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TMI Blog2019 (2) TMI 1705X X X X Extracts X X X X X X X X Extracts X X X X ..... wing amongst other grounds: 1. The order passed by the Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, is bad in law, contrary to legal pronouncement and same be quashed. The additions/disallowances confirmed by the Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, are unwarranted and unjustified. It be held so now and same be deleted. 2. The Hon'ble Commissioner of Income Tax(Appeals)-! Baroda, has erred in confirming Rs. 2,32,000 /- treating the same as Prior Period Expenses without appreciating the fact that the appellant has already added back the same while computing the taxable income. This addition amounts to duplication of the addition to the income. It is therefore submitted that there is no justification to confirm the addition made by the AO. It is also submitted that The Hon'ble CIT(A), Baroda has wrongly considered this ground under the MAT provision which is not the subject matter of this ground. It is therefore submitted that the directions given y Hon'ble CIT(A), Baroda is unwarranted. Without prejudice to the above it is submitted that the liability has been crystallized and quantified during the year. Hence the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the assessee has claimed prior period expenses of Rs. 2.32 lacs which are not allowable as a deduction under normal provision and MAT computation of income. Accordingly, the AO disallowed the same and added to the total income of the assessee determined under normal as well as MAT computation of income. 6. Aggrieved assessee preferred an appeal to Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the prior period expenses of Rs. 2.32 lacs has already added in the computation of income prepared under normal and MAT provision of the Act. Accordingly, the assessee claimed that further disallowance/addition of prior period expenses would lead to double addition to the total income of the assessee. 7. However, the ld. CIT(A) disagreed with the contentions of the assessee and confirmed the order of the AO. 8. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. 9. The Ld. AR, before us, submitted that the amount of prior period expenses has already disallowed while computing income under the normal provision of the Act. 9.1 The Ld. AR also submitted that under MAT computation of income the adjustment could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced any argument on this aspect. Therefore, we are not inclined to concur with the view of the Ld. CIT(A). Accordingly, we reverse the order of the authorities below and direct the AO to delete the addition made by him while computing book profit u/s 115JB of the Act. Hence the ground of appeal of the assessee is partly allowed for statistical purpose, and the ground of appeal of the Revenue is dismissed. 12. The second issue raised by the assessee in the ground no. 4 is that the Ld. CIT(A) erred in directing the AO to delete the addition after verification whether there is an increase in the amount of profit on account of MODVAT credit. 13. The assessee in its balance sheet as on 31/03/2011 has shown unutilized MODVAT credit of Rs. 5,31,03,250/- only. The assessee claimed to have followed an exclusive method of accounting regarding its transaction relating to purchase and sale. Therefore, the amount of unutilized MODVAT credit was not included in the closing stock shown as on 31/03/2011. 14. However, the AO was of the view that the assessee is under obligation to include the amount of MODVAT credit in the closing stock of the goods as on 31/03/2011 as per the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistently. Moreover, closing stock one year becomes the opening stock of the subsequent year. Accordingly, there will not be any effect on the amount of profit declared by the assessee over a period of time. 16.2 There will also not be any impact on the profitability/ total income of the assessee. It is because if the amount of unutilized MODVAT credit is added in the value of closing stock as on 31/03/2011, then there shall also be a corresponding increase in the value of purchases and opening stock in the proportion of MODVAT credit amount. Thus the entire exercise of including the unutilized MODVAT credit in the closing stock of the assessee will be futile. 17. On the other hand Ld. DR vehemently supported the order of the authorities below. 18. We have heard the rival contentions and perused the materials available on record. The allegation of the Assessing Officer in the instant case is that the assessee while valuing the closing stock of its goods as on 31/03/2011 has not included the amount of MODVAT which is contrary to the provisions of section 145A of the Act. Therefore, the closing stock of the assessee was enhanced by the amount of MODVAT as discussed above. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly is directed to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 19. The next issue raised by the assessee in the ground no. 5 is that ld. CIT(A) erred in confirming the order of the AO by denying deduction claimed by the assessee u/s 80IA(4) of the Act for Rs. 47,91,81,000/- 20. The assessee has claimed deduction u/s 80IA(4) of the Act for Rs. 47,91,81,000/- in respect of its power generation unit. 21. However, the AO was of the view that the assessee was not eligible for deduction in respect of its power generation unit u/s 80IA(4) of the Act for the following reasons; 1. The power generated by the assessee was shown as captive consumption. 