2017 (9) TMI 126 - HC - Income Tax

Depreciation on UPS - @60% OR 15% - Held that:- The issue is squarely covered by a decision of a coordinate bench of the ITAT in the case of SRL itself [2013 (4) TMI 814 - ITAT PANAJI]. The CIT followed that decision. It was on this limited ground that in paragraphs 9 and 10 the ITAT held against the Revenue on this aspect of the appeal. We see no defect in the reasoning of the Tribunal. Indeed we are unable to appreciate why, when there is a decision of a coordinate Bench on an identical point, the Tribunal should, or even could, take a diametrically opposite view. To do so would only add to uncertainty in tax proceedings, and the doctrine of precedent would apply just as much to the ITAT. This is by no stretch of the imagination a substantial question of law.

Disallowance on interest expenditure on loans taken at interest and advanced to sister concerns interest-free - whether the loans in question and interest thereon were matters of commercial expediency - Held that:- This is admittedly not a case where the amount was either a donation (as in Madhav Prasad Jantia’s case - 1979 (4) TMI 2 - SUPREME Court) or even loan was given to an individual or to a director of the company in his personal capacity. Had that been so, the question might legitimately been asked as to prove the purposes of the loan. In other words, the question posed by the Revenue suggests its own answer. It postulates that when two commercial entities have between them a loan transaction, it is conceivable that the purpose is something other than a business purpose. Prima facie, it seems that the only possible other purpose, as oppose to a business purpose or commercial expediency, is a ‘personal’ one (such as a loan to a director for personal use or a commemorative loan), and a commercial entity can have no such personal purpose. The finding of the Tribunal in our view, cannot be faulted. It relied on a decision of a co-ordinate bench of the Tribunal in another matter where a decision of the Gauhati High Court in Highways Construction Co Pvt Ltd v Commissioner Of Income-Tax (1992 (11) TMI 86 - GAUHATI High Court) was considered. The finding there was that only the real income earned by the assessee could be brought to tax, not some notional income. The question suggested as a substantial of law seems to proceed on a basis that some notional interest might have been asked to be assessed.

Current repairs to old vessels - Held that:- The expenditure was necessary to keep the vessel in good working condition and to keep them seaworthy. The increased expenditure did not result in an increase of the capacity of the vessels or any new advantage or capital asset coming into existence. Thus allowable business expenditure.

Additional depreciation - ore extraction and processing - Held that:- Supreme Court in The Commissioner of Income Tax v Sesa Goa Ltd. [2004 (11) TMI 14 - SUPREME Court] held that mining for the purpose of production of mineral ore falls within the ambit of the word ‘production’. The Division Bench of this Court had held that in such a process, ore has to be extracted or raised from earth. This activity is ‘production’, entitling the assessee to the benefit of Section 32(A) of the Act. Thus, there would be an allowable depreciation deduction in respect of the machinery used in mining. It cannot be said that mining is neither production nor manufacture. That is no longer res integra.