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TMI Blog2021 (2) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as 'Income from other sources - we are of the considered view that the disallowance made while computing the deduction allowable u/s 80-IA of the Act is not justified. MAT Computation u/s 115JB - unascertained liability - interest to beneficiary states, which may have to be paid in case of reduction in tariff as a result of revision order - HELD THAT:- As relying on own case [ 2018 (3) TMI 1589 - PUNJAB AND HARYANA HIGH COURT ] we hold that the AO was not justified and in not allowing the claim as unascertained liability. We therefore, direct the AO to treat the amount as ascertained liability for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in not allowing deduction amounting to ₹ 6,45,37,576/- claimed by the assessee under Section 80-IA of the Act. (ii) That the above said disallowance of deduction has been confirmed despite the fact that the said income is directly relatable to the business of the assessee. (iii) Without prejudice to the above and in the alternative, the learned CIT(A) has erred both on facts and in law in ignoring settled position of law that in case said income is held not to be eligible for deduction under Section 80-IA, corresponding relief on account of expenses related to said incomes may also be given. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of ₹ 14,34,00,000/- on account of provision of interest to beneficiaries states due to reduction in Tariff as a result of CERC order while computing regular income of the assessee. (ii) That the said addition has been confirmed rejecting the contention of the assessee that the said liability is an ascertained liability and not a contingent liability and hence an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not from other income . The assessee was accordingly showcaused to explain as to how the income earned under the head Other Income was eligible for deduction u/s 80-IA of the Act. The assessee made the submissions which are noted by the AO in the assessment order but he was not satisfied with the explanations. AO noted that the income shown under the head Others aggregating to ₹ 6,45,37,576/- [comprising of ₹ 96,40,329/- from Chamera-II, 96,71,102/- from Dhauliganga, ₹ 33,00,795/- from Rangit and ₹ 4,19,25,350/- from Dulhasti]. He therefore, held that the aforesaid aggregate amount of ₹ 6,45,37,576/- to be not eligible for deduction u/s 80-IA and accordingly denied the claim of deduction. 10. Aggrieved by the order of AO, assessee carried the matter before the CIT(A). CIT(A) following his own order for A.Ys. 2010-11 to 2012-13 dismissed the grounds of appeal and upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 11. Before us, Learned AR pointed to the project-wise recovery of expenses other income earned by the assessee and the details which are also listed at Page 430 of the Paper Book which are as under: Details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR in the case of National Fertilizers Limited 193 CTR 498(AAR) held that the expenses incurred to earn these other incomes should be excluded from the debit side of the profit and loss account for computing the deduction u/s 80-I of the Act. The relevant extract of the judgment is as below: (2)question No. 2 in AAR/532/2001 that the expenses of ₹ 2,76,03,364 and ₹ 12,12,74,426 (it is stated that the correct figure is ₹ 11,02,56,561) allocated by marketing office and corporate office and interest expenditure of ₹ 71,65,99,045 allocated by the corporate office and on question No. 2 in AAR/533/2001 that expenses of ₹ 2,56,44,186 and of ₹ 12,94,59,292 allocated by corporate office and marketing office and interest expenditure of ₹ 8,49,30,952 allocated by corporate office should be excluded from the debit side of the profit and loss account of the industrial undertaking for the purpose of deduction under section 80-I of the Income-tax Act, 1961; the fact that the allocated interest income from corporate office ₹ 5,22,94,939 and ₹ 3,97,44,811 credited to profit and loss account of Vijaipur unit in the assessment years 1995-96 and 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m any business referred to in sub-section (4) whereas in Section 80-IA (2A) what is available for deduction is hundred percent of the profits and gains of the eligible business . The following conclusion reached by the ITAT in para 13.11 of the impugned order correctly encapsulates the legal position as far as the interpretation of Section 801A (2A) is concerned. 13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/enterprise 'who fall under subsection (2A) to claim 100% deduction of profits and gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a basic fallacy resulting in an error in law and on facts. The Tribunal instead of recording findings on facts proceeded to discuss law. This litigation could have been avoided if the parties had invited attention to basic facts. 