TMI Blog2020 (12) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of the expenditure incurred through the corporate office at Bhubaneswar and further submitted that the assessee has evidence to prove the claim. Considering the above facts and submission put forth by the ld. AR and findings recorded by the CIT(A) in details, it would be pertinent to reconsider the matter at the level of AO. Therefore, the issue is remitted back to the file of Assessing Officer for re-examination and the assessee is also given liberty to produce supporting evidence with regard to peripheral expenditure before the AO. Also assessee has taken alternative plea before the CIT(A) that if the peripheral development expenses incurred in the corporate office are not allowed as not incurred for the purpose of business, then it should be allowed the benefit u/s. 80G of the Act for the donations included in the peripheral development expenses which are eligible for such deduction. In this regard, we direct the AO to considering the above alternative plea of the assessee on production of supporting documents. Disallowance u/s. 40(a)(i) - assessee failed to make TDS from the payment in foreign currency - HELD THAT:- we are of the opinion that the matter needs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn case [ 2019 (10) TMI 124 - ITAT CUTTACK] has already decided the issue against the Revenue confirming the observations made by the CIT(A) thereby deleting the addition made on account of loss on revaluation of non-moving stores and spares. TDS u/s 194I - Non deduction of TDS on the payment to GRIDCO - HELD THAT:- CIT(A) has decided the issue and deleted the addition made by the AO u/s. 40(a)(ia) of the Act considering the decision of coordinate bench of the Tribunal in the case of GRIDCO [ 2011 (11) TMI 77 - ITAT, CUTTACK ] , Madhyanchal Vidyut Vitran Nagam Ltd { 2015 (5) TMI 788 - ITAT LUCKNOW} and the case of Maharashtra State Electricity Distribution Co. Ltd. [ 2015 (5) TMI 396 - BOMBAY HIGH COURT] wherein held that no tax is deductible u/s. 1941 in the case of payment for wheeling or transmission charges. Addition made under the head claims, receivables, debts, shortages etc. written off - HELD THAT:- Assessee has purchased coal from Mahanadi Coal Field Limited which is Government of India Enterprises and the assessee after purchasing coal it is transported upto the destination where the coal measurements are taken by the assessee and shortages are also pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at and B.K. Mahapatra, CAs For the Respondents : M.K. Gautam, CIT, DR ORDER 1. These are the cross appeals filed by the assessee and Revenue and cross objections by the assessee, against the separate orders of the CIT(A)-1, Bhubaneswar, dated 30.12.2017, 27.12.2018 24.10.2019 for the assessment years 2009-2010, 2015-2016 2016-2017, respectively. 2. Out of the six appeals, one appeal i.e. ITA No. 65/CTK/2020, which has been filed by the Revenue for assessment year 2016-2017, is barred by limitation of 19 days. In this regard, the department has filed an application dated 30.01.2020 for condonation of delay stating therein the cause for delay in filing the present appeal, to which ld. AR did not object to it. After considering the application of the department, we find that the department has explained the sufficient cause for condonation of delay. Accordingly, we condone the delay of 19 days in filing the present appeal and the appeal is heard finally along with other connected appeals. 3. First of all, we would like to take on record the following paper books filed by the assessee in the appeals under consideration which have been perused and relevant part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles of natural justice, arbitrary, erroneous, bad in law and legally untenable. b. That the learned CIT (Appeals) ignoring and not following the order of the Jurisdictional ITAT (Hon'ble ITAT Cuttack Bench, Cuttack) for the Asst. Year 2005-06 in appellant's own case), wherein in similar circumstances, the issue of allowability of 'Interest on Disputed Govt. duty (Electricity Duty and water charges)' having been decided in favour of the assessee, his order in confirming the addition/disallowance of ₹ 76,56,75,884/- under 'Interest on Disputed Govt. duty (Electricity Duty and water charges)' is an act of judicial impropriety, bad in law and illegal and deserves to be set aside on this ground alone. c. That in similar facts and circumstances, for the Asst. Year 2005-06 and in the past years, in assessee's own case, the Hon'ble ITAT Cuttack Bench having held that Interest on unpaid Electricity Duty and water charges is fully allowable, the learned CIT (Appeals) in not deleting the said addition/disallowance of ₹ 76,56,75,884/- under 'Interest on Disputed Govt. duty (Electricity Duty and water charges)' is arbitrary, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d charity and not connected to running of business and not in accordance with notification of Govt. of Odisha is on mis-appreciation of facts, arbitrary, erroneous and bad, both in the eye of law and on facts. 4. Disallowance u/s. 40(a)(i) of the Act-₹ 5,58,82,675/- a. That on the facts and in the circumstances the case, the sustaining of the addition/disallowance of ₹ 5,58,82,675/- u/s. 40(a)(i) of the Act by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That the Assessee having not violated any provisions of section 195 of the Act, there ought not be any addition/disallowance u/s. 40(a)(i) of the Act and the disallowance of the said ₹ 5,58,82,675/- is contrary to facts, arbitrary, unjustified, erroneous and bad in law. c. That the learned CIT(Appeals) holding that the assessee itself has stated that on payment of foreign currency of ₹ 5,58,82,675/- no TDS was deducted as per section 195 is wrong, incorrect contrary to facts on record, arbitrary, unjustified, erroneous and bad in law. d. The A.O. having not specified on which amount the TDS were not made and which are required to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was selected for scrutiny within the