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Assistant Commissioner of Income-Tax Versus Tata Metalics Ltd. and Vice Versa

2016 (6) TMI 245 - ITAT KOLKATA

Disallowance of deduction under section 80-IA - Held that:- This issue involved is squarely covered in favour of the assessee, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 wherein the similar claim of the assessee for deduction under section 80-IA in respect of captive power units has been allowed by the Tribunal relying on the various judicial pronouncements as well as the CBDT instruction No. 1116. .....

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n of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 wherein the similar amount of incentive received by the assessee-company under the same scheme of the West Bengal Government has been held to be capital in nature not chargeable to tax. Respectfully following the said decision of the Tribunal, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue - Decided in fa .....

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essee-company not set off with the profit of another unit which is eligible for the deduction u/s 80IA - Decided in favour of assessee

Disallowance under section 14A - Held that:- As regards the disallowance under section 14A on account of common and general expenses, it is observed that the co-ordinate Bench of this Tribunal has taken a consistent stand on this issue in several cases by holding that a disallowance to the extent of 1 per cent. of the exempt income would be fair and re .....

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Addition made to the book profit computed under section 115JB of the Act on account of disallowance of expenses incurred by the assessee in relation to the earning of exempt income under section 14A - Held that:- In the case of Goetze (India) Ltd. (2009 (5) TMI 615 - ITAT DELHI ), wherein the similar addition made to the book profit of the assessee-company computed under section 115JB on account of disallowance of expenses made under section 14A was held to be unsustainable by the Tr .....

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hon'ble Gauhati High Court in the case of CIT v. Bongaigaon Refinery and Petro-chemicals Ltd. [1996 (6) TMI 64 - GAUHATI High Court] as held that the amount incurred by the assessee for construction of railway sidings and track outside the refinery complex was a revenue expenditure in the year in which it was incurred since the said expenditure did not result in bringing into existence any capital asset for the assessee - Decided in favour of assessee

Disallowance u/s 14A - Held that .....

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s been recorded by the learned Commissioner of Income-tax (Appeals) that the foreign tour undertaken by the employees of the assessee-company to participate in the said convention was for the purpose of its business and the expenditure incurred on such travel was an allowable expenditure. At the time of hearing before us, the learned Departmental representative has not been able to rebut or controvert the finding recorded by the learned Commissioner of Income-tax (Appeals) in this regard - Decid .....

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and 2008-09 and since the same involve some common issues, they have been heard together and are being disposed of by a single consolidated order for the sake of convenience. 2. First we shall take up the cross appeals for the assessment year 2005-06 being I. T. A No. 737/Kol/2012 (assessee's appeal) and I. T. A No. 956/Kol/ 2012 (Revenue's appeal), which are directed against the order of the learned Commissioner of Income-tax (Appeals)-I, dated March 1, 2012. 3. In the first and second .....

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n October 30, 2005, declaring a total income of ₹ 86,56,89,360. In the said return, deduction of ₹ 8,52,83,712 was claimed by the assessee under section 80-IA in respect of one of its two power generating units, namely, turbine power generating unit. During the course of assessment proceedings, it was noticed by the Assessing Officer that the entire power generated by the said unit is consumed by the pig iron manufacturing unit of the assessee- company. According to him, the assessee .....

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e Madras High Court in the case of Tamilnadu Petro Products Ltd. v. Asst. CIT [2011] 338 ITR 643 (Mad) ; [2011] 51 DTR 67 (Mad), wherein it was held that the assessee is entitled to deduction under section 80-IA in respect of notional income from generation of electricity, which was captively consumed by itself. He also relied on the CBDT's instruction No. 1116 clarifying that the deduction under section 80-IA is available to captive power generating unit. The learned Commissioner of Income- .....

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olved in ground Nos. 1 and 2 of the Revenue's appeal is squarely covered in favour of the assessee, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 rendered, vide its order dated October 23, 2009, in I. T. A. Nos. 752 and 785/Kol/2008, wherein the similar claim of the assessee for deduction under section 80-IA in respect of captive power units has been allowed by the Tribunal relying on the vari .....

