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TMI Blog2020 (1) TMI 1606X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The assessee will get relief of ₹ 13.04 lakhs. Accordingly, Ground No. 2 with sub grounds is partly allowed. Interest received on provisional assessment u/s 143(1) - HELD THAT:- As decided in own case [ 2019 (11) TMI 270 - ITAT DELHI ] we restore the issue in dispute to the file of the Ld. Assessing Officer for verifying that the interest granted under section 143 (1) in relation to previous year corresponding to assessment year under consideration, but same has been subsequently withdrawn under section 143(3) of the Act passed in financial year 2003-04 and decide the issue in accordance with law after providing adequate opportunity of being heard to the assessee. Disallowance of deduction from income earned from PE in foreign countries and not chargeable to tax under DTAA in computing the book profit for the purpose of section 115JB of the Act - HELD THAT:- Hon'ble Supreme Court in the case of Apollo Tyres Limited [ 2002 (5) TMI 5 - SUPREME COURT ] have held that the Book Profit as computed from the books of accounts maintained in accordance with the Companies Act is sacrosanct and it can be adjusted only for making increases and reductions as specifically p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to claim deduction 80IA, which was wrongly denied. Addition on account of provision for maintenance expenditure - HELD THAT:- CIT(A) has verified that the liability on account of maintenance expenses arisen in the year under consideration. Thus we do not find any error in the order of the Ld. CIT(A) in deleting the disallowance. Disallowance on account of provision of demobilization expenditure, provision for maintenance and provision for other expenses - HELD THAT:- We find that the Ld. CIT(A) has sustained the disallowance due to failure on the part of assessee in substantiating whether the liability arose during the year under consideration and also failure to submit necessary documentary evidence in support of the claim. Before us also, no evidences have been furnished by the assessee to substantiate the claim whether the expenses crystallised during the year. In our opinion, the order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same. Disallowance on account of foreign exchange fluctuation loss - HELD THAT:- As loss should also be allowed as deductible expenditure in the year in which the same accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Years. 5. The assessee carried the matter before the ld. CIT(A) but the ld. CIT(A) confirmed the findings of the Assessing Officer. 6. Before us, the ld. counsel for the assessee fairly conceded that in earlier years, the Tribunal has decided the issue and the findings may be followed. 7. Per contra, the ld. DR relied upon the findings of the ld. CIT(A). 8. We have given thoughtful consideration to the orders of the authorities below. We find that a similar issue was considered by the co-ordinate bench in assessee s own case in ITA No. 1825/DEL/2005, 705/DEL/2006 and 3804/DEL/2008 for Assessment Years 2001-02 to 2003-04. The relevant findings of the co-ordinate bench read as under: 11.9 Before us, the assessee has failed to demonstrate whether the spare parts which are used when a machine malfunctions, has brought into existence a new asset or given enduring benefit to the assessee. In absence of satisfying the requirement for constituting a machinery spare as capital expenditure as laid down in the above decisions of the Hon ble Supreme Court, expenditure incurred on machinery repairs can not be allowed as capital expenditure and consequent depreciation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 14A squarely apply on the facts of the case. The assessee was asked to show cause as to why reasonable disallowance of expenses should not be made for earning exempt income. 12. In its reply, the assessee strongly contended that no disallowance should be made as the assessee has not incurred any expenditure in earning exempt income. 13. Not convinced with the reply of the assessee, the Assessing Officer was of the opinion that certain portion of the administrative expenses should go towards earning of exempt income and, accordingly, attributed the administrative expenses towards earning of dividend income in proportion to tax free income to total receipts and computed the disallowance of ₹ 28.04 lakhs. 14. The assessee carried the matter before the ld. CIT(A) but without any success. 15. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 16. Per contra, the ld. DR strongly supported the findings of the Assessing Officer. 17. We have given thoughtful consideration to the orders of the authorities below. At the very outset, we have to state that Rule 8D of the Rules has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment a refund becomes due to assessee, an enforceable debt is created in favour of assessee and assessee acquires a right to receive the interest. Sub-s. (3) of s. 244A only affects its quantification under certain circumstances and not the right of interest. The Hon'ble Supreme Court in the case of CIT vs. Shri Goverdhan Ltd. (1968) 69 ITR 675 (SC) has observed at p. 681 that once a debt is created, then the liability cannot be said to be contingent merely because it is to be quantified at later date. Under s. 244A, even the interest is quantified immediately whenever a refund is issued. In our view, the right to grant interest is absolute since existence of such right is not dependent on any event. For example, assessee is granted interest of ₹ 1,000 on the date of granting refund. Subsequently, under s. 244A(3), it is reduced to ₹ 600 by virtue of assessment under s. 143(3). Can it be said that right to interest did not accrue on the date of refund ? In our opinion, the right of interest came into existence on the date of refund by virtue of s. 244A(1) though its quantification may or may not vary depending upon the outcome of assessment. 