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TMI Blog2019 (1) TMI 2043X X X X Extracts X X X X X X X X Extracts X X X X ..... w Chemical International Pvt. Ltd.,is also filed. And the storage tanks are connected with associated pumps, pipelines, connecting hoses, valves, metering and control devices and auxiliary equipment to carry out the loading and unloading functions. Thus, the MDI tanks are special tanks for specific liquid cargo hence has separate dedicated pipeline and pump for the same has been installed. The tanker vessels carrying on the specific chemicals come to Kandla Port for discharge of the cargo. The vessels are berthed at Oil Cargo Jetty and after necessary customs formalities; the cargo is unloaded in the storage tank through pipelines as per permission of Kandla Port Trust. As we can see, that case of the assessee case is squarely falls under the clarification provided in Circular No. 10 of 2005. It is fact that storage tanks are an integral part of Port operations and it can't be utilized for any other non-port operations, Moreover, in AY 2013-14, the AO in his order u/s. 143(3) after physical verification of; the structure, categorically given his finding that the respondent qualified the condition of new infrastructural facility of having structures at the port for storage, load ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common power evacuation charges - As per AO charges were paid to the Suzlon Energy for common power Evacuation infrastructure facility on sharing basis and these charges were not refundable and clear from this bill that respondent has not acquired any asset by paying these charges on which it can claim depreciation - as per AO assessee cannot claim depreciation @ 80% on windmill but assessee stated that in respect of the entire windmill inclusive of civil, electrical items because a powerful thrust of air at any point of time - HELD THAT:- As we can see, the ld. A.O. has unnecessarily adopted a very restrictive view wherein he has resorted to dissect the purchase value of the entire windmill assembly in various sub components i.e. land, machinery, labour charges, right to access, etc. and has opined that 80% depreciation will be available only to the windmill proper mentioned in the Depreciation Schedule in the IT Rules. Erecting and operating windmill assembly is not limited to installing a windmill turbine only. Bringing windmill in existence and making it operational requires fulfillment of various sub components like installing and fabricating accessory machineries, electric fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion filed by the assessee. First of all we will take up the ITA No. 349/Rjt/2016. The revenue has taken following grounds have been taken: 1. The Ld. CIT(A) has erred in deleting the addition made by the A.O. on account of disallowing of deduction u/s. 80IA(4)(i) on storage tank-MDI of Rs. 1,14,31,020/- and storage tank-EDA of Rs. 76,04,753/-. 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition made U/S. 14A of Rs. 31,40,255/- though the assessee had investment of Rs. 4.65 crore in Shares for which no expenses have been allocated by the assessee. 3. The Ld. CIT(A) has erred in deleting the addition of Rs. 4,37,18,888/- made by the A.O. u/s. 40A(2)(a) r.w.s. 40A(2)(b) in respect of Terminal Handling . Storage Charges paid to Shreeji Power . Insulator Pvt. Ltd. (SPIPL). 4. The Ld. CIT(A) has erred in deleting the addition of Rs. 2,27,867/- made by the A.O. on account of disallowance of depreciation on land purchased, or land related expenses under the windmill. 5. The Ld. CIT(A) has erred in deleting the addition of Rs. 2,61,000/- made by the A.O. on account of disallowance of share issue expenses. 6. It is therefore prayed that the order of Ld. CIT(A) be set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowed the claim of deduction u/s. 80IA of Rs. 37,92,256/- by alleging that profit of wind mill, eligible for deduction u/s. 80IA(4) of the Act becomes NIL after absorption of earlier years' losses/depreciation. (iv) Alleged that the assessee had incurred share issue expenses of Rs. 2,61,000/- in normal course and the same is not fit into criteria laid down u/s. 35D of the Act and accordingly disallowed the same. (v) Disallowed Rs. 30,94,549/- by invoking provisions of section 14A of the Act on the alleged ground that appellant failed to prove one-to-one nexus from bank account that investment has been done entirely from its own funds. (vi) Alleged that assessee (i) paid excessive terminal handling charges to Shreeji Power and Insulators Pvt. Ltd. [SPIPL] and (ii) paid for the quantities which have not been used by the appellant. He also alleged that the appellant shifted profit from marketing other activities to SPIPL for which no service has been provided by the SPIPL. Thus, the AO alleged that appellant routed the transactions from SPIPL at arbitrary hypothetical rates and saved its tax on Rs. 6,22,78,406/- and saved dividend distribution tax. In total disregards to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per MOU with DOW Chemical International Pvt. Ltd. and is fully dedicated to that party only which is used by them for storage of a specific cargo at a specific temperature required to be maintained for that particular tank and the cargo of Dow Chemical International Private Limited is only stored as per the agreement with the party and assessee has filed copy of the agreement before the lower authorities. 