TMI Blog2014 (9) TMI 1156X X X X Extracts X X X X X X X X Extracts X X X X ..... l in assessee's own case in assessment year 2008-09 (supra) and the applicability of the said provisions has been upheld. AO directed to recompute the disallowance under section 14A read with Rule 8D(ii) of the IT Rules by following our directions in the order relating to assessment year 2008-09 and in respect of netting of interest - However, the disallowance under Rule 8D(iii) is to be computed in line with the provisions of the Act i.e. ½ % of the average of the value of investment and not at the closing value of the investments. Rate of Depreciation on Wind Turbine Generator - Held that:- the power evacuation infrastructure facility is part and parcel of the windmill though partly owned by the assessee on which the assessee is entitled to the claim of depreciation at the same rate on which depreciation was allowed on the windmill. Further the assessee is also entitled to the claim of depreciation at higher rate on the transmission lines which again are part and parcel of the windmill. - ITA No. 345/CHD/2013, C.O. No. 13/CHD/2013 - - - Dated:- 19-9-2014 - SHRI T.R. SOOD ACCOUNTANT MEMBER AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER For the Department- Shri Subhash Aggar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the disallowance. 6. That the learned CIT(A)-II has erred in not giving any finding in respect of charging of interest u/s 234B of the IT Act. 4. The issue in ground No. 1 raised by the assessee is against the disallowance under section 36(1)(iii) of the Act. 5. The brief facts relating to the issue are that the assessee had purchased land at village More Karima and Shekh Pura during the earlier years. The total investment in the land was ₹ 4.78 Cr. The Assessing Officer noted that the assessee during the year under consideration had received loans of ₹ 31.60 Cr on which the interest liability was ₹ 3.77 Cr. The land had not been put to use and in view thereof, the Assessing Officer invoked the provisions of section 36(1)(iii) of the Act and made a disallowance of ₹ 57,36,000/-. Further disallowance under section 36(1)(iii) of the Act was made on account of the interest relatable to the building under consideration at Ayali Kalan. The disallowance of ₹ 593,348/- was made and total disallowance of ₹ 63,59,348/- was made. 6. The Commissioner of Income Tax (Appeals) after considering the submissions of the assessee that no fresh invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 288 294 respectively. The Hon'ble Supreme Court have allowed the appeal of the assessee against the disallowance of interest under section 36 (1) (iii) of the Act in view of the profits earned by the assessee against which interest free loan of ₹ 5 lacs being advanced to the sister concern. In view of the ratio laid down by the Hon'ble Supreme Court in the case of Munjal Sales Corporation Vs. CIT (supra) we find no merit in the pleadings of the learned D.R. for the Revenue placing reliance on the ratio laid down by the Hon'ble Punjab Haryana High Court, which have been reversed by the Hon'ble Supreme Court. 12. In the facts of the present case where loan of ₹ 5 lacs has been advanced during the year under consideration and the balance loan having been advanced in the earlier years, where no disallowance was made out of interest expenditure and the assessee having established the availability of the non interest bearing funds, we are in conformity with the order of the CIT (Appeals). The ground No.1 raised by the Revenue is thus dismissed. 10. We find that the issue before the Tribunal was in relation to the investment made in the purchase of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 3.77 Cr. The assessee was show caused to explain why the expenditure in relation to the investment, income from which was exempt from tax, should not be added back to the income of the assessee in view of the provisions of section 14A of the Act read with Rule 8D of IT Rules. The Assessing Officer, after elaborating upon the issue and the provisions of the Act, made disallowance of ₹ 55,65,935/- on account of interest being relatable to such investment, income from which was exempt from tax under Rule 8D(ii) of the Rules and further made a disallowance of ₹ 11,98,375/- under Rule 8D(iii) of the IT Rules. The total disallowance worked out by the Assessing Officer was ₹ 67,64,310/-. 15. The Commissioner of Income Tax (Appeals) in view of the ratio laid down by the Tribunal in assessee's own case relating to assessment year 2008-09 (supra) and also the ratio laid down by the Hon'ble Bombay High Court in M/s Godrej Boyce Manufacturing Co. Ltd. Vs DCIT 328 ITR 51 (Bom) applied the provisions of section 14A of the Act and also made reference to other decisions. The Assessing Officer was thus, directed to recompute the disallowance under section 14A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are clearly applicable. Similar issue of disallowance under section 14A of the Act read with Rule 8D of the Rules arose before the Tribunal in assessee's own case in assessment year 2008-09 (supra) and the applicability of the said provisions has been upheld. In view thereof, we find no merit in the ground of appeal No. 1 and 2 raised by the assessee. 