2. Without prejudice to the above, the sale price shown by the assessee at Rs. 4.4471 per unit was on the higher side. In fact, the Gujarat State Electricity Corporation Limited was selling power at the rate of Rs. 3.04 power unit. Therefore, the AO was of the view that assessee should have taken the sale price of its power generation used for captive consumption at the rate of 3.07 power unit which will result in a loss to the assessee. Accordingly, there was no question of claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et value for the electricity units actually sold by the appellant to be the actual rate and for electricity units captively consumed to be average rate of purchase of power by GUVNL during FY 2010-11 from various generating companies i.e. Rs. 3.07 per unit. The assessing officer would accordingly recomputed the profit of eligible undertakings for the purpose of section 80IA(4). Since the same would still work out to be loss figure, no deduction under 80IA(4) would be allowed to the appellant for the year under consideration also. Further, the loss so computed of CPPs would be carried forward and set off against deduction claimed under section 80IA." 23. Being aggrieved by the order of the ld. CIT(A) assessee is in appeal before us. The ld. AR before us submitted that the Hon'ble Jurisdictional High Court had adjudicated the identical issue in the own case of the assessee in its favor in tax appeal no.708/2016. 24. On the other hand ld. DR vehemently supported the order of the authorities below. 25. We have heard the rival contentions and perused the materials available on records. At the outset, we find that the issue has already been adjudicated by the Jurisdictional High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. 7. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub-Section (8) of Section 80IA of the Act. However, in so far as the Tribunal's reasoning to adopt the market value of the goods at Rs. 5.40 ps. per unit is concerned, we find no error. Undisputedly, GEB supplied the electricity to its consumers at the same rate. This, therefore, was a market value of the electricity supplied by the CPP Unit to the general unit. The fact that this amount of Rs. 5.40 ps. comprises of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed." 5. Issue once again reached the Division Bench of this Court in case of CIT v. Alembic Ltd. in Tax Appeal No.471/2009 and connected appeals. The Division Bench referring to earlier judgments of the Court held as under : "11. We have considered the submissions made by the learned counsel for the parties. We have also considered the case laws cited by the learned counsel for the assessee. Taking into consideration the judements of this court and other High Courts, cited above, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation (1) to subsection (2) of section 115JB. A bare perusal of clause (f) of explanation (1) makes it that the) amount of expenditure relatable to any exempt income, other than section 10(30), is liable to be added back to net profit as shown in the P&L account As per section 14A it transpires that it talks of disallowing any expenditure incurred in relation to income not includible in the total income. The expression in relation to used for making disallowance under section 14A has been employed in Explanation (1) to section 115JB(2) as expenditure relatable to', in more or less the/same form. It is manifest that the amount of dividend is exempt under section 10(33)/[not section 10(3) of the Act]. Thus, any expenditure relatable to' the exempt dividend income would fall under clause (f). The Explanation 1, which provides in unequivocal terms that the amount of expenditure relatable to' exempt income shall be added back. Neither the language of clause (f) expressly refers to the amount specifically debited to the profit and loss account nor there can be an implication in this regard. What has been contemplated by the provision is the amount of the expenditure rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 115JB of the Act. 33.3 However, in our considered view the disallowance needs to be made as per Clause (f) to Section 115JB of the Act independently. The judgment of Hon'ble Gujarat High Court relied on by the ld AR in the case of Alembic Ltd. (supra), does not deny to make the disallowance as per clause (f) u/s 115JB of the Act. 33.4 Thus it is clear that the disallowance needs to be made in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw our support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance about exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- "We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of ? 14.51 Lacs on account of lease rent holding. The Id.CIT(A) erred in not appreciating the fact that the lease rent was paid in respect of capital assets in accordance with accounting standard 19(AS-19) which distinguishes finance lease from the operating lease and regards the former as a finance transaction and not a lease transaction with conformity with the International Accounting Standard. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 9,57,77,910 made on account of disallowance of expenditure for replacement of re-membraning cells - II disregarding the decision of the Hon'ble Supreme CourFlrTtRenifase of CIT vs Saravana Spinning Mills Pvt. Ltd. (2007) 293 ITR 201 (SQ. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred in considering the 'tonners' as 'gas cylinders' and accordingly directing the Assessing Officer to allow depreciation @ 60% on chlorine tonners instead of 15% applicable to plant and machinery of Caustic Chlorine Plant. 4. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is held that lease rent of Rs. 14,51,000/- is deductable as revenue expenditure for the year under consideration also. In view of this the AO is directed to allow this lease rent of Rs. 14,51,000/- as revenue expenditure. Thus, the ground of appeal no. 2 of the appellant is allowed." 