9911796707
TMI Blog2017 (11) TMI 1971X X X X Extracts X X X X X X X X Extracts X X X X ..... ies the requirement is also to be rejected. Hence we hold that the assessee failed to substantiate his claim that Enclosing Withering Trough Machine is an energy-saving device or pollution control equipment , which is entitled to higher rate of depreciation. Just because the Assessing Officer had not disturbed this claim of the assessee in the Assessment Year 2012-12, this claim cannot be allowed. The findings in those cases are that the machines therein fall within this category. We have given a factual finding otherwise. Before us, the assessee has not advanced any arguments on its claim for allowing this expenditure as revenue expenditure. We find that this so called alternative claim is a contradictory claim. The argument is that a machine is fabricated, and it is entitled to depreciation. This means that it is capital expenditure. Just because higher rate of depreciation is not allowed on an asset, it does not lead to a conclusion that the expenditure incurred for acquiring an asset is revenue expenditure. This is an untenable claim. In the result, we uphold the findings of the Assessing Officer on this issue and reverse the order of the ld. CIT(A). Allowability of depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is mentioned in this Section. In fact such introspection would defeat the very objection of introduction of this Section.Thus, we uphold the contention of the revenue and allow this ground of the revenue. Deduction u/s. 80IE which had not been claimed in the return nor any Audit Report has been filed in that regard - HELD THAT:- FAA has not admitted this claim but has held that the assessing officer should have granted the deduction under section 80 IE equal to 100 percent of the profits of Dullabcherra Tea Estate, as the fact that the assessee is eligible for deduction under section 80 IE is not in dispute. How the ld. CIT(A) has come to a conclusion that the fact of the assessee being eligible for claim of deduction u/s 80-IE of the Act and that this fact is not in dispute is not known. There are no basic facts record and no authority has examined the facts and have come to a conclusion that the statutory requirements for claim of deduction u/s 80-IE have been complied by the assessee. In our view, this finding is perverse. The assessing officer nor the ld. CIT(A), have examined the basic facts or have come to the conclusion that the assessee is eligible for deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 3rd year has been allowed as if the entire facts have been considered in the earlier years. When no authority has verified the fact as to whether the assessee has complied with the statutory conditions laid down u/s 80IE of the Act, in any of the years, we cannot understand as to how the Assessing Officer decided to allow the claim for the first time in the 3rd year.Assessing Officer has failed to conduct a proper enquiry. CIT(A) has also failed in his duty on this issue. Thus we set aside this issue to the file of the AO, for fresh adjudication, in accordance with law. The Assessing Officer is directed to examine whether the conditions laid down u/s 80IE of the Act, have complied with by the assessee company in the Initial Year and then only come to a conclusion on this issue. We draw strength for this proposition, from the judgement of the Hon ble Delhi High Court in the case of CIT vs. Delhi Patra Prakashan Ltd[ 2013 (6) TMI 70 - DELHI HIGH COURT] . Disallowance of club expenses - HELD THAT:- What is to be seen, is as to whether these expenses are incurred for official purposes or personal purposes. If it is incurred for personal purpose, then the same has to be disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and hence there had been no genuineness of such a valuation of an intangible asset. 4. Whether on the facts and in the circumstances of the case, the Ld CIT(A) erred in allowing Assessee's contention that MAT was applicable only when there was positive income and the same was less than Book Profit." 5. The facts relating to Ground No. 1 & 2 of the revenue appeal are that the assessee claims that it is entitled to higher rate of depreciation on "Enclosed Withering Trough Machine" on the ground that this is an energy-saving device and a pollution controlling equipment. The Assessing Officer was of the view that these machines are called Withering Trough Machinery and are required in all tea making factories and are integral part of the factories. He records at page 2 of his order that the function of the withering trough machine is to pass dry air over green leaves, to dry the green leaves procured from gardens so that the moisture in the green leave could evaporate gradually. He was of the view that the "Enclosed withering Trough Machine" is not an energy saving device or a pollution control equipment. The Assessing Officer asked the assessee as to the specific item to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Calcutta High Court in case of The General Fibre Dealers P. Ltd., in which expenses for conversion of coal fired heater to oil fired heater was allowed as revenue expenditure. The AO did not consider this alternative claim. 