9911796707
TMI Blog2021 (2) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2013-14 are reproduced as under:- Assessee's Appeal Disallowance of 'other income' under Section 80IA The Learned AO and CIT(A) erred in disallowing amount to the tune of Rs. 27,80,384 under Section 80IA the following income classified as 'other income' without appreciating the fact that there is first degree nexus with the business of the assessee II. The Learned AO and CIT(A) failed to appreciate the fact that the decision of Hon'ble Apex Court in the case of M/s Liberty India (317 ITR 218) is not applicable to the facts of the present case. III. Without prejudice to the above, the Learned CIT(A) erred in estimating only 10% of 'other income' as expenses incurred in relation to earning of the 'other income' and 90% thereof as profit element therein not eligible for deduction without any nexus to any material or evidence. Disallowance of expenses under Section 14A IV. The Learned AO and CIT(A) erred in remanding the issue of applicability of Section 14A for fresh consideration by the Learned AO without appreciating that during the Assessment year 2004-05, the power bills due and surcharge dues from EB's has been converted into 8.5% Tax free SLR Power bonds iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant is entitled to deduction on account of any debt written off as irrecoverable in the books of account as can be inferred from the decision of Hon'ble Apex Court in the case of TRF Ltd. v CIT [(2010) 323 ITR 397 (SC)] and the accounting and tax treatment of the Appellant in not recognizing the revenue is equivalent to the accounting and tax treatment of recognizing the revenue and simultaneously writing off the same as bad debt. Thus, in view of the settled law [CIT v. Sarkar Builders (2015) 375 hR 392 (SC)] that an assessee should not be prejudiced by the differences in accounting treatment adopted by him, the Hon'ble ITAT ought to have accepted the plea of the Appellant. XIV The Appellant craves leave to alter, modify, add any additional grounds of appeal during the course of the proceedings. Revenues Appeal 1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2. The learned CIT(A) has erred in deleting the disallowance made u/s 801A in respect of TPS-l expansion unit by placing reliance on its ITAT order in the assessee's own case for the AY 2001-02 and 2008- 09 to 2010-li. 3. The learned CIT(A) has erred in allowing the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/2011 and 2077/Mds/2013. But, the issue of surcharge received from Electricity Board has come up for consideration for the first time and hence it cannot be said that the issue if fully covered against the assessee. The AR further submitted that interest from EB's represents interest for delayed payment of receivables which is having a first degree nexus with main business activity of the assessee. Therefore, it forms part of income from operations eligible for deduction under the Act. The ld.AR further submitted that one more item of income came up for the first time for consideration is interest from contractors pertains to amount received from contractors for non-compliance with terms of agreement. The agreement between the parties is with regard to generation of electricity which is the main business activity carried out by the assessee for the impugned assessment years and hence forms a direct nexus to the main business activity of the assessee i.e., generation and distribution of power. Therefore the AO as well as the ld.CIT(A) were erred in excluding other income, more particularly surcharge received from Electricity Boards and interest from others while computing deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion are similar to the facts considered by the Tribunal for earlier years except to the extent of two new items of income being surcharge from electricity boards and interest from others [interest received from Fenner India Limited as per terms of agreement]. Therefore, we are of the considered view that the assessee is not entitled for deduction towards eligible profit u/s.80IA of the Act in respect of other income because said income does not have first degree nexus with the main business activity of the assessee. In so far as surcharge from Electricity Boards, the issue has came up for discussion for the first time in the impugned assessment year and hence, needs to be considered in light of arguments advanced by the assessee that it has first degree nexus with business of generation and distribution of power. We have examined the claim of the assessee in light of proviso to Regulation 5(3) of Central Electricity Regulatory [terms and conditions of tariff] Regulations 2009 and find that although the assessee claims that it has received surcharge from Electricity Boards for delayed payment of receivables in respect of supply of electricity, but in principle said payment represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. We further note that a similar issue has been considered by the Co-ordinate Bench of the Tribunal in assessee's own case for assessment year 2012-13 in