TMI Blog2018 (10) TMI 1700X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. As relying on GUJARAT STATE FERTILIZER AND CHEMICALS LTD [ 2017 (3) TMI 1337 - GUJARAT HIGH COURT] assessee is entitled to claim of depreciation u/s.32(1)(iia) of the Act on windmill and we, therefore, find no reason to interfere with the order passed by the CIT(A). Thus, the appeal preferred by the Department against the impugned order is dismissed. Addition u/s. 41(1) - Assessee had failed to discharge its onus to prove existence of the liability to pay the creditors - HELD THAT:- We find that merely because the liabilities are outstanding for a long period of time the same cannot be said to be ceased to exist. Neither the AO has proved that the assessee has obtained the benefit of the said liabilities by way of remission or cessation thereof. The judgments cited above have decided the same issue involved in this matter as discussed. We, therefore, find no infirmity in the order passed by the CIT(A) and respectfully following the judgments, we decline to interfere with the same. This ground of appeal preferred by the Revenue is thus dismissed. ] Disallowance on account of setting off STCG against depreciation - HELD THAT:- A decided in MAHALAXMI SUGAR MILLS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on surmises by the Ld. Assessing Officer cannot be justified for such audited cash book and bank book the Ld.CIT(A) deleted such addition. Taking into consideration the ratio laid down by the Coordinate Bench in the matter of Saurin Nandkumar Shodhan, we find no infirmity in the order passed by the ld.CIT(A), same is hereby upheld. Thus, this ground of appeal raised by the Revenue is dismissed. - I.T.A. No.1773, 1774, 1775/Ahd/2014 – AY 2006-07 To 2009-10 - - - Dated:- 26-10-2018 - Shri Pramod Kumar Vice President And Ms. Madhumita Roy, Judicial Member Appellant by : Shri Mukesh Kumar Shah, CIT-DR Respondent by : Shri S.N. Soparkar Shri Parin Shah, ARs ORDER Ms. Madhumita Roy The instant appeals have been filed by the Revenue before us against the order dated 10.03.2014 passed by the Commissioner of Income Tax(Appeals)-XIV, Ahmedabad [Ld.CIT(A) in short] arising out of the order dated 04.11.2011, 14.12.2009 20.12.2010 passed by the ACIT, Circle-8, Ahmedabad for Assessment Years (AYs) 2006-07, 2007-08 2008-09 respectively. ITA No.1773/Ahd/2014 AY 2006-07 2. The following main ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Representative of the Department relied upon the order passed by the Ld. Assessing Officer and prayed for quashing of the order passed by the Ld. CIT(A). 7. At the time of hearing of the instant appeal, the Ld. Representative of the assessee submitted before us that the case of the assessee is covered by the judgment pronounced by the Hon ble Jurisdictional High Court in the case of CIT vs. Diamines and Chemicals Ltd. (2017) 271 CTR 0098 (Guj.) as well as in the matter of Principal Commissioner of IncomeTax, Vadodara vs. Gujarat State Fertilizer Chemicals Ltd. (2017) 80 taxmann.com 40 (Guj.). 8. We have heard the Ld. Representatives appearing for the respective parties. We have perused the relevant materials available on record. We find that the power generation is a manufacturing activity and duly recognized by the government. It is a priority section under the government policies. In this particular business, wind is the raw-material for generation of electricity and/or power by wind mills through which the turbines are operated and power is generated and transmitted to grid lines. Since this is manufacturing activity claim of additional depreciation u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the ITAT. At the outset, it is required to be noted that the assessee claimed the deduction under Section 32(1)(iia) of the Income Tax Act with respect to the cost incurred by it for installation of the Wind Electric Generator. The Assessing Officer disallowed the same and made the addition of ₹ 1,17,98,030/- by observing that as the assessee is not in the business of generation and distribution of power, the assessee shall not be entitled to deduction under Section 32(1)(iia) of the Income Tax Act of Rs.l,17,98,030/-. The said addition has been deleted by the CIT(A) relying upon the decisions of the Madras High Court in the case of VTM Ltd (Supra) and in the case of Hi Tech Arai Ltd. (Supra). In both the aforesaid decisions, the Madras High Court had an occasion to consider the similar issue and it is held that 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into consideration the facts and circumstances of the case and respectfully following the judgment passed by the Jurisdictional High Court as cited above, we find that the assessee is entitled to claim of depreciation u/s.32(1)(iia) of the Act on windmill and we, therefore, find no reason to interfere with the order passed by the Ld. CIT(A). Thus, the appeal preferred by the Department against the impugned order is dismissed. ITA No.1774/Ahd/2014 for AY 2007-08 12. In this appeal, the Revenue has raised the following ground of appeal: The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of ₹ 3,58,39,862/- made u/s.41(1) of the Act when Assessee had failed to discharge its onus to prove existence of the liability to pay the creditors. 