specified time as per the Income Tax Act. 1961 and statutory notices were issued to the assessee. In this regard, the ld. AR of the assessee submitted the details as required by the AO. The AO completed the assessment u/s. 143(3) of the Act originally on 30.12.2011 determining the total income at ₹ 20,42,54,11,240/- after making following additions/disallowances:- Disallowance of the loss on account of revaluation of Non-moving Stores and Spares 4,95,31,377/- Claim of Additional Depreciation 72,49,61,074/- Peripheral Development Expenses 50,42,549/- Provision for Leave Encashment 43,44,18,199/- Claims, receivables, debts, shortages etc. written off 3,33,22,664/- Disallowance u/s. 40(a)(ia) 2,84,32,895/- Payment of Electricity Duty and Water Charges-Disallowance u/s. 43B 46,28,87,187/- Interest on dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it is a government dues and the liability has not been crystallized during the year. The matter is disputed before the Hon'ble High Court. There is no demand notice has been issued by the Government in this regard. In regard to principal amount as well as interest thereon till date, if the principal amount itself is in dispute then how the interest can be allowed, which are unascertained liabilities. 12. The similar issue has been decided by the coordinate bench of the Tribunal in assessee's own case for the assessment year 2014-2015 in ITA Nos. 106 110/CTK/2018, vide order dated 23.09.2019, wherein the Tribunal relying its earlier order dated 29.06.2018 passed in ITA No. 211/CTK/2017 has allowed the issue in favour of the assessee. The relevant observations of the Tribunal in order dated 29.06.2018 at para 11 as under:- 11. On further appeal to the Tribunal, the ld. AR of the assessee before us submitted that the issue under consideration is squarely covered by the order of this Tribunal in assessee's own case for A.Y. 2006-07 and 2007-08 in ITA Nos. 233, 234/CTK/2011 dated 20.07.2012 and in ITA Nos. 66-68, 459, 511-512/CTK/2003 dated 20.11.2005 in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance for claiming deduction u/s. 37. The Assessing Officer after having applied his mind allowed the claim in the impugned Assessment Year on both these issues therefore cannot be thrust upon by the learned CIT holding a view other than the view which was legitimately accepted by the Assessing Officer but on the basis of arithmetical finding of the learned CIT which rather leans in favour of the assessee. 5. The issue under consideration are same, respectfully following the order of the Tribunal, we direct the AO to allow assessee's claim of interest insofar as assessee is also offering interest on the amount deposited in the bank account as per the direction of the Hon'ble High Court. When interest on such deposit is brought to tax, there is no reason for disallowing interest payable to Government for non-payment of such duty in Government account. 6. The reasoning given by the AO for disallowing interest on non/delayed payment of water charges are that it was a contingent liability. We found that Tribunal in assessee's own case in earlier years had allowed this claim under similar circumstances and held that interest on unpaid electricity duty and water c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they are in the nature of donations, charity and not connected with the running of assessee's business. Such expenditure is also not periphery development in the districts of Angul and Koraput and not in accordance with the notification of Govt. of Odisha. The assessee before the CIT(A) has also taken alternative plea that benefit u/s. 80G of the Act for donations included in PDE which are eligible for such deduction, should be allowed. In this regard, the CIT(A) directed the assessee to claim deduction u/s. 80G of the Act before the AO with necessary evidence. Finally, the CIT(A) enhanced the disallowance made by the AO from ₹ 50,42,549/- to ₹ 7,25,83,189/-. 14. Ld. AR relied reiterated the submissions made before the authorities below and further submitted that out of the total disallowance of ₹ 7,25,83,189/- under 'Peripheral Development Expenses', expenditure of ₹ 7,22,76,640/- incurred through Corporate Office of the assessee, which is wholly and exclusively for the purpose of its business. The CIT(A) has categorised that the peripheral development expenditure does not cover as per the Govt. of Odisha Notification and the expenses ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions without considering the nature of expenditure and its benefit to the assessee, to which the CIT(A) upheld the same. Ld. AR referred to the paper book and the nature of expenditure incurred by the corporate office. Ld. AR submitted that this issue is covered in favour of the assessee by the earlier order of the Tribunal. During the course of hearing, ld.AR referred to the paper book and submitted that assessee has complete information of the expenditure incurred in peripheral area of various districts and the area includes Taluka and villages where company's activities are carried out and this expenditure is incurred on the order of the Government of Odisha. It is wholly and exclusively used for the purpose of business. The ld. AR referred to the nature of the expenditure incurred through the corporate office at Bhubaneswar and further submitted that the assessee has evidence to prove the claim. Considering the above facts and submission put forth by the ld. AR of the assessee and findings recorded by the CIT(A) in details, it would be pertinent to reconsider the matter at the level of AO. Therefore, the issue is remitted back to the file of Assessing Officer for re-examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;. Therefore the gross amount of the said ₹ 27,38,71,725/- i.e., liable for TDS u/s. 195 for F.Y. 2008-09(Asst, Yr 2009-10) considered by the A.O. for the amount disallowed of ₹ 5,58,82,675/- u/s. 40(a)(ia) of the Act is factually incorrect. The A.O. disallowed the aforesaid amount of ₹ 5,58,82,675/- computing in his own manner (10% of ₹ 27,38,71,725,-21,79,89,050) for which the