TMI Blog2020 (11) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... idence as regards to how the scrap sale is derived from the industrial undertaking. As regards to interest on fixed deposits, various decisions of the Hon ble High Court categorically held that the deduction in respect of interest on fixed deposits under Section 80IA is allowable. The revenue has not pointed out as to why the same should be denied to the assessee. The case laws given by the Revenue in fact reiterate the stand of the assessee. Hence, it is pertinent to remand back the matter to the file of the AO and we direct the Assessing Officer to allow deduction in respect of interest on fixed deposits under Section 80IA - interest on employees loans and advances is concerned, the interest on loan provided to employees in our opinion is inextricably linked to the business of the assessee and constitutes business income eligible for deduction - interest on customer outstanding is profit derived from eligible undertakings and entitled for deduction under Section 80IA/80I, in department s appeal, the issue is covered in favour of the assessee by various decisions of High Court. As regards to miscellaneous income, the said income is inextricably linked to and have first degree nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and machinery was put to use before 31.3.1990 and was capitalized during the assessment year 1989-90 - HELD THAT:- The fact is that in the first order of litigation the Tribunal has categorically allowed the claim of deduction u/s 32A of the Act. Though certain verifications were to be done by the AO. However without following the directions of the Tribunal the AO simply repeated the addition. However the first appellate authority after considering the findings of the Tribunal in the first order of litigation allowed the claim of deduction. AO is directed to verify only the aggregate amounts of investment allowance and investment allowance reserve, respectively, claimed by the reliant during this period. If the aggregate amount of reserves created are more than 75% of the aggregate amount of investment allowance claimed by the appellant, the claim of deduction u/s 32A is to be allowed. Accordingly, this ground is allowed in favour of the appellant -No error or infirmity in the directions of the CIT(A) and hence we do not find any reason to interfere with the same - ITA No. 4657/Del/2014 ITA No. 5091/Del/2014 - - - Dated:- 26-11-2020 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 80HH, 801 801A in the initial assessment year 1992-93. 2. That on the facts and circumstances of the case and in law, the CIT(A) erred in holding that no deduction under section 80HH of the Act was admissible in respect of the customer terminals situated in backward areas, on the ground that no manufacturing is carried out at the customer terminals thereby disallowing claim of the appellant. 3. That on facts and circumstances of the case and in law, the CIT(A) erred in holding that interest income of ₹ 14260.93 lakhs (except interest on customers outstanding and interest on loans and advances given to employees of LPG Plants Vijaipur and Vaghodia) and miscellaneous income of ₹ 81.85 lakhs, was not eligible for deduction under sections 80HH, 801 and 80IA of the Act, on the ground that the said receipts were not derived from the eligible business of the appellant. 4. That on facts and circumstances of the case and in law, the CIT(A) erred in not directing the assessing officer to reduce the amounts capitalized and transferred to expenditure during construction from interest and miscellaneous income excluded from eligible profits for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO and the matter travelled up to the Tribunal and in the first round of litigation the Tribunal following its orders passed for assessment year 1996-97, 1992,93 and 1993-94 set aside the matter to the file of the AO to decide afresh. 6. In the second round of proceedings, the AO once again denied the claim of deduction in respect of profits from production of lean gas/processed natural gas at various customer terminals. However in principle allowed the claim for deduction in respect of LPG plants. The first appellant authority relying upon the order of the CIT(A) for asstt. Year 1996-97 are allowed benefit of deduction u/s 80IA and held that lean gas was manufactured/produced at the two LPG plants at Vijaipur and Vaghodia and not at customer terminals as claimed by the assessee. Aggrieved by this both the assessee and revenue are in appeal before us. 7. At the very outset the counsel for the assessee stated that the issue has been decided in favour of the assesee and against the revenue by the Tribunal in assessee s own case. In ITA No. 4454/Del/2013 and 4642/Del/ 2013 the DR strongly supported the findings of the AO. 8. We have carefully considered the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Ground No. 1 and 2 of the assessee s appeal are allowed and Ground No. 1 and 2 of revenue s appeal are dismissed. 9. Respectfully following the findings of the coordinate bench (supra) we are of the considered view the appellant is eligible to the deductions/tax holding u/s 80HH/801 and 801A of the Act on lean gas at the stage of customer terminals. Ground No. 1 and 2 are accordingly allowed. 10. Facts relating to ground No. 3 and 4 are that the assessee has shown interest income of ₹ 14260.93 lacs which comprised of the following :- (a) Interest on fixed deposits, bonds and inter-corporate deposits ₹ 13,233.37 lacs (b) Interest on employees loans and advances ₹ 172.56 lacs (c) Interest on customer outstanding ₹ 855 lacs 11. Out of the aforementioned income an amount of ₹ 215.87 lacs was reduced from income and transferred to IEDC account which was capitalised and the balance interest income of ₹ 14,045.06 lacs was credited to profit and loss account. The assessee has also received miscellaneous income of ₹ 81 lacs which was in the nature of dividend. The AO denied the claim of deduction u/s 801A/801/80HH on the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered in favour of the assessee by various decisions of High Court. As regards to miscellaneous income, the said income is inextricably linked to and have first degree nexus with the profits and gains of the eligible undertaking and the same were eligible for deduction. Therefore, Ground No. 3 in assessee s appeal is allowed and Ground No. 3 in revenue s appeal is dismissed. 