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2020 (4) TMI 848 - AT - Income TaxDeduction u/s 80IB - Manufacturing activity - claim denied as assessee company is only providing services to mineral oil concerns and generation of logs does not amount to manufacture or production of article or thing - HELD THAT:- Following the decision rendered by the Hon’ble High Court in assessee’s own case [2011 (5) TMI 322 - DELHI HIGH COURT] we are of the considered view that assessee company is an industrial undertaking engaged in the business of manufacturing or production of an article or thing for the purpose of section 32A and section 80IB. So, AO as well as CIT (A) have erred in AYs 2004-05, 2007-08 & 2008-09 in denying the deduction claimed by the assessee company u/s 80IB of the Act on the ground that the assessee company is not a manufacturing concern. Depreciation on plant & machinery owned and used below the ground in field operation in mineral oil concern - @ 25% as against 80% claimed by the assessee - HELD THAT:- As held in assessee’s own case [2011 (5) TMI 322 - DELHI HIGH COURT] assessee’s wireline logging and perforation equipments are eligible for a higher depreciation @ 100% under cl. (ii) of s. 32(1) of the Act, r/w item III(3)(ix)(b) of the schedule of rates of depreciation in Appendix I to the Income Tax Rules, 1962. Disallowance u/s 14A - addition @ 15% of the exempted income earned by the assessee company during the year under assessment being the reasonable expenditure incurred to earn dividend income by the assessee company - HELD THAT:- As assessee has stated to have already disallowed expenditure directly related to earning exempt dividend income - when investment is made by the assessee company time and manpower need to be utilized to steer the investment in right places so we reasonably restrict the disallowance made by the AO and CIT (A) from 15% to 5% of the gross exempt dividend income earned by the assessee during the year under assessment. Service-tax payable - AO held the service-tax payable as a trading receipt on the ground that the assessee has raised sales bills and charged service-tax on the same and service-tax is in the nature of revenue receipt - HELD THAT:- When undisputedly aforesaid amount as service-tax payable has not been passed through P&L account duly reported in tax audit report nor the assessee has claimed deduction of service-tax payable to the Government, there is no question of disallowance of the deductions not claimed by the assessee. As decided in NOBLE AND HEWITT (I) P. LTD. [2007 (9) TMI 238 - DELHI HIGH COURT] since the assessee did not debit the amount to the profit and loss account as an expenditure nor claim any deduction in respect of the amount and considering that the assessee was following that mercantile system of accounting, the question of disallowing the deduction not claimed would not arise - CIT (A) has rightly deleted the addition Revision u/s 263 - Claim of additional depreciation - HELD THAT:- When the assessee company has been held to be engaged in the manufacture or production of an article or thing by the order passed by the Hon’ble Delhi High Court affirmed by Hon’ble Supreme Court, the assessee is entitled for additional depreciation u/s 32(1)(iia) of the Act and as such, the AO has rightly allowed the additional depreciation to the assessee, hence assessment orders passed by the AO are not erroneous sufficient to exercise revisionary jurisdiction u/s 263 of the Act. Revenue supported the order passed by the ld. CIT on the only ground that the assessee is not engaged in the manufacture of any article or thing, but this issue is no longer res integra as assessee in its own case held to be engaged in manufacture or production of an article or thing. Moreover, since the ld. CIT only modified the assessment directing the AO to withdraw the deduction for additional depreciation allowed u/s 32(1)(iia) but has not set aside the assessment to be framed afresh, Explanation 2 to section 263 of the Act relied upon by the ld. DR for the Revenue is not attracted. So, we are of the considered view that arguments addressed by the ld. DR and his reliance on umpteen number of judgments is not applicable to the facts and circumstances of the case. Consequently, impugned orders passed by the ld. CIT u/s 263 not sustainable in the eyes of law, hence ordered to be quashed. - Decided in favour of assessee.
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