21. Now the second contention raised by the assessee is in respect of the interest disallowance. The perusal of the appellate order reflects that before the Commissioner of Income Tax (Appeals), the assessee had contended that calculation made by the Assessing Officer with regard to the disallowance under Rule 8D was not correct and it was submitted as under : 4.9 The appellant has contended that the calculation made by the AO with regard to the disallowance under Rule 8D is not correct. In this regard the appellant had submitted that while making the disallowance of interest the total assets had been taken after reducing the current liability and provisions from current assets. Further the interest incurred on term loans taken for specific purposes have also been included in total interest while apportioning the same toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working out the disallowance. We find merit in the plea of the assessee as the similar ratio has been laid down by the Tribunal in Shri Shiv Parshad Agarwal Vs ACIT in ITA No. 927/Chd/2012 relating to assessment year 2009-10. The Tribunal vide order dated 27.03.2014 observed as under : 8. We have heard the rival contentions and perused the record. The assessee is the sole proprietor of M/s Saligram Shiv Parshad and is carrying on the business of consignment agent of M/s Tata Steels Ltd. In addition to the business income declared by the assessee at ₹ 2.13 Cr, the assessee has declared salary income from M/s Aarti Steels at ₹ 61,69,515/-. The assessee has also declared interest income earned from M/s Aarti Steels Ltd. at ₹ 118,29,523/- against which it has claimed the expenditure of interest at ₹ 77,72,910/-. The said interest income and interest expenditure has been declared under the head income from other sources in the computation of income filed for the year under consideration placed at pages 8 to 10 of the Paper Book. On the other hand, the assessee had shown investment of ₹ 13.45 Cr in the shares and mutual funds, which the assessee claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation on power evacuation infrastructure facility and also on the transmission lines. The plea of the assessee was that the said power evacuation infrastructure facility was part and parcel of the windmill, which could not run without the same. The assessee claimed to have made payments to Suzlon Energy Ltd. for becoming part owner of the said facility alongwith other persons who were utilizing the said facility. The assessee had claimed depreciation on the said part ownership as the facility was set up by Suzlon Energy Ltd. jointly for group of windmills, as it was not viable to set up independent power evacuation infrastructure facility for each and every individual owner of the windmill. It was also certified by Suzlon Energy Ltd. that the ownership of the said asset has been transferred to the assessee and no depreciation was claimed by them on the said power evacuation infrastructure facility. The confirmation from Suzlon Elergy Ltd. has been reproduced by the CIT (Appeals), copy of which is filed by the assessee during the course of hearing, which reads as under: This has reference to your query seeking clarification with regards to costs borne by you on setting up of Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing system or controlling/monitoring system, it cannot be treated as an independent machinery and not part of the integrated machinery. The submission of the learned counsel is that if the machinery installed at the first stage of installing the windmill itself, the claim of the assessee would have been allowed. Merely because for some reason or other it was subsequently installed does not mean that it is not a part of the machinery as such. Since the machinery had no independent functioning, we are of the view that the claim of the assessee is to be allowed. Coming to the payment made to GEDA, we are of the view that the decision of the Hon'ble Calcutta High it in the case of Birla Jute Manufacturing Ltd (Supra) is clearly applicable. In case of Excel Industries Ltd (Supra), the Hon'ble Bombay High Court held; payment made for overhead service line, which remained the property of tricky Board is allowable as revenue expenditure. On facts, in the instant case tie assessee, the payment to GEDA is to be allowed in the light of this decision of the jurisdictional High Court. Hence, appeal by the assessee with regard to l,2,3, and 4 are allowed 31. The Pune Bench of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land. Accordingly, this limited issue is restored to the file of the AO with the directions to verify the facts and in case the borrowed amount has been utilised for the purpose of purchase of the land, then to disallow the depreciation on the capitalized interest to that extent. We direct accordingly. 33. In the present facts and circumstances of the case where the assessee is part owner of power evacuation infrastructure facility, the assessee is entitled to claim depreciation on the said asset. Under the provisions of section 32 of the Act, depreciation is allowable on the asset whether owned wholly or partly by the assessee but the condition is that the same should be used for the purposes of business. In view of the ratio laid down by the Pune Bench of the Tribunal in Poonawala Finvest Agro P. Ltd. Vs. ACIT (supra), the Mumbai Bench of the Tribunal in Trumac Engineering Co. Pvt. Ltd. Vs. Income Tax Officer (supra) and the Ahamedabad Bench of the Tribunal in ACIT(OSD) Vs. Parry Engineering Electronics P. Ltd. (supra), we hold that the power evacuation infrastructure facility is part and parcel of the windmill though partly owned by the assessee on which the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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