TMI Blog2022 (7) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest to be charged, the decision of the Ahmedabad Bench in the case of Micro Inks Ltd. [ 2013 (8) TMI 332 - ITAT AHMEDABAD] is not applicable to the assessee. The assessee being unable to establish with evidence the parity of facts as noted by the ITAT in the said case, of the advance being in the nature of quasi capital given to safeguards the business interest of the assessee, the said decision is of no assistance to the assessee. The advances therefore we hold are in the nature of loans and since no interest has been charged by the assessee on the same, the transfer pricing adjustment made by charging interest applying LIBOR is, we hold, justified. No reason to interfere in the order passed of the Ld. CIT(A) upholding the transfer pricing adjustment. - Decided against assessee. Disallowance of expenses made for the purposes of earning exempt income as per the provisions of Section 14A r.w.r.8D - CIT(A) deleted the disallowance of expenses in relation to investments made by the assessee in foreign subsidiary companies, noting that the dividend income earned therefrom were not exempt, while the rest of the disallowance was upheld - HELD THAT:- What is relevant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of strategic investments while computing disallowance as per Rule 8D of the Rules is dismissed. Upward adjustment made u/s. 92CA - Arm's Length Price adjustment made to the Success fees paid by the assessee to its subsidiary Kalpataru Power Transmission, USA, for its services in identifying projects in the US market - CIT-A deleted the addition - HELD THAT:- CIT(A) noted the nature of activities conducted by the AE for the assessee as being identifying projects, collecting project data and technical specification and transmitting the same to India for analysis. He noted that a success fee of 3% was agreed to be paid to the AE for securing orders and during the impugned year had paid the fee for securing order from Isoluv Ingenieria, SA. He noted that the assessee had benchmarked the transaction using US Census Bureau published annual data relating to sales made by agents on behalf of others and commission earned by such agents as part of annual economic census. He noted that as per the data such agents derived 4.1% commission while the AE had charged only 3%. He found the benchmarking done by the assessee to be correct noting that the Census report relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) and therefore decline to interfere. Ground No. 3 of Revenue's appeal is accordingly dismissed. Disallowance made u/s. 14A rws Rule 8D - CIT(A) deleting the disallowance of expenses pertaining to foreign investment made by the assessee - HELD THAT:- We see no reason to interfere in the order passed by the Ld. CIT(A) deleting the disallowance made u/s. 14A read with Rule 8D of the Rules with respect to foreign investment made by the assessee. - ITA Nos. 2471, 2853 & 2472/Ahd/2017 - - - Dated:- 6-7-2022 - Ms. Annapurna Gupta , Accountant Member And Shri TR Senthil Kumar , Judicial Member Appellant by : Shri Milin Mehta , A. R. Respondent by : Shri Mohd Usman , CIT / DR ORDER PER : ANNAPURNA GUPTA , ACCOUNTANT MEMBER : - The present appeals relate to the same assessee and are against separate orders passed by the Commissioner of Income Tax (Appeals)-Gandhinagar, (in short referred to as CIT(A)), u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) for Assessment Year (AY) 2012-13 2013-14 both dated 11-09-2017. While the appeal in ITA No. 2471 2853/Ahd/2017 are cross appeals filed by the Assessee and the Revenue for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Mauritius loan and 4.03% in respect of the Nigeria loan. Ld. counsel pointed out that the assessee had pleaded no such adjustment to be made on the ground that they were not in reality loans but were quasi capital in nature and were given interest free out of commercial expediency since the AEs were subsidiaries of the assessee floated to explore various business opportunities for the assessee only. That notional interest could not be assessed in the context of transfer pricing. The A.O. however rejected all the contentions of the assessee relying on the decision of the ITAT Delhi Bench in the case of Perot Systems TSI vs. DCIT (ITAT Delhi) and bench marked the transmission for interest to be charged thereon @ 4.16% in respect of the Mauritius loan and 4.03% in respect of the Nigeria loan accordingly proposing an adjustment of Rs. 2,52,390/- (Rs. 87,279 + Rs. 1,65,040) respectively for