5.1.2. The ld. First Appellate Authority, considered the submissions of the assessing and at para 4 onwards of his order held as follows:- a. That the entire process of withering is crucial to the manufacturing. b. Installation of this particular device has been remunerative and economical to the assessee and the device has been installed with the clear intention to save energy, reduce carbon emission, control effect of pollution on tea produced. c. The material figures of production appeared to justify the contention of the assessee that the "Enclosed Withering Trough Machines" is based on latest technology and it reduces energy consumption. d. That "Enclosed Withering Trough Machines" is equal to "flameless furnace" and a "flat bed dryer". e. Reliance was pleased on the decision in the case of Commissioner of Income Tax, WB-IV, KOLKATA versus MCLEOD RUSSEL (INDIA) LTD., in ITA No. 254of 2001, judgement dt. 10.02.2014 (2015) 55 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and submitted that the same cannot be applied as the judgement of the Hon'ble Jurisdictional High Court binds the ITAT Bench at Kolkata on this issue. 5.6. The ld. DR, Shri Saurabh Kumar, Additional CIT, DR, on the other hand, opposed to the contentions of the ld. Counsel for the assessee and submitted that the assessee claims to have fabricated certain covers to "Withering Trough Machines" and claimed that this is a power saving device. He argued that the so called "Enclosed Withering Trough Machines" were non-standard equipment, at best improvised and that there is no material or literature, whatsoever in the public domain, to substitute the claims of the assessee. He submitted that the ld. CIT(A), has only listed out the function of withering process in a tea industry and had simply accepted the contentions of the assessee without application of mind and without going into the merits of the case. He submitted that there is no evidence, whatsoever of the assessee having saved energy or that these enclosures having done pollution control. He pointed out that in the alternative claim; the assessee submitted that an open withering trough machine which is powered by TD Oil was conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh machines, would result in energy-saving. Only the process of withering is explained in all these materials furnished by the assessee and there is not iota of evidence that enclosing a "Withering Trough Machine" would convert it into an energy saving device. 6.2. We also observe that earlier the assessee was using TD Oil for powering this withering trough machine and by enclosing the withering trough machines, it was powered by coal in place of TD oil. Nothing is said on whether using coal as a fuel in place of TD Oil would reduce the pollution. In fact coal as a fuel is a pollutant. In view of the above discussion, we hold that by changing the fuel that is being used, from TD Oil to Coal, and by modifying the "withering trough machine" by enclosing it by fabrication, in our view does not make the machine an energysaving equipment or pollution control equipment. 6.2.1. Be it as it may, the assessee furnished the following comparison of consumption of electricity in support of its claim of saving energy. This is reproduced below for ready reference:- 6.3. A perusal of the same demonstrates that use of TD oil was reduced drastically from the year 2008-09 and dis-continued from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed into the second fluidized bed and conveyed through that bed. Each fluidized bed is controlled so that a specific heat treatment can be applied to the article by the fluidized bed. The fluidized bed can be used as a portion of an automated production line. The retort of the fluidized bed includes a system for recycling the air passed through the fluidizing media in the furnace. The recycling system includes a fan positioned above the fluidizing media in the retort, a filter for removing any fluidizing media within the recycled air, and piping for reintroducing the recycled air to the retort. The heaters are placed within the retort and include heat exchangers for heating the incoming combustion air. The heaters are rigidly attached at one end and fit within sleeves attached to another portion of the retort. The heater tubes can be replaced with refrigeration tubes or units so that articles may be quenched. A plain reading of this takes us to a conclusion that the assessee's contention is devoid of merit. 6.3.2. It is clear that "Enclosed Withering Trough Machines", is not comparable with any of the energy-saving devices listed in the New Appendix-I to the Income Tax Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company reallocated the purchase consideration between different assets it had acquired through this sale and arrived at a value of an intangible asset which it claims to have purchased and it termed it as "Goodwill" and claimed depreciation on the same. Some of the contentions of the assessee before the ld. First Appellate Authority are brought out for ready reference:- "We may mention that at the time of planning and purchase of the Dullabhcherra T. E. we were advised to allocate value towards intangible assets as valuable and useful assets. However, at that time we had to accept the allocation as made by the vendors and we could not insist because of certain prejudices of the vendor and their executives. Just to have deal carried in appellants favour promoters of appellant accepted the allocation made by vendors because otherwise appellant may have lost opportunity to purchase the T.E. Furthermore the promoters were new in the business and this was first acquisition of T.E. by the promoters. Therefore, they had to accept the dictates of the vendor about allocation of higher amount towards land and plantations. From the original grounds of appeal it is clear that proper allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of intangible assets have been rightly arrived at by the management of the company by re-allocating the costs of purchase. He vehemently contended that, this is not a case of revaluation of assets and it was only a case of proper allocation of cost to various assets purchased. At pages 59 to 68 of the paper book, he filed certain papers to explain and justify the valuation of intangible assets at ₹ 325 lakhs, by reallocating the cost of purchase of land and plantation. 