TMI Blog2017 (11) TMI 1971X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer had not disturbed this claim of the assessee in the Assessment Year 2012-12, this claim cannot be allowed. The findings in those cases are that the machines therein fall within this category. We have given a factual finding otherwise. Before us, the assessee has not advanced any arguments on its claim for allowing this expenditure as revenue expenditure. We find that this so called alternative claim is a contradictory claim. The argument is that a machine is fabricated, and it is entitled to depreciation. This means that it is capital expenditure. Just because higher rate of depreciation is not allowed on an asset, it does not lead to a conclusion that the expenditure incurred for acquiring an asset is revenue expenditure. This is an untenable claim. In the result, we uphold the findings of the Assessing Officer on this issue and reverse the order of the ld. CIT(A). Allowability of depreciation on good-will - claim for allowance of depreciation on the ground that it had acquired intangible assets through this conveyance deed - claim was not made by the assessee in the return of income and was made before the ld. CIT(A) - HELD THAT:- When a registered conveyance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed in the return nor any Audit Report has been filed in that regard - HELD THAT:- FAA has not admitted this claim but has held that the assessing officer should have granted the deduction under section 80 IE equal to 100 percent of the profits of Dullabcherra Tea Estate, as the fact that the assessee is eligible for deduction under section 80 IE is not in dispute. How the ld. CIT(A) has come to a conclusion that the fact of the assessee being eligible for claim of deduction u/s 80-IE of the Act and that this fact is not in dispute is not known. There are no basic facts record and no authority has examined the facts and have come to a conclusion that the statutory requirements for claim of deduction u/s 80-IE have been complied by the assessee. In our view, this finding is perverse. The assessing officer nor the ld. CIT(A), have examined the basic facts or have come to the conclusion that the assessee is eligible for deduction under section 80 IE equal to 100 per cent of the profits for the Dullabcherra Tea Estate. Without doing such an exercise the ld. CIT(A), has directed grant of this deduction. This is bad in law. Interest subsidy received - capital receipt or revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80IE of the Act, in any of the years, we cannot understand as to how the Assessing Officer decided to allow the claim for the first time in the 3rd year.Assessing Officer has failed to conduct a proper enquiry. CIT(A) has also failed in his duty on this issue. Thus we set aside this issue to the file of the AO, for fresh adjudication, in accordance with law. The Assessing Officer is directed to examine whether the conditions laid down u/s 80IE of the Act, have complied with by the assessee company in the Initial Year and then only come to a conclusion on this issue. We draw strength for this proposition, from the judgement of the Hon ble Delhi High Court in the case of CIT vs. Delhi Patra Prakashan Ltd[ 2013 (6) TMI 70 - DELHI HIGH COURT] . Disallowance of club expenses - HELD THAT:- What is to be seen, is as to whether these expenses are incurred for official purposes or personal purposes. If it is incurred for personal purpose, then the same has to be disallowed. Hence this matter is set aside to the file of the assessing officer for fresh adjudication, in accordance with law, after examining the vouchers of club expenses.In the result, this ground of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Ld. CIT(A) erred in allowing depreciation on goodwill which had merely been quantified on the revaluation and hence there had been no genuineness of such a valuation of an intangible asset. 4. Whether on the facts and in the circumstances of the case, the Ld CIT(A) erred in allowing Assessee's contention that MAT was applicable only when there was positive income and the same was less than Book Profit. 5. The facts relating to Ground No. 1 2 of the revenue appeal are that the assessee claims that it is entitled to higher rate of depreciation on Enclosed Withering Trough Machine on the ground that this is an energy-saving device and a pollution controlling equipment. The Assessing Officer was of the view that these machines are called Withering Trough Machinery and are required in all tea making factories and are integral part of the factories. He records at page 2 of his order that the function of the withering trough machine is to pass dry air over green leaves, to dry the green leaves procured from gardens so that the moisture in the green leave could evaporate gradually. He was of the view that the Enclosed withering Trough Machine is not an energy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely and, therefore, the entire expenditure should be allowed as revenue expenditure. Reliance was placed on the judgement of the Hon ble Calcutta High Court in case of The General Fibre Dealers P. Ltd. , in which expenses for conversion of coal fired heater to oil fired heater was allowed as revenue expenditure. The AO did not consider this alternative claim. 