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TMI Blog2020 (11) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961 ("the Act") and not at various customer terminals, as claimed by the appellant following the order of CIT (A)for the preceding assessment year. 1.1 That on facts and circumstances of the case and in law, the CIT(A) erred in holding that the activities undertaken by the appellant at its customer terminals did not constitute "manufacture or production of any article or thing", so as to be eligible for deduction under sections 801, 80IA and 80HH of the Act. 1.2 That on the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the various activities/ processes undertaken by the appellant, including removal of impurities, condensate and moisture and for regulating temperature and pressure at various customer terminals, as part of mandatory contractual obligations, in order to render lean gas in usable state and tradable condition, constituted "manufacture"/ "production" of processed "Lean Gas". 1.3 That on the facts and circumstances of the case and in law, the CIT(A) erred in holding that the aforesaid activities undertaken by the appellant at customer terminals were merely for the enabling supply of lean gas at customer termin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant assessment year as the same has been offered to tax in assessment year 2007-08 and also accepted by the assessing officer. 3. Briefly stated the facts of the case are that the appellant is engaged in the business of production/processing transmission and distribution of various gases. The appellant has set up and operates gas pipeline running /located in north western India known as HBJ pipeline. The appellant acquires rich natural gas at Hazira which is transmitted to its 2 LPG plants located at Vaghodia (Gujarat) and Vijaipur (MP) and various customer terminals. 4. The appellant claimed deduction u/s 80-IA and 80HH on production of LPG and Lean Gas undertaken at LPG plants and various customer terminals by treating the same as separate and independent units. The deduction claimed is as under :- S. No. Particulars Amount 1. Deduction under section 80HH 92,61,48,000 2. Deduction under section 801 3,69,27,000 3. Deduction under section 80IA 114,26,46,000 Total Rs. 210,57,21,000 5. The aforesaid claim of the assessee was denied by the AO and the matter travelled up to the Tribunal and in the first round of litigation the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Gas is supplied to the customer. Extensive processing activities undertaken by the assessee at the customer terminals to make lean gas and natural gas marketable and fit for use, clearly constitute "manufacture ". The contention of the assessee is that the claim of deduction made by the assessee under section 80I/80IA/80HH are genuine as the similar claims have been allowed in the earlier years by the revenue. Deduction allowed in earlier years cannot be denied in subsequent years. Since deduction under section 80IA of the Act in respect to profit derived from eligible units has been allowed by Revenue till assessment year 1995-96, the same cannot be denied subsequently. The Ld. AR made reference to the decision of the CIT(A) in assessee's own case for the assessment year 1994-95. Therefore, the CIT(A) has not taken into account the revenue's stand in the earlier years and deviated from the same without any substantial reasons or evidence on record. Thus, the claim of deduction made by the assessee under section 801/801A/80HH are genuine in this year as well, Ground No. Ground No. 1 and 2 of the assessee's appeal are allowed and Ground No. 1 and 2 of revenue's appeal are dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Assessing Officer and we direct the Assessing Officer to allow deduction in respect of interest on fixed deposits under Section 80IA of the Act. So far as 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. As regards to 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/- had already been offered and nothing further remained to be taxed. Per contra Ld. DR strongly supported the findings of the AO but could not say anything about the error in the calculation made by the AO. 20. We have given a thoughtful consideration to the order of the authorities below. The Asset Transfer Agreement which is at page 548 of the paper book and on particular page 553 the total value of assets to be transferred is mentioned which is Rs. 18,13,13,311/-. We further find that on this total value appellant was issued shares of Rs. 10/- each at 18131331. We have carefully considered the computation of additional reimbursement computed by the AO at Rs. 3,01,17,428/-. We find that the AO has simply proceeded by erroneous figures without applying his mind. The actual reimbursement of cost of Rs. 2,68,16,119/- has already been offered therefore in our considered opinion nothing further remained to be added more particularly on erroneous figures 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DR strongly supported the findings of the AO. 25. We have given a thoughtful consideration to the orders of the authorities below. It is not in dispute that the C&AG made adverse remark and pursuance to which the assessee created the liability. In our considered opinion the assessee has rightly created the liability as such liability was properly ascertainable. We are of the considered view that merely because the assessee was pursuing the matter with the Ministry of Petroleum and Natural Gas the same can not make the liability a contingent liability. Moreover this is not an estimated liability but the same is in line with the office Memorandum F-12 (1)-B/SB/92 dated 4.6.1993 by which the Central Government has instructed for levy of guarantee fee @ 1.2% per annum on the outstanding amount of loan. As per the said OM the guarantee fee was to be levied on the date of guarantee and thereafter on first day of April every 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 allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter verifying amount of reserve only without appreciating that assessee's claim had been rejected on more than one ground,which have been ignored by him. 8. The appellant craves leave to add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 27. The grievance raised vide ground No. 1 to 4 are identical to the grievance raised by the assessee vide ground No. 1 to 4 of its appeal. For our detailed discussion in ITA No. 4657/Del/2014 (supra) ground No. 1 to 4 are dismissed. 28. The facts relating to ground No. 5 are that during the year under consideration the assessee has incurred Horticulture expenses amounting to Rs. 10.10 crores which comprises of expenditure incurred on planting on trees ,maintenance of lawns and areas in the close vicinity of the offices / plants of the appellant in accordance with the mandate of the Government. The AO denied the claim of the assessee and made the disallowance of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was made was set up in the AY 1989-90. Even though the assessee has claimed investment allowance with respect to the original cost of plant & machinery, which was not declined, but due to inadequacy of profit, the assessee could not take the benefit of the same. During the AY 1997-98 under consideration. the claim of investment allowance was not in dispute, but the issue in dispute was only with respect to increase in claim of investment allowance due to additional bill raised by the supplier of pipeline and to which the assessee agreed to pay. 14. There is no dispute to the well settled legal proposition that any cost incurred towards plant & machinery including enhanced cost payable due to revision in cost or due to exchange fluctuation, is required to be considered while determining the actual cost and with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of Rs. 351.41 Crores, while during the same period, it had created investment allowance reserve of Rs. 413.01 Crores, which is more than 118% of the aggregate amount of investment allowance claimed by the appellant during this period. In view of this, the appellant satisfies this condition as well.
The Ld. 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."
39. We have given a thoughtful consideration to the aforestated findings of the Ld. CIT(A). We could not find any error or infirmity in the directions of the CIT(A) and hence we do not find any reason to interfere with the same ground No. 7 and 7.1 are accordingly dismissed.
40. In the result the appeal filed by the revenue is dismissed and the appeal filed by the assessee is allowed.
Order pronounced in the open court on 26th November, 2020. X X X X Extracts X X X X X X X X Extracts X X X X
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