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tion of the nature of sales tax remission amount received as subsidy, whether capital or revenue. 7. During the year under consideration, the assessee-company had received a sum of ₹ 11,61,154 under the sales tax remission arrangement as incentive for expansion/modernisation carried out by it. The said incentive was granted under the West Bengal Incentive Scheme, 1983, in respect of industrial units of large and medium scale, set up in the State of West Bengal. In the return of income, thi .....

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xplained by the assessee before the Assessing Officer that the subsidies in the form of sales tax remission were directly related to expansion of the undertaking, sales, investment of fixed capital and the same, therefore, was a receipt of capital in nature. This stand of the assessee was not found acceptable by the Assessing Officer. According to him, the sales tax remission granted by the West Bengal Government was not capital in nature since there was no stipulation in the scheme that the amo .....

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received by the assessee under the West Bengal Incentive Scheme for expansion of capacity, modernisation and improving the marketing capabilities to tide over the crisis for promotion of industry in the State was capital in nature. The learned Commissioner of Income-tax (Appeals) also relied on the decision of the Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 rendered, vide its order dated October 23, 2009, wherein a similar issue was decided by the Tribun .....

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009 (supra), wherein the similar amount of incentive received by the assessee-company under the same scheme of the West Bengal Government has been held to be capital in nature not chargeable to tax. Respectfully following the said decision of the Tribunal, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue and dismiss grounds Nos. 3 and 4 of the Revenue's appeal. 9. The solitary issue involved in the appeal of the asse .....

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hment and the said amount was added back in the computation of total income as per clause (f) of section 43B as the same was not paid before the due date of filing of the return of income for the year under consideration. During the course of appellate proceedings before the learned Commissioner of Income-tax (Appeals), the assessee, however, raised an additional ground claiming deduction on account of leave encashment on provision basis. Although the said additional ground was admitted by the l .....

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heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that the similar issue had come up for consideration before the co-ordinate Bench of this Tribunal in the case of Deputy CIT v. BLA Industries P. Ltd. (I.T.A. No. 1434/Kol/2012 dated January 16, 2015) [2016] 6 ITR (Trib)-OL 392 (Kol) and after taking note of the interim orders passed by the hon'ble Supreme Court in the case of Exide Industries Ltd., the Tribunal res .....

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7 being I. T. A. No. 738/Kol/2012 (assessee's appeal) and I. T. A. No. 957/Kol/ 2012 (Revenue's appeal), which are directed against the order of the learned Commissioner of Income-tax (Appeals)-I, dated March 1, 2012. 13. As regards grounds Nos. 1 and 2 raised by the Revenue in its appeal for the assessment year 2006-07, it is observed that the issue involved therein relating to the assessee's claim for deduction under section 80-IA in respect of its captive power units is similar to .....

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volved in ground No. 3 of the Revenue's appeal is whether the loss of one eligible unit is required to be set off against the profit of other eligible unit for the purpose of computing deduction under section80-IA. 15. During the year under consideration, one of the two captive power plants, namely, diesel generating power unit had suffered a loss, whereas the other captive power plant, namely, turbine generating power unit had earned profit. In the return of income, the assessee-company had .....

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ose of computing deduction under section 80-IA. The learned Commissioner of Income-tax (Appeals), however, did not approve this stand of the Assessing Officer by relying on the decision of his predecessor in the assessee's own case for the assessment year 2003-04, wherein a similar issue was decided in favour of the assessee and the said decision was accepted by the Department by not raising this issue in the appeal filed before the Tribunal for the assessment year 2003-04. 16. We have heard .....

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cided by the learned Commissioner of Income-tax (Appeals) in favour of the assessee in the assessee's own case for the assessment years 2005-06, 2007-08 and 2008- 09 and the Department has accepted the same by not raising this issue in the appeals filed before the Tribunal for the said years. Following the decision of the hon'ble Delhi High Court in the case of Dewan Kraft System P. Ltd. [2008] 297 ITR 305 (Delhi) and keeping in view the principle of consistency, we uphold the impugned o .....