TDS particular the details has been furnished by NALCO. It is pertinent to note that for making any disallowance/addition U/S. 40(a)(ia) of the Act for the non deduction of TDS U/S-195 of the Act, It is but necessary that specific non-deduction of TDS U/S-195 of the Act is to be brought on record by the A.O. before making any disallowance u/s. 40(a)(ia) of the Act. Further, the ld. AR submitted that the A.O. has not specified on which amount the TDS were not made and which are required to be made by NALCO and merely on a working made by A.O. himself without any material on record and evidence, but merely on the basis of assumptions, surmises and conjectures, the disallowance made in order u/s. 263/143(3) of the Act is arbitrary, unjustified, erroneous and bad, both in the eye of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack to the income as per the provisions of Section 43B of the Act. Therefore, the AO added the unpaid liabilities to the total income of the assessee. In appeal, the CIT(A) upheld the same. 23. Before us, ld. AR submitted that the issue is squarely covered by the decision of the Tribunal in assessee's own case in ITA Nos. 106 110/CTK/2018, order dated 23.09.2019, wherein the Tribunal has followed its earlier order dated 29.06.2018, passed in No. 211/CTK/2017, thereby restoring the issue to the file of AO to examine and allow the claim of the assessee. Further the ld. AR submitted that the Hon'ble Supreme Court in the case of Union of India Vs. Exide Industries Ltd. [2020] 116 taxman.com 378 (SC), wherein it is held that the provision of Section 43B(f) of the Act to be constitutionally valid and operative for all purposes. 24. On the other hand, ld.DR relied on the orders of authorities below and submitted that similar amounts were offered to tax by the assessee in some of the earlier assessment years. In support of his arguments he relied on the decision of Hon'ble Supreme Court of India in the case of Union of India vs. Exide industries Ltd. Vs. (2020) 116 taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the AO to examine and allow the claim and this ground of appeal is allowed for statistical purposes. Respectfully following the order of the Tribunal and we restore this issue to the file of AO to examine and allow the claim of the assessee and we allow this ground of appeal of the assessee for statistical purposes. We follow the reasoning of the Tribunal and accept the judicial precedence and remit the disputed issue to the file of AO to examine and allow the claim of the assessee. Accordingly, this ground of appeal is allowed for statistical purposes. 26. Further, the Hon'ble Supreme Court in the case of Union of India Vs. Exide Industries Ltd. [2020] 116 taxmann.com 378 (SC) has observed in para 42 as under:- Constitutional validity of clause (f) The approach of the Court in testing the constitutional validity of a provision is well settled and the fundamental concern of the Court is to inspect the existence of enacting power and once such power is found to be present, the next examination is to ascertain whether the enacted provision impinges upon any right enshrined in Part III of the Constitution. Broadly speaking, the process of examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right flowing from sub-section (1) is subject to the provisions of sub-section (2) , which unambiguously empowers the Central Government to prescribe income computation and disclosure standards for accounting. Concededly, subsection (2) is an enabling provision. It signifies that the general principle of autonomy of the assessee in adopting a system of accounting, is controlled by the regulation notified by the Central Government and must be adhered to by the class of assessee governed thereunder. [Para 15] Section 43B, however, is enacted to provide for deductions to be availed by the assessee in lieu of liabilities accruing in previous year without making actual payment to discharge the same. It is not a provision to place any embargo upon the autonomy of the assessee in adopting a particular method of accounting, nor deprives the assessee of any lawful deduction. Instead, it merely operates as an additional condition for the availment of deduction qua the specified head. [Para 16] Section 43B bears heading certain deductions to be only on actual payment . It opens with a non-obstante clause. As per settled principles of interpretation, a non obstante clause assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of this payment is beneficial and pro-employee. However, it is not in the form of a bounty and forms a part of the conditions of service of the employee. An employer seeking deduction from tax liability in advance, in the name of discharging the liability of leave encashment, without actually extending such payment to the employee as and when the time for payment arises may lead to abhorrent consequences. When time for such payment arises upon retirement (or otherwise) of the employee, an employer may simply refuse to pay. Consequently, the innocent employee will be entangled in litigation in the evening of his/her life for claiming a hard-earned right without any fault on his part. Concomitantly, it would entail in double benefit to the employer advance deduction from tax liability without any burden of actual payment and refusal to pay as and when occasion arises. It is this mischief clause (f) seeks to subjugate. [Para 19] The argument advanced by the respondents that the nature of leave encashment liability is such that it is impossible to make the actual payment in the same year, adds no weight to the claim of invalidity of the clause. It is so because the thrust of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of an ambiguous provision. [Para 25] Indubitably, when the Court examines the validity of a provision, its primary concern is the literal text of the provision. It is so because the legislature speaks through the text and as long as it is not speaking in an equivocal manner, there is limited space for the Court to venture beyond the text. This constitutes the first test of