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TMI Blog2018 (6) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on irrelevant considerations, against the principles of natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Disallowance under "Peripheral Development Expenses" - Rs. 1,81,73,621/- a. That on the facts and in the circumstances the case, the order of the learned CIT(Appeals) in partly sustaining the disallowance of Rs. 1,81,73,621/- under 'Peripheral Development Expenses' incurred through appellant's Corporate Office is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That the aforesaid expenditure of Rs. 1,81,73,621/- is incurred by the assessee wholly and exclusively for the purpose of its business, sustaining of the disallowance by the learned CIT(Appeals) is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. c. That in similar facts and circumstances, in the past years, in appellant's own case, the Jurisdictional ITAT (Hon'ble ITAT Cuttack Bench, Cuttack) having held that the similar, aforesaid expenditure are fully allowable, the learned CIT (Appeals)'s order in not allowing the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable, the learned CIT (Appeals) in not deleting the said addition/disallowance of Rs. 168,47,54,889/- under 'Interest on Disputed Govt. duty (Electricity Duty and water charges)' is arbitrary, erroneous, and bad, both in the eye of law and on facts and legally untenable. d. That the aforesaid Rs. 168,47,54,889/- under "Interest on unpaid Electricity Duty and water charges, although a statutory liability, the learned CIT (Appeals) holding that the same is a provision and disallowable because the same is under dispute and no demand has been raised in respect thereof, is arbitrary, erroneous, and bad, both in the eye of law and on facts and legally untenable. 4. Disallowance of claim of Addl. Depreciation u/s.32(i)(iia) of the Act- Rs. 30,93,207/- a. That the learned CIT (Appeals) has mis-appreciated the facts and the sustaining of disallowance of Rs. 30,93,207/- under 'Additional Deprecation u/s.32(1)(iia) of the I.T Act is contrary to facts, erroneous and bad, both in the eye of law and on facts. b. That the acquisition and installation in respect 'New Plants' having been made after 01.04.2005, the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,55,26,088/- as "Income from Business"; and ii. Discarding of Loss under Long term Capital Gains of Rs. 8,89,62,948/- (in respect of Rs. 57,53,86,000/- gains booked in Profit and Loss Account, after indexation) and treating as "Income from Business" a. That on the facts and in the circumstances the case, the dismissal of the ground and sustaining of: i. the treatment of Short term Capital Gains of Rs. 4,55,26,088/- as "Income from Business" ii. Ignoring and discarding the Loss under Long term Capital Gains of Rs. 8,89,62,948/- (in respect of Rs. 57,53,86,000/- gains booked in Profit and Loss Account, after indexation); and iii. the addition of Rs. 59,81,49,044/- as "Income from Business" by the learned CIT (Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That in the facts and circumstances of the case, the lower authority holding that the transactions of the assessee in mutual funds and shares and securities should be treated as business activities and income earned from that should be treated as income from business is contrary to facts, arbitrary, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntenable. c. That in the past assessments years, the lower authorities having disallowed amounts debited under "Provision for Leave Encashment u/s.43B(f) of the Act, the amount of Rs. 11,31,24,984/- credited during the accounting year 2012-13 under the said "Provision for Leave Encashment" ought to be deducted in computing the assessed income for the assessment year 2013-14. 8. That the appellant craves leave to add, supplement, modify the grounds herein-above before or at the hearing of the appeal." 3. The brief facts are that the assessee is a public sector company is engaged in the business of bauxite mining, manufacture of Alumina and Aluminum & Power Generation and filed its return of income for the assessment year 2013-2014 electronically on 28.09.2013 with total income of Rs. 825,55,04,003/- and under the provision of section 115JB of the Act at Rs. 619,50,19,389/- and the return of income was processed u/s.143(1) of the Act and subsequently, the case was selected for scrutiny under CASS and notices u/s.143(2) & 142(1) were issued. In compliance, the AR of the assessee appeared from time to time and filed written submissions and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in assessee's own case in ITA No.66-68, 459, 511 & 512/CTK/2003 order dated 30.11.2015 and in subsequent years. The ld. AR also placed copy of the order passed by this Bench of the Tribunal in ITA No.343&392/CTK/2015 and other connected assessee's appeals, order dated 23.04.2018 for the assessment years 2007-08 & 2008-09 and for other subsequent years. 8. Contra, ld. DR relied on the assessment order of the AO. 9. We have heard rival submissions and perused the material on record. The assessee has claimed the peripheral expenditure of Rs. 22,32,20,569/- and the AO has made the addition without considering the nature of expenditure and its benefit to the assessee. The CIT(A) after verifying the facts and considering the submissions made by the assessee in this regard granted the relief but restricted disallowance of peripheral expenditure to the extent of Rs. 1,81,73,621. Ld. AR submitted that this issue is covered in favour of the assessee by the earlier orders of the Tribunal. We have gone through the order of the Tribunal in assessee's own case in ITA No.343&392/CTK/2015 and other connected appeals, dated 23.04.2018 for the assessment years 2007-08 & 2008-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in respect of incurring of expenditure at peripheral areas as per the order of the Govt. is not disputed and the reasons recorded by the lower authorities in respect of sustenance of the addition