15. As no distinguishing facts have been brought to our notice, respectfully following the findings of the coordinate bench we allow ground No. 3 and 4. 16. The underlying facts in respect of ground No. 5 are that on 2.4.1996 the appellant entered into the Asset Transfer Agreement with M/s. Mahanagar Gas Ltd.. The said agreement has the following salient features :- 1. Agreement was for transfer of business of CNG distribution network in the state of Maharashtra as capital contribution to the JV entity. 2. Assets of the aforesaid business were transferred to the JV entity aggregating to ₹ 18,13,13,311. 3. Appellant was issued 1,81,31,331 equity shares of ₹ 10 each by the JV entity. Further the sale proceeds of depreciable assets were adjusted from WDV of relevant block of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igures and computation. We accordingly direct the AO to delete the impugned addition. Ground No. 5 is accordingly allowed. 21. The underlying facts in ground No. 6 are that the Central Government has given guarantee on behalf of the assessee in lieu thereof instructed for levy of guarantee fee @ 1.2% per annum on the outstanding amount of loan. Since there was no mention regarding the payment of guarantee fee the appellant did not provide for any liability on this account and in fact made a representation to Ministry of Petroleum and Natural Gas for waiver of the guarantee fee. However the CAGI in its report stated that there was short provision on account of guarantee fee. Accordingly the appellant made provision for guarantee fee payable aggregating to ₹ 13,07,71,000/- which was relatable to earlier years and debited the same to the profit and loss account as interest in Schedule 13 as Prior Period Adjustment. 22. In the first round the AO disallowed the amount of interest of ₹ 13,07 crores. Before the ITAT assessee pointed out that this has been reversed back in financial Year 2006-07 relevant to assessment year 2007-08 and has been duly offered to tax. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Considering the facts of the case in totality we are of the considered view that such liability has to be allowed in the year under consideration. We accordingly direct the AO to delete the impugned addition on account of guarantee fee. Ground No. 6 is allowed. In the result the appeal filed by the assessee is allowed. 26. We will now address to revenue s appeal of ITA No. 5091/Del/2014 the grievance read as under :- 1. On the facts and circumstances of the case and in Saw Id. CIT(A) has erred in directing the Assessing Officer to give the benefit of deduction u/s 80IA in respect of manufacturing of lean gas at the 02 LPG plants. 2. On the facts and circumstances of the case and in Saw Ld. CIT(A) has erred in directing the Assessing Officer to give the benefit of deduction u/s 80IA in respect of interest income from loans and advances to others including contractor and suppliers (other than customers) which have direct nexus with the operations of the 2 LPG plants. 3. On the facts and circumstances of the case and in law Ld. GST(A) has erred in directing the Assessing Officer to give the benefit of deduction u/s 80IA in respect of interest income from cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the Government. The AO denied the claim of the assessee and made the disallowance of ₹ 101094960/-. The CIT(A) deleted the addition holding that the same has been incurred for the purpose of business. 29. Before us the DR strongly supported the findings of the AO per contra the Counsel for the assessee drew our attention to the decision of the coordinate bench for asstt. Year 1996-97 and pointed out that on similar facts the Tribunal has confirmed the deletion of the horticulture expenses. 30. We have carefully perused the orders of the authorities below. We find force in the contention of the counsel. The Tribunal in ITA No. 4454 and 4642/Del/2013 in assessment year 1996-97 on similar set of facts has confirmed the deletion of the disallowance. The relevant finding read as under :- 26. We have heard both the parties and perused all the relevant material available on record. The horticulture expenses on planting of trees, maintenance of lawns and areas in the close vicinity of the offices/plants of the assessee in accordance with the mandate of the Government and the assesee has to comply with the government regulations for environmental cause. Thus, the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith reference to this actual cost, claim for deduction on account of depreciation, investment allowance etc. is to be considered. As the facts with regard to quantum of actual expenditure incurred towards additional cost is not clear from the orders of lower authorities, we arc restoring the matter back to the file of the AO with a direction to consider assessee s claim of investment allowance with reference to the enhanced cost of plant machinery, after due verification. The AO is to verify the facts and figures and assessee is directed to furnish details of the additional cost so incurred. AO is to recomputed the eligible amount of investment allowance. AO is to verify the other conditions for eligibility of claim of investment allowance before allowing the same. Assessee is directed to furnish the required documents as per the provisions of section 32A of IT Act. We direct accordingly. 36. In the fresh assessment proceedings the AO repeated the addition of ₹ 17.39 crores. The first appellate authority allowed the deduction of investment allowance holding that the Tribunal has already held that enhanced cost is eligible for deduction u/s 32A of the Act and the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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