ITA No.2200/Mds/2016, where under identical set of facts the Tribunal has upheld re-computation of eligible deduction u/s.80IA of the Act, however accepted the plea of the assessee for deduction of 10% expenses towards other income while computing the deduction. The relevant findings of the order of the Tribunal are as under:- "6.3 We have considered the rival submissions. On perusal of the Assessment Order and also the order of the Co-ordinate Bench of this Tribunal in the assessee's own case referred to supra clearly shows that the issues in regard to the handling charges, interest received from employees and miscellaneous income has been held to be not interlinked with industrial activity of power generation and therefore in view of the decision of the Hon'ble Supreme Court in the case of M/s.Liberty India Ltd. Vs. CIT referred to supra, as the same did not have a direct link with the business of power generation, the deduction u/s.80IA of the Act on the said incomes were excluded. However, in Para No.10 of the Order the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the Tribunal after considering relevant facts and also following its earlier order has set aside the issue to the file of the AO and directed him to re-adjudicate the issue in accordance with law. The relevant findings of the Tribunal are as under:- 6.5 We have considered the rival submissions. As the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 referred to supra wherein the Co-ordinate Bench of this Tribunal following the decision in the assessee's own case in ITA Nos.712 & 713/Mds/2010 dated 11.04.2013 wherein it has been held as follows: 13. We have perused the orders and heard the rival submissions. Insofar as ground of the Revenue that ld. CIT(Appeals) had not considered the decision of Special Bench of this Tribunal in the case of Daga Capital Management (P) Ltd. (supra), we find that this decision, insofar as it relates to applicability of Rule 8D for years prior to assessment year 2008-09, stands reversed by Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd vs. Dy. CIT (328 ITR 81). Hon'ble Bombay High Court clearly held in the said decision that Rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red Accountants of India and argued that where the ability to assess the ultimate collection with reasonable certainty is lagging at the time of raising any claim, revenue recognition is postponed to the extent of uncertainty. Since there is no certainty of realization of surcharge from Electricity Boards, the assessee has postponed recognition of income even though said surcharge has been accounted in the books of accounts of the assessee on accrual basis. The assessee has taken support from the decision of Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd., vs. CIT, 225 ITR 746 and argued that in the event of uncertainty of realization of income, the same even though accrued in the accounts, deserves to be excluded for the purpose of computation of taxable income. The assessee has taken support from the decision of the Hon'ble Supreme Court in the case of CIT vs. Excel Industries Limited, (2013) 39 taxmann.com 100 (SC) in support of its arguments. However, fairly admitted that the issue is covered against the assessee by the decision of ITAT in assessee's own case for assessment year 2008-09 to 2010-11 in ITA Nos.1983/Mds/2011 and 2140/Mds/2013. 5.2 The ld.DR on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the material placed before us. In this case there is provision for levy of surcharge in delayed payments and the assessee has not reckoned the surcharge as income. The assessing officer has assessed the surcharge on the basis of the accounting system followed by the assessee. The tariff in respect of NLC which is central generating station is governed by the Central Electricity Regulation Commission (in short 'CERC') which is generally notifies once in three years. Accordingly, CERC has notified tariff regulations 2001 for the period 2001-04, Tariff regulations-2004 for the period 2004-09 and tariff regulations 2009 for the period of 2009-14 and presently tariff regulations 2014 is valid till 31.03.2019. In all the above notification CERC has provided late payment surcharge and the assessee has levied surcharge, but could not recover from the Electricity Boards. According to the tariff regulations of the CERC, the powers are conferred u/s.178 of Electricity Act, 2003 r.w.s.61. The CERC has to fix the tariff accordingly and the CERC notified the regulations as under: In exercise of powers conferred under section 178 of the Electricity Act * 2003 read with section 61 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of conditions, stipulations and strict guidelines to the Electricity Boards in Para No.8.3 to 8.6 from the tripartite agreement in the Assessment Order which is extracted as under: 8.3 However, the tripartite agreement also stipulates strict guidelines to the Electricity Boards for making payment of current dues, i.e., dues payable on or after 1st October 2001. For ready reference, list of such conditions and guidelines given in the tripartite