12.1. The grievance of the Department is against the deletion of addition of ₹ 3,58,39,862/- made u/s.41(1) of the Act particularly when the assessee has failed to discharge its onus to prove the existence of the liability to pay the creditors as claimed by the Department. 13. The assessee-company filed its return of income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of some of the parties were placed before the Ld. Assessing Officer wherefrom it appears that the last transaction made with them was in the month of September-2004 i.e. beyond three years and still demands are outstanding as it were on 31.03.2007, the Ld. Assessing Officer found as per Limitation Act, the creditor does not have any legal right to enforce the account or that the liability is barred by limitation. According to the Ld. Assessing Officer, the amount has been remitted on foregone or the sum has ceased to be claimable against the assessee it would be a clear case of remission or cessation or liability of the assessee. The right of recovery of the said amount has become time-barred and invoking section 41(1) of the Act, the entire amount of ₹ 3,58,39,862/- has been added to the total income of the assessee. 14. In appeal, while dealing with the ground, the Ld.CIT(A) observed as follows: 5.3 Ground No. 3 is against the addition of ₹ 3,58,39,862/- u/s 41(1) of the Act with regards to the long outstanding creditors. The A.O. in assessment proceedings after verifying the details as submitted by appellant, found in respect of six parties that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted before us that as per clear an ambiguous provision of section 41(1) of the Act unless and until the liability is remitted and an assessee gets some benefit or advantage directly or indirectly out of such remission then only the provision of section 41(1) of the Act comes into play. If such liabilities remained outstanding for many years such unilateral interpretation made by the Ld. Assessing Officer for invoking section 41(1) of the Act is not as per settled principle of law. He further submitted that the case is covered by the judgment of Bhogilal Ramjibhai Atara. He thus, relies upon the order passed by the Ld. CIT(A). 17. We have heard the Ld. Representatives appearing for the respective parties. We have perused the relevant materials available on record. We have gone through the orders passed by the Ld. Assessing Officer and Ld. CIT(A). We find that the Hon ble Jurisdictional High Court decided the issue in the case of Bhogilal Ramjibhai Atara as relied upon by the Ld. AR in favour of assessee in the manner as follows: Briefly stated, the facts are that for the assessment year 2007-08, the assessee filed return of income which showed, besides other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assessment of liabilities. Merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist. The Appellate Tribunal has rightly observed that-the Assessing Officer shall have to' prove that the assessee has obtained the benefits in respect of such, trading liabilities by way of remission or cessation thereof which is not the case before us. Merely because the assessee obtained benefit of reduction in the earlier years and balance is carried forward in the subsequent year, it would not prove that the trading liabilities of the assessee have become non existent. 16. Moreover, as pointed out in the case of Sugauli Sugar Works (P) Ltd. (supra), vide the last five lines of the paragraph-6 of the judgement, the question whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar relevant to the assessment year under consideration. In the present case, both elements are missing. There was nothing on record to suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration. It is undoubtedly a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so called creditors. Many of them were not found at all in the given address. Some of them stated that they had no dealing with the assessee. In one or two cases, the response was that they had no dealing with the assessee nor did they know him. Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41(c) of the Act. This is one of the strange cases where even if the debt itself is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (In Rs.) 1. Income from house property 1849899/- 2. Income from business and profession (Including depreciation) (- 9384638/- 3. Income from STG u/s.50 15825808/- 4. Income from other Sources 80695/- Total 8371764/- 21.1. The income from STCG after setting off of the business losses including depreciation had been set off against the unabsorbed depreciation for the AY 2006-07 and consequently, the total return of income was shown as Rs.NIL. 22. Upon scrutiny, notice u/s.143(2) of the Act dated 25.08.2009 was issued followed by notice u/s.142(1) along with the questionnaire against the assessee. However, the contention made by the