5.1.2. The ld. First Appellate Authority, considered the submissions of the assessing and at para 4 onwards of his order held as follows:- a. That the entire process of withering is crucial to the manufacturing. b. Installation of this particular device has been remunerative and economical to the assessee and the device has been installed with the clear intention to save energy, reduce carbon emission, control effect of pollution on tea produced. c. The material figures of production appeared to justify the contention of the assessee that the Enclosed Withering Trough Machines is based on latest technology and it reduces energy consumption. d. That Enclosed Withering Trough Machines is equal to flameless furnace and a flat bed dryer . e. Reliance was pleased on the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h they were not specifically listed in the Depreciation Table. He relied on the decision of the Hon ble Madras High Court in the case of Commissioner of Income Tax versus Adar Tea Products Company [2009] 314 ITR 38 (Mad) , and submitted that the same cannot be applied as the judgement of the Hon ble Jurisdictional High Court binds the ITAT Bench at Kolkata on this issue. 5.6. The ld. DR, Shri Saurabh Kumar, Additional CIT, DR, on the other hand, opposed to the contentions of the ld. Counsel for the assessee and submitted that the assessee claims to have fabricated certain covers to Withering Trough Machines and claimed that this is a power saving device. He argued that the so called Enclosed Withering Trough Machines were non-standard equipment, at best improvised and that there is no material or literature, whatsoever in the public domain, to substitute the claims of the assessee. He submitted that the ld. CIT(A), has only listed out the function of withering process in a tea industry and had simply accepted the contentions of the assessee without application of mind and without going into the merits of the case. He submitted that there is no evidence, whatsoever of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench had granted sufficient time to the assessee to produce materials from independent sources like Tea Research Institute, Universities or any other organisation or professors etc., in support of its claim that enclosing the withering trough machines, would result in energy-saving. Only the process of withering is explained in all these materials furnished by the assessee and there is not iota of evidence that enclosing a Withering Trough Machine would convert it into an energy saving device. 6.2. We also observe that earlier the assessee was using TD Oil for powering this withering trough machine and by enclosing the withering trough machines, it was powered by coal in place of TD oil. Nothing is said on whether using coal as a fuel in place of TD Oil would reduce the pollution. In fact coal as a fuel is a pollutant. In view of the above discussion, we hold that by changing the fuel that is being used, from TD Oil to Coal, and by modifying the withering trough machine by enclosing it by fabrication, in our view does not make the machine an energysaving equipment or pollution control equipment. 6.2.1. Be it as it may, the assessee furnished the following compari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The method also includes removing fluidizing media from the article as the article is removed from the fluidized bed. An elevator is used to remove the article from the fluidized bed. The elevator may include a conveyor for moving the article into another fluidized bed. The article can then be placed into the second fluidized bed and conveyed through that bed. Each fluidized bed is controlled so that a specific heat treatment can be applied to the article by the fluidized bed. The fluidized bed can be used as a portion of an automated production line. The retort of the fluidized bed includes a system for recycling the air passed through the fluidizing media in the furnace. The recycling system includes a fan positioned above the fluidizing media in the retort, a filter for removing any fluidizing media within the recycled air, and piping for reintroducing the recycled air to the retort. The heaters are placed within the retort and include heat exchangers for heating the incoming combustion air. The heaters are rigidly attached at one end and fit within sleeves attached to another portion of the retort. The heater tubes can be replaced with refrigeration tubes or units so that arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets through this conveyance deed. This claim was not made by the assessee in the return of income. The claim was made before the ld. CIT(A). No intangible asset in the form of goodwill or other such rights sold by Dullabhcherra Tea Estate or purchased by the assessee company as per this conveyance deed. The assessee company reallocated the purchase consideration between different assets it had acquired through this sale and arrived at a value of an intangible asset which it claims to have purchased and it termed it as Goodwill and claimed depreciation on the same. Some of the contentions of the assessee before the ld. First Appellate Authority are brought out for ready reference:- We may mention that at the time of planning and purchase of the Dullabhcherra T. E. we were advised to allocate value towards intangible assets as valuable and useful assets. However, at that time we had to accept the allocation as made by the vendors and we could not insist because of certain prejudices of the vendor and their executives. Just to have deal carried in appellants favour promoters of appellant accepted the allocation made by vendors because otherwise appellant may have los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) the actual cost of these intangible assets is ₹ 325 lakhs and depreciation at the rate of 25% of the same as allowable. 