18.6 However the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year corresponding to assessment year under consideration, but same has been subsequently withdrawn under section 143(3) of the Act passed in financial year 2003-04 and decide the issue in accordance with law after providing adequate opportunity of being heard to the assessee. In the result, the ground No. 8 of the appeal is allowed for statistical purposes. 20. Respectfully following the findings of the co-ordinate bench, we direct accordingly. Ground No. 3 with sub ground is treated as allowed for statistical purposes. 21. Ground No. 4 relates to disallowance of deduction from income earned from PE in foreign countries and not chargeable to tax under DTAA amounting to ₹ 34.55 crores in computing the book profit for the purpose of section 115JB of the Act. 22. The underlying facts in issue are that the assessee excluded DTAA income earned from its project in Bangladesh, Malaysia and United Kingdom on the ground that the DTAA income is not taxable in India and consequently, the company is not obliged to pay tax under MAT on the said income. The Assessing Officer was of the firm belief that the adjustment required to be done are specified in the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws in force in the country (115JA) will get attracted since there is no specific provision in the DTAA as regards the computation of 'Book Profit' for the purpose of levy of Minimum Alternative Tax (MAT). Therefore, there is no merit in the claim of the appellant since section 115JA imposes tax on the Book Profit, which is computed for the purpose of companies Act. The plain reading of Section 115JA of the Act makes it obvious that none of the clauses (i) to (ix) of the Explanation thereto provide for reduction in respect of the income which may be exempt by virtue of the application of the DTAA. The Hon'ble Supreme Court in the case of Apollo Tyres Limited Vs. CIT (255 ITR 273) have held that the Book Profit as computed from the books of accounts maintained in accordance with the Companies Act is sacrosanct and it can be adjusted only for making increases and reductions as specifically provided in the Explanation to the said section. It has been categorically held that apart from the adjustment as provided in the Explanation, no adjustments can be made to the book profit as per the Companies Act. The exclusion of income under the DTAA is nowhere provided in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 18,920.26 1 7,948.30 33,366.55 22,211.59 It is not clear whether the total debts of ₹ 23,366.55 lakhs is after deducting the provision of ₹ 1,063.70 lakhs. The amount of ₹ 624.70 lakhs considered by the Assessing Officer for addition is obviously difference between opening provision of ₹ 439 lakhs and closing provision of ₹ 1063.70 lakhs, mentioned in the above schedule. If the provision debited by assessee is indeed deducted from the total debts and only the net balance shown in the balance-sheet then by virtue of decision of the Hon ble Karnataka High Court in the case of Yokogawa India Ltd. (supra) there cannot be any addition of such amount under section 115JB of the Act. However, as mentioned by us, this aspect is not clear. Hence we are of the opinion that the issue regarding provision for doubtful debts requires a fresh look by the Assessing Officer. We, therefore, set aside the order of authorities below in so far as this aspect is concerned, and remit the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s first required to be computed under the IT Act and if the total income so computed is less than 30 per cent of the book profits then the P L a/c shall have to be prepared in accordance with Part II and Part III of Sch. VI of the Companies Act. The important thing to be noted is that while calculating the total income under the IT Act, the assessee is required to take into account income by way of capital gains under s. 45 of the IT Act. In the circumstances, one fails to understand as to how in computing the books profits under the Companies Act, the assessee-company cannot consider capital gains for the purposes of computing book profits under s. 115J of the Act. Further, under cl. (2) of Part II of Sch. VI to the Companies Act where a company receives the amount on account of surrender of leasehold rights, the company is bound to disclose in the P L a/c the said amount as non-recurring transaction or a transaction of an exceptional nature irrespective of its nature i.e. whether capital or revenue. That, it would be inappropriate to directly transfer such amount to capital reserve [see Companies Act by A. Ramaiya, p. 1669 (Fourteenth Edn.]