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2018 (2) TMI 1909 - AT - Income TaxDisallowance of late delivery fee - HELD THAT:- Facts in the year under appeal are identical to that of A.Y. 2005-06 and in A.Y. 2005- 06 [2017 (9) TMI 1832 - ITAT PUNE] the matter has been remitted back to AO and therefore the matter be remitted back to AO. The aforesaid contention of Ld.A.R. has not been controverted by Ld.D.R. We therefore following the order of the Co-ordinate Bench of the Tribunal and for similar reasons restore the issue to the file of AO. Thus, the ground of the assessee is allowed for statistical purposes and ground of Revenue is dismissed. Depreciation on windmill - AO denied the claim of depreciation at 40% which is applicable to the windmills, on cost of foundation, erection and commissioning expenditure for the reason that he was of the view that the rate of depreciation applicable on such costs is the normal rate of depreciation which is applicable to building and plant and machinery - HELD THAT:- We find that Ld.CIT(A) while deciding the issue has given a finding that by applying functional test that without civil foundation the windmills will not generate power and that civil foundation cannot be separated from windmills and cannot be treated as a separate building. With respect to the cost of erection and commissioning expenditure, Ld.CIT(A) has given a finding that the same cannot be separated from windmills as the same are directly related to the functioning of windmills. The aforesaid findings of Ld.CIT(A) has not been controverted by Revenue. We further find that in the case of CIT Vs. Mehru Electricals and Mechanical Engineers Pvt. Ltd. [2016 (7) TMI 708 - RAJASTHAN HIGH COURT] has held that the rate of depreciation applicable to windmills also applies to civil foundation and electric turbine generator for windmill as they are the part of the windmill. We further find that the Hon’ble Bombay High Court in the case of CIT Vs. CTR Manufacturing Industries Pvt. Ltd. [2016 (4) TMI 265 - BOMBAY HIGH COURT] has held that the depreciation of windmill is to be allowed even on the cost like erection and commissioning charges, electric items, application charges etc., which are capitalized to windmill. Before us, Revenue has not placed any contrary binding decision in its support. In view of the aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A) and thus, this ground of the Revenue is dismissed. Addition on account of debit balances written off - HELD THAT:- Identical issue came up in assessee’s own case before the Pune Bench of the Tribunal [2017 (11) TMI 1841 - ITAT PUNE] for A.Y. 2006-07 wherein the claim of the assessee was allowed. He accordingly directed that the same may be allowed. With respect to the addition of ₹ 38,50,000/- he noted that it was with respect to the entry tax levied by the Karnataka Government. He has noted that assessee had filed appeal before Karnataka Bench of the Tribunal and the dispute was decided in favour of the assessee and the entire tax was refunded and the assessee has offered the same as income. In such a situation, Ld.CIT(A) was of the view that the addition of ₹ 38,50,000/- was not warranted. With respect to ₹ 21,11,554/- he noted that since assessee could not furnish the details, he confirmed the addition to that extent. Before us, Revenue has not pointed out any fallacy in the findings of Ld.CIT(A). In view of these facts, we do not find any reason to interfere with the order of Ld.CIT(A) and thus, the ground No.2 of the Revenue is dismissed. Addition of liquidated damages - HELD THAT:- As heard the rival submissions and perused the material on record. In view of the submissions of both the parties while deciding ground No.2 in assessee’s appeal hereinabove, we have decided the issue in favour of assessee. We therefore for the similar reasons stated herein while deciding the ground No.2 of the assessee in assessee’s favour and for similar reasons, dismiss the grounds Nos.3 and 4 of Revenue. Thus, these grounds of the Revenue are dismissed. Addition u/s 14A - HELD THAT:- The issue in the present ground is with respect to disallowance of expenses u/s 14A of the Act by following Rule 8D of I.T. Rules. It is an undisputed fact that the year under consideration is A.Y. 2007-08. The Hon’ble Bombay High Court in the case of Godrej and Boyce Mfg., Co., Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that the method prescribed by Rule 8D of the Income Tax Rules, for working out disallowance u/s 14A are applicable from A.Y. 2008- 09. In view of the aforesaid decision of Hon’ble Bombay High Court, the provisions of Rule 8D of I.T. Rules are not applicable to the year under consideration being A.Y. 2007-08. It is also a fact that assessee has suo-motu disallowed ₹ 5 lac u/s 14A of the Act and that the assessee is not in appeal against the aforesaid addition. Further before us, Revenue has not placed any contrary binding decision in its support. In such a situation, we find no reason to interfere with the order of Ld.CIT(A) and thus, the ground of the Revenue is dismissed. Disallowance of commission u/s 40A(2) - AO can disallow the expenditure made to close associates having substantial interest in the company for goods, services and facilities - HELD THAT:- AO can disallow only that portion of expenditure, which in his opinion, is excessive or unreasonable. Reasonableness of the expenditure has to be seen from the view point of the businessman and not from the view point of Revenue authorities. Before disallowing the expenses, the AO must establish that the payment is excessive or unreasonable and he has to place on record evidences with respect to excessiveness and unreasonableness. He cannot proceed merely on the basis of surmises and conjectures. Before us, no material has been placed by the Revenue to demonstrate that the payment of commission was not bonafide or how it was unreasonable. Merely by comparing the commission paid between two years, it cannot be concluded that the commission was excessive. We further find that CIT(A) while deciding the issue has noted that the facts for the year under consideration are identical to that of earlier years and in earlier years, the payment of commission was allowed. Before us, Revenue has not placed any material on record to controvert the findings of Ld.CIT(A). We therefore find no reason to interfere with the order of.CIT(A). Thus, the ground of Revenue is dismissed. Addition on account of warranty expenses - HELD THAT:- We find that while deciding the issue, Ld.CIT(A) has given a finding that in case of large engines the warranty obligation starts immediately after the sales made by the assessee. CIT(A), following the decision of order in assessee’s own case in A.Ys. 2005-06 and 2006-07 also held that the provision of warranty for large engines at ₹ 1,07,02,212/- is an allowable deduction. Before us, Revenue has not placed any material on record to controvert the findings of CIT(A). We therefore find no reason to interfere with the order of Ld.CIT(A). Thus, the ground of Revenue is dismissed. Disallowance of claim of long term capital loss - AO had disallowed the claim of long term capital loss for the reason that the transaction was a tax planning devise to evade taxes - HELD THAT:- It is an undisputed fact that KFIL was promoted by assessee, is a listed company and had huge accumulated losses. The issuance of preference shares to the assessee on account of restructuring exercise undertaken to revive KFIL is an undisputed fact. It is also a fact that the assessee was issued preference shares in earlier years and in those years the transaction was not doubted by the Revenue. Further no material has been brought on record by Revenue to demonstrate that the transaction was a sham. We further find that while deciding the issue in favour of assessee, CIT(A) had relied on the decision of Hon’ble Bombay High court in the case of CIT Vs. Enam Securities Pvt. Ltd [2012 (5) TMI 257 - BOMBAY HIGH COURT] . Before us, Revenue has not pointed out any fallacy in the findings of Ld.CIT(A) nor has pointed out as to why the ratio of decision relied upon by Ld.CIT(A) while deciding the appeal is not applicable to the present facts. Considering the totality of aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A) and thus, the ground of Revenue is dismissed.
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