TMI Blog2021 (2) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as 'Income from other sources - we are of the considered view that the disallowance made while computing the deduction allowable u/s 80-IA of the Act is not justified. MAT Computation u/s 115JB - unascertained liability - interest to beneficiary states, which may have to be paid in case of reduction in tariff as a result of revision order - HELD THAT:- As relying on own case [ 2018 (3) TMI 1589 - PUNJAB AND HARYANA HIGH COURT] we hold that the AO was not justified and in not allowing the claim as unascertained liability. We therefore, direct the AO to treat the amount as ascertained liability for the purpose of computing income under normal tax provisions and also for the purpose of computing book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in not allowing deduction amounting to ₹ 6,45,37,576/- claimed by the assessee under Section 80-IA of the Act. (ii) That the above said disallowance of deduction has been confirmed despite the fact that the said income is directly relatable to the business of the assessee. (iii) Without prejudice to the above and in the alternative, the learned CIT(A) has erred both on facts and in law in ignoring settled position of law that in case said income is held not to be eligible for deduction under Section 80-IA, corresponding relief on account of expenses related to said incomes may also be given. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of ₹ 14,34,00,000/- on account of provision of interest to beneficiaries states due to reduction in Tariff as a result of CERC order while computing regular income of the assessee. (ii) That the said addition has been confirmed rejecting the contention of the assessee that the said liability is an ascertained liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of power, it shall be eligible for deduction only from profits earned from that business and not from other income . The assessee was accordingly showcaused to explain as to how the income earned under the head Other Income was eligible for deduction u/s 80-IA of the Act. The assessee made the submissions which are noted by the AO in the assessment order but he was not satisfied with the explanations. AO noted that the income shown under the head Others aggregating to ₹ 6,45,37,576/- [comprising of ₹ 96,40,329/- from Chamera-II, 96,71,102/- from Dhauliganga, ₹ 33,00,795/- from Rangit and ₹ 4,19,25,350/- from Dulhasti]. He therefore, held that the aforesaid aggregate amount of ₹ 6,45,37,576/- to be not eligible for deduction u/s 80-IA and accordingly denied the claim of deduction. 10. Aggrieved by the order of AO, assessee carried the matter before the CIT(A). CIT(A) following his own order for A.Ys. 2010-11 to 2012-13 dismissed the grounds of appeal and upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 11. Before us, Learned AR pointed to the project-wise recovery of expenses other income earned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue is squarely covered in assessee s favour by the decision of the Tribunal in assessee s own case. He submitted that for A.Y. 2012-13, the Hon ble Tribunal in ITA No. 2786 3121 /Del/2016 vide order dated 20.03.2020 has decided the issue in favour of the assessee. He pointed to the relevant pages of the order placed in the paper book. He therefore submitted that since the facts in the year under consideration are identical to that of earlier years, then following the order of the Tribunal in assessee s own case in earlier years, the matter be decided accordingly. 13. Learned DR on the other hand did not controvert the submissions made by the Learned AR but however supported the order of lower authorities. 14. We have heard the rival submissions and perused the materials on record. The issue in the present ground is with respect to denial of claim of deduction u/s 80-IA of the Act. The claim of deduction was disallowed by the AO as he was of the view that the other income shown by the assessee was not eligible for deduction u/s 80IA. We find that identical issue arose in A.Y. 2011-12 before the Co-ordinate Bench of Tribunal. The Coordinate Bench of Tribunal by following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80 IA. The said six items were: (i) Extra Ordinary Items (ii) Refund from Universal Service Fund (iii) Interest from others (iv) Liquidated Damages (v) Excess provision written back (vi) Others including sale of directories, publications, form, waster paper, etc. 9. The AO held that the six items of income could not be said to be derived from the business of the Assessee and added the income therefrom to the returned income of the Assessee. In the appeal by the Assessee, the Commissioner of Income Tax (Appeals) [ CIT (A) ] agreed with the AO that three of the above items, viz. Extraordinary Items, Refund from Universal Service Fund and Interest from Others, did not form part of the profit derived from eligible business. However, the Assessee's plea regarding the other three items as being derived from the business was accepted by the CIT (A). 