interpretation, often termed as the literal interpretation. If the text of the provision is unambiguous, the legislative intent gets coalesced and is epitomised therefrom. [Para 26] In other words, when the textual element of the provision reeks of ambiguity and is susceptible to multiple meanings, the Court enters into a proactive examination to find out the real meaning of the provision. This proactive examination by the Court offers multiple avenues and methods to achieve the ultimate purpose of interpretation. Adverting to the express objects and reasons may be useful for limited purpose to understand the surrounding circumstances at the time of enactment. The Court is not bound by such external elements, as discussed above. Therefore, the presence or absence of objects and reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The High Court has characterised clause (f) as arbitrary and unconscionable while imputing it with unconstitutionality. It is pertinent to note that the High Court reaches this conclusion without undertaking an actual examination of clause (f). Instead, the declaration is preceded by an enquiry into the circumstances leading upto the enactment. As discussed above, the constitutional power of judicial review contemplates a review of the provision, as it stands, and not a review of the circumstances in which the enactment was made. Be it noted that merely holding an enacted provision as unconscionable or arbitrary is not sufficient to hold it as unconstitutional unless such infirmities are sufficiently shown to exist in the form, substance or functioning of the impugned provision. No such infirmity has been exhibited and adverted to in the impugned judgment. [Para 30] Inconsistency of clause (f) and absence of nexus with section 43B The High Court has supported its finding of invalidity by recording two observations vis-a-vis the previously existing (unamended) clauses of section 43B-first, that clause (f) is inconsistent with other clauses and nature of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at the ground level. The general principles of exclusion and inclusion do not apply to taxing statutes with the same vigour unless the law reeks of constitutional infirmities. No doubt, fiscal statutes must comply with the tenets of article 14. However, a larger discretion is given to the legislature in taxing statutes than in other spheres. Viewed thus, the reason submitted by the Division Bench of the High Court in the impugned judgment is untenable. [Para 34] Allegation of defeating the dictum in Bharat Earth Movers case The legislature cannot sit over a judgment of this Court or so to speak overrule it. There cannot be any declaration of invalidating a judgment of the Court without altering the legal basis of the judgment as a judgment is delivered with strict regard to the enactment as applicable at the relevant time. However, once the enactment itself stands corrected, the basic cause of adjudication stands altered and necessary effect follows the same. A legislative body is not supposed to be in possession of a heavenly wisdom so as to contemplate all possible exigencies of their enactment. As and when the legislature decides to solve a problem, it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguished the autonomy of the assessee to follow the mercantile system. It merely defers the benefit of deduction to be availed by the assessee for the purpose of computing his taxable income and links it to the date of actual payment thereof to the employee concerned. Thus, the only effect of the insertion of clause (f) is to regulate the stated deduction by putting it in a special provision. [Para 39] Notably, this regulatory measure is in sync with other deductions specified in section 43B, which are also present and accrued liabilities. To wit, the liability in lieu of tax, duty, cess, bonus, commission etc., also arise in the present as per the mercantile system, but assessees used to defer payment thereof despite claiming deductions there against under the guise of mercantile system of accounting. Resultantly, irrespective of the category of liability, such deductions were regulated by law under the aegis of section 43B, keeping in mind the peculiar exigencies of fiscal affairs and underlying concerns of public revenue. A priori, merely because a certain liability has been declared to be a present liability by the Court as per the prevailing enactment, it does not follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the order of AO. 29. After hearing both the parties and perusing the entire material on record along with orders of authorities below, we find that the assessee has claimed additional deprecation u/s. 32(1)(iia) of the Act, however, the AO disallowed the same on account of the fact that the assessee could not produce the particulars/details of actual cost during the course of assessment proceedings. The CIT(A) has dealt with the issue in details and restore the issue to the file of AO for verification of claim of depreciation as per the necessary details to be filed by the assessee to ascertain the date of acquisition and directed the AO to allow the additional depreciation as per the law after such verification. The relevant observations of the CIT(A) read as under:- 5.2 I have considered the matter. Similar issue has been decided by the CIT(A)-II, Bhubaneswar vide her order dt. 16.7.2014 in ITA No. 0700/2013-14 for the AY 2011-12 with the following observations: xxx xxx xxx The appellant company submitted that the majority of the plant and machinery installed in a manufacturing plant like theirs; are commissioned in the premises of the appellant company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emitted the issue to the file of AO to allow the claim of the assessee after verification of necessary details. Therefore, any order/direction by us, at this stage, on this issue, would be futile exercise. However, a reasonable order is expected from the AO on the above observations of CIT(A). Thus, ground No. 6 is allowed for statistical purposes. Ground No. 7: Disallowance u/s. 43B of the Act-Under 'Electricity Duty' water charges-₹ 46,28,87,187/- 31. The AO on perusal of financial statements found that the assessee has debited a sum of ₹ 127,98,00,241/- to the profit and loss account on account of electricity duty on self generation. Since the assessee deposited an amount of ₹ 46,28,87,187/- in the specified account as per the direction of the Hon'ble High Court and the assessee claimed deductions u/s. 43B of the Act. The AO was of the opinion that the amount of ₹ 46,28,87,187/- deposited in the bank as per the Direction of the Hon'ble Odisha High Court does not comply the requisite provisions of Section 43B of the Act, and made addition and on appeal the CIT(A) confirmed the disallowance. 