescribed authority was 7.12.2011. It was the case of AO that since in the previous year relevant to AY 2010-11, the assessee had not even made application for grant of approval to the prescribed authority and since the approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi High Court in the case of CIT v. Sandan Vikas (India) Pvt. Ltd., 335 ITR 117 (Del) laying down identical proposition and also on the decision of the Hon ble Gujarat High Court in the case of Banco Products (I) Ltd., 405 ITR 318 (Guj) . 10. We have perused the aforesaid decisions and we find that in the case of Claris Lifesciences (supra) , weighted deduction was claimed by the assessee in AY 2001-02 and the approval was received in that year itself. Similarly in the case of Sandan Vikas (India) Pvt. Ltd. (supra) , weighted deduction was claimed in AY 2005-06 and the application was filed by the assessee company on 10.1.2005 i.e., during the relevant previous year. In the case of Banco Products (I) Ltd. (supra) , weighted deduction was claimed for AY 2008-09 and application to the prescribed authority was made on 22.12.2006, much prior to the previous year relevant to AY 2008- 09. It was in those circumstances that that the High Court took the view that the date of recognition or date of approval is irrelevant, but the existence of recognition or approval is sufficient to grant deduction u/s. 35(2AB). In our view, the ratio laid down in the aforesaid decision cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act was to be allowed. 14. On appeal by the assessee, the CIT(Appeals) deleted the addition made by the AO, by following the decision of his predecessor CIT(Appeals) on a similar allocation of expense in AY 2008-09 2009-10, wherein the CIT(Appeals) held that the allocation of expenses was uncalled for because there was an operating maintenance contract with a person who supplied and installed windmill and therefore there was no personnel of the assessee used for the purpose of running the windmill. Similarly, it was also factually found that no loans were availed for installation of windmills which were outstanding during the previous year and therefore there was no reason why finance charges should be allocated. The CIT(Appeals) also found that the department did not dispute the order of CIT(A) for AY 2008-09 and 2009-10 and therefore those issues attained finality. The CIT(Appeals) therefore held that allocation of expenses for windmill unit was uncalled for. Aggrieved by the order of CIT(Appeals), the revenue has raised ground No.1 before the Tribunal. 15. The only point urged by the revenue in ground No.1 is that the assessee had not maintained separate books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the foundation, civil and electrical works are necessary for installation of wind-mill and is part and parcel of the wind-mill project which is eligible for depreciation at the rate of 80%. While allowing the claim of higher depreciation CIT (A) has followed the decision of Ahmedabad bench of this Tribunal in the case of ACIT v. Parry Engineering [ITA No.3317/Ahd/2011]. 13. Before us Ld. DR has submitted that roads are not part of wind-mills and therefore, not eligible for higher depreciation. In support of his contention he has relied upon the decision dt.29.05.2013 of Pune Benches of this Tribunal in the case of Rajmal Lakhichand Jewellers P. Ltd v. DCIT in ITA.319 to 322 /Pune/2012, dt.29.05.2013, and submitted that the Tribunal has held that depreciation on approach road is allowable only at the rate of 10%. 14. On the other hand, Ld. AR has submitted that Chennai Bench of this Tribunal vide order dt.24.07.2012 in the case of DCIT v. Madras Cement Ltd, [ITA Nos.1391, 1392 1655/Mds/2011, has held that approach roads are an integral part of the wind-mills and therefore it is entitled for higher rate of depreciation. He has also relied upon the decision dt.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee claimed deduction u/s.80IA of the Act, in respect of profits derived from three units to the extent of ₹ 1,63,33,926/- and the assessee has not exercised its option to claim deduction in respect of fourth unit. In the statement of computation of deduction of ₹ 1,63,33,926 assessee has deducted the depreciation of the current year as well as other charges from the gross receipts of each unit and arrived at net profit which is eligible for deduction u/s.80IA of the Act. AO was of the view that the computation of deduction u/s.80IA of the Act, has to be done on the profit after adjustment of the brought forward losses and unabsorbed depreciation of the earlier years. Accordingly, AO recomputed eligible profit of the assessee after adjustment of the brought forward losses and unabsorbed depreciation of the earlier years and arrived at a negative profit. Consequently the AO denied the deduction u/s.80IA of the Act. 5. On appeal, CIT (A) has allowed the claim of the assessee by following the decision of this Tribunal dt.21.05.2010 in the case of Swarnagiri Wire Insulations p. Ltd, v. ITO in ITA No.200/Bang/2010, dt.21.05.2010. 6. Before us, Ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to claim deduction under Section 80 IA of the Act, deduction to that extent only can be allowed. In other words, the Assessing Officer held that for the purpose of arriving at the profits from the assessee's wind mill, the brought forward depreciation and business losses are to be taken into account and after set off of the same against the income from wind mill, if there-remains any positive income, the claim of deduction under Section 80 IA of the Act to that extent only will be available. 6.3.2 As contended by the learned Authorised Representative, we find that the solitary issue in these four appeals of the allowability of the assessee's claim for deduction under Section 80-IA of the Act: is covered by the decision of the co-ordinate bench of this Tribunal in the case of Anil H Lad (supra) which was confirmed by the Hon ble High Court of Karnataka in the case reported in 225 Taxman 170. The Hon'ble High Court in the case of Anil H Lad (supra) at para 10 thereof has held as under :- 10. Therefore, keeping in mind the object with which these provisions are introduced, it is clear that an assessee is given the benefit of 100% deduction of the profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional High Court in the case of Anil H. Lad (supra) and by following the said judgment of Hon'ble jurisdictional High Court. the Tribunal has decided this issue in favour of the assessee by holding that the depreciation and losses of the earlier year even in respect of the eligible business (the wind-mill) has already been set off against other business income of those assessment years, there is no need for notionally carrying forward and set off of the same for computing the quantum of deduction u/s.80IA of the Act. Respectfully following the judgment of Hon'ble jurisdictional High Court as well as the coordinate bench of this Tribunal in principle, we concur with the view of the CIT (A) on this issue subject to verification of the fact that the losses and depreciation of the earlier years has already been set off against the other business income of those assessment years. AO is direct to verify the same and give effect to the findings on this issue. 