to the extent of Rs. 56,27,609/- cannot be overlooked. Accordingly, in the interest of justice, we remit this issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide the same on merits. This ground of appeal is allowed for statistical purposes." We respectfully follow the order of the coordinate bench of Tribunal and remit this disputed issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide on merits and allow this ground of appeal for statistical purposes." From the above observations of the Tribunal, we find that the expenditure claimed by the assessee has been incurred wholly and exclusively for business purposes as envisaged by the assessee however, the AO has to verify the claim as to whether the peripheral expenditure in the corporate office is for the particular area of the employees or as a whole. Accordingly, we respectfully following judicial precedence and the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Tribunal and decided in favour of the assessee. The observation of the Tribunal for the assessment year 2005-06 are as under :- "4. We have considered rival contentions and found that the issue under consideration is covered by the order of the Tribunal in assessee's own case vide order dated 20-07-2012 for the assessment year 2006-07 & 2007-08, wherein the Tribunal on merit allowed such interest after observing as under :- 6.1With respect to the interest on electricity duty provided for by the assessee was in consequence to the preference and not claimed as prior period expenses on the basis of statutory auditors pointing out that the amount held by the assessee to be paid as statutory duty in a bank was for earning interest. Therefore, corresponding payment of interest was to be provided for. When the issue is subjudice, neither the assessee nor the Department may sit on the judgment to award interest. Therefore, interest being a period payment for the impugned year, has been provided for in the impugned Assessment year cannot be subjected to disallowance for claiming deduction u/s.37. The Assessing Officer after having applied his mind allowed the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l grievance of the assessee is that the CIT(A) erred in confirming the disallowance of additional depreciation u/s.32(1)(iia) of the Act. The AO in the course of assessment proceedings found that there is no mention regarding the date of acquisition of these assets. The assessee explained that under industrial projects of this kind it is natural and common that the procurement of individual machinery and installation activities go on stretching from one year to the another and it is not possible to install and commission all such items in the same year of acquisition (procurement). The AO observed that in the absence of the dates of acquisition of all the individual parts & machineries, the assessee cannot be presumed to have complied with the requirement of acquisition to be made after 31.03.2005, therefore, the AO disallowed the claim of additional depreciation. 13. On appeal, the CIT(A) observed that the ITAT has remanded this matter in earlier years to the AO for re-verification and allowance of the claim as per law, whereas the assessee claimed that all the relevant details could be produced, however, the CIT(A) observed that the decision of ITAT has no applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that both acquisition and installed of plant or machineries should take place after 31.3.2002 to enable the assessee to claim additional depreciation of 15% if it achieves substantial expansion by way of increase in the installed capacity by not less than 25% in the previous year. The RPU unit as contended by the assessee though acquired by the assessee on amalgamation which the amalgamated company had started commencement of installation of the said unit. The assessee also contended before us that to start the unit, many plant & machinery were acquired and installed after 1.4.2002 (during F.Y. 2002-03 and 2003-04) enabling the Unit to become operative and capable o manufacturing rolled products for commercial purpose. Such submission was also made before 'the authorities below but we find that assessing authorities have not examined this aspect of the case whether any such plant and machinery acquired and installed after 1.4.2002 in the said plant by the assessee. Therefore, finding force in the contention of Id A.R. of the assessee, we restore this issue o the file of the AO for reconsideration in the light of above observation and allow the claim of additional depreciation u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal in ITA Nos.352/CTK/2016 along with other connected appeals, order dated 27.04.2018 for the assessment year 2010-2011. Contra, ld. DR relied on the order of AO. 21. We have heard rival submissions and perused the material on record. In the instant case the AO made the disallowance u/s.14A of the Act and applied Rule 8D. The CIT(A) in appeal has confirmed the action of AO. We find that this issue has been decided by the Tribunal in assessee's own case for the assessment year 2010-2011 in ITA No.352/CTK/2016 along with other connected appeals vide order dated 27.04.2018, wherein the Tribunal observed as under :- "17. We have heard rival submissions and perused the material available on record. We find that the AO while computing the disallowance under clause (iii) of Rule8D has computed 0.5% of the average investments held by the assessee company in whole, which includes the investments in equity shares and long-term debt funds as well, income from which has not been claimed as exempt by the assessee. Ld. AR submitted that on similar circumstances for the assessment 2011-2012, the First Appellate Authority has deleted the additions made by the AO u/s.14A applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowances, the Assessee "submitted that they have not incurred any expenditure for earning the dividend income." Thereafter, in para 3.3, the AO records "I have considered the submissions of the Assessee and found not