32. Ld. AR submitted before us that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified on facts and in law in deleting the addition of ₹ 2,84,32,895/- u/s. 40(a)(ia) of the I.T. Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified on facts and in law in deleting the addition of ₹ 3,33,22,664/- made under the head claims, receivables, debts, shortages etc written off. ' 4. On the facts and in the circumstances of the case and having regard to the findings given by the AO in the assessment order, the Ld. CIT(A) ought to have upheld the above additions made by the Assessing Officer. 5. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceedings. 36. Ground No. 1 is relating to disallowance of the loss claimed on account of re-valuation of non-moving stores and spares. Ld. CIT-DR submitted that the CIT(A) is not justified in deleting the addition made by the AO towards 'disallowance of loss on revaluation of non-moving stores and spares' when the assessee, during the assessment proceedings, could not explain properly, the method adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Tribunal in assessee's own case in ITA No. 106 110/CTK/2018, order dated 23.09.2019 has already decided the issue against the Revenue confirming the observations made by the CIT(A) thereby deleing the addition made on account of loss on revaluation of non-moving stores and spares. In this order, Tribunal has followed the decision taken in ITA No. 197/CTK/2017, order dated 29.06.2018. The relevant observations of the Tribunal read as under:- We have decided this issue in assessee's own case for the assessment year 2011-2012 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeling charges are clearly subject to provisions of Section 194I of the Act as use of transmission network and equipments of GRIDCO attracts TDS deduction u/s. 194-I of the Act by the assessee. It was submitted by the ld. AR that wheeling charges does not attract the provision of Section 194-I of the Act as has been held by the coordinate bench of the Tribunal in the case of GRIDCO vs. ACIT in ITA No. 404/CTK/2011 order dated 07.11.2011. We have perused the observations of the CIT(A) in this regard and the found that the CIT(A) at para 7.1 has deleted the addition made u/s. 40(a)(ia) of the Act after holding as under:- 7.1 I have considered the matter with reference to the facts on record and the decisions of various judicial forums on the issue at hand. I find that in the case of GRIDCO Ltd. v. ACIT in ITA NO. 404/CTK/2011 dt. 7.11.2011, the Hon'ble ITAT Cuttack Bench has decided that no tax is deductible u/s. 1941 in the case of payment for wheeling or transmission charges. The ITAT, Lucknow 'A' Bench, in the case of ACIT v. Madhyanchal Vidyut Vitran Nagam Ltd. has rendered similar decision. In the case of CIT v. Maharashtra State Electricity Distribution Co. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tages etc. written off. It was also contended by the ld. AR that the amount in question is for shortage in coal written off which is revenue/trading loss, therefore, the CIT(A) has rightly deleted the same. Further, the ld. AR pointed out that shortage of coal worked out to 0.498% of the total coal purchased which is very reasonable in the nature of business of the assessee and also submitted that this fact has also been considered by the CIT(A) while deleting the addition. 45. After hearing the submissions of both the sides and perusing the entire material available on record, we find that the assessee has claimed ₹ 3,33,22,664/- on account of claims, receivables, debts and shortages, etc. written off and the same was considered by the CIT(A) after observing as under:- 8.2 I have considered the matter with reference to the facts on record. It appears that all the relevant details on the loss on account of shortage of coal supplied by MCL through 'linkage coal' and 'open auction' were filed before the AO. These details filed before the AO have been submitted at the time of appeal hearing. On examination of the details, it is seen that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accepted. Thus, CIT(A) is not justified in deleting the addition made in this regard. Accordingly, we allow the ground No. 3 raised by the Revenue. 47. Ground Nos. 4 5 are general in nature, which require no adjudication. 48. Thus, the appeal of Revenue in ITA No. 331/CTK/2017 is partly allowed. 49. Now, we shall take up the appeal of the assessee for assessment year 2015-2016 in ITA No. 39/CTK/2019, wherein the assessee has raised the following grounds:- 1. That the order dated 27.12.2018 passed by the Learned Commissioner of Income Tax (Appeals) [in short CIT(Appeals) ], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against the principles of natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Disallowance of claim of Addl. Depreciation u/s. 32(i)(iia) of the Act-₹ 43,48,202/- a. That the learned CIT (Appeals) has mis-appreciated the facts and the sustaining of disallowance of ₹ 43,48,202/- under 'Additional Deprecation u/s. 32(1)(iia) of the I.T Act and dismissing the ground of the assessee is contrary to facts, erroneous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cashment' u/s. 43B(f) of the Act, the learned CIT (Appeals) ignoring and not following the order of the Jurisdictional ITAT and in confirming the addition/disallowance of ₹ 30,66,15,443/- under 'Provision for Leave Encashment' u/s. 43B(f) of the Act is arbitrary, erroneous, and bad, both in the eye of law and on facts and legally untenable and deserves to be set aside on this ground alone. 