10. The Assessee filed appeals and the Revenue filed cross- appeals before the ITAT. The ITAT in the impugned orders concluded that with sub-section (2A) beginning with a non- obstante clause, the legislative intention of making available to an undertaking, providing telecommunication s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Ltd. Vs DCIT (2006) 283 ITR 402 has held as under: 27. Insofar as question No. 2 is concerned, according to the Tribunal s. 80-I of the Act uses the phrase 'derived from' and hence the interest received by the assessee from its trade debtors cannot be taken into consideration for the purpose of computing profits derived from an industrial undertaking. The Tribunal has failed to appreciate that it is not the case of the AO that the interest income is not assessable under the head 'Profits and gains of business'. It is only while computing relief under s. 80-I of the Act that the Revenue changes its stand. When one reads the opening portion of s. 80-I of the Act it is clear that words used are: gross total income of an assessee includes any profits and gains derived from an industrial undertaking . Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. That, in fact, the gross total income of the assessee included profits and gains from such business, and this is apparent on a plain glance at the computation in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal has held, to say that this interest is totally de hors the contract business carried on by the assessee. It is well settled that interest can be assessed under the head 'Income from other sources' only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as 'Income from other sources' . 50. In view of the above quoted decisions, we are of the considered view that the disallowance made of ₹ 4,46,54,883/- while computing the deduction allowable u/s 80-IA of the Act is not justified. Hence, we set aside the orders of the lower authorities and direct the Assessing Officer to recompute the deduction allowable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 18. Before us, Learned AR reiterated the submissions made before the AO and CIT(A) and further submitted that ₹ 14.34 crores was provided in the books towards interest to beneficiary states, which have to be paid due to reduction in tariff as a result of CERC revision order. He further submitted that interest has been provided as per the guidelines issued by the CERC and thus it being an ascertained liability, the same was required to allowed and also not added back while computing income u/s 115JB of the Act. He further submitted that identical issue arose in assessee s own case in the year 2006-07 wherein the Hon ble Punjab Haryana Court in ITA No. 356 of 2015 (O M) order dated 21.03.2018 decided the issue in favour of the assessee by holding that provision towards electricity tariff adjustment made as per the CERC Regulations is an ascertained liability and could not be added to book profit under section 115JB of the Act. He pointed to the relevant findings of the Hon ble High Court order placed in paper book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tariff adjustment of about ₹ 51.80 crores was not considered for addition while computing the book profit under section 115JB. The assessee answered the notice issued by the Assessing Officer under section 143(2). 6. The facts are admitted. For the purpose of answering these questions, it is sufficient to note that the assessee received an amount of ₹ 1713.79 crores for the relevant Assessment Year 2006-07. The assessee however, adjusted tariff in the sum of ₹ 51.80 crores. The assessee did so on account of the manner in which it is required to compute the tariff for the sale of electricity during the financial year in question viz. 2005-06. It is initially or provisionally charged at the immediately previous rate. The tariff was fixed for the period 01- 04-2001 to 31-03-2004 That is not the final tariff that would be charged for the subsequent period, for the subsequent year, the assessee is required to submit its application before the CERC for revision of tariff Thus, in the present case, the assessee was required to submit its application before the CERC for revision of tariff for the period 01-04-2004 to 31-03-2009. After the close of the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f conservatism as laid down in Accounting Standard-1 as per which all known ascertained liabilities have to be accounted for. The assessee is following the mercantile system of accounting. 10. The reliance placed by Mr. Ved Jain, the learned counsel appearing on behalf of the respondent/assessee upon the judgment of the Supreme Court in Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61 is well- founded. In that case the assessee had created a fund by making a provision for meeting its liability arising on account of accumulated earned/vacation leave that the employees were entitled to for the relevant assessment year. An amount of about ₹ 62 lakhs was set apart in a separate account as provision for encashment of accrued leave which was claimed as a deduction. The Tribunal held that the assessee was entitled to do so whereas the High Court held that the provision for accrued leave salary was a contingent liability and, therefore, was not a permissible deduction. The High Court based its judgment on the ground that the liability will arise only if an employee does not go on leave and applies for encashment. The Supreme Court held:- 4. The law is settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of converting that liability into a contingent liability; and (iv) a trader computing