TMI Blog2015 (3) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... sets damaged due to floods - CIT(A) vacated the disallowance on the ground that the assessee had received financial assistance of ₹ 929 lakhs for repairing of its assets damaged due to flood and the assessee has claimed deduction of ₹ 353.90 lakhs on account of expenses incurred on repairs of flood damaged assets and the balance amount was shown as income in the year under consideration - Held that:- The fact that the assessee suffered loss has not been disputed by the AO, and therefore, the AO was not justified in disallowing the entire amount of loss claimed by the assessee, and thereby inferring that no actual loss was suffered by the assessee.However, we also find that the details of the expenditure incurred or loss suffered due to flood as well as Misc. write off of ₹ 82.93 lakhs was not filed before the CIT(A) or before us also by the assessee. The CIT(A) deleted the disallowance on the ground that the accounts of the assessee was audited by the C&AG and without verifying the details of loss and write off by the assessee. Thus, in our considered view orders of both the authorities below cannot be sustained. We, therefore, in the interest of justice remit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Valley Fertilizers Ltd.,(2013 (8) TMI 300 - GUJARAT HIGH COURT ) wherein it was held that the expenditure incurred by the assessee on restructuring of loan was revenue expenditure. No contrary decision was cited by the learned DR. Therefore, respectfully following the decision we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. - Decided against revenue. Addition on account of Employee’s PF contribution - employees contribution to PF paid beyond the due date - CIT(A) deleted addition - Held that:- AR of the assessee submitted that the AO has disallowed the deduction simply because the payments were not made to the credit of PF authorities within the due date prescribed under the PF Act. He submitted that under the PF Act, the payments can be made within 15 days from the deduction of PF contribution from the employees’ salary plus 5 grace days. The AO has not verified the payments made to the PF authorities according to this provision of the PF Act. He, therefore, submitted that the matter should be remitted back to the file of the AO for verification, and thereafter making the disallowance of payments, which are made beyond 15 days from the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompletely. We, therefore, in the interest of justice restore this issue back to the file of AO for adjudicating the same afresh - Decided in favour of revenue for statistical purposes. Re computation of the book profit for MAT by not reducing the claim for depreciation - Held that:- is not in dispute that the assessee has claimed only that depreciation which was debited in its audited profit & loss account which was laid before the AGM. In our considered view, following the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. ( 2002 (5) TMI 5 - SUPREME Court) only those adjustments from net profit disclosed by such audited accounts can be made which are specified in Explanation to section 115JB. The depreciation not being a specified item in Explanation to section 115JB at the relevant time, we do not find any error in the order of the CIT(A) in directing the AO to recomputed the book profit for MAT by not reducing the claim for depreciation of ₹ 1.75 crores. - Decided against revenue. Disallowance under Section 14A read with rule 8D - Held that:- It was mandatory for the AO to apply Rule 8D while computing the disallowance under section 14A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Fuel related gains for prior period 65.1 192.38 Prior period adjustment of Head Office 91.27 Receipts from consumers relating to prior period 65.2 2.34 Subsidies against loss due to flood 929.00 INCOME 1214.99 Loss due to flood cyclone fire 79.8 353.90 EXPENSE 353.90 Total 861.09 The Company has accounted subsidy of ₹ 929.00 lacs received due to partly compensate the toss on account of the flood, as the income has been received during the year, the same is accounted and offered for taxation. Similarly during the year under review, the Company's claim amounting to ₹ 283.65 lacs (Rs.192.33 lacs + ₹ 91.27 lacs) regarding quality of coal supplied in past have been settled. Hence, the same h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be allowed the claim without such details. Moreover, loss on account of obsolescence could not be allowed after introduction of concept of depreciation on block of assets. As regards loss due to cyclone, fire and flood and sundry debits, no details have been furnished by the assessee despite requirements of this office. Without details assessee's claims cannot be allowed. In view of the above, the assessee s claim of ₹ 2,95,13,000/- under the head extra ordinary items is disallowed and added back to the total income. 