4. Disallowance u/s. 14A-₹ 5,47,52,850/- a. That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in sustaining the disallowance of ₹ 5,47,52,850/- u/s. 14A of the Act and dismissing the ground of the assessee is on based on irrelevant considerations, presumptions, conjectures and surmises, without any material evidence on record, contrary to facts, arbitrary, erroneous and bad, both in the eye of law and on facts. b. That in similar facts and circumstances, for the Asst. Year 2011-12, the learned predecessor CIT (Appeals) having fully deleted similar addition u/s. 14A of the Act, the order of the learned CIT (Appeals) in ignoring/not following the order and sustaining the disallowance of ₹ 5,47,52,850/- is u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r; iii. the reconciliation of capital works account submitted by assessee for claiming the benefit is not scientifically acceptable, tenable for passing the benefit; and iv. the disallowance made by the AO u/s. 32AC is in accordance with law. is on mis-appreciation /misconstruing the facts, contrary to facts, arbitrary, erroneous and bad, both in the eye of law and on facts. c. That on the facts and in the circumstances the case, the learned CIT(Appeals) ought to have allowed the claim of Investment Allowance of ₹ 34,12,08,111/- u/s. 32AC of the IT Act. 6. That the appellant craves leave to add, supplement, modify the grounds here-in-above before or at the hearing of the appeal. 50. Ground No. 1 6 are general in nature. The issue raised by the assessee in Ground No. 2 in respect of additional depreciation has already been decided by us while deciding the appeal of the assessee for A.Y. 2009-2010 in ITA No. 338/CTK/2017, wherein we have observed that the CIT(A) has already remitted the issue to the file of AO to allow the claim of the assessee after verification of necessary details, therefore, any order/direction by us, at this stage, on this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Ld. AR before us submitted that the assessee has already added the sum of ₹ 82,378/- in the computation of income with the (return of income) u/s. 14A of the Act in respect of expenses incurred relating to its exempted income and Rule 8D is not applicable. Ld. AR further submitted that this issue has been decided by the Tribunal in ITA No. 211/CTK/2016 along with other connected appeals, order dated 29.06.2018 for the assessment year 2013-2014. On the other hand, ld. DR relied on the order of AO. 13. 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. 211/CTK/2016 along with other connected appeals, order dated 29.06.2018 for the assessment year 2013-2014, wherein the Tribunal relying its earlier order dated 27.04.2018, passed in ITA No. 352/CTK/2016 for the assessment year 2010-2011 along with other connected appeals has observed as under:- 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 re-verification and apply the provisions of Section 14A r.w. rule 8D and in the instant case, the issue b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e body of this order above. Accordingly, ground No. 4 is allowed for statistical purposes. Respectfully following the above observations of the Tribunal, we also restore this issue to the file of AO for calculating the disallowance u/s. 14A read with Rule 8D afresh in the light of the observations made by us in the earlier order as quoted above. Thus, ground No. 4 is allowed for statistical purposes. 54. Ground No. 5 relates to disallowance of claim of investment allowance u/s. 32AC of the Act. 55. During the course of assessment proceedings, the AO has noticed that the assessee has claimed deduction of ₹ 34,12,08,111/- u/s. 32AC of the I.T. Act by way of filing of revised return. The AO has assessed on the basis of revised return filed by the assessee. In the revised return the assessee claimed deduction @15% of ₹ 227.47 crores on new plant and machinery installed during the year. In this regard, the AO asked the assessee to justify the claim made by him. In this regard, the assessee submitted detailed written submission before him, which has been incorporated by the AO in its assessment order but the AO was not satisfied from the submissions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has claimed investment allowance u/s. 32AC of the Act are vague, sketchy, lacks clarity, and has no linkage with the assets against which investment allowance u/s. 32AC of the Act is claimed, therefore, the same cannot be taken as the base for claiming investment allowance. Accordingly, the CIT(A) has confirmed the action of the AO. 57. Ld. AR before us reiterated the submissions made before both the authorities below and submitted that provisions of section 32AC of the Act stipulates that both acquisition and installation of any eligible Plant Machinery have to be taken place on or after 1.4.2013 and on installation, the assessee is entitled to claim investment allowance. The assessee for the assessment year 2015-2016 has claimed investment allowance for the first time although the provisions of Section 32AC of the Act came into force with effect from 1.4.2014 i.e., A.Y. 2014-15, because of the fact that the Capital work In Progress(CWIP) of the assessee company as on 1.4.2013 stood at ₹ 714.86 crore and therefore, all the acquisition made upto 31.3.2013, has been excluded from the purview of claim of deduction under investment allowance u/s. 32AC of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted that there must be mistake in the original return filed by the assessee due to bonafide mistake which is not in this case, therefore, the claim made by the assessee u/s. 32AC of the Act should not be accepted. In support of his arguments, he relied on the decision of Hon'ble Gauhati High Court in the case of Sunanda Ram Deka Vs. CIT, [1994] 210 ITR 988 (Gau). Further he relied on the orders of authorities below and submitted that the assessee