agreement dated 17.04.2002 are given below. * "12. All CPSUs ( viz., assessee company and other power suppliers) will continue to raise and collect their current bills against the SEBs or their successor entities in accordance with the existing practice or such other arrangement as may be mutually determined. Notwithstanding any mutual arrangement, payment of such bills shall be made no later than 60 days from the date of billing, or within 45 days of their receipt, whichever is later. * 13.1 SEBs or their successor entities shall open and maintain irrevocable Letter of Credits (L.Cs) that are equal to 105 percent of their average monthly billing for the preceding 12 months. The amount shall be revised once in six months, based on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement, particularly in Para 14 (highlighted) it is amply clear that interest (or surcharge) becomes payable from Electricity Boards if payments due to the assessee company are not made within 60 days from the date of billing or within 45 days of receipt of bill, whichever is later. It is also provided in Para 17 of the agreement that payments that remain outstanding after 90 days from the date of billing shall be recovered, on behalf of the assessee company, by the Ministry of Finance through adjustment against releases due to the respective State Government on account of plan assistance, States' share of Central taxes and any other grant or loan. This tripartite agreement would be in force till 31.10.2006 and hence, the year under consideration is covered by this agreement. 8.5 In view of the above, it cannot be said that there is uncertainty in recovery of surcharge. Even assuming that the Electricity Boards defaults in making payments due to the assessee company, the tripartite agreement provides for recovery of the same through adjustment by Ministry of finance. Thus, there is no reason for the assessee company in not recognizing the surcharge on accrual basis. After recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easing the dues in the case of Godhra Electricity Co. Ltd. There was no tri-partite agreement, as if, in the case of the assessee to ensure recovery by Ministry of Finance through adjustment in the case of Godhra Electricity Co. Ltd.. Therefore, the case law relied upon by the assessee cannot come to help of the assessee. The tripartite agreement entered in to with the Government of India, Reserve Bank of India and the state Governments has to be given due credence and simply cannot be brushed aside. Considering all the facts and merits of the case we hold that there was no uncertainty in realizing the tariff or surcharge by the assessee company and accordingly we hold that the income is accrued and the assessing officer has rightly brought to tax. Therefore we set-aside the orders of the Ld.CIT(A) and restore the Assessment Order. 4.4 In the result, the ground of appeal raised by the Revenue on the issue of surcharge recovery from Electricity Boards is allowed for the AYs 2007-08 to 2010-11." 5.4 In this view of the matter and consistent view taken by the Tribunal in assessee's own case for earlier years, we are of the considered view that surcharge recovered from Electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds/2003. The relevant findings of the Tribunal are as under:- "5.0 For the AYs 2008-09, 2009-10 and 2010-11, the Revenue raised the grounds relating to the issue of deduction u/s.80IA. During the assessment proceedings the AO found that the assessee has claimed the deduction u/s 80IA pertaining to the Unit TPS-I expansion. AO was of the view that the Unit TPS-I was an expansion of the existing unit and hence not eligible for deduction u/s80IA.The AO disallowed the deduction holding that the expansion cannot be considered as a new unit. The disallowance made by the AO u/s.80IA for the AYs 2008-09, 2009-10 & 2010-11 is as under: Assessment year Amount in Rs. 2008-09 147,36,91,926 2009-10 209,94,46,495 2010-11 246,92,76,304 5.1 For the sake of convenience, the reasoning given by the AO is extracted from the Assessment order made available in Page No.5 of the A.Y.2008-09 as under: In the instant case also, the assessee has claimed deduction u/s 80-IA of the Income-tax Act on the profit of power generated in the TPS-l Expansion Unit by treating the same as separate unit / undertaking, even though the final product manufactured is same i.e. Power. Further, there is inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing but the expansion of the already existing TPS-l unit. He further stated that benefit of sec 80-lA shall be applicable only to the assessee who have started "new business" of generation of power and not to those expanding their business by establishing new plant and machinery and also by introducing new technology for enhancing existing productivity. But reading of the section, in my opinion, does not lead to the interpretation as expounded by the AO. Relief u/s 80-lA(1) is in respect of profits and gains derived by an undertaking from business referred to in subsection (4) of sec 80-lA. In the present case, as per clause(iv) of