6. On appeal, the CIT(A) deleted the addition for Asstt.Year 2006-07 by observing as under: 4.2 I have considered the submissions of the Id. AR and the facts of the case. The disallowance has been made only on the ground that the assessee could not substantiate that it had incurred expenditure of ₹ 353.90 lacs on repairing its assets damaged due to flood. It is seen that the assessee had received financial assistance amounting to ₹ 929 lacs for this purpose. This is evident from the Government of Gujarat Resolution No GUV-1105-2724-K1 dated 4.7.2005 10.10.2005 and 13.10.2005 issued by the Principal Secretary, Energy Petro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood damaged assets amounted to ₹ 186.99 lacs. The C AG has certified the expenditure. No further evidence in this regard would ordinarily be necessary. If, however, it was felt that the expenses were over-stated, an independent enquiry could have been made to ascertain the correct expenses. However, this has not been done. Looking to the circumstances and also the fact that the excess subsidy received has been included in the taxable income, it is held that the AO was not justified in making the addition of ₹ 1,86,99,000/-, which is directed to be deleted. So far as the miscellaneous write off of ₹ 82.93 lacs is concerned, it was submitted as under: The Company has carried out physical verification of material by a specified team as per the standard practices. After completion of physical verification, shortage/excesses of materials were listed out. The detailed reasons of shortage of material were received from respective stores in-charge. Excess material was treated as gain of the materials. However, shortage of material was treated as loss of material after detailed analysis and approved by the Competent Authority. Looking to the no. of transactions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also observed that the accounts of the assessee are audited by C AG, as the assessee is a Government company, and therefore, the disallowance was not justified. We find that the undisputed facts are that the assesseecompany received grant of ₹ 929.00 lakhs from Govt. of Gujarat on account of loss suffered in flood and the said amount was declared as income by the assessee and was also accepted by the Department. 9. Further, the assessee claimed ₹ 353.90 lakhs as actual expenditure incurred on account of damages by flood in the Asstt.Year 2006-07 and ₹ 186.99 in Asstt.Year 2007-08. The assessee also claimed ₹ 82.93 lakhs as Misc. write off in Asstt.Year 2007-08. The AO disallowed the entire amount of loss claimed by the assessee on account of loss due to flood and Misc. write off on the ground that the details of expenditure incurred were not available before him. In our considered view, the fact that the assessee suffered loss has not been disputed by the AO, and therefore, the AO was not justified in disallowing the entire amount of loss claimed by the assessee, and thereby inferring that no actual loss was suffered by the assessee. 10. However, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees should not be disallowed as capital expenditure. In reply the assessee vide letter dated 8.8.2008 stated as under:- The company raised loans from banks and financial institution and offered guarantee for, repayment of loan and interest thereon as security. Moreover, during the year under review, the assets and liability; of erstwhile Gujarat Electricity Board was transferred to the company, which also contained loans raised from banks and financial institutions. The guarantee fees are payable to the state government every year on the outstanding balance of guarantee given to banks / financial institutions on the first day of the year. Therefore, it is submitted that it is not a single one time payment but recurring expenditure till repayment of loans. The company has repaid higher interest bearing loans. For the same the bank charges premium on restructuring of loans. As the same reduces the cost of interest expenditure, it is requested to allow the same as revenue expenditure.'' I have gone through the submission of the assessee. It is clear from the details in this respect that the assessee is going to derive all the benefits in the form of restructurin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has submitted only details without any justification specifically called for. I have gone through the submission of the assessee. It is clear from the details in this respect that the assessee is going to derive all the benefits in the form of restructuring of the debt, rescheduling of repayment schedule, reduction in interest etc. over a long period of time which are in the range of more than 5 years. It means that the assessee will derive advantage of enduring nature as a result of restructuring of loans, therefore, the expenses pertaining to the same in the form of premium for restructuring debts have resulted into advantage or benefit of enduring nature to the assessee. It is pertinent here to mention enduring benefits has been discussed as under - The Honorable Supreme Court has in case of CIT vs. Coal Shipments Pvt Ltd reported in 82ITR 902 has defined Enduring benefit in the following terms - Although and enduring benefit need not be of an everlasting character, it should not at the same time be transitory or ephemeral, so that it can be terminated at any time at the volition of either of the parties. What is the extent durability, or permanence should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of GEB to redeem the bonds and other financial instruments, the same would be made good by the Government of Gujarat. In lieu of this, commission @ 1% of the outstanding value of unsecured loans was charged. Hence the addition of ₹ 20,57,03,000/- may be deleted. 