also could not provide any conclusive evidence to prove its acquisition within the stipulated period i.e., after 31.03.2013 but before 01.04.2015, neither before the AO nor before the CIT(A), to satisfy the provisions of Section 32AC(1)(b) of the Act. It was further submitted by the ld. DR that reconciliation of capital work account for claiming the benefit is not scientifically acceptable for passing the benefit. Further the details provided has no linkage with the assets against which the investment allowance is claimed, therefore, the same cannot be taken as the base for claiming the investment allowance u/s. 32AC of the Act. As per this section the assessee has to fulfil twin conditions, i.e., acquired and installed during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regard to fresh claim made by the assessee u/s. 32AC of the Act by way of filing of revised return of income, we observe from the assessment order that the AO has accepted the revised return of income filed by the assessee and has disallowed fresh claimed made by the assessee as per Section 32AC of the Act. The ld. CIT-DR has raised this issue before us without taking any grounds in his appeal or by way of filing any cross objections regarding the revised return filed by the assessee. It was the bonafide claim made by the assessee which is legally if he has fulfilled entitled as per Section 32AC of the Income Tax Act. We also noted that the revised return was filed by the assessee on 29.03.2017, whereas the assessment proceedings have been completed 30.03.2017. Therefore, it is within the purview of the Income Tax Act. We found substance on the submission of the ld. AR in this regard, therefore, the arguments advanced by the ld. CIT-DR on this issue cannot be accepted. 61. With regard to arguments advanced by both the sides in respect of claiming of deduction u/s. 32AC of the Act, we find that the assessee before the AO has produced a reconciliation of CWIP claiming that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd machinery of ₹ 300 crores during financial year 2013-14 and ₹ 200 crores during financial year 2014-15. In this case, deduction will be allowed as under: Deduction that will be allowed for assessment year 2014-15 in terms of new section 32AC(1)(a)=15% of ₹ 300 crores = ₹ 45 crores Deduction that will be allowed for assessment year 2015-16 in terms of new section 32AC(1)(b) ₹ 75 crores ₹ 45 crores ₹ 30 crores Illustration 2 ABC Ltd., a manufacturing company, acquires and installs new plant and machinery of ₹ 100 crores during financial year 2013-14 and ₹ 200 crores during financial year 2014-15. In this case, deduction will be allowed as under: No deduction under section 32AC(1)(a) for assessment year 2014-15 as investment during financial year 2013-14 does not exceed ₹ 100 crores Total investment for both financial years 2013-14 2014-15 exceeds ₹ 100 crores. Therefore, deduction allowed in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. ITO [2013] 30 taxmann.com 5 (Delhi-Trib.) in the context of the phrase 'acquired and installed after 31-3-2005' in section 32(1)(iia) dealing with additional depreciation, the Tribunal held as under: On the plain reading of these provisions it is obvious and apparent that both the words acquired and installed are linked with and . Thus requirement of both these words cannot be seen fulfilled even if either of the two is only fulfilled. In other words both the acquisition and installation of the new machinery or plant are required to be made after 31-3-2005 by an assessee engaged in the business of manufacture or production of an article or thing. There is no doubt that incentive provisions of the Act should be read liberally. However, that does not mean that liberal approach should be applied at the cost of literal and obvious meaning of the statute, fulfilment of which is the primary requirement to qualify for the benefit of claimed depreciation. Liberal approach is required to be given while interpreting a provision, where possibility of more than one interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.04.2013 to 31.03.2015. While introducing this section the decision of Hon'ble coordinate bench of ITAT Delhi in case of International Cars Motors Ltd. v. ITO [2013] 30 taxmann.com 5 (Delhi-Trib.) has been considered. Respectfully following the above decision of the Tribunal, and the commentaries of the Finance Act as reproduced hereinabove, we think it fit to send back to the file of AO for re-examination of the claim made by the assessee u/s. 32AC of the I.T. Act after considering the above commentaries of the Finance Act and the decision of the coordinate bench of the Tribunal. The assessee is also directed to provide the necessary details for fulfilling the above twin conditions in the light of the above commentaries and the decision of the coordinate bench of the Tribunal, quoted supra. Needless to say, that reasonable opportunity of being heard be given to the assessee. Thus, this ground of appeal of the assessee is allowed for statistical purposes. 63. Thus, ITA No. 39/CTK/2019 is allowed for statistical purposes. 64. Now, we shall take up the appeal of the Revenue in ITA No. 69/CTK/2019 for the assessment year 2015-2016, wherein the Revenue has raised the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowed. The CIT(A) has considered the above observations of the Tribunal and deleted the addition made in this regard. Accordingly, we do not see any reason to interfere in the findings recorded by the CIT(A) and we uphold the same. Hence, ground No. 3 of Revenue is dismissed. 69. Thus, ITA No. 69/CTK/2019 filed by Revenue is dismissed. 