to be acceptable." Thereafter, the AO proceeded to deal with the said provisions of Section 14A and Rule 8D and observed, in para 3.3.1, that making of investment, maintaining or continuing investment and time of exit from investment are well informed and well coordinated management decisions that, in relation to earning of income, are embedded in indirect expenses. It is then stated in para 3.4 that, in view of the above, the provisions of sub-section (2) of Section 14A and Rule 8D of the Rules are in operation and therefore, will strictly be adhered to by the Assessee. In para 3.6 of the assessment order, after discussing Section 14A(1) read with Rule 8D and referring to the decision of the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd v. DCIT (supra), the AO simply stated that "in view of the facts and circumstances and legal position on the issue as discussed above, I am satisfied that the Assessee had incurred expenses to manage its investments which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules did not arise. The question framed in ITA 549 of 2015 is answered accordingly. We found that in the instant case the AO could not make distinction between the equity shares and debt funds and calculated the disallowance, we are of the opinion this disputed issue has to be re-examined and apply the provisions of Section 14A r.w.rule 8D. Accordingly, we follow the ratio of judicial decision and restore this disputed issue to the file of the AO to re-examine and verify and apply the above provisions. This issue is allowed for statistical purposes." 22. From the above judicial decisions, we find that the Tribunal has restored the disputed issue to the file of AO for re-examination and reverification and apply the provisions of Section 14A r.w.rule 8D and in the instant case, the issue being similar, we find that the AO has not complied with the mandatory requirement of Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules and we respectfully follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the main object of the assessee is manufacturing and assessee being a public sector company has enough funds and made investment in the mutual funds and on redemption the income is offered under the capital gain and the main object being the business and the maximum income is established through the direct business operations and not from the financial transaction. The investment has been made with the mutual funds/liquid funds/ closed ended funds and encashment on redemption/maturity. Further, the total profit earned by the assessee company by way of capital gains is only about 4% of the total income of the assessee company, which clearly shows that the assessee company is engaged in the business of mining, manufacturing, generation and production of aluminium and not dealing in mutual funds / liquid funds. We find the Hon'ble Gujarat High Court in the case of Pr. CIT Vs. Ramniwas Ramjivan Kasat [2017] 248 Taxman 484, has held as under :- "5. The second issue pertains to the treatment to the income earned by the assessee on sale of shares. The assessee contended that the shares were in the nature of his investment and the income earned should be treated as long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-intrade, the income arising from transfer of such shares/securities would be treated as its business income, (b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; (c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 5. It is reiterated that the above principles have been formulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2010-2011 in ITA No.352/CTK/2016 along with other appeals, order dated 27.04.2018 and prayed for allowing the appeal. Contra, ld. DR relied on the order of lower authorities. 28. We have heard rival submissions and perused the material available on record. We find that the Tribunal in assessee's own case for the assessment year 2010-2011 in ITA No.352/CTK/2016 along with other appeals, order dated 27.04.2018 relying on its earlier order has restored the disputed issue to the file of AO. The observations of the Tribunal in this regard are as under :- "31. We have heard rival submissions and perused the material on record. We found that the similar issue has been decided by the Tribunal in assessee's own case for the assessment years 2007-08 & 2008-2009 in ITA No.343 & 392/CTK/2015, order dated 23.04.2018, wherein the Tribunal has observed as under :- "28. We have heard rival submissions and perused the material on record. The assessee has made the provision for leave encashment and the provision was not added back in the computation of income. As the ld. AR submitted that the above issue is covered by the order of the coordinate bench of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 in ITA Nos.374/CTK/2014, wherein the Tribunal has observed as under :- "We have decided this issue in appeal of the assessee for assessment year 2011-2012 (ITA No.374/CTK/2014) in favour of the assessee and against the Revenue relying on the decision of the Tribunal in assessee's own case for the earlier assessment years. We follow the same reasoning given in the aforesaid appeal and we do not see any reason to interfere with the order of the CIT(A), who has passed a reasoned. Accordingly, we dismiss this ground of Revenue raised in both the years under consideration." We respectfully follow the decision of the Tribunal in assessee's own case for earlier year and dismiss this ground of appeal of Revenue. 33. Ground No.2 in appeal of the Revenue argued by the ld. DR is relating to disallowance on account of peripheral development expenses and ld. AR relied on the order of CIT(A). 34. We have decided the issue in appeal of the assessee for assessment year 2010-2011 (ITA No.352/CTK/2016) and in ITA Nos.339&340/CTK/2016 for the assessment years 2010-2011 & 20122013. Ld. DR in respect of partial relief granted by the CIT(A) could not controvert or bring on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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