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rores made in the shares of Rallies India Ltd. and the same was claimed to be exempt from tax. No disallowance on account of expenses incurred in relation to the earning of said exempt income, however, was made by the assessee as required by the provision of section 14A, on the ground that no expenditure attributable to the earning of dividend income was incurred. This stand of the assessee was not found acceptable by the Assessing Officer. According to him, the common or general expenses, such .....

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ee out of interest-bearing funds. On appeal, the learned Commissioner of Income-tax (Appeals) deleted the disallowance made by the Assessing Officer on account of interest after having found that the investment in shares was entirely made by the assessee out of its own funds and the borrowed funds were not utilised for making such investment. As regards the disallowance made under section 14A by the Assessing Officer to the extent of 0.5 per cent. of the common and general expenses, the learned .....

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t is observed that the disallowance made by the Assessing Officer under section 14A on account of interest amounting to ₹ 8,00,000 has been deleted by the learned Commissioner of Income-tax (Appeals) after having found that the investment in shares was made by the assessee-company out of its own funds and the borrowed funds were not utilised for making such investment. At the time of hearing before us, the learned Departmental representative has not been able to rebut or controvert this fi .....

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x (Appeals) in his impugned order has followed this stand consistently taken by the Tribunal while restricting the disallowance under section 14A on account of common and general expenses to 1 per cent. of the exempt income, we find no infirmity in the same. Accordingly, the impugned order of the learned Commissioner of Income-tax (Appeals) restricting the disallowance made by the Assessing Officer under section 14A to ₹ 34,750 is upheld thereby dismissing ground No. 4 of the Revenue's .....

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ur conclusion drawn on the similar issue in the assessment year 2005-06, we restore this issue to the file of the Assessing Officer for deciding the same afresh as per the same direction as given in the assessment year 2005-06. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes. 21. Now, we take up the cross appeals for the assessment year 2007-08 being I. T. A. No. 739/Kol/2012 (assessee's appeal) and I. T. A. No. 958/Kol/ 2012 (Revenue' .....

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-IA is similar to the one involved in ground Nos. 1 and 2 of the Revenue's appeal for the assessment year 2005-06 which has already been decided by us in the foregoing portion of this order. Following our conclusion drawn on the similar issue in the assessment year 2005-06, we dismiss grounds Nos. 1, 2 and 3 of the Revenue's appeal for the assessment year 2007-08. 23. As regards grounds Nos. 4 and 5 of the Revenue's appeal and ground No. 2 of the assessee's appeal for the assessm .....

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l as ground No. 2 of the assessee's appeal. 24. In ground No. 6 of its appeal for the assessment year 2007-08, the Revenue has challenged the action of the learned Commissioner of Income-tax (Appeals) in directing the Assessing Officer to delete the addition of ₹ 6,43,924 made to the book profit computed under section 115JB of the Act on account of disallowance of expenses incurred by the assessee in relation to the earning of exempt income under section 14A. 25. While computing the bo .....

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e disallowance so made under section 14A amounting to ₹ 6,43,924 while computing the income of the assessee under the normal provisions of the Act was restricted by the learned Commissioner of Income-tax (Appeals) to ₹ 30,000, he held that the amount of disallowance so sustained, however, could not be added while computing the book profit of the assessee-company under section 115JB as the disallowance so sustained at 1 per cent. of the exempt dividend income was on notional basis, wh .....

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1 to section 115JA. 26. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the learned representatives of both the sides, this issue involved in ground No. 6 of the Revenue's appeal for the assessment year 2007-08 is squarely covered, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the case of Goetze (India) Ltd. (supra), wherein the similar addition made to the book profit of the assessee-company co .....

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smiss ground No. 6 of the Revenue's appeal. 27. In grounds Nos. 7 and 8 of its appeal for the assessment year 2007-08, the Revenue has challenged the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition of ₹ 3,15,00,000 made by the Assessing Officer by way of disallowance of expenditure incurred on railway sidings. 28. During the year under consideration, the assessee-company, as per the understanding entered into with the Konkan Railway Corporation Ltd., .....