70. Now, we shall take up the appeal of the assessee filed for assessment year 2016-2017 in ITA No. 01/CTK/2020, wherein the assessee has raised the following grounds:- 1. That the order dated 21.10.2019 passed by the Learned Commissioner of Income Tax (Appeals) [in short CIT(Appeals) ], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against the principles of natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Disallowance of claim of Addl. Depreciation u/s. 32(i)(iia) of the Act-₹ 88,15,717/- a. That the learned CIT (Appeals) has mis-appreciated the facts and the sustaining of disallowance of ₹ 88,15,717/- under 'Additional Deprecation u/s. 32(1)(iia) of the I.T. Act and dismissing the ground of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the learned CIT (Appeals) in ignoring/not following the order and sustaining the disallowance of ₹ 4,57,03,000/- is unjustified, arbitrary, erroneous and bad in law. c. That the assessee having already added certain sum u/s. 14A of the Act in the computation of income (returned income), Rule 8D is not applicable and sustaining of the addition of ₹ 4,57,03,000/- u/s. 14A of the Act is unjustified, arbitrary, contrary to facts, erroneous and bad in law. d. The appellant's computation of the aforesaid sum u/s. 14A of the Act is based on its books of accounts and is worked out in a reasonable and fair manner, the learned lower authorities have mis appreciated/misconstrued the same and the disallowance u/s. 14A of the Act is incorrect, arbitrary, erroneous and bad in law. e. That in similar facts and circumstances, for the Asst. Years 2010-11 and 2012-13, in assessee's own case, the Jurisdictional IT AT (Hon'ble IT AT Cuttack Bench, Cuttack) having not accepted the findings of the learned CIT (Appeals) in respect of disallowance u/s. 14A of the Act, the learned CIT (Appeals) ignoring and not following the order of the Jurisdictional IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. That without prejudice to Grounds (a) and (d) above, on the facts and in the circumstances the case, during the accounting year 2015-16, there being a credit of ₹ 32,09,59,743 under 'Provision for Leave Encashment' and in the past assessment years Learned Assessing officer having already disallowed the amounts debited under 'Provision for Leave Encashment' u/s. 43B(f) of the Act., the Lower authorities ought to have deducted the said ₹ 32,09,59,743/- while passing the orders. 5. That the appellant craves leave to add, supplement, modify the grounds here-in-above before or at the hearing of the appeal. 71. Ground Nos. 1 5 are general in nature. Ground No. 2 relates to disallowance of claim of additional depreciation u/s. 32(i)(iia) of the Act. The issue raised by the assessee has already been decided by us while deciding the appeal of the assessee for A.Y. 2009-2010 in ITA No. 338/CTK/2017, wherein we have observed that the CIT(A) has already remitted the issue to the file of AO to allow the claim of the assessee after verification of necessary details, therefore, any order/direction by us, at this stage, on this issue, would be futile exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2010-2011 along with other connected appeals has observed as under:- 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 re-verification 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 the above judicial decision of the Tribunal and remit the disputed issue to the file of AO for re-examination and verification and to decide the issue on merits after complying the mandatory requirement of the provisions of Section 14A of the Act and this ground of appeal is allowed for statistical purposes. 14. From the orders both the authorities below, we observe that the assessee is earning income under different heads, as mentioned above. During the year, the assessee has received dividend of ₹ 11,00,68,076/- and claimed such income as exempt income. The assessee has only made disallowance at ₹ 1,20,828/- u/s. 14A to earn the exempt income. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance u/s. 43B(f) of the Act can be made. It was further contended by the ld. AR that the AO has erroneously added the impugned amount under the provisions of leave encashment whereas the fact remains that this amount is not relating to provision for leave encashment but it is an actual payment made for leave encashment during the financial year 2015-2016, therefore, no such amount ought to have been added u/s. 43B(f) of the Act. 75. On the other hand, ld. DR relied on the orders of authorities below. 76. This issue has also been decided by us while deciding the appeal of the assessee for A.Y. 2009-2010 in ITA No. 338/CTK/2017, wherein we have observed that the issue is squarely covered by the decision of the Tribunal in assessee's own case in ITA Nos. 106 110/CTK/2018, order dated 23.09.2019, wherein the Tribunal has followed its earlier order dated 29.06.2018, passed in No. 211/CTK/2017, thereby restoring the issue to the file of AO further verification and examination of the issue. Thus, we direct the AO to examine as to whether the payment has been made towards leave encashment during the financial year 2015-2016 as claimed by the assessee before us and decide the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Tribunal has followed the decision taken in ITA No. 197/CTK/2017, order dated 29.06.2018. Respectfully following the observations of the coordinate bench of the Tribunal in the said appeal, we dismiss the ground No. (ii) (iii) raised by the Revenue. 81. Thus, the appeal of the Revenue in ITA No. 65/CTK/2020 is dismissed. 82. Now, we shall take up the cross objections filed by the assessee in CO Nos. 11/CTK/2019 08/CTK/2020, wherein the assessee has supported the order of the CIT(A). Since, we have already dismissed this ground as raised by the Revenue in its respective appeals, therefore, the grounds taken by the assessee in its cross objections for the both the years under consideration have become infructuous and the same are dismissed. 83. In the result, all the appeals of the assessee and Revenue along with the cross Objections filed by the assessee are decided in the following manner:- i) ITA No. 338/CTK/2017 filed by the assessee for A.Y. 2009-2010 is partly allowed for statistical purposes; ii) ITA No. 331/CTK/2017 filed by the Revenue for A.Y. 2009-2010 is partly allowed; iii) ITA No. 39/CTK/2019 filed by the assessee for A.Y. 2015-2016 is allowed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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