the two loans. The proposed adjustment was made by the A.O. in his order passed u/s. 143(3) of the Act. 7. The matter was carried before the Ld. CIT(A) who upheld the adjustment relying on the decision of the ITAT Ahmedabad Bench in the case of Soma Textile Industries vs. Addl. CIT in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial in the present context. We have also noted that the assessee has not offered any assistance on the quantum of ALP adjustment in respect of this loan transaction, and that in the subsequent assessment years, the assessee himself has accepted ALP adjustment by adopting the LIBOR + 2% interest rate. In this view of the matter, no interference is warranted on the quantum of the ALP adjustment either. In view of these discussions, we confirm the stand of the authorities below on this issue and decline to interfere in the matter. The facts of the appellant's case being identical, addition of Rs. 2,52,391/- made on short term advance to its overseas subsidiaries is held justified and is hereby confirmed. Relevant ground of appeal is rejected. 8. Before us, the Ld. Counsel for the assessee reiterated the contentions made before the lower authorities that the impugned advances were in the nature of quasi equity capital since they were given to the subsidiaries which were floated to explore business opportunities in their respective regions; the advances had no repayment schedule and was granted without any condition for repayment and further that the loans were given for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sily repatriate money back to India once the entities start earning revenue Advance has no repayment schedule and granted without any condition for repayment Refer Page 204 to 205 of Paper Book Page No. 701 to 702 of Paper Book Reliance placed on decision of ITAT Ahmedabad in case of Micro Inks Ltd. v. Asstt. CIT [2013] 144 ITD 610 (Refer Page No. 702 to 704 of Paper Book) Decision of Perot Systems TSI (India) Ltd. vs. DCIT 37 SOT 358 2010 not applicable (Refer Page No. 702 of Paper Book) Argument of quasi-equity capital rejected on the basis of facts Core legal issue i.e. whether ALP adjustments will also be warranted in case of interest free loans given as quasi capital, was left open There was no material on record to establish that the loans were in reality not loans but were quasi-capital Without prejudice to above, application of LIBOR + rate for arm's length price determination in case of short-term advance is not permitted. Reliance is placed on decision of ITAT Ahmedabad in case of Micro Inks Ltd. v. Asstt. CIT [2013] 144 ITD 61 LIBOR is an inter-bank offer rate and is applicable between 2 banks Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng adjustment made by charging interest applying LIBOR is, we hold, justified. 12. In view of the above, we see no reason to interfere in the order passed of the Ld. CIT(A) upholding the transfer pricing adjustment of Rs. 2,52,319/- on account of determination of Arms Length Price (ALP) of interest to be charged on short term advances given to the AE of the assessee. 13. Ground of appeal No. 1 1.1 is accordingly dismissed. 14. Ground No. 2 to 2.5, it was pointed out related to disallowance of expenses made for the purposes of earning exempt income as per the provisions of Section 14A of the Act. The grounds reads as under: 2. The learned CIT(A) has erred in partly confirming the addition made by the learned Assessing Officer to the total income of the appellant u/s. 14A by invoking rule 8D in respect of investments made in Indian companies and Mutual Funds. 2.1 The learned CIT(A) has erred in confirming disallowance under Section 14A made by the learned AO. It is submitted that, in the facts and circumstances, no disallowance over and above disallowance already made by the Appellant in the return of income need be made under Section 14A. 2.2 Without prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) at Para 9.3 and 9.3.1 of his order are as under: 9.3 I have carefully considered the Assessment Order and submission filed by the Appellant. The Appellant has earned exempt income in the form of dividend of Rs. 8,18,54,250/- and while fining the Return of Income it has made suo moto disallowance of Rs. 60,000 in computation of total income towards administrative and other expenditure. The AO has applied Rule 8D and worked out disallowance of Rs. 2,05,15,540 being 0.5% of average investments. As Appellant has made suo moto disallowance of Rs. 60,000, net addition of Rs. 2,04,55,540/- was made. It is observed that similar