7.3. Aggrieved the Revenue is in appeal before us. 7.4. The ld. Counsel for the assessee, took this Bench through the various submissions made before the lower authorities as well as judgements of various Courts and argued that the value of intangible assets have been rightly arrived at by the management of the company by re-allocating the costs of purchase. He vehemently contended that, this is not a case of revaluation of assets and it was only a case of proper allocation of cost to various assets purchased. At pages 59 to 68 of the paper book, he filed certain papers to explain and justify the valuation of intangible assets at ₹ 325 lakhs, by reallocating the cost of purchase of land and plantation. 7.4.1. The ld. DR, on the other hand, submitted that the registered conveyance deed dt. 06/05/2006, gave the value of each and every asset that was transferred by the vendor of Dullabcherra Tea Estate M/s. Gillanders Arbuthnot Company Ltd. to the assessee company and that the assessee has artificially created an intangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding ground of cross-objection of the assessee supporting the order of the ld. CIT(A) i.e., Ground No. 5 is dismissed. 7.7 Ground No. 4 of the Revenue is on the legal issue as to whether Section 115JB of the Act is applicable only when there is no positive total income for the assessee. 7.7.1 The assessee relies on the judgement of the Jurisdiction Tribunal in the case of Sasamus Sugar Works Ltd. vs. DCIT, ITA No. 1024/Kol/2007, order dt. 28/09/2007. In our view this decision does not hold the field any longer and in view of the subsequent decisions of the Apex Court in the case of Apollo Tyres Ltd. vs. Commissioner of Income Tax (2002) 255 ITR 273 (SC) as well as the decision of ITAT Kolkata in the case of Bhatkawa Tea Industries Pvt. Ltd. vs. ACIT, Circle-4, Kolkata in ITA No. 813/Kol/2010, for the Assessment Year 2005-06, wherein it was held as follows:- 10.1 We are of the considered opinion that section 115JB of the Act is attracted in the case of the appellant. The appellant has not also been able to show us that the deductions as claimed by it from the net profit as per the P L account were allowable as per the provisions of the Act, keeping in view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee. 7.9 In the result this appeal of the revenue is allowed and the C.O. of the assessee is dismissed. ITA No. 1750/Kol/2016 C.O. No. 65/Kol/2016, Assessment Year 2009-10 8. Ground No. 1 and 2 of the revenue appeal and Ground No. 2, 3 4 of the cross objection by the assessee are on the issue of rate of depreciation allowable on Enclosed Withering Trough Machines . 8.1. We have adjudicated this issue in paragraph number 6 of this order for the Assessment Year 2008-09. Consistent with the view taken therein, we allow Ground number 1 and 2 of the revenue and dismiss Ground number 2, 3 4 of the cross objection. 8.2. Ground No. 3 of the revenue and Ground No. 5 of the cross objection is on the issue of depreciation on tangible asset. 8.2.1. Consistent with the view taken by us while disposing of this very issue for the Assessment Year 2008-09 we allow this ground of the revenue and dismiss the corresponding ground of the cross objection. 8.3. Ground No. 4 of the revenue appeal reads as follows:- whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing a deduction of ₹ 1,29,38,14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined the basic facts or have come to the conclusion that the assessee is eligible for deduction under section 80 IE equal to 100 per cent of the profits for the Dullabcherra Tea Estate. Without doing such an exercise the ld. CIT(A), has directed grant of this deduction. This is bad in law. 8.4.1. Hence, this Ground of the Revenue is allowed and the corresponding ground of the cross-objection is dismissed. 8.5. Ground No. 6, of the Revenue and Ground No. 7 of the Cross-Objection by the assessee, are on the issue of computation of profits under section 115JB of the Act. The issue is the same as was dealt by us while disposing of Ground Number 4 of the revenue appeal for the Assessment Year 2008-09. Consistent with the view taken therein, we allow Ground No. 6 of the revenue and dismiss Ground No. 7 of the cross objection by the assessee. 