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2019 (5) TMI 540

8 - ITAT AHMEDABAD] to be decided in favour of assessee Disallowance of additional depreciation - used less than 180 days - entire plant and machinery was on lease - HELD THAT:- As decided in assessee's own case [2019 (5) TMI 458 - ITAT AHMEDABAD] it is an undisputed fact that the assessee is engaged in the manufacturing business as well as in the business of leasing. Therefore the condition imposed under section 32(iia) of the Act gets fulfilled for claiming the additional depreciation. While claiming the deduction under Section 32(1)(iia) of the Income-tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture or production of any article or thing. Considering relevant provisions of Section 32(1)(iia) which was prevailing at the relevant time, i.e. during the year under consideration, it cannot be said that the ITAT by applying the ratio of decision of VTM Ltd. [2009 (9) TMI 35 - MADRAS HIGH COURT] and Hi Tech Arai Ltd. [20 .....

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Circle -1, Ahmedabad & DCIT, Circle - 1(1)(1), Ahmedabad for the Assessment Years 2011-12 & 2012-13 respectively. ITA No.1247/Ahd/2016 for A.Y. 2011-12: 2. The instant appeal filed by the revenue with the following grounds: 1. The CIT(A) has erred in law and in facts in deleting the disallowance made u/s 40(a)(i) in respect of consultancy and supervision charges of ₹ 71,43,952/-. 2. The CIT(A) has erred in law and in facts in deleting the disallowance made on additional depreciation of ₹ 1,53,74,316/-. 3. The CIT(A) has erred in law and in facts in deleting the addition made on account of unutilized CENVAT Credit of ₹ 23,64,484/-. On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent' mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. Ground No.1 3. This ground relates to the order p .....

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Bench as relied upon by the Learned Senior Counsel appearing for the assessee. The relevant portion thereof is as follows: 17. The 1st issue raised by the Revenue is that learned CIT (A) erred in deleting the addition made by the AO for rupees 87,57,593.00 on account of non-deduction of TDS under section 195 read with section 40(a)(i) of the Act. 18. At the outset, we note that the issue raised is identical to the issue raised by the Revenue in ITA 539/Ahd/2018 which we have decided against the Revenue and in favor of the assessee vide Paragraph No. 14 of this order. Therefore respectfully following the same we do not find any reason to disturb the finding of the learned CIT-A. Hence the ground of Revenue s appeal is dismissed. We find no reason to deviate from decision taken by the Co-ordinate Bench as narrated above and respectfully relying upon the same we confirm the order passed by the authorities below. The revenue s appeal is found to be devoid of any merit and thus dismissed. Ground No.2 7. The second ground relates to deletion of disallowance of additional depreciation of ₹ 1,53,74,316/-. 8. The assessee-company had purchased plant and machinery of ₹ 153,743,1 .....

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equired to be engaged in the business of manufacture or production of any article or thing and it is not necessary whether new machinery is used for the business of manufacture or production. 22. Further, it is also important to note that assessee is engaged in manufacture or production and on this account also assessee is eligible for the additional depreciation. 23. The assets have been used in the business of leasing the assets of the assessee. Accordingly, the assessee is eligible for additional depreciation. 24. However, AO disregarded the contention of the assessee by holding that the assets were used in the business of leasing and not in the business of manufacture. Thus the assessee is not entitled to the additional depreciation. 24.1 Thus the AO after having a reliance on the judgment of Hon ble Gujrat high court in case of Bhagwati Appliances vs. ITO (337 ITR 286) added ₹ 85,75,341/- to the total income of the assessee. 25. Aggrieved assessee preferred an appeal to ld. CIT-A, who deleted the addition made by the AO following the co-ordinate bench order in the case of Heavy Metal and tubes Ltd in ITA no. 1951/A/2011. The ld. CIT-A also relied on the judgment of Hon b .....

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ile claiming the deduction under Section 32(1)(iia) of the Income-tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture or production of any article or thing. Considering the aforesaid facts and circumstances and considering the relevant provisions of Section 32(1)(iia) of the Income-tax Act, which was prevailing at the relevant time, i.e. during the year under consideration, it cannot be said that the ITAT by applying the ratio of decision of the Madras High Court in the case of VTM Ltd. (Supra) and in the case of Hi Tech Arai Ltd. (Supra) has committed any error in deleting the addition of ₹ 1,17,98,030/- on account of disallowance of additional depreciation of Wind Electric Generator. 3. We see no reason to interfere with the impugned judgment and order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and .....

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/- on account of unutilized CENVAT credit. 12. During the course of assessment proceeding on explanation of column No. 22(a) of 3CD Report, it revealed that the appellant shown unutilized CENVAT credit at the end of the year totaling to ₹ 23,64,484/-. If further revealed that the appellant has been following exclusive method for accounting CENVAT as against inclusive method mandated under section 145A of the Act, the specific quarry, therefore, was raised by the Learned AO. However, the explanation rendered by the assessee was not found suitable and Learned AO made addition of the said amount being utilized CENVAT to the total income of the assessee. During the appellate proceeding, the appellant submitted as follows before the first appellant authority: 6.2 Appellant during the course of appellate proceedings, contended as under: 3] The ld.AO was completely in error on facts and in law in making an impugned addition for the alleged unutilized Cenvat Credits of ₹ 23,64,484/- by not appreciating the submission made by the Appellant in reply dt.06.01.14 vide para-1 in right perspective which was although reproduced in the assessment order but however, the ld. AO completel .....