28. Neither the approach nor the reasons advanced by the Tribunal deserve acceptance. It is an incorrect proposition to state that interest paid by the debtors for late payment of the sale proceeds would not form part of the eligible income for the purpose of computing relief under s. 80-I of the Act. The reliance on the general meaning of the term interest as well as drawing distinction between the source of sale proceeds and the source of interest is erroneous in law in the case of CIT vs. Govinda Choudhury Sons (supra) the apex Court was called upon to decide as to the nature of interest received by the assessee therein. In the case before the apex Court the assessee who was executing Government contracts found itself involved in disputes with the State Government with regard to the payments due under the contracts and upon reference to arbitrators, the award included the principal sum as well as the interest for delay in payment of the principal sum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO and confirmed by the ld. CIT (A) to the tune of ₹ 2,99,54,875/- while computing the deduction allowable u/s 80IA is not sustainable and all the items of income qua which deduction has been sought by the assessee u/s 80IA are allowable deduction and order passed by the AO and ld. CIT (A) is not sustainable. So, the order passed by the lower authorities is set side directing the AO to recompute the deduction allowable to the assessee u/s 80IA without excluding amount of ₹ 2,99,54,875/- disallowed by the AO. Consequently, ground no.2 is determined in favour of the assessee. 15. Before us, Revenue has not pointed to any contrary binding decision in its support nor has placed any material on record to demonstrate that the aforesaid decision of Delhi Tribunal for A.Y. 2010-11 2011-12 in assessee s own case has been set aside, stayed or overruled by higher judicial forum. In view of these facts and following the order of the Co-ordinate Bench of Tribunal and for similar reasons, we allow the ground of appeal of the assessee. 16. Ground No.3 4 are interconnected and are with respect to confirming the addition of ₹ 14.34 crores. 17. AO noticed that an amount of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials on record. The issue in the present ground is with respect to the disallowing the claim of ₹ 14.34 crores by treating the amount as an unascertained liability. We find that identical issue arose in assessee s own case in A.Y. 2006-07 and it was decided in assessee s favour by Hon ble Punjab and Haryana High Court. The relevant substantial question of law before the Hon ble High Court and the observation reads as under: 3. Whether, on the facts and in circumstances of the case in law, the Hon ble ITAT was right in law in confirming the order of Ld. CIT(A) in deleting the addition of ₹ 51,80,00,000/- made by AO in normal income as well as book profit computed u/s 115JB on account of tariff adjustments being unascertained liability? 4. Whether, on the facts and in circumstances of the case and in law, the Hon ble ITAT was right in law in holding that the contention of the AO that this liability has not crystallized is also not correct and the AO has not appreciated the facts in the right perspective disregarding the fact that later on, the CERC actually approved the tariff rates which were different from the rates proposed by the assessee and quantification of adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contingent upon the order of the CERC. The Assessing Officer held:- The CERC may have kept the tariff at the same level or have reduced by a factor which is not certain on the date of provisioning and therefore, the liability cannot be ascertained. Accordingly, the Assessing Officer added back ₹ 51.80 crores to the book profit for the purpose of computing the minimum alternate tax under section 115JB. .. 8. The question of law that arises is whether the tariff charged by the assessee from 01-04-2005 and till the final order of the CERC is contingent and cannot be said to have crystallized or attained certainty and is, therefore, liable to be added back to the assessee s income. 9. As we noted earlier, the assessee is not entitled to fix the tariff. It is the CERC which fixes the tariff, albeit upon the assessee's application. Upon completion of the period for which tariff is fixed the assessee is bound to make an application to the CERC for fixing the future tariff. This application is made after the completion of the earlier period for which the tariff is fixed. There is, therefore, a time-lag between the expiry of the period for which the tariff is fixed and the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall have to be discharged is not certain. 5. In Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC) the appellant Company estimated its liability under two gratuity schemes framed by the Company and the amount of liability was deducted from the gross receipts in the P L account. The Company had worked out on an actuarial valuation its estimated liability and made provision for such liability not all at once but spread over a number of years. The practice followed by the Company was that every year the Company worked out the additional liability incurred by it on the employees putting in every additional year of service. The gratuity was payable on the termination of an employee's service either due to retirement, death or termination of service - the exact time of occurrence of the latter two events being not determinable with exactitude beforehand. A few principles were laid down by this Court, the relevant of which for our purpose are extracted and reproduced as under: (i) for an assessee maintaining his accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a rate lower than that sought by the assessee. The difficulty in estimating does not convert the accrued liability into a conditional one as held by the Supreme Court. Further, as held by the Supreme Court, it is upon the tax authorities to arrive at a proper estimate of the liability having regard to all the circumstances of the case. However, it is not suggested that the liability was not properly estimated. 