7.4.1. The ld. DR, on the other hand, submitted that the registered conveyance deed dt. 06/05/2006, gave the value of each and every asset that was transferred by the vendor of "Dullabcherra Tea Estate" M/s. Gillanders Arbuthnot & Company Ltd. to the assessee company and that the assessee has artificially created an "intangible asset" so as to claim depreciation on the same when in fact what was paid was towards cost of land and plantation. He pointed out that the assessee had admitted in its written submissions that no value has been assigned to "intangible assets" in the conveyance deed between the seller and the buyer and under those circumstances; the cost of each assets sold on accepted by both the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks Ltd. vs. DCIT, ITA No. 1024/Kol/2007, order dt. 28/09/2007. In our view this decision does not hold the field any longer and in view of the subsequent decisions of the Apex Court in the case of Apollo Tyres Ltd. vs. Commissioner of Income Tax (2002) 255 ITR 273 (SC) as well as the decision of ITAT Kolkata in the case of Bhatkawa Tea Industries Pvt. Ltd. vs. ACIT, Circle-4, Kolkata in ITA No. 813/Kol/2010, for the Assessment Year 2005-06, wherein it was held as follows:- "10.1 We are of the considered opinion that section 115JB of the Act is attracted in the case of the appellant. The appellant has not also been able to show us that the deductions as claimed by it from the net profit as per the P & L account were allowable as per the provisions of the Act, keeping in view the ratio laid down by the Hon'ble Apex Court's decision in the case of Apollo Tyres Ltd (supra). In this view of the matter, we find no infirmity in the impugned order of the ld.CIT(A) on the issues agitated by the appellant in the present appeal and confirm the same. Thus, we reject all the grounds of appeal of the assessee." 7.7.2 Section 115JB of the Act reads as follows:- "115JB. (1) Notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 6 of this order for the Assessment Year 2008-09. Consistent with the view taken therein, we allow Ground number 1 and 2 of the revenue and dismiss Ground number 2, 3 & 4 of the cross objection. 8.2. Ground No. 3 of the revenue and Ground No. 5 of the cross objection is on the issue of depreciation on tangible asset. 8.2.1. Consistent with the view taken by us while disposing of this very issue for the Assessment Year 2008-09 we allow this ground of the revenue and dismiss the corresponding ground of the cross objection. 8.3. Ground No. 4 of the revenue appeal reads as follows:- "whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing a deduction of ₹ 1,29,38,147/- u/s. 80IE which had not been claimed in the return nor any Audit Report has been filed in that regard. " 8.3.1. The undisputed fact is that the assessee has not made a claim for deduction under section 80 IE in the return of income, nor did he file an audit certificate in support of his claim. The ld. CIT(A), was of the view that the assessee is entitled to make a claim before the AO, other than by way of filing the revised return of income. He held that the assessee has m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the issue of computation of profits under section 115JB of the Act. The issue is the same as was dealt by us while disposing of Ground Number 4 of the revenue appeal for the Assessment Year 2008-09. Consistent with the view taken therein, we allow Ground No. 6 of the revenue and dismiss Ground No. 7 of the cross objection by the assessee. 8.6. In the result, the appeal of the revenue is allowed and the cross-objection by the assessee is dismissed. ITA No. 1829/Kol/2016 & C.O. No. 66/Kol/2016, Assessment Year 2010-11 9. Ground No. 1 of the Revenue appeal and Ground No. 2, 3 & 4 of the Cross- Objection are on the issue of rate of depreciation on "Enclosed Withering Trough Machines". Consistent with the view taken by us for the Assessment Year 2008-09, while adjudicating the very same issue, we allow this ground of the revenue and dismiss the corresponding ground of the cross-objection raised by the assessee. 9.1. Ground No. 2 of the Revenue and Ground No. 5 of the cross-objection are on the issue of depreciation on intangible assets. Consistent with the view taken by us while adjudicating the similar issue for the Assessment Year 2008-09, we allow Ground Number 2 of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee states that it's alternative claim for deduction under section 80 IE on this interest subsidy has to be allowed. This issue may be examined by the assessing officer, in accordance with law. Thus, Ground Nos. 6 and 7, of the Cross-objection filed by the assessee, are allowed for statistical purposes. 