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count 23,61,721 Booking of Output tax liability to respective payable account: Sales Account Dr.(Excise / service tax liability portion) - 23,61,721 To Cenvat payable Account - 23,61,721 Utilization of Cenvat receivable amount against output tax liability: Cenvat payable Account Dr. - 23,61,721 To Cenvat receivable Account - 23,61,721 Now, the accounting as drawn and explained above means that only the Cenvat credit (totaling to ₹ 47,26,205/-) which has actually been utilized to the extent for output tax liability (arising out of Sales to the tune of ₹ 23,61,721/-) and the remainder of Cenvat which has been actually availed but not utilized were shown as carried forward balance of Loans and Advances in the Balance Sheet as on 31/03/2011. Further, the Appellant would like to reiterate the fact that the provisions of Section 145A of the Income Tax Act, 1961 cannot be linked with the accounting precedence. Since, the Appellant has to draw your kind attention to the fact that the statement No. 12 stating particulars in Form 3CD for clause 22(a) gives the reconciliation effect on profitability by following inclusive method and giving the effect of Cenvat taxes by following t .....

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Companies Act, 1956 and is being consistently followed from year to year. The credit so available is accounted for in the books which is debited when credit is available/availed of and credited when excise duty liability is paid off utilizing the balance available in this regard. On examination of profit and loss account it is found that the appellant has not claimed this expenditure in Profit and Loss account and therefore appellant has opted for exclusive method so to say purchase and sale are debited/credited without the amount of VAT. The result of which either debit or credit is considered as a balance sheet item. This method is consistently followed by the appellant this is admitted position of fact that the amount of VAT paid by appellant is not included in cost of purchase and the same was not debited in P & L account. Further u/s 145A in determining the profit the cost of inventory should comprise all cost of purchase, cost of conversion, and other cost incurred in bringing inventories to their present location and condition. The section further provide that the cost of purchase consist of purchase price including duties and taxes(other than those subsequently recovera .....

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se Act and the IT Act leading to contrary positions under both the statutes and in the facts of the present case, even on application of the general principles, the addition sought to be made by Revenue cannot be sustained. Further, it is held that making of an entry or absence of an entry cannot determine rights and liabilities of parties. In other words, Hon'ble High Court held that if the law does not lead to incurring of a liability, or does not lead to a corresponding right to insist for discharging such a liability any accounting practice (even if suggested by the ICAI) cannot lay down anything to the contrary. Hon'ble High Court has discussed the provisions of Section 145A which has been inserted by Finance (No.2) Act, 1998 w.e.f. 1 st April, 1999. Hon'ble High Court considered that though the Bill proposed retrospective insertion ultimately the section has come on the statute book only from 1st April, 1999 but what is more material is that the same relates to inclusion in the value of inventory the amount of any tax, duty etc. paid or liability incurred for the same under any law in force. Meaning thereby such tax, duty, etc. should have been actually paid or sh .....

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nds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. Ground No.1 16. This ground of appeal relates to the order passed by the Learned CIT(A) in deleting the disallowance u/s 40(a)(ia) in respect of consultancy and supervision charges of ₹ 81,55,045/-. 17. The issue involved in this ground of appeal is identical to that of the issue already been dealt with by us in ITA No.1247/Ahd/2016 for A.Y. 2011- 12 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, this ground of appeal preferred by the revenue is also dismissed. Ground No.2 18. In this ground of appeal revenue has challenged the order passed by the Learned CIT(A) in deleting the addition made on account of unutilized CENVAT credit of ₹ 7,18,178/-. 19. The issue involved in this ground of appeal is identical to that of the issue already been dealt with by us in ITA No.1247/Ahd/2016 for A.Y. 2011- 12 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, this ground of appeal preferred by the revenue is .....

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Learned AO is uncalled for. He also relied upon the judgment passed by the Jurisdictional High Court on this issue in the matter of CIT-vs- Corrtech Energy Pvt. Ltd. reported in 372 ITR 92 (Guj) in support of his argument. On the contrary the Learned DR relied upon the order passed by the Learned AO. 23. We have heard the rival contentions made by the respective parties, perused the relevant materials available on record and also the judgment passed by the Jurisdictional High Court in the matter of Corrtech Energy Pvt. Ltd. (supra). It is settled principle of law that when there is no claim for expenditure addition of notional disallowance expenditure is all the more illogical and unsustainable in the eye of law, particularly when the AO has not been able to prove that any expense has been made to earn the income nor has disproved the claim of the appellant in this regard. Respectfully, relying upon the ratio laid down by the Hon ble Jurisdictional High Court in the matter of Corrtech Energy Pvt. Ltd., we find no infirmity in the order passed by the Learned CIT(A) so far as to warrant interference. The question is accordingly answered in the affirmative, i.e. in favour of the asse .....

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