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TMI Blog2020 (6) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... he same time the assessee has claimed interest expenses in its profit and loss account amounting to Rs. 12,84,88,704/- only. But the assessee has not made any disallowance of the expenses under the provisions of section 14A read with rule 8D. Accordingly the AO invoked the provisions of section 14A r.w. rule 8D and made the disallowance as under: i. Direct expenses nil ii. Interest expenses Rs. 75,602/- iii. Administrative expenses Rs. 25,000/- Total Rs. 1,00,602/- 4. Aggrieved assessee preferred an appeal to the learned CIT (A), who has partly confirmed the order of the AO by observing as under: "The appellant has earned exempt income and therefore the disallowance made by the AO was correct. However, it has been claimed by the appellant that the interest expenses considered by the AO while making the impugned disallowance included financial charges which was not an interest expense. If these expenses are not considered, the disallowance works out to Rs. 87,544/-. I am inclined to agree with the appellant in this regard and the AO is directed to verify the figure of disallowance and give relief accordingly. Ground of appeal No2 is partly allowed, subject to verification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of prior period expenses. 11. The AO during the assessment proceedings found that the assessee has claimed the deduction on account of prior period expenses amounting to Rs. 17,59,880/- only. As per the AO such deduction was not available to the assessee. Accordingly the AO disallowed the same and added to the total income of the assessee. 12. Aggrieved assessee preferred an appeal to the learned CIT (A) who also confirmed the order of the AO by observing as under: "6.2 I have considered the assessment order and the submissions made by the appellant. A perusal of the submissions made by the appellant shows that it has claimed that the prior period expenses actually pertained to the current year i.e., year under consideration and that the liability had actually crystallized during the year. However, this has not been substantiated by the appellant by bringing on record any documentary in support of its claim. In view of the same, the disallowance made by the AO is confirmed. Ground of appeal No. 3 is accordingly dismissed." 13. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 14. The learned AR before us submitted that this trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n held that liability is allowable only in the year in which it has crystallized and determined particularly when the mercantile system of accounting is practiced by the assessee. The expenditure is not to be disallowed merely because it related to earlier previous year. In short under mercantile system of accounting the liability is allowable in the year it crystallized and thus the claim of the assessee seems to be justified and hence allowable. The addition made in this respect is, therefore, deleted." 17. The facts of the case on hand are identical to the facts of the case as discussed above. The learned DR at the time of hearing has also not brought anything on record contrary to the argument advanced by the learned AR. Hence respectfully following the principle laid down in the own case of the assessee by this tribunal, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 18. The 3rd issue raised by the assessee is that the learned CIT (A) erred in in directing the set off of the unabsorbed depreciation of Rs. 2,82,96,976/- against the income of the current year. 19. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows as it appears at page 128 of the Paper Book filed before us: "Reply: As per Power Purchase Agreement - PPA with Gujarat Urja Vikas Nigam Ltd. - GUVNL, GSEG raised invoices to GUVNL based on the calculation of Fixed Charge as mentioned in PPA. One of the components of Fixed Charge is Depreciation. Now, as per Re-negotiated Power Purchase Agreement-PPA with Gujarat Urga Vikas Nigam Ltd. - GUVNL it was agreed that the year in which GSEG will be facing heavy cash out flow due to repayment of debentures, GUVNL will give some amount in advance to GSEG by way of advance depreciation and shall recover it against the future bills. However for the year under assessment, there is a '"maximum ceiling of Rs. 14.92 Cr as per calculation attached, i.e. GUVNL will not pay more than Rs. 14.92 Cr by way of Advance Depreciation. Thus, in the current year, GSEG made repayment of Rs. 98.81 Crores as per repayment schedule. As agreed GUVNL paid 14.92 Cr. as advance and the same was shown under the H- Long Term Liability by GSEG, which will be adjusted against future bills. (Annexure - 7)." Further that, the Schedule 'L' Column 2.2 of the Balance sheet of the company also specifies t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown any income. Thus, the related ground of appeal is partly allowed. " However, it is the case of the assessee that such advances to be adjusted with the power so supplied in the future. We, thus, having regard to the facts and circumstances of the case find no infirmity in the order passed by the Learned C1T(A) in making such direction upon the Ld. AO with the guidelines framed therein in order to grant relief to the assessee if permissible under the law, so as to warrant interference. Hence, we confirm the order passed by the Ld. C1T(A). 25. The facts of the case on hand are identical to the facts of the case as discussed above. Hence respectfully following the principles laid down in the own case of the assessee by this tribunal, we confirm the finding of the learned C1T (A). Hence the ground of appeal of the assessee is dismissed. 26. The next issue raised by the assessee is that the learned C1T (A) erred in confirming the order of the AO by upholding the disallowance of depreciation amounting to Rs. 1,69,46,634/- on account of change in accounting method. The assessee to the immediate preceding assessment year was showing the capital spares as inventory and claiming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before us. 31. The learned AR before us submitted that the assessee has correctly claimed the depreciation under the provisions of section 32 of the Act with respect to the capital spares. 32. On the other hand the learned DR vehemently supported the order of the authorities below. 33. We have heard the rival contentions of both the parties and perused the materials available on record before us. The issue in the present case relates whether the assessee can claim depreciation on the capital spares under the provisions of section 32 of the Act, instead of amortizing the same. The assessee can claim the depreciation as per the provisions of section 32 of the Act. The assessee is entitled for the depreciation on the capital spares at the rate of 15% whereas there is no provision under the statute to amortize the capital spares over the period of 14 years. Thus we are of the view that the assessee has changed the accounting policies with respect to the capital spares within the provisions of law. Thus, such change does not contravene any of the provisions of section 32 of the Act. Accordingly we hold that there is no infirmity in the action of the assessee for changing its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that there cannot be any addition of the expenses disallowed under section 14A r.w.r. 8D of the Rules while determining the book profit under section 115JB of the Act. 39. On the other hand the ld. DR vehemently supported the order of the authorities below. 40. We have heard the rival contentions of both the parties and perused the materials available on record. Regarding the addition in the book profit under section 115JB of the Act, we note that the AO in the instant case has made the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules while determining the income under normal computation of income. Further, the AO while determining the income under Minimum Alternate Tax (MAT) as per the provisions of section 115JB of the Act, has added the disallowance made under the normal computation of Income under section 14A r.w.r. 8D of Income Tax Rule - in pursuance to the clause (f) of explanation 1 to section 115JB of the Act. However, we note that in the recent judgment of Special Bench of Hon'ble Delhi Tribunal in the case of ACIT v. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts &circumstances, we feel that ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income under the clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the condition that the disallowance shall not exceed the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to note that the clause (c) of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing. However, during the prevailing circumstances where the entire world is facing the unprecedented challenge of Covid 2019 outbreak, resulting the lockdown in the country, the orders though substantially prepared but could not be pronounced for the unavoidable reasons within the maximum period of 90 days. In such circumstances we find that the Hon'ble Mumbai Tribunal in the case of JSW Limited v. Deputy Commissioner of Income Tax in ITA No. 6103/MUM/2018 vide order dated 14-5-2020 extended the time for pronouncing the order within 90 days of time by observing as under: 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary " period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Man ..... X X X X Extracts X X X X X X X X Extracts X X X X
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