21. In view of the above, we find no merit in ground No.6 raised by the revenue. 22. Ground No.7 reads as follows:- 7. The Ld. CIT(A) erred in deleting the addition made towards notional interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that of subsidiary Company (ZHL) is in the nature of International Transaction and he further held that Commercial Principles are to be applied to evaluate the International Transaction. The AO further held that International lending rate of LIBOR has to be considered while determining the Arm's Length Interest rate. The AO again held that the decision rendered in the case of SA Builders (supra) would not be relevant in taxing notional interest which involves application of Chapter-X dealing with Transfer Pricing provisions. The AO did not accept the Assessee's contention that the Associated Enterprise was in a start-up phase and the Assessee had to finance them as no one would have given loan. The contention of the Assessee that the advancement of fund to the subsidiary in turn to the step-down subsidiary was for the purpose of investment as Quasi-Equity was not accepted to the AO who rejected the theory that the advances were made out of Commercial Expediency. Accordingly, the AO adopted the LIBOR rate at 6% relevant for the AY 2008-09 plus mark up of 1% for other profit elements and computed the interest thar was chargeable on their advances made to the Subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid order of the CIT(Appeals), the revenue has raised ground No.7 before the Tribunal. 28. The ld. counsel for the assessee relied on the order of CIT(Appeals) and the ld. DR relied on the stand of the revenue as reflected in the ground of appeal before the Tribunal. 29. We have given a careful consideration to the rival submissions. At the time of hearing, it was brought to our notice that the Special Bench of ITAT Kolkata in the case of Instrumentariam Corporation Ltd. v. ADIT (IT) in ITA No.1548 1549/2009 dated 15.7.2016 held that interest-free loans are subject to the provisions of section 92 of the Act and the ALP of such transaction have to be determined. In view of the aforesaid decision, we are of the view that the conclusion of the CIT(Appeals) that the provisions of section 92 of the Act were not attracted, cannot be sustained. We, however, remand the question of determination of ALP to the AO/TPO, who shall in accordance with the provisions of section 92 refer the question of determination of ALP interest to the TPO, only with regard to rate of interest to be adopted in adopted in determining the ALP of the interest payment. This ground is acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext and that there is no dispute with regard to the issue that the cost of roads is to be capitalized but that the dispute is regarding the block under which it has to be capitalized. 3. Ld. CIT(A) ought to have appreciated that when different percentages are provided for different blocks of assets by law, they cannot be clubbed for the simple reason that a consolidated invoice was received for erection and commissioning cost. 4. The Ld. CIT(A) ought to have appreciated that the decision of ITAT, Ahmedabad in the case of ACIT (OSD) Vs. Parry Engineering Electronics Pvt. Ltd. is only with regard to civil work and foundation for installing the windmill and not relating to approach roads. 5. The Ld. CIT(A) ought to have appreciated that the AO has rightly brought forward (notionally) the losses of the earlier years in respect of the eligible business to set it off against the income of the current year in terms of the provisions of Section 80IA(5). 6. The Ld. CIT(A) ought to have appreciated that the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Anil H. Lad [2014] 45 taxmann.com 98 (Karnataka) relied upon by the assessee has not become fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed losses/unabsorbed depreciation for the A.Yrs. 2008-09 2009-10 and these losses have been adjusted against the profit of the non-eligible unit even though the assessee is not entitled to make such adjustments. By making the adjustments, the assessee company has reduced the profit to the extent of ₹ 3,80,21,039/- for the A.Y. 2008-09 and ₹ 27,44,49,575/- for the A.Y. 2009-10. With regard to the deduction claimed under s. 10B of the Income Tax Act for the A.Y. 2011-12, it is noticed that the assessee had filed only one Profit Loss Account wherein the net profit was shown at ₹ 65,83,64,069/-. In the computation statement, the assessee claimed deduction u/s. 10B amounting to ₹ 18,95,68,278/- As per the provisions of section 10B (8) of the I. T. Act, where the assessee before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment year. However, it is noticed that the assessee has not furnished an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,278/- is disallowed and added to the income returned. 41. Before CIT(A) it was argued by the Assessee that the provisions of section 10B are in the nature of deduction and not in the nature of exemption. The provisions of section 10B(6) of the Income Tax Act were amended vide the Finance Act, 2003 (FA, 2003) w.r.e.f. 1st April, 2001 to permit the losses earned it an Eligible Unit during the period after 1st April, 2001 and before the last year in which the tax incentive to be carry forward and set off against the profits earned from the business after the tax holiday period. This amendment clearly brings out the intention behind the amendment to section 10B vide Finance Act, 2000 that the incentive prior to 01.04.2001 was in the nature of an exemption and post the same it has been classified as a deduction. Section 10B is an optional section and is applicable when all the provisions of section 10B are complied with in toto. The company has not opted for application of section 10B(6) of the Act for the AYs 2008-09, 2009-10 and 2010-11 as it has not filed Audit Report as prescribed under section 10B(5) of the Income Tax Act. Section 10B(8) clearly states that the provisi ..... 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