5.2 I have considered the submissions of the Id. AR and the facts of the case. The issue relating to whether an item of expenditure lies in the capital or the revenue field has exercised the courts in numerous cases. From an analysis of such cases a few guiding principles/tests can be identified. One of the important tests for categorizing any expenditure as capital in nature is whether the laying out of the impugned expenditure results in the acquisition or creation of any new asset. Where no such asset is created, it would be indicative of an expenditure which was not capital in nature. Another test relates to the principle of enduring benefit . Enduring benefit may be in the form of long lasting use of an asset or the acquisition of a right to exploit certain commercial processes, etc. In the instant case, the assessee did not acquire any right to exploit a commercial technology or process, and ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of an expenditure, viz., test of bringing into existence an asset, test of enduring benefit, test of fixed and circulating capital, etc. However, the general view is that the test of enduring benefit is not a certain or conclusive test and it cannot be applied without regard to the particular facts and circumstances of each case. It has been generally agreed that where the laying out of such expenditure confers an advantage to the assessee which constitutes of merely facilitating the assessee's trading operations or enabling the management or conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be in the revenue account even though the advantage may endure for the indefinite future. As observed by the Supreme Court in the case of Alembic Chemical Works Co. Ltd. v CIT, 111 ITR 377, the idea of once for all payment and enduring benefit are not to be treated as something akin to statutory conditions; nor are the notions of capital or revenue a judicial fetish. What is capital expenditure and what is revenue are not eternal verities but must needs be flexible so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that it is not in dispute that the amount was paid by the assessee as guarantee commission for unsecured loans. Therefore, respectfully following the decision of the Hon ble Gujarat High Court in the case of Mihir Textile Ltd. (supra), we confirm the order of the CIT(A) and dismiss this ground of the Revenue for both the years under consideration. 20. The ground no.2 of the appeal of the Revenue for the Asstt.Year 2006-07 is also directed against the order of the CIT(A) in deleting the disallowance of premium claim on restructuring of loan of ₹ 172.71 lakhs. The AO disallowed the claim of premium claim on restructuring of loans by holding as under: 4. Guarantee fees and Premium on debt restructuring: During the financial year under consideration the assessee has paid guarantee fees of ₹ 20,57,03,000/- to the Government of Gujarat in consideration of it issuing guarantee for repayment of unsecured loans. Further the assessee has also paid ₹ 1,72,71,000/- as premium on restructuring of loans. The said premium has been paid to the Financial Institutions from whom Loans have been taken. The said premium was paid for restructuring of the loans in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either of the parties. What is the extent durability, or permanence should depend on the facts of each case. The expression Enduring Advantage is a relative term, not enduring in the sense of its being permanent, but is sufficiently durable depending upon the nature of terms upon which it can be acquired. . The above views were again expressed by the Honorable Supreme Court in the case of Devidas Vitthaldas Co. Vs. ClT (1972) reported in 84 ITR 277. Therefore, having regard to that discussion and facts of the case as discussed above, the entire expenditure pertaining to CDR is held as capital expenditure. Accordingly, the total amount of ₹ 22,29,74,000/- as claimed by the assessee on this account and discussed above, is held as capital expenditure and the same is disallowed and added to its total income. 21. The CIT(A) has decided the issue by observing as under: 6.2 I have considered the submissions of the Id. AR and the facts of the case. The courts have been repeatedly called upon to pronounce on the issue of capital vs revenue expenditure. The concurrence of judicial opinion now is that there are a number of tests for determining the nature of an expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restructuring of loan was to reduce the interest burden and the assessee will benefit from the same for a long period of time of more than 5 years, therefore, he disallowed the same by treating it as capital expenditure. 23. On appeal, the CIT(A) deleted the disallowance on the ground that it does not confer any enduring benefit and merely facilitate the assessee s business in more efficient manner. 24. DR relied on the order of the AO. 25. On the other hand, AR of the assessee relied of the decision of the Hon ble Gujarat High Court in the case of DCIT Vs. Gujarat Narmada Valley Fertilizers Ltd., 356 ITR 460 (Guj) wherein it was held that the expenditure incurred by the assessee on restructuring of loan was revenue expenditure. No contrary decision was cited by the learned DR. Therefore, respectfully following the decision of the Hon ble Gujarat High Court in the case of Gujarat Narmada Valley Fertilizers Ltd. (supra), we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. 