. Such receipts are also covered by cl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other statutory bodies. A close reading of the agreement (for instance agreement with MSRDC enclosed in the paper book) clearly shows that appellant developed the infrastructure facility and has not acted merely as contractor as sought to be made out by Assessing Officer and C1T (Appeals). The Oxford dictionary defines the term developer as a person that designs and crate new products, whereas contractor is a person or a company that has a contract to do work or to provide goods or services. Various clauses of the above referred agreement to which reference has been made by us little below would show that the construction rail over bridge projection (ROB) awarded by MSRDC to the appellant is nothing but development of infrastructure facility, which was to be legally handed over to the Railways and MSRDC after the payment was received. Various clauses of the agreement would show that the jobs done by the appellant were planning, execution, construction and making the infrastructure facility ready for operations. Ld. Assessing Officer has not pointed out any specific clauses of any agreement, which shows that all attributes of development were not present. Making a bald asserti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside the order of the. ld. CIT (Appeals) and direct the Assessing Officer to allow deduction: u/s 801A has claimed by the appellant. Ground No. 1 is allowed. 38. As no new facts have been brought on record for the year under consideration, respectfully following the findings of the co-ordinate bench [supra] we direct the Assessing Officer to allow deduction u/s 80IA of the Act as claimed by the assessee. The findings of the ld. CIT(A) are accordingly confirmed. Ground No. 2 is dismissed. 39. Ground No. 3 relates to the deletion of addition of ₹ 1.56 crores on account of provision for maintenance expenditure. 40. An identical issue was considered by the co-ordinate bench in ITA No. 3805/DEL/2008. The relevant findings of the co-ordinate bench read as under: 62. Ground No. 5 the appeal relates to addition of ₹ 1,28,77,257/-deleted by the Ld. CIT(A) on account of provision for maintenance expenses. We find that the Ld. CIT(A) has verified that the liability on account of maintenance expenses arisen in the year under consideration. The Ld. DR could not rebut this factual finding of Ld. CIT(A). Accordingly we do not find any error in the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates to deletion of disallowance of ₹ 16.19 crores on account of foreign exchange fluctuation loss. 46. Facts on record show that the Assessing Officer has disallowed loss stating that it is notional in nature. It was strongly agitated before the ld. CIT(A) that the loss arising on account of foreign exchange fluctuation cannot be called notional since the fall in the exchange rate has already taken place in the accounting year. Reference was made to the CBDT Circular 225/161/95/ITA dated 07.05.1996 wherein the Board has stated that foreign exchange fluctuation gain earned by the project exporters has to be considered as income chargeable to tax in the year in which the said gain accrues/arises. 47. By the same analogy, it was claimed that loss should also be allowed as deductible expenditure in the year in which the same accrues or arises. It was brought to the notice of the ld. CIT(A) that similar forex loss has been allowed in Assessment Year 1998-99 and 2000-01. On the basis of this, the ld. CIT(A) deleted the disallowance made by the Assessing Officer. 48. Before us, the ld. DR could not bring any distinguishing decision in favour of the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior period expenses claimed during the year under consideration. The assessee was asked to justify the claim of prior period expenses. The assessee furnished details of prior period expenses. 59. On perusal of the details, the Assessing Officer was convinced with the claim of three expense, namely, leave encashment and bonus, adjustment of exchange fluctuation and payment to M/s Alstom. As regards the claim of other expenses, the Assessing Officer observed that no evidence has been furnished to demonstrate that the liabilities have actually crystallised during the year under consideration. The Assessing Officer, accordingly, made disallowance of prior period expenses amounting to ₹ 66,31,867/-. 60. The assessee carried the matter before the ld. CIT(A) and reiterated its claim and furnished few supporting evidences to demonstrate that the liabilities have been crystallised during the year. 61. After considering the facts and after analysing the details, the ld. CIT(A) was convinced that to the extent of ₹ 27,50,609/-, the assessee has successfully demonstrated that the liabilities have crystallised during the year under consideration and gave relief to tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t accordingly. Accordingly, Ground No. 3 is dismissed. 72. Ground No. 2 relates to the deletion of disallowance of deduction u/s 80IA of the Act amounting to ₹ 39,40,45,216/- made by the Assessing Officer. 73. A similar issue was considered by us in ITA No. 1491/DEL/2010 [supra] vide Ground No. 2 of that appeal. For our detailed discussion therein, we direct accordingly. Accordingly, Ground No. 2 is dismissed. 74. Ground No. 3 relates to the deletion of addition of ₹ 2.44 crores on account of provision for maintenance expenditure. 75. A similar issue was considered by us in ITA No. 1491/DEL/2010 [supra] vide Ground No. 3 of that appeal. For our detailed discussion therein, we direct accordingly. Accordingly, Ground No. 3 is dismissed. 76. Ground No. 4 relates to the restriction of disallowance of ₹ 53.58 lakhs made u/s 14A of the Act. 77. This issue has been considered by us in assessee s appeal [supra] vide Ground No. 1 of that appeal. For the detailed reasoning given therein, this ground is partly allowed. 78. Ground No. 5 relates to deletion of addition of ₹ 2.17 crores on account of proportionate corporate expenses allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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