disallowance was made in A.Y. 2009-10 wherein Hon'ble Ahmedabad ITAT in ITA No. 538/Ahd/2013 (dated 18/03/2016) has confirmed such disallowance and held as under: 39. We have noted that Section 14A(2) categorically provides that The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard. The dispute is confined to the quantum of disallowance and the basis on which it is to be quantified. In the absence of any reasonable basis of disallowance offered by the assessee, and in the absence of the assessee even disclosing the basis on which disallowance is made, the Assessing Officer had invoked the rule 8D. We see no infirmity in this action. In view of these discussions, as also bearing in mind entirety of the case, we vacate the relief granted by the CIT(A) and restore the disallowance of Rs. 68,45,142 made by the Assessing Officer. 9.3.1 In view of above finding of Hon'ble ITAT in Appellant's own case, it is held that AO was justified in holding that Rule 8D is applicable and disallowance made by AO is confirmed subject to following observations: (i) During the year under consideration, Appellant has also made ad hoc disallowance of Rs. 60,000 for which no basis was provided hence following the observations in appellate order supra, plea of Appellant that AO has not recorded his satisfaction regarding not accepting method of disallowance is Return of Income cannot be accepted. Further, Hon'ble Gujarat High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 476.01 314.37 Special Purpose Vehicle company 3815.51 3815.51 Investment from which no dividend income earned in the year 6639.50 3855.00 Investment from which dividend income earned during the year 29562.52 31573.09 Total 40493.54 39557.97 18. He thereafter submitted that ground No. 2.1 and 2.2 were not being pressed. With respect to ground No. 2.3 raised by the assessee against the invocation of Rule 8D of the Rules by the A.O. without recording any satisfaction, Ld. Counsel for the assessee pointed out that though the issue stood decided against the assessee in its own case in A.Y. 2009-10 to A.Y. 2011-12 by the ITAT Ahmedabad however considering the decision of the Hon'ble Apex Court in the case of Godrej Boyce Manufacturing Co. Ltd. 394 ITR 449 holding that recording of reasons by A.O. is mandatory for making disallowance u/s. 14A and since the Hon'ble Apex Court decision was pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Ld. Counsel for the assessee was asked as to what specific explanation was filed by the assessee to the A.O. justifying the suo moto disallowance of Rs. 60,000/-. 21. The Ld. Counsel for the assessee was unable to point out any such explanation but only referred to the explanation filed to the Ld. CIT(A) to the fact that the investments were strategic and no expenses were required to be incurred and therefore only a portion of the expenses of the accountant was disallowed attributing it to the earning of exempt income which amounted to Rs. 60,000/-. 22. Considering the above, we are of the view that the Ld. CIT(A) has rightly held that the A.O. has duly recorded his reasons for not being satisfied with the explanation of the assessee for making suo moto disallowance of expenses and has therefore rightly proceeded to apply Rule 8D for working out the same. As is evident from a bare perusal of the assessment order and as pointed out to the Ld. Counsel for the assessee during the course of hearing before us, the assessee was unable to give plausible explanation to the A.O. for making suo moto disallowance of Rs. 60,000/-. It may be pointed out that for invoking Rule 8D f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those investments on which dividend income is earned during 'he year should be considered for applying Rule 8D ACIT vs. Vireet Investments (P.) Ltd. [2017] 82 taxmann.com 415 (Special Bench Delhi) Adani Enterprise Ltd. Vs. ACIT [2019] 111 taxmann.com 196 (ITAT Ahmedabad) Aditya Medisales Ltd. vs. DCIT [2019] 105 taxmann.com 209 (ITAT Ahmedabad) 24. Ld. D.R. countered by stating that the issue of investment in SPVs already stood decided against the assessee by the Hon'ble Apex Court in the case of Maxopp Investments. Ltd. vs. Commissioner of Income Tax (2018) 406 ITR 0640 (SC). 