26. The ground no.3 of the appeal for the Asstt.Year 2006-07 and the ground no.1 of the appeal for the Asstt.Year 2007-08 are directed against the order of the CIT(A) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was made before the due date for filing of return of income. 4.2 I have considered the submission of the A.O. and facts of the case. The delay in this case is of only one day. The General Clauses Act provides that if payment is made on the date following a holiday, the payment would be deemed to have been made within time. Moreover, in AIMIL's case, the Delhi High Court has clearly stated that even in the case of employees' contribution to PF, the delayed payment would qualify for deduction, provided it was deposited before the due date for filing of return. In the instant case, the payment has been made before the prescribed due date for filing the return of income. Accordingly, the disallowance of ₹ 5,23,892/- is directed to be deleted. 29. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the AO disallowed deduction for employees contribution to PF of ₹ 37,31,520/- in Asstt.Year 2006-07 and ₹ 5,23,892/.- in the Asstt.Year 2007-08, as the assessee failed to deposit the contribution with PF authority within the due date prescribed under the PF Act by invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,68,000/- in the Asstt.Year 2006-07 and ₹ 401.16 lakhs in the Asstt.Year 2007-08. 35. The CIT(A) in the Asstt.Year 2006-07 has decided the issue as under: 8.1 Ground No. 5.1 pertains to the treatment by the AO of the provision for gratuity amounting to ₹ 3,68,000/- as unascertained liability and in enhancing the book profit by this amount. 8.1.1 The Id. AR submitted in appeal that, as held by various judicial authorities, if the provision for gratuity was made on acturial valuation, the same should not be considered as unascertained liability but was to be treated as an ascertained one. The assessee computed the quantum of provision for gratuity based on acturial valuation done by LIC of India, a Government owned company. 8.1.2 I have considered the submissions of the Id. AR and the facts of the case. The issue relating to treatment of provision as unascertained liability was considered by the Supreme Court in Bharat Earth Movers, 245 ITR 428. In that case, the issue was of provision for leave encashment. The principle laid down by the Court was that where the liability could be computed along scientific lines and on a scientific basis regularly from year to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee submitted that the issue is covered in favour of the assessee by the decision of the Hon ble Gujarat High Court in the case of DCI Vs. Inox Leisure, 351 ITR 314 (Guj) wherein it was held that the provision of gratuity on the basis of acturial calculation was not to be added back under clause (c) to Explanation-1 below section 115JB of the I.T.Act, 1961. 40. DR could cite any contrary decision. He could not controvert the findings of the CIT(A) that the provision for gratuity in the instant case was made by the assessee on actuarial valuation. Therefore, following the decision o the Hon ble Gujarat High Court in the case of DCIT Vs. Inox Leisure (supra), we dismiss this ground of the Revenue. 41. The ground no.5 in the Asstt.Year 2006-07 is directed against the order of the CIT(A) directing the AO to exclude the amount withdrawn from reserve of ₹ 8990.87 lakhs in the computation of book profit u/s.115B. 42. The CIT(A) has held as under: Ground No. 5.2 relates to disallowance of ₹ 88,90,87,000/-. The AO noted that the assessee had reduced its book profits by the aforesaid amount for the purposes of section 115JB in terms of clause (i) of sec. 115JB (2), Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out the book profits under section 115JB of the IT Act. The learned Assessing Officer has, however, disallowed the said deduction taking the view that the profit loss account of the year under consideration has not been increased by the amount withdrawn from the reserve and has misinterpreted the proviso to clause (i) to Explanation 1 to section 115JB(2) of the IT Act. The appellant invites your honour's reference to the provisions of clause (i) to Explanation -1 to sub-section (2) to section 115JB of the I T Act which provide that the amount withdrawn from reserves and credited to profit loss account shall not be reduced unless the book profits of such year, in which such reserves were created, were increased by the amount transferred to such reserves or provisions (out of which the said amount was withdrawn). From the above, it is clear that only such transfers (from the reserves of earlier years) shall be reduced from the book profits which have already been taxed in earlier years. Thus as explained in preceeding paras, the company has already offered the income for tax in the respective years in which the same was transferred to the Reserves. Out of the same Rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,047.82 1,133.43 212.8 1,413.44 5,556.87 9,119.57 5,505.10 2,500.59 Profit B/F earlier years 15,262.22 14,128.71 13,913.73 12,544.32 15,177.96 7,215.82 2,12,430 Other adjustments 5,207.31 0.08 2.18 -44.03 -8,190.51 -1,157.43 -413.58 -37629 Profit C/F to Balance Sheet 27,517.35 15,262.22 14,128.71 13,913.73 12,544.32 15,177.96 7,215.82 21,243 8.2.3 From the table, it is clear that in the earlier years the reserves had been created after profits earned during the year were credited to the profit and loss account and had duly suffered taxation. It is noteworthy that the profits carried to balance sheet were those profits which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng whether the amount was included in the net profit of the year or not. Before us, copy of the audited profit and loss account was not filed by either of the party. In the absence of the same, we are not in a position to adjudicate the issue completely. We, therefore, in the interest of justice restore this issue back to the file of AO for adjudicating the same afresh after verifying the amount withdrawn from the reserve was credited in the profit loss account of the year, and consequently included the net profit or not. Thus, this ground of the appeal is allowed for statistical purpose. 47. In Asstt.Year 2006-07, the ground no.6 of the appeal is directed against the order of the CIT(A) in directing the AO to recomputed the book profit for MAT by not reducing the claim for depreciation of ₹ 1.75 crores. 48. The CIT(A) has decided the issue as under: 8.3 Ground No. 5.3 relates to the enhancement of the book profits u/s 115JB by reducing the amount of depreciation allowable under clause (ii)(a) of Explanation- 1. The AO noted from the audited annual accounts that the C AG had made a remark to the effect that the profits were under-stated by ₹ 1.75 crores, due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes of depreciation are not applicable to the Part II and Part III of Schedule VI of the Companies Act but are meant only for sections 205 and 350 of the Companies Act which relate to the declaration of dividends and fixation of managerial remuneration respectively. The rates prescribed are only minimum rates and higher/lower rates can be applied after giving suitable notes to the account. The Assessing Officer has no jurisdiction to recast the profit loss account for the purpose of section 115JB of the I T Act and can only make specific adjustments as provided in the Explanation below section 115JB. The appellant invites reference to the Circular No:2 dated 7-3-2009 issued by the Department of Company Affairs which clarified the position that the rates of depreciation prescribed in Schedule XIV could be viewed as minimum rates and that on the basis of a bona-flde technological evaluation, if justified, higher rates of depreciation can be provided with proper disclosure by way of notes forming part of Annual Accounts. It is, therefore, submitted that even depreciation rates higher than the rates prescribed bv the Companies Act are permissible and the Assessing Officer in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a fresh enquiry in regard to the entries made in the books of account of the company. (Underlined emphasized by us). The appellant also invites reference to the Supreme Court decision in case of Malyala Manorama Co. Ltd. vs. Cit, reported at 168 Taxman 471 wherein on similar issue the Supreme Court has affirmed the decision in case ofAppollo Tyres Ltd. (supra). The appellant's case is also squarely covered by the decision of Gujarat High Court in case ofDCIT vs. Vardhman Fabrics (P) Ltd. reported at 122 Taxman 375 wherein the assessee had calculated the depreciation on the plant and machinery at 33.33 per cent as permissible under the Income-tax Rules, 1962 as against 30 per cent depreciation required to be calculated under Schedule XIV of the Companies Act, 1956. The Assessing Officer allowed depreciation but the Commissioner exercised powers under section 263 and held that the rate of depreciation claimed under the Income-tax Rules was in excess of the rate under the Companies Act and that the excess was required to be disallowed. On further appeal to the Tribunal, the Tribunal held that the Circular of the CLB lays down minimum rate of depreciation for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant also invites reference to the decision of IT AT, Bombay in case of Modern Woollen Ltd., vs. DCIT, reported at 47ITD 154. The Gist of the decision is as under : Section 115J of the Income-tax Act, 1961, read-with Parts II and III, of Schedule VI and Schedule XIV to the Companies Act, 1956 - Book profits - Special provisions relating to certain companies - Assessment year 1989-90 - On account of introduction of uniform previous year, assessee- company filed return of income for 18 months from 1-10-1987 to 31-3-1989 declaring a loss - It also furnished computation of book profits for purpose of section 115J which amounted to nil - For computing the booh profits the assessee charged depreciation at lower rates as provided in Schedule XIV to the Companies Act for the period 1-10-1987 to 30-9-1988 while for the later period 1-10-1988 to 31-3-1989 it charged depreciation at higher rates as provided in the Income-tax Rules - Assessing Officer calculated depreciation at lower rates according to Schedule XIV and determined at 30 percent of book profit atRs. 47,43,691 - Whether the assessee had discretion to provide higher rates of depreciation than those laid down in Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the submissions of the Id. AR