13. And assessee stated that storage facility is for loading and unloading of chemical, a copy of storage and terminal agreement with M/s. Dow Chemical International Pvt. Ltd., dated 22.10.2007 is also filed. And the storage tanks are connected with associated pumps, pipelines, connecting hoses, valves, metering and control devices and auxiliary equipment to carry out the loading and unloading functions. Thus, the MDI tanks are special tanks for specific liquid cargo hence has separate dedicated pipeline and pump for the same has been installed. The tanker vessels carrying on the specific chemicals come to Kandla Port for discharge of the cargo. The vessels are berthed at Oil Cargo Jetty and after necessary customs formalities; the cargo is unloaded in the storage tank through p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such scenario provision of section 14A of the Act cannot be invoked - Hon'ble High Court of Delhi in the case of Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 has held if no exempt income has been earned by the assessee in the relevant assessment year then no disallowance can be made u/s. 14a of Income Tax Act.. 18. As we can see, assessee was having substantial interest free funds, it is fact that as per paper book interest free funds went into investment, which generated exempt income. Therefore, no disallowance can be made u/s. 14A as no interest bearing funds has been deployed to earn exempt income. And ld. A.O. had not demonstrated any nexus between the earning of exempt income for such income. Therefore, in our considered opinion, ld. CIT(A) has rightly granted relief to the assessee. 19. But disallowance made under Rule 8D(iii) of Rs. 2,23,639/- are confirmed by lower authorities because assessee has not been able to prove one to one nexus of interest free funds as well as investment in securities because such investment require bank charges, clerical work and time of directors. Therefore, we are of the opinion that ld. CIT(A) has rightly confirmed the addition of Rs. 2,23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,20,81,572/- made by the A.O. on account of disallowance of depreciation on windmill. 26. The assessee has claimed depreciation of Rs. 1,13,85,840/- in respect of the common power evacuation charges. The above charges were paid to the Suzlon Energy for common power Evacuation infrastructure facility on sharing basis and these charges were not refundable. It is also clear from this bill that respondent has not acquired any asset by paying these charges on which it can claim depreciation. Assessee has claimed depreciation on wind mill inclusive of civil electric work as well. 27. And ld. A.O. held that in such circumstances, assessee cannot claim depreciation @ 80% on windmill but assessee stated that in respect of the entire windmill inclusive of civil, electrical items because a powerful thrust of air at any point of time. Specialized foundation and specialized area specifically ear-marked to facilitate a flow of wind without hindrance, and specialized electrical fittings and high-tension lines are all basic requirements for a wind mill plant. None of these requirements including the premises can be seen detached from what is called a 'wind mill' since a wind mill t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, equipments are part and parcel of the windmill and cannot be separated from the same. The assessee s claim for higher depreciation on such investment was, therefore, rightly allowed. 30. Therefore respectfully following the order of Jurisdictional High Court, we upheld the order of ld. CIT(A) and dismissed the ground of Revenue. 31. Now we come to ground related to deleting the addition of Rs. 12,920/- made by the A.O. on account of disallowance of expenditure incurred on consideration for lease land. 32. As we can see, assessee has made this payment to Kandla Port Trust as Windmill land charges and same are for business purpose. Therefore, such amount cannot be disallowed and ld. CIT(A) has rightly allowed the claim of the assessee. 33. Now we come to ITA No. 379/Rjt/2016. The Revenue has taken following grounds of appeal. 1) The Ld. CIT(A) has erred in deleting the addition made by the A.O. on account of disallowing of deduction u/s. 80IA(4)(i) on storage tank-MDI of Rs. 1,14,31,020/- and storage tank-EDA of Rs. 76,04,753/-. 2) The Ld. CIT(A) has erred in law and on facts in deleting the addition made U/S. 14A of Rs. 31,40,255/- though the assessee had investment of Rs. 4.65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of Rs. 2,61,000/- made by the A.O. on account of disallowance of share issue expenses is concerned an amount of Rs. 2,61,000/- on account of amortization of share issue expenses u/s. 35D were debited by the assessee its Profit and Loss account. But ld. A.O. disallowed the same on the ground that assessee company is a Private Limited company and has made expenses in relation to normal issue of shares, not for public issue, and expenses has been done after startup of business and are not related to expansion of undertaking or setting up of new unit. 43. In appeal before the ld. CIT(A), ld. CIT(A) granted relief to the assessee. 44. We have gone through the relevant record and impugned order. The above said expenses has been incurred before the commencement of business and same are in the capital in nature. In our considered opinion, assessee has rightly claimed its amortization. Therefore, we dismiss this ground of appeal by holding that above expenses were incurred for business purpose and same are allowable. 45. In the result, this ground of appeal of the Revenue is dismissed. ITA No. 160/Rjt/2015 Assessee's appeal for A.Y. 2010-11 46. In said appeal, assessee has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Now we come to ground relating to claim of deduction u/s. 80IA of the Act of Rs. 29,33,517/-. 51. Same ground has been allowed by us in connected appeal in ITA No. 379/Rjt/2016 ITA 349/Rjt/2016 in favour of assessee and against the revenue. Therefore in parity with those orders, we allow this ground of appeal. 52. Now we come to ground relating to shares expenses of Rs. 2,61,000/- u/s. 35D. 53. In ITA No. 379/Rjt/2016, in this case, this amount was allowed by the ld. CIT(A) in the order for assessment year 2011-12. Thereafter appeal was filed by the revenue against the order of ld. CIT(A). Now we have allowed this ground of appeal of the assessee. Since already order of the ld. CIT(A) has been confirmed with regard to Rs. 2,61,000/- u/s. 35D. Since this ground is already covered by our order as discussed above. Hence ground of assessee is allowed.. 54. Now we come to addition of Rs. 10,07,333/- u/s. 41(2) of the Act is concerned, assessee was asked by the lower authorities for outstanding of followings: Sr. No Name of the Assessee Amount 1 Anita Internationa 37047 2 Deva m Dafda 70181 3 Dupoly marketing Pvt Ltd 97365 4 Emerson Process Mangment Pvt Ltd 1522 5 Friends and Chemical ..... 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