sub-sec (4), deduction in respect of an undertaking which is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on 31st day of March, 2011 shall be 100% of the profit for a period of ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise generates power or commences transmission or distribution of the power. Therefore, deduction is clearly fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of a wording in an Explanation to a subsection concerned only with regard to transfer of machinery previously used for any other purpose to a new business. Various Hon'ble Courts including the Hon'ble Supreme Court, on issues relating to deductions u/s. 80HH, 80I and 80J, have consistently held that expansion in production of the existing product in a geographically separate and independent undertaking will be entitled to relief under those sections. In fact, the heading of these section as well as 80-lA is "Deduction in respect of profits and gains from industrial undertakings or enterprise engaged in infrastructure development, etc.." and not "profits and gains from certain new business". In these circumstances, I am of the considered opinion that the appellant is entitled to relief under section 80-lA in respect of TPS-l Expansion. The requirement regarding investment in the plant and machinery and other conditions for availing benefit of deduction u/s.80-IA have also been satisfied and the AO has not raised any other objection regarding these conditions. In view of the above factual position and authoritative precedents, the deduction claimed by the appellant us 80-IA is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue was against the action of the Ld.CIT(A) in allowing the depreciation on UPS at 60% as against 15% allowed by the AO. It was submitted that the Ld.CIT(A) had allowed the same following decision of the Hon'ble Supreme Court in the case of CIT vs. BSES Rajdhani Power Ltd. in SLP No.1266/2010. The Ld.DR vehemently supported the order of the AO. 7.8 In reply, Ld.AR vehemently supported the order of the AO. 7.9 We have considered the rival submissions. UPS being the integral part of the computer system, admittedly, is eligible for higher rate of depreciation at 60%. It is noticed that the Ld.CIT(A) had decided the issue by following the decision of the Hon'ble Supreme Court in the case of CIT vs. BSES Rajdhani Power Ltd. referred to supra. This being so, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue. Consequently, Ground No.5 of the Revenue's appeal stands dismissed. 8.3 In this view of matter and consistent view taken by the Coordinate Bench, we are of the considered view that the ld.CIT(A) was right in deleting additions made by the AO towards disallowance of excess depreciation on UPS and hence, we are inclined to uphold the findings of CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to 10%. It was a submission that the Ld.CIT(A) had allowed the claim of the assessee by following his predecessors orders. It was fairly agreed by both the sides that this issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 referred to supra wherein Para No.2.4, the Co-ordinate Bench of this Tribunal has held that the civil structures made for drainage and water supply in the mines are to be treated as plant and entitled for higher rate of depreciation. In these circumstances, respectfully following the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case, findings of the Ld.CIT(A) stands confirmed. In the result, Ground Nos.6.1 & 6.2 of the Revenue's appeal stands dismissed. 9.3 In this view of the matter and consistent view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the findings recorded by the ld.CIT(A) in allowing relief to the assessee and hence we are inclined to uphold the findings of the ld.CIT(A) and reject the ground taken by the Revenue for both the assessment years. 10.0 The next common is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spare consumption to be treated as revenue in nature. The relevant findings of the Tribunal are as under:- "7.13 In regard to Ground No.8, it was submitted that the issue was against action of the Ld.CIT(A) in allowing the assessee's claim of treating the spares valued at more than Rs. 50.00 lakhs as Revenue expenditure instead of a capital. It was fairly agreed by both the sides that the issue was squarely covered by the decision of the Hon'ble jurisdictional High Court of Madras in the assessee's own case for the AYs 1993-94 to 1999- 2000 in [2016] 69 taxmann.com 174 Madras wherein it has been held that the said spares were to be treated as the Revenue expenditure. 7.14 We have considered the rival submissions. As it is noticed that the Ld.CIT(A) has followed the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case, which has been upheld by the Hon'ble jurisdictional High Court, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue, consequently, the findings of the Ld.CIT(A) on this issue stands confirmed. In the result, Ground No.8 of the Revenue's appeal stands dismissed." 10.3 In this view of the matter and consistent view ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