8.6. In the result, the appeal of the revenue is allowed and the cross-objection by the assessee is dismissed. ITA No. 1829/Kol/2016 C.O. No. 66/Kol/2016, Assessment Year 2010-11 9. Ground No. 1 of the Revenue appeal and Ground No. 2, 3 4 of the Cross- Objection are on the issue of rate of depreciation on Enclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accrued during the year and the assessee got the right to receive the interest in this year only, as it is a successor of Dullabcherra Tea Estate. The nature of receipt is not interest subsidy in the hands of the assessee. There is no claim from the vendors of Dullabcherra Teas Estate till date on the assessee for return of this amount to them. Hence the receipt is in the revenue field and it has accrued and arisen during the year. Thus this ground of the revenue is allowed. 9.4. Coming to Ground No. 6 7 of the cross objection, the assessee states that it s alternative claim for deduction under section 80 IE on this interest subsidy has to be allowed. This issue may be examined by the assessing officer, in accordance with law. Thus, Ground Nos. 6 and 7, of the Cross-objection filed by the assessee, are allowed for statistical purposes. 9.5. Ground No. 4 5 of the Revenue appeal is on the allowability of deduction under section 80 IE of the Act. 9.5.1. The facts of this issue is that the assessee claims that it had made additions to plant and machinery exceeding 25% of the opening book value during the Financial Year 2007-08, relating to the Assessment Year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2015, at para 42, held as follows:- 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a further inquiry in exercise of the power under Section 250(4). This approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. (Emphasis ours) 9.6.1. In the case on hand, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same issue, we dismiss the ground of the revenue as well as the ground of cross-objection of the assessee. 13. Ground No. 4 of the Revenue and Cross-objection No. 7 of the assessee are on the allowability of deduction under section 80 IE of the Act. 13.1. Consistent with the view taken by us for the Assessment Year 2010-11, while adjudicating the very same issue, we set aside this issue to the file of the Assessing Officer, for fresh adjudication, in accordance with law. 14. Ground No. 5 of the Revenue and Ground No. 8 of the Cross-objection of the assessee are on the computation of book profits u/s 115JB of the Act. 14.1. Consistent with the view taken by us while disposing of Ground No. 4 of the revenue appeal for the Assessment Year 2008-09, we allow this ground of appeal raised by the revenue and dismiss this ground of cross-objection by the assessee. ITA No. 787/Kol/2017, Assessment Year 2011-12, appeal by the Assessee 15. This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-2, Kolkata, (hereinafter the ld. CIT(A)), passed u/s 250 of the Income Tax Act, 1961 (the Act ), arising out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead of 20% due to less than 180 days after putting to use, 20% incentive in the first year is mandatory for the reason that one time incentive @20% of cost, is to be allowed as language used is shall be allowed . 9. Alternately, in case incentive is restricted to 10% for the reason that any eligible plant and machinery was used for less than 180 days, then, AO may be directed to allow balance 10% in subsequent year wherein 180 days are completed. 10. For that learned AO may be directed to allow correctly depreciation on correct WDV of plant and machinery for which depreciation was claimed @80% in earlier years but was allowed @ 15% by AO, however, from AY 2012-13 AO allowed depreciation @80% but on wrong WDV b/f, as if 80% depreciation was allowed in earlier years. 11. For that learned AO may be directed to treat A.Y.2012-13 as 4th year based on order of CIT(A) in earlier years holding that AY 2009-10 is initial year for deduction u/s 80 IE. 12. For that learned AO may be directed to make computation of 100% of profit of eligible undertaking correctly by including all incidental receipts and recoveries and incomes in such profit and to allow ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009] 319 ITR 204 (PH), it has been held that the disallowance made u/s 14A, cannot exceed the dividend earned. Keeping in this position of law, we uphold the contention of the assessee and delete this addition made under section 14 A, to the extent of ₹ 63131/-. DMAT charges of ₹ 1433/-, is disallowed by the Assessing Officer twice. Hence the disallowance is deleted as it was a double disallowance. 16. Ground No. 6 to 12, are remanded to the file of the ld. CIT(A), with a direction to adjudicate the same on merits, for the reason that, the ld. First Appellate Authority was wrong in holding that these grounds do not arise for the order of the Assessing Officer. In the result, these grounds are allowed for statistical purposes. 17. Ground No. 13, is on the issue whether 40 per cent of the dividend income or 100 per cent of the dividend income is to be considered for the purposes of Section 115O. Recently the Hon ble Supreme Court in the case of Union of India ors. vs. Tata Tea Co. Ltd. in CA NO. 9178 OF 2012, judgement dt. 20/09/2017, wherein it was held as follows:- 33. This Court, however, while considering the nature of dividend in the above ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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