his taxable profits for a particular year may properly deduct not only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated. 6. So is the view taken in Calcutta Co. Ltd. v. CIT [1959) 37 ITR 1 : AIR 1959 SC 1165] wherein this Court has held that the liability on the assessee having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case. 11. Although the judgment was not under section 115JB, the ratio applies equally to the case before us as the question is the same. The liability in the present case also has definitely arisen, although it would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was not justified and in not allowing the claim of ₹ 14.34 crores as unascertained liability. We therefore, direct the AO to treat the amount of ₹ 14.34 crores as ascertained liability for the purpose of computing income under normal tax provisions and also for the purpose of computing book profits u/s 115JB. Thus the grounds of the assessee are allowed. 22. In the result, appeal of the assessee is allowed. 23. Now we take up Revenue s appeal in ITA No.5211/Del/2016 for A.Y. 2013-14. 24. Ground No.1 is with respect to deleting the disallowance made u/s 14A read with Rule 8D. 25. AO during the course of assessment proceedings and on perusing the computation of income filed by the assessee noticed that during the year assessee had made investment in shares and bonds and had earned interest and dividend income and the same was claimed as exempt while computing the taxable income. AO also noticed that while computing the income, no disallowance u/s 14A has been made by the assessee. The assessee was therefore, asked to explain as to why the expenses claimed for earning exempt income should not be disallowed while computing the income under the normal provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of ITAT Delhi in the case of ACIT vs. Vireet Investments Pvt. Ltd. - 2017 (6) TMI 1124 - ITAT DELHI wherein it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules. He further submitted that identical issue arose in assessee s own case for A.Y. 2012-13 wherein the addition was deleted by CIT(A) and the Revenue had preferred the appeal before the Tribunal. The Tribunal vide order in ITA No. 2786 3121 /Del/2016 order dated 20.03.2020 has upheld the order of CIT(A). He further submitted that identical issue also arose in assessee s own case in A.Y. 2008-09, 2009-10, 2010-11, 2011-12 2012-13 wherein the issue has been decided in assessee s favour. He therefore, submitted that in view of these facts, no interference to the order of CIT(A) is called for. 29. We have heard rival submissions and perused the materials available on record. The issue in the present ground is with respect to the disallowance u/s 14A. We find that identical issue arose for A.Y. 2012-13 and the Co-ordinate Bench of Tribunal held that AO was not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and in view of the decisions of the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Max India Ltd in ITA No. 186 of 2013 by order dated 6/9/2016 and CIT vs. winsome textile industries Ltd 319 ITR 204 and Bombay High Court in the case of CIT vs. HDFC bank Ltd in ITA No. 330 of 2012 by order dated 23/7/2014, no addition could be made by invoking Rule8D (2) (ii) of the Rules. 11. It is an admitted fact that a similar question in had arisen and was decided in favour of the assessee in assessee's own case for the assessment year 89, 2010-11 and 2011-12 in assessee's own case, as was noticed by the Ld. CIT(A) in the impugned order. Further the facts of this issue are covered by the decision of the Hon'ble Punjab and Haryana High Court in assessee's own case for the assessment year 2006-07 also. 12. In the circumstances we are of the considered opinion that the addition made by the assessing officer by invoking section 14A of the Act read with Rule 8D of the Rules cannot be sustained and the Ld. CIT(A) rightly deleted the same. No reasons to interfere with the reasoning given and conclusions reached by the Ld. CIT(A) on this aspect and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2004-05 in ITA No. 2449/Del/2008 order dated 30.09.2014 had dismissed the department appeal and the aforesaid order for A.Y. 2004-05 has been followed by the Tribunal in assessee s own case for A.Y. 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011- 12 2012-13. He further submitted that the issue is also covered by the decision of Hon ble Punjab and Haryana High Court in assessee s own case for A.Y. 2006-07 in ITA No. 136 of 2015, dated 28.02.2018. He therefore, submitted that in view of these facts no interference to the order of CIT(A) is called for. 36. We have heard rival submissions and perused the materials available on record. The issue in the present ground is with respect to the addition of ₹ 4.07 crores while computing the book profits u/s 115JB of the Act. We find that identical issue arose in assessee s own case in A.Y. 2012-13 before the Coordinate Bench of Tribunal. The Tribunal by following the order in assessee s own case for A.Y. 2006-07 upheld the order of CIT(A) by observing as under: 16. Now coming to the last ground of Revenue's appeal, in respect of the disallowance of ₹ 3,32,81,500/- made in computing book profits under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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