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2023 (8) TMI 1058 - ITAT MUMBAIDisallowance u/s 14A r.w.r. 8D - sufficiency of own funds - HELD THAT:- As decided in the case of South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] that in case assessee has surplus fund then it is presumed that investment has been made out of surplus funds and no disallowance u/s 14A can be made on interest expenditure - thus no disallowance on account of interest can be made when assessee has surplus funds. In so far as the ld. CIT(A)’s direction that to re-compute disallowance considering only those investments including investment in subsidies which have earned tax free income during the year, is based on precedents of earlier years of the Tribunal for the A.Y. 2017-18 and 2018-19 supra. Decided against revenue. Nature of expenses - Expenditure on replacement of meters - AO held that expenditure incurred in replacement of meters is a capital expenditure and allowed depreciation thereon as against assessee’s claim as “revenue expenditure” - HELD THAT:- The expenditure on replacement of meters is for facilitating the assessee’s business operations and enables maintenance and conduct of the assessee’s business more effectively or more profitably. The replacement of meter does not increase the assessee’s generation or distribution capacity. Further, replacing old meters by new meters has resulted only in getting better readings of the current consumption and does not in any way enhance the capital assets or the quantity of power supply. Accordingly, the assessee has correctly claimed the expenditure incurred on replacement of meters as revenue expenditure - See Bombay High Court in assessee’s own case [2014 (6) TMI 574 - BOMBAY HIGH COURT] Allocation of head office expenses for computing profit eligible for deduction u/s. 80IA for distribution unit - AO has apportioned the head office expenses to all the units and the eligible profits were re-computed - HELD THAT:- Now this issue is settled in the case of the assessee on the same point by the decision of the Tribunal as well as the Hon’ble Bombay High court in earlier years that profit of eligible undertaking has to be worked out as if such undertaking was only source of income during the previous year and deduction u/s. 80IA is allowable in respect of profits and gains derived from such business. Therefore, head office expenses cannot be deducted from the profits and the gains which had derived from eligible business because it has been found as a finding of fact that these expenses do not have direct and immediate connection with the eligible unit. Accordingly, ground raised by the Revenue is dismissed. Deduction u/s. 80IA restricted to business income instead of total income - HELD THAT:- The Hon’ble Supreme Court [2021 (4) TMI 1237 - SUPREME COURT] has decided the issue in favour of the assessee wherein claim that deduction u/s. 80IA ought to be allowed upto gross total income has been accepted. Thus, in view of the above, we allow the assessee’s claim of deduction u/s. 80IA that it ought to be allowed up to gross total income which has been accepted. Consequently, the ground is dismissed. MAT - computation of book profits u/s. 115JB and disallowance u/s.14A - HELD THAT:- As no disallowance u/s. 14A is required to be made for computing book profits u/s. 115JB. See Vireet Investments P. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] Disallowance of inflated coal expenses - disallowance on adhoc and estimated basis at 12% - HELD THAT:- As all the observations and the finding given by the ld. AO as incorporated these are all based on DRI report which as of now has not been approved by the higher appellate forums and as informed by the assessee, the same are still at the stage of show-cause notice and no final order has been passed. Thus, all the observations of AO has no relevance at all. As observed above, the case of the Revenue is that assessee might have inflated cost of the coal, however, once the cost of the coal is part of tariff price determination by the regulatory authority and once the electricity is sold on the same tariff which has been credited to the profit and loss account and offered to tax, then there is no question of separately taxing the alleged inflated cost of coal. Therefore, no disallowance at all is warranted. Accordingly, the entire addition is deleted and consequently, the Revenue’s appeal is dismissed and assessee’s appeal is allowed.
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