25. Having considered the arguments of both the parties, we find no merit in the contention raised by the Ld. counsel for the assessee for reducing Strategic Investments made while computing disallowance as per Rule 8D of the Rules. As rightly pointed out by the Ld. DR the Hon'ble apex court in the case of Maxopp (supra) has in very clear terms upheld the theory of apportionment of expenses between taxable and exempt income 'categorically rejecting the dominant purpose theory' as per which the dominant purpose of the investment made would determine the applicabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een now widened under section 14 A. 35. The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the Legislature has not only inserted Section 14A by the Finance (Amendment) Act, 2001 but also made it retrospective, i.e., 1962 when the Income Tax Act itself came into force. The aforesaid intent was expressed loudly and clearly in the Memorandum explaining the provisions of the Finance Bill, 2001. We, thus, agree with the view taken by the Delhi High Court, and are not inclined to accept the opinion of Punjab Haryana High Court which went by dominant purpose theory. The aforesaid reasoning would be applicable in cases where shares are held as investment in the investee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o collect project data and technical specifications and transmitting the same to India for further, analysis. In respect of these services the AE charges a monthly sum of USD 15000 plus 3% success fee on the net invoice. During the year under consideration the AE was successful in generating business for the Appellant and a success fee of 3% was paid for securing the order from Isoluv Ingenieria, SA. The Appellant has benchmarked the above transaction applying comparable uncontrolled price method. In all the submissions before the TPO the appellant has submitted that 3% success fee is nothing but the commission paid to its foreign AE, This transaction is being benchmarked using the US Census Bureau published annual data relating to sales made by agents on behalf of and commission earned by such agents as part of annual economic census. As per the said data agents derived 4.1% commission on sales generated by them. Against this 4.1% the AE has charged a success fee of 3% which is approximately 30% lower. However, the TPO has summarily rejected the above benchmarking process and held that the aforesaid data encompasses commission of electronics market broker which may not involve sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply relying on the decision of Cadila Healthcare is held not justified and is hereby directed to be deleted. Relevant grounds of appeal are therefore, allowed. 34. Ld. D.R. relied on the order of the A.O. while the Ld. Counsel for the CIT(A). 35. We have gone through the order of the Ld. CIT(A). We find that the Ld. CIT(A) considered all the facts before him relating to the issue and thereafter gave a well reasoned and detailed finding that the comparable selected by the assessee for determining the ALP of the transaction was correct while that by the Revenue was not appropriate. The Ld. CIT(A) noted the nature of activities conducted by the AE for the assessee as being identifying projects, collecting project data and technical specification and transmitting the same to India for analysis. He noted that a success fee of 3% was agreed to be paid to the AE for securing orders and during the impugned year had paid the fee for securing order from Isoluv Ingenieria, SA. He noted that the assessee had benchmarked the transaction using US Census Bureau published annual data relating to sales made by agents on behalf of others and commission earned by such agents as part of annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved by UNFCC Nil Nil Nil 41. While filing the return of income the assessee had excluded the income pertaining to CER and added back the expenditure incurred for earning such income in its total income on the ground that CER is a Capital receipt. The A.O. held that CER was akin to import entitlement and was a taxable business receipt and referring to section 2(13) of the Act concluded that profit arising from sale of Carbon Credits was business profit u/s. 28 of the Act. Accordingly the income earned from the sale of the Carbon Credits amounting to Rs. 5,25,41,076/- was added to the business income of the assessee being taxable business receipt. 42. The Ld. CIT(A) deleted the addition agreeing with the assessee's contention that it was a capital receipt, noting his own order in the case of the assessee for A.Y. 2010-11 2011-12 in first appeal and further following the decision of the ITAT Ahmedabad Bench in the case of Alembic Ltd. In ITA No. 1912/Ahd/2012. The order of the Ld. CIT(A) in this regard at para 8.3.4 to 8.3.6 is as under: 8.3.4 On careful consideration of entire facts, it is observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipline 19.2 The Ld. Departmental Representative, on the other hand, contends that the realization from carbon credits has been treated by the appellant itself as revenue income and offered to tax and in fact in actualities they are revenue receipt. However, no adverse judgment on this has been cited. 20. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. The additional ground stands already admitted. The duty of the ITAT is to ensure that fair, just and proper assessment is made. Merely because the appellant was of the opinion that the - receipt was Revenue in nature cannot act as an estoppels against it when the law as interpreted by Hon'ble High Courts takes a view at variance with the Appellant. The law is settled that the Revenue cannot stand benefited from a tax-which is not leviable in right earnest. We find merit in the contentions of the Ld. Counsel for the appellant that the Hon'ble Karnataka High Court in the case of Subhash Kabini Power Corporation Ltd. (supra) and the Hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd. (supra), have taken a view that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the taxability of the income from sale of CERs in future year. It is not in dispute that so far as the year under consideration for which the appeal was before the learned Tribunal, the learned Tribunal has confirmed, the order passed by the learned CIT(A) deleting the addition of Rs. 5,78,28,058 by observing that no such income has been received by the assessee in the year under consideration as there was neither any sale nor transfer of the carbon receipts in favour of any foreign companies during the year under consideration. Therefore, as such the issue before the learned Tribunal was as such academic. Therefore, keeping the said question open to be considered in accordance with law in the year in which the income is derived from sale of CERs, the learned Tribunal ought to have disposed of the appeal. At this stage it is required to be noted that even the learned Tribunal has in the impugned order has specifically observed that the learned tribunal is making observations on the aforesaid issue to show their understanding on the issue and that they have briefly touched the issue. In any case the learned Tribunal ought not to have decided the issue which as such was ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 2] [In favour of appellant] (ii) Decision of Hon'ble ITAT Chennai in case of Sri Velayudhaswamy Spinning Mills (P.) Ltd. Vs. DCIT [2013] [40 taxmann.com 141]: Section 4 of the Income-tax Act, 1961 - Income - Chargeable, as [Carbon credits] Assessment year 2009-10 - Appellant was engaged in business of manufacturing of yarn and electricity generation through windmills - Appellant treated clean development mechanism (COM) receipts, on account of sale of carbon credits as capital receipts, whereas Assessing Officer held same to be revenue receipts - Whether following decision in Ambika Cotton Mills Ltd. v. Dy. CIT [2013] 27 ITR (Trib.) 44 (Chennai), sale of carbon credits was to be considered as capital receipt-Held, yes [Para 7] [In favour of appellant] (iii) Decision of Hon'ble ITAT Hyderabad DCIT Vs. Sree Rayataseema Green Energy Ltd. [2015] [58 taxmann.com 62]: Section 28(1) of the Income-tax Act, 1961 - Business income-Chargeable as (Carbon credits) - Assessment year 2010-11 - Appellant, engaged in business of generation of power and sale of transformers, credited income from sale of carbon credits-to its sister concern instead of crediting amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was accordingly claimed by the assessee in the impugned year, which was disallowed by the A.O. but allowed by the Ld. CIT(A). The assessee had claimed additional depreciation of Rs. 26,41,911/- u/s. 32(1)(iia) of the Income Tax Act during the impugned year i.e. A.Y. 2012-13, on the assets which were put to use in A.Y. 2011-12 for a period less than 182 days and therefore additional depreciation was calculated at 50% of the applicable rate during A.Y. 2011-12. The balance additional depreciation was claimed during the impugned year. The A.O. disallowed the same following his order in A.Y. 2010-11 2011-12 in the assessee's own case. Before us, the Ld. Counsel for the assessee pointed out that the order of the Ld. CIT(A) in A.Y. 2010-11 2011-12 had been upheld by the ITAT in its order in ITA No. 1422 1463/Ahd/2016 dated 10.05.2019. Our attention was drawn to para 8 of the order is as under: 8. Ground No. 3 of Revenue's appeal concerns eligibility of additional