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TMI Blog2022 (8) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... alcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - HELD THAT:- We feel that ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the maximum amount of disallowance made by the lower authorities. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation- 1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,17,06,000/- in respect of windmills under the provisions of Section 32(1)(iia) of the Act. 5. Briefly stated facts are that the assessee, in the present case, is a Limited Company and engaged in the business of exports, imports and trading of various commodities. The AO during the assessment proceedings found that the assessee has claimed additional depreciation on the plant and machinery acquired in the year under consideration amounting to Rs. 9,17,06,000/- being 20% of the value of plant and machinery. However, the AO was of the view that the activity of generating electricity does not classify as manufacturing activity as mandated under the provisions of Section 32(1)(iia) of the Act. Thus, the AO disallowed the same and added the sum of Rs. 9,17,06,000/- to the total income of the assessee. 6. Aggrieved, the assessee preferred appeal before the learned CIT(A) who has deleted the addition made by the AO by observing as under: The appellant referred two decisions of different Tribunals as discussed at para 4C above where on the interpretation of Hon'ble Supreme Court in various cases Electricity is treated as goods and electricity generation is treated as prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year involved in the impugned appeal relates to AY 2006-07. Thus, according to the learned DR, the assessee is not eligible for the additional depreciation. 7.2 On the other hand, learned counsel appearing on behalf of the assessee contended that Hon ble Madras High Court in case of S. Srinivasaraghavan vs. ACIT [2022] 139 taxmann.com 230 (Madras) held that the activity of generating electricity is a manufacturing activity. Therefore, the assessee is eligible for additional depreciation on the cost of windmill acquired in the year under consideration. Both the learned DR and learned AR before us vehemently supported the order of the authorities below as favourable to them. 8. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the Hon ble Madras High Court, in the case of S. Srinivasaraghavan vs. ACIT [2022] 139 taxmann.com 230 (Madras) involving identical facts and circumstances for A.Y. 2006-07, has allowed the additional depreciation on windmill considering the activity of generating the electricity as manufacturing in nature. The relevant extract is reproduced as under: 8. It is settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profit under the provisions of Section 115JB of the Act. Accordingly, the AO added the same to the book profit determined under S.115JB of the Act. 11 Aggrieved, the assessee preferred an appeal before the learned CIT(A) who has deleted the addition made by the AO by observing as under: 5.3.(i)Ground No.3 is against the addition of Rs.14,62,000 disallowed u/s.14A' of the Act for the purpose of computing book profit u/s.115JB of the Act. (ii) The A.O. during reasstt. noticed that while giving appeal effect to ld.CIT(A) order dated 28.06.2010, the disallowances enhanced by ld.CIT(A) u/s.14A of the Act from Rs.15,000 to Rs.14,62,000 were not given effect to while computing book profit u/s.115 JB of the Act. (iii) The appellant contended that A.O. could have taken the recourse of section 154 of the Act if the effect given to ld.CIT(A) order is not properly given. The appellant further contended that no such income escaped the asstt. was mentioned in reasons recorded for reopening. The appellant relying on the ratio of Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (supra) contended that it is only escaped income which can be considered while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lined with appellant's contention that as per legal proposition as per the order of Hon'ble ITAT; Ahmedabad in the case of Reliance Petroproducts Pvt.Ltd. (ITA No.2324/Ahd/2009 A.Y.2001-02 order dated 13.1.2012) such disallowances of expenditure u/s.14A of the Act are not to be considered as disallowances while working out book profit u/s.115JB of the Act. It is therefore such addition made by A.O. is not justified. 12. Being aggrieved by the order of learned CIT(A), the Revenue is in appeal before us. 12.1 The learned DR inter alia contended that the disallowance has to be made under Clause (f) to Explanation 1 of Section 115JB of the Act. Therefore, the amount of disallowance calculated under S. 14A of the Act can also be adopted while working out the book profit under the provisions of Section 115JB of the Act. 12.2 On the other hand, learned AR contended that no reference can be made to the provisions of Section 14A of the Act while determining the book profit under the provisions of Section 115JB of the Act. 13. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that in the recent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (Supra). Now the question arises to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts circumstances, we feel that ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the maximum amount of disallowance made by the lower authorities. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation- 1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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