and the facts of the case. Section 115JB (2) provides that - Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956(1 to 1956): Provided that while preparing the annual accounts including profit and loss account, - (i) the accounting policies; , (u) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): (Emphasis supplied) Thus, what is material for the purposes of section 115JB is not the profit loss account prepared in terms of the Income-tax Act but that prepared in terms of Schedule-VI of the Companies Act. Part-II of Schedule-VI lays down the requirement as to profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of depreciation and the company could claim higher depreciation on the basis of a bonafide technological evaluation and proper disclosure thereof in the notes forming part of annual accounts. In the instant case, from the facts as above, I am of the opinion that the assessee has complied with the provisions contained in Schedule-VI to the Companies Act read with Schedule-XIV and Circular dt. 7.3.2009 of the Department of Company Affairs. Hence the AO's action in reducing the claim of depreciation under item (ii)(a) by ₹ 1.75 crores is held to be unjustified. The AO is directed to recompute the book profit for MAT by allowing the depreciation claimed. 49. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the AO noted from the audited annual accounts that C AG has made a remark that the profit was understated by ₹ 1.75 crores due to higher claim of depreciation on this account. On a show cause notice issued by the AO, the assessee submitted that rate of depreciation was claimed as per the Central Electricity Regulatory Commission s guidelines. However, this explanation was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of ₹ 1,13,55,000/- out of interest expenditure considering the same as attributable to exempt dividend income by invoking the provisions of section 14A of the IT Act. 53. The CIT(A) has decided the issue as under: 5. Ground No. 3 relates to the disallowance of ₹ 1,13,55,000/- under Section 14A. It was noticed by the A.O. that the assessee had declared tax-free income amounting to ₹ 41,32,000/-, being dividend. Following the decision of the ITAT, Mumbai, ITA No. 8057/MUM/2003 in the case of Daga Capital Management Pvt. Ltd., the disallowance under Section 14A read with rule 8D was quantified at ₹ 113.55 lacs. 5.1 In appeal, the ratio in the case of Daga Capital Management Pvt. Ltd. was sought to be distinguished and it was submitted that on similar facts, no disallowance was made in the earlier years. It was further submitted that without prejudice to the assessee's claim that Section 14A was not applicable in its case, the A.O. had made a computational error while working out the quantum of disallowance. It was stated that the interest has been wrongly taken as ₹ 26,795.12 lacs whereas the correct figure should be ₹ 5,195.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITO Vs. Daga Capital Management Pvt. Ltd., 117 ITD 169 (Mum)(SB) and restored the matter back to the file of the AO to adjudicate the issue afresh as per the guidelines of the Hon ble Bombay High Court. He submitted that the directions given by the CIT(A) should be modified accordingly. 57. We find that the AR could not point out any specific error in the order of the CIT(A) which was purportedly passed following the decision of the jurisdictional High Court. The only submission of the AR is to follow the decision of the Tribunal and of the Hon ble Bombay High Court.It is not the case of the assessee that the CIT(A) has not correctly followed the decision of the Hon ble jurisdictional High Court. We find that once the Hon ble jurisdictional High Court has decided the issue then that decision has to be followed in preference over the decision of the Tribunal or of any other High Courts. Thus, we do not find any error in the order of the CIT(A), therefore, this ground of appeal of the assessee is dismissed. 58. The ground no.2 of the appeal of the assessee for the Asstt.Year 2007-08 is directed against the order of the CIT(A) confirming the disallowance out of extra ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on restoration of the coal handling plant. The fact that the assessee has not claimed the entire expense in one year, clearly shows that the expenses were capital in nature. Accordingly, I hold that the A.O. has correctly disallowed the write off of this amount. The action of the A.O. is confirmed. Since this has been considered as capital expense, the A.O. is directed to allow depreciation in respect of the capitalized amount incurred on restoration of coal handling plant. 60. We have considered rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the AO disallowed the deduction of ₹ 25.21 lakhs on account of sundry debits, which was on account of writing off of the deferred revenue expenditure for the reason that no details were submitted by the assessee, and therefore, he could not verify the same. 61. On appeal before the CIT(A), it was submitted that the amount of ₹ 25.21 lakhs represents 1/5th of the expenditure written off during the year which related to expenditure for restoration of the coal handling plant at Sikka, dist. Jamnangar. The CIT(A) confirmed the disallowance on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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