assessee was not accepted by the Ld. Assessing Officer and the same was disallowed. According to him, the loss incurred on account of unabsor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged to tax. 3.2. Without prejudice to the fact that the irregular set off of unabsorbed depreciation has been denied to the assessee, full effect to the brought forward business losses and unabsorbed depreciation had been given in the order u/s.143(3) for the Assessment Year 2007-08 wherein the whole carried forward business losses and unabsorbed depreciation had been set off against the assessed income. Therefore the claim of set off of unabsorbed depreciation is disallowed to the assessee on this ground also. As the assessee has furnished inaccurate particulars of income penalty proceedings u/s.271(1)(c) r.w.s. 274 is also being initiated separately. 25.1. In appeal, the Ld. CIT(A) observed as follows: These legal proposition gives following priority based on provisions u/s.32(2) and u/s.72 of the Act as follows: (i) Unabsorbed depreciation can be carried forward for unlimited years as per section 32(2) of the Act. Such unabsorbed depreciation become part of allowance of depreciation for subsequent asstt. year irrespective of fact whether there is business or not i.e. such unabsorbed depreciation in subsequent year takes the shape of cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per provision of section 71 of the Act, from income under other head including short term capital gain. The appellant gets relief accordingly but for the amount as worked out for unabsorbed depreciation for A.Y. 06-07 after appeal effect for A.Y. 06-07 A.Y. 07-08. This ground is therefore partly allowed. 26. Respectfully following the judgment passed by the Hon ble Apex Court which decided the issue of the present case relating to setting off STCG against brought forward unabsorbed depreciation in favour of the assessee, we find no justification to interfere with the order passed by the Ld. CIT(A) and dismiss this ground of appeal preferred by the Department. 27. Ground No.2 is against the deletion of addition of ₹ 20,95,000/- made u/s.68 of the Act. During the year under consideration, the assessee received unsecured loan from various parties including the Directors of the company. The assessee was asked to furnish the confirmation of the loan upon which the same was filed but not signed by the respective person but by the authorized person of the Director. The Ld. Assessing Officer came to a finding that the assessee thus not been able to prove the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten off. In reply to the show-cause, the assessee submitted that the bad debts details written off during the year are genuine bad debts. He further added that amount has become irrecoverable by passage of time and in spite of legal and other recovery action taken by the company against all the parties the amount has become irrecoverable. The matter was duly discussed in the Board meetings before written off. However, such explanation was not accepted by the Ld. Assessing Officer and he thus added the entire amount to the income of the assessee on the premise that written off of debt as irrecoverable has to be based upon a bona fide belief of the assessee and not merely a convenient belief. According to him, the assessee failed to produce the material to indicate that there was any formation of a reasonable and bona fide belief to write off of the debt irrecoverable. 31. In appeal, relying upon the judgment passed by the Honb ble Apex Court in the matter of TRF Ltd. reported at 323 ITR 397 (Guj.) the Ld. CIT(A) allowed the claim of the assessee and thereby deleted the disallowance made by the Ld. CIT(A). The judgment of TRF Ltd. was also relied upon by the representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of hearing of the appeal, the Ld.DR relied upon the order passed by the Ld. Assessing Officer and the Ld.AR prays for confirmation of the order passed by the Ld. CIT(A). In reply to a show-cause proposing addition of such amount made by the Ld. Assessing Officer the assessee replied as follows: I . All the cash deposits in the respective banks have been made out of the cash balances available with the company in hand as on that day. The source of this cash deposits is either from the cash in hand or from the withdrawal from other banks. This being a genuine cash deposits deposited in various banks on various dates out of the cash available with the company in cash books and source of that cash balance is also clearly reflected in the cash book became totality is genuine transaction and hence no addition can be made on this account. 36.1. However, the said explanation was not become satisfactory before the Ld. Assessing Officer and he thus added the same to the total income of the assessee though the complete details in the form of cash-book and bank book reflecting such transactions were duly submitted before the Ld. Assessing Officer by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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