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eing revenue expenditure by placing reliance, inter alia, on the decision of the hon'ble Supreme Court in the case of CIT v. Associated Cement Companies Ltd. [1988] 172 ITR 257 (SC). This claim of the assessee was not found acceptable by the Assessing Officer. According to him, the expenditure of ₹ 3.50 crores incurred by the assessee was going to give enduring benefit of ten years. Accordingly, he allowed the expenditure in question incurred by the assessee on railway sidings only to .....

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which were to belong to and be maintained by the municipality was deductible in computing the business profit since the installation and accessories were assets of the municipality and not of the assessee and the expenditure did not result in bringing into existence any capital asset for the company. The learned Commissioner of Income-tax (Appeals) also relied on the decision of the hon'ble Gauhati High Court in the case of CIT v. Bongaigaon Refinery and Petro-chemicals Ltd. [1996] 222 ITR .....

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hon'ble Supreme Court in the case of Associated Cement Companies Ltd. (supra) that the amount incurred by the assessee for construction of railway sidings and track outside the refinery complex was a revenue expenditure in the year in which it was incurred since the said expenditure did not result in bringing into existence any capital asset for the assessee. Respectfully following the said decision of the hon'ble Gauhati High Court in the case of CIT v. Bongaigaon Refinery and Petro-che .....

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n provision basis is similar to the one in ground No. 1 of the assessee's appeal for the assessment year 2005- 06, which has already been decided by us in the foregoing portion of this order. Following our conclusion drawn on the similar issue in the assessment year 2005-06, we restore this issue to the file of the Assessing Officer with the similar direction. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes. 31. Now, we shall take up the c .....

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ation of captive power units is similar to the issue involved in ground No. 1 of the Revenue's appeal for the assessment year 2005-06, which has already been decided by us in the foregoing portion of this order allowed by the Tribunal relying on the various judicial pronouncements as well as following our conclusion drawn the said decision on a similar issue in the assessment year 2005-06, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) allowing the claim of .....

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guments of both the sides on this issue and also perused the relevant material available on record. It is observed that this issue relating to the disallowance under section 14A to the extent interest is similar to the one involved in the appeals for the earlier years, i.e., the assessment years 2006-07 and 2007-08, wherein the orders of the learned Commissioner of Income-tax (Appeals) deleting the disallowance made by the Assessing Officer on account of interest under section 14A has been uphel .....

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ssing Officer under section 14A on account of common and general expenses, the learned Commissioner of Income-tax (Appeals) held that rule 8D of the Income- tax Rules being made applicable to the assessment year 2008-09, such disallowance is required to be made to the extent of 0.5 per cent. of average value of investment as per the said Rule. Accordingly, the disallowance made by the Assessing Officer under section 14A on account of common and general expenses to the extent of ₹ 2,91,260 .....

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tion raised by her is that while computing such disallowance, investment which yielded dividend income during the year under consideration only should be considered. Since this contention of the learned counsel for the assessee is duly supported by the decision of the co-ordinate Bench of this Tribunal in the case of REI Agro Ltd. v. Deputy CIT reported in [2013] 144 ITD 141, we modify the impugned order of the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing O .....

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it is observed that the issue involved relating to the sales tax incentive subsidy is similar to the one involved in grounds Nos. 3 and 4 in the appeal of the Revenue for the assessment year 2005-06, which has already been decided by us in the foregoing portion of this order. Following our conclusion drawn on the assessment year 2005-06, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue and dismiss grounds Nos. 6 and 7 o .....

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assessee-company to Pattaya. In this regard, the explanation offered by the assessee that the said visit was for attending Tata Quality Management Convention held at Pattaya was not found acceptable by the Assessing Officer as, according to him, Pattaya was a world famous tourist spot, where no business related activities could take place. The learned Commissioner of Income-tax (Appeals), however, did not agree with this stand of the Assessing Officer and deleted the disallowance made by the As .....

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such convention organised at Pattaya was allowable business expenditure. 39. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that after taking into consideration the nature and purpose of Tata Business Excellence Convention organised at Pattaya, a finding has been recorded by the learned Commissioner of Income-tax (Appeals) that the foreign tour undertaken by the employees of the assessee-company to participa .....

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