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2022 (8) TMI 1409 - HC - Income TaxNature of expenses - expenditure incurred on capital stores and spares claimed - revenue or capital expenditure - assessee is engaged in generation of power in form of electricity - AO disallowed the replacement cost of parts of machinery on the ground that the same is of capital nature - HELD THAT:- As there is no replacement of the gas turbine as a whole but certain repair and replacement to some of the parts of the gas turbine, which does not result in bringing into existence a new asset of enduring nature, rather, the repair and maintenance are of recurring nature and essentially required for smooth running of business of the assessee i.e., generation of power.Therefore we have no hesitation in holding that the replacement of spares in the machineries would be allowable as Revenue expenditure only and addition made by the AO is directed to be deleted. Disallowance u/s 80IA - audit report was filed by the assessee before completion of the assessment - It is settled law that filing of tax audit report during pendency of assessment proceedings is sufficient compliance for claiming deduction under section 80IA. Set off of losses as per section 80IA(5) for computation of income of eligible unit - As the term “initial assessment year” would mean, the first year opted for by the assessee for claiming deduction under section 80IA with a rider that total number of ten years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years as the case may be and the period of claim should be availed in continuity. Following the aforesaid circular No. 1/2016, SLP filed by the department was also dismissed against the decision of Velayuthasamy Spinning Mills (P) Ltd [2010 (3) TMI 860 - MADRAS HIGH COURT] holding that loss in earlier year to initial year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profit of eligible business as no such mandate is provided u/s 80IA(5) - Tribunal, following the decision of the Apex Court and the Circular No. 1/2016 issued by the CBDT, rejected the appeal filed by the Revenue allowing the claim of deduction under section 80IA of the Act in favour of the assessee. No substantial question of law.
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