depreciation amounting to Rs. 7,91,852/-. The CIT(A) has dealt with the issue as under: 7. Next set of grounds of appeal is regarding rejection of claim of additional depreciation of Rs. 7,91,852/- u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al depreciation was calculated at 50% of the applicable rate during the assessment year 2010-11. The balance amount of additional depreciation was not claimed by the Appellant at the time of filing the return of income and therefore such additional depreciation was claimed by submitting the letter No. 933 dated 17.03.2014 clarifying the reason thereof. However, the Assessing officer not only rejects the claim but addition of the same amount of Rs. 7,91,852/- was made while calculating the total income without considering the facts that the said amount of Rs. 7,91,852/- on account of additional depreciation was not claimed at the time of filing the return of income. Accordingly, the AO has erred in computation of total income by not allowing the deduction of additional depreciation but also erred while calculating the assessed taxable income u/s. 143(3) of the Act by way of addition on account of additional depreciation which was not at all claimed originally at the time of calculation of taxable income at the time of filing return of income. 7.3 The Appellant further submitted that with regard to additional depreciation u/s. 32(1)(iia), 50% of which has not been claimed in pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery or plant is acquired by the machinery or plant is acquired and installed after 31-03-2005. Proviso to section 32(1)(iia) says that if the machinery was acquired by the assessing during the previous year and has put to use for the purpose of business less than 180 days, the deduction shall be restricted to 50% of the amount calculated at the prescribed rate. Therefore, if the machinery is put to use in any particular year, the assessee is entitled for 50% of the prescribed rate of additional depreciation. The Income-tax Act is silent about the allowance of the balance 10% additional depreciation in the subsequent year. Taking advantage of this position, the assessee now claims that the year in which the machinery was put to use the assessee is entitled for 50% additional depreciation since the machinery was put to use for less than 180 days and the balance 50% shall be allowed in the next year since the eligibility of the assessee for claiming 20% of the additional depreciation cannot be denied by invoking Second Proviso to section 32(1)(ii) of the Act. DCIT v. Cosmo Films Ltd. 139 ITD 628 [2012 .... Thus, the intention was not to deny the benefit to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. We allow ground No. 2 of the assessee's appeal. Since we have decided ground No. 2 in favour of assessee, there is no need to decide the alternative claim raised in ground No. 3. The same is dismissed. Asstt. CIT v. SIL Investment Ltd. 26 taxmann.com 78 (Delhi) 40. There is nothing on record to show that the directions given by Ld. CIT(A) are not proper. The eligibility for deduction of additional depreciation stands admitted, since 50% thereof had already been allowed by the AO in the assessment year 2005-06, i.e., the immediately preceding assessment year. Therefore, obviously, the balance 50% of the deduction is to be allowed in the current year, Le. assessment year 2006-07. The Ld. CFT(A) has merely directed the verification of the contentions of the assessee and to allow the balance additional depreciation after such factual verification. Accordingly, finding no merit therein, ground No. 3 raised by the Department is rejected. Birla Corporation Ltd. v. DCIT 55 taxmann.com 33 15. We have heard rival submissions and gone through facts and circumstances of the case. The facts are admitted and there is no dispute on the facts. Only issue for adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO cannot cut down the scope of deduction by referring to second proviso to section 32(1)(ii) of the Act. He also pointed out that even if there is any contradiction between sections 32(1)(iia) and second proviso to section 32(1)(ii), it has to be reconciled so as to give harmonious effect to the legislative intent. The benefits conferred on the assessee by way of incentive provision cannot be taken away by adopting an implied meaning to second I proviso to section 32(1)(ii) of the Act. Since the second proviso to section 32(1)(ii) does not expressly prohibit, the allowance of the balance 50% depreciation in the subsequent year, second proviso to section 32(1)(