9.5. Ground No. 4 & 5 of the Revenue appeal is on the allowability of deduction under section 80 IE of the Act. 9.5.1. The facts of this issue is that the assessee claims that it had made additions to plant and machinery exceeding 25% of the opening book value during the Financial Year 2007-08, relating to the Assessment Year 2008-09. The assessing officer held that this is the initial year of claim of deduction under section 80 IE. He held that, assessment year 2009-10 as the second year of this claim of deduction. The assessee had not claimed deduction under section 80 IE, for this year in the return of income as the gross total income was negative. During the Assessment Year 2010-11, the assessee claimed deduction under section 80 IE, on the ground that this is the initial year and stated that it could claim the deduction for the next 10 years, from Assessment Year 2010-11. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under Section 250(4). This approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld." (Emphasis ours) 9.6.1. In the case on hand, the Assessing Officer has failed to conduct a proper enquiry. The ld. CIT(A) has also failed in his duty on this issue. Thus, applying the proposition of laid down by the Hon'ble Delhi High Court, to the facts of this case, we set aside this issue to the file of the Assessing Officer, for fresh adjudication, in accordance with law. The Assessing Officer is directed to examine whether the conditions laid down u/s 80IE of the Act, have complied with by the assessee company in the "Initial Year" and then only come to a conclusion on this issue. We draw strength for this proposition, from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Consistent with the view taken by us while disposing of Ground No. 4 of the revenue appeal for the Assessment Year 2008-09, we allow this ground of appeal raised by the revenue and dismiss this ground of cross-objection by the assessee. ITA No. 787/Kol/2017, Assessment Year 2011-12, appeal by the Assessee 15. This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-2, Kolkata, (hereinafter the 'ld. CIT(A)), passed u/s 250 of the Income Tax Act, 1961 (the 'Act'), arising out of Appeal No. 1236/CIT(A)-2/15-16, for the Assessment Year 2012-13, on the following grounds:- "1. General for all grounds: For that learned CIT( A ) has passed the order, with a prejudiced mind, denying various relief claimed, and mostly confirming order of the AO, without fully considering facts and circumstances of the case, written submissions of the assessee, precedence relied on by assessee, and not following binding precedence. Furthermore, learned CIT(A) was also wrong in not asking and not providing opportunity and time to file further details and evidences, or explanation, if any, which he required for proper adjudication of appeal and doing jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O allowed depreciation @80% but on wrong WDV b/f, as if 80% depreciation was allowed in earlier years. 11. For that learned AO may be directed to treat A.Y.2012-13 as 4th year based on order of CIT(A) in earlier years holding that AY 2009-10 is initial year for deduction u/s 80 IE. 12. For that learned AO may be directed to make computation of 100% of profit of eligible undertaking correctly by including all incidental receipts and recoveries and incomes in such profit and to allow deduction equal to 100% of such profit u/s 80lE. 13. For that learned AO may be directed to revise tax u/s 1150 on 40% of dividend declared as against 100% of dividend. 14. For that learned AO may be directed not to invoke S.115JB, as held by learned CIT(A) in earlier years. 15. For that learned AO may be directed to charge interest u/s 234B and 234C, if any, based on income as per return of income and not as per income assessed. 16. For that the appellant seek kind permission to raise new contentions and new grounds of appeal and to revise any grounds of appeal as may be required to seek justice." 15.1. We have heard the rival contentions. We find that Ground No. 1 & 2, are general i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes. 17. Ground No. 13, is on the issue whether 40 per cent of the dividend income or 100 per cent of the dividend income is to be considered for the purposes of Section 115O. Recently the Hon'ble Supreme Court in the case of Union of India & ors. vs. Tata Tea Co. Ltd. in CA NO. 9178 OF 2012, judgement dt. 20/09/2017, wherein it was held as follows:- "33. This Court, however, while considering the nature of dividend in the above case held that although when the initial source which has produced the revenue is land used for agricultural purposes but to give to the words 'revenue derived from land', apart from its direct association or relation with the land, an unrestricted meaning shall be unwarranted. Again as noted above Nalin Behari Lal Singha (supra) observation was made that shares of its profits declared as distributable among the shareholders is not impressed with the character of the profit from which it reaches the hands of the shareholder. We, thus, find substances in the submission of the learned counsel for the Union of India that when the dividend is declared to be distributed and paid to company's shareholder it is not impressed with character of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