12. The Delhi High Court dealt with a similar question in NTPC Ltd. v. CIT, [2014] 45 taxmann.com 527/224 Taxman 234 (Mag,) Delhi High Court. We were informed that the nature of the NTPC activities in business and the manner in which it fixes the tariff are the same. The Division Bench of the Delhi High Court held:- 21. There is authority, in the form of Supreme Court judgments in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585, Bharat Earth Movers Ltd. v. CIT [2000] 245 ITR 428 and Metal Box Company of India Ltd. v. Their Workmen, (1969) 73 ITR 53, that a provision made on a reasonable basis, it would be in the nature of an ascertained liability and that in a mercantile system of accounting, provision for liability ascertained during the course of the relevant accounting p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... squarely covered by earlier year orders. He accordingly following the order for earlier years, directed the deletion of addition made by the AO. Aggrieved by the order of CIT(A), Revenue is now before us. 27. Before us, Learned DR supported the order of AO. 28. Learned AR on the other hand reiterated the submissions made before the AO and CIT(A) and further submitted that AO had merely made the impugned addition by stating that the provisions of section 14A are automatic and there is always a portion of interest expenditure which is attributable to earning exempt income. He further submitted that AO had not recorded any satisfaction to disbelief the submission of assessee that no expenditure has been incurred by assessee to earn the exempt income. He submitted that it is a settled law that the AO has to first examine the records of the assessee, and only after arriving at the dissatisfaction as to the correctness of the claim of assessee in respect of expenditure incurred in relation to exempt income, can resort to the provisions of section 14A read with Rule 8D. He further submitted that the investments made by the assessee have been either out of its own funds or out of the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14A of the Act read with Rule 8D of the Rules and without having regard to the accounts of the assessee, learned Assessing Officer straightaway proceeded under section 14A of the Act read with Rule 8D of the Rules, without recording any reason for not agreeing with the assessee not making any disallowance in this regard. 9. When the assessee received tax-free investment income on bonds/LTA which was in lieu of long overdue is receivable on account of sales made to the parties and pursuant to the drive-by trade agreement between the assessee, state electricity boards and reserve bank of India the assessee acquired the bonds to ensure timely payment of the warrant use and the investment in NHDC a subsidiary of the assessee, for out of the equity capital and internal accruals/equity/reserves the investment was made, it was necessary for the learned Assessing Officer to record as to why he reached a conclusion that the assessee must have incurred some expenditure that too having regard to the accounts of the assessee. Law laid down by the Hon'ble Delhi High Court on this aspect in the decisions relied upon by the assessee is clear that is only after arriving at the dissatisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue is dismissed. 31. Ground No.2 is with respect to the direction of CIT(A) in deleting the disallowance of ₹ 4.07 crores while computing the book-profit in respect of depreciation claimed on amortization of land. 32. AO noticed that assessee had claimed an amount of ₹ 13,41,80,668/- on account of depreciation on land being unclassified and Leasehold land and of which assessee had debited of ₹ 4,07,79,845/- to the Profit and Loss account and the balance amount of ₹ 9,34,00,823/- was added to the cost of capital work in progress. He further noticed that assessee had added back the amount debited to the Profit and Loss account in the computation of normal income but the same was not added for treatment under MAT. The assessee was therefore asked to explain as to why the amount of ₹ 4.07 crores debited to the Profit and Loss account not be added back to work out the book profit, to which assessee made the submission which was not found acceptable to AO. He accordingly proceeded to disallow ₹ 4.07 crores debited to the Profit and Loss account and added back to the profit to work out the book profits. 33. Aggrieved by the order of AO, assessee carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act and as such amortisation is permissible under section 115 JB of the Act as the same is in accordance with the provisions of Companies Act. Further it is submitted that this issue has been covered by the addition of the Hon'ble Punjab and Haryana High Court in assessee's own case for the Assessment Year: 2006-07 and followed by the Tribunal in assessee's own case for the earlier and subsequent years. 18. We have gone through the record in the light of the submissions made on either side. The submissions made before us could not be contradicted by the Revenue and more particularly the fact that this issue has been covered by the addition of the Hon'ble Punjab and Haryana High Court in assessee's own case for the Assessment Year: 2006-07 in ITA No. 136/2015 by order dated 28/02/2018. Further it is also not in dispute that a view in consonance with the decision of the Hon'ble High Court has been taken by the Tribunal for the Assessment Years: 2004-05 to 2011- 12. In the circumstances since it is an issue covered by the decision of the Hon'ble High Court and also the Tribunal for earlier years, respectfully following the same we uphold the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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