40. Being aggrieved by the order of the Ld. CIT(A) Revenue is in appeal before us. 41. Both the parties before us relied on the order of the authorities below as favorable to them. 42. We have heard the rival contentions and perused the materials available on record. At the outset, we find that the impugned issue is covered in favor of the assessee in its case by the Judgment of Hon'ble Gujarat High Court in Tax appeal no. 579 of 2016 vide order dated 03/10/2016. The relevant extract of the order is reproduced below: "9.0. Now, so far as question no.2 in Tax Appeal Nos. 778 of 2013 and 779 of 2013 and sole question in Tax Appeal No.780 of 2013 i.e. Whether the learned Tribunal was right in law in holding that Rs. 3,86,224/- being amortization of lease rent for the land is capital expenditure is concerned, on considering the decision of this Court in the ease of Sun Pharmaceutical Industries Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of Rs. 8,85,94,567/- (after allowing depreciation of Rs. 71,83,343/-) being cost of replacement of Membrane Cell as well as above submission of the appellant have been considered. In this regard it is mentioned that following the decision of Hon'ble ITAT, Ahmedabad, for assessment years 2003-04 and 2004-05 in appellant's own case on the similar issues have been decided in its favour in the appeal orders as passed by the CIT(A)-I, Baroda for assessment years 2009-10 and 2010-11. Following such decisions as given in these appeal orders, for the year under consideration also it is held that Membrane Cell expenditure of Rs. 9,57,77,910/- is a revenue expenditure. Another stand which without prejudice to its main ground of appeal no. 4 of the appellant is that the AO has erred in not granting additional depreciation as per the provisions of section 32(2)(iia) of the Act on the amount disallowed by treating the same as of capital nature. In this regard it is mentioned that since the entire expenditure of Rs. 9,57,77,910/- has been allowed as revenue expenditure and therefore the above further ground of appeal of the appellant is not required to be adjudicated upon.'' 48. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation claim of the assessee at the rate of 60% on Chlorine tonners. 52. The AO during the assessment proceedings found that the assessee has claimed depreciation at the rate of 60% on Caustic Chlorine Plant though it is entitled to depreciation at the rate of 15% only. Accordingly, the AO worked out excessive depreciation claimed by the assessee amounting to Rs. 1,09,93,340/- and added to the total income of the assessee. 53. Aggrieved assessee preferred an appeal to Ld. CIT(A) who deleted the addition made by the AO by observing as under: ''8.3 The reasons as mentioned by the AO in the assessment order for making disallowance of depreciation of Rs. 1,09,93,340/- being difference in rate of depreciation at 15% as per Departmental stand and 60% as per appellant's claim as well as above submission of the appellant have been considered. It is mentioned that the Hon'ble High Court of Gujarat in Tax Appeal No. 942 of 2013 vide order dated 20/01/2014 in appellant's case for AY 2007-08 has dismissed the Departmental appeal holding that the CIT(A) and Tribunal has not committed any error in this respect. In view of this legal position, it is held that for the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the containers/tankers were nothing but big cylinders as they had all the attributes of a cylinder, which was rejected by the Revenue on the ground that since the so-called cylinders were merely containers and were mounted on trucks, the assesses therein was entitled to depreciation at the rate of 25 per cent as eligible to "plant arid machinery". While deciding the issue whether the item claimed by the assessee therein is gas cylinders or machinery, the Division Bench has found that there is no dispute that the item in question was gas cylinder, though no doubt a big one and that the expression "gas cylinder" used in Appendix I to the Income Tax Rules does not the mention the size of the gas cylinders nor does it say that gas cylinders should be only for cooking purpose or for any other particular purpose and any interpretation of the expression "gas cylinders" to mean "cooking gas cylinder", would be really adding words to the statute which is not permissible. Accordingly, the Division Bench of the Delhi High Court held that gas cylinders are entitled to depreciation at 100 per cent." B. Learned counsel for the assessee also stated that till the stage of Assessment Year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed." 60. Being aggrieved by the order of Ld. CIT(A) the Revenue is in appeal before us. 61. Both the parties before us relied on the order of the order of the authorities below as favorable to them. 62. We have heard the rival contentions and perused the materials available on record. At the outset, we find that the impugned issue is covered in favor of the assessee in its case by the Judgment of Hon'ble Gujarat High Court in Tax appeal no. 942 of 2013 vide order dated 20/01/2014. The relevant extract of the order is reproduced below: "10. Coming to the second question, facts are that during the previous year relevant to the Assessment Year 2007-08 the assessee installed certain computers in its factory premises and claimed depreciation available to computeRs. The Assessing Officer, however, held that the computers shouldbe treated either as office appliances failing which they would form part of the plant and machinery. In either case, right of depreciation would be 208 and not 608 as claimed by the assessee. The assessee carriedthe matter in appeal. CIT (Appeals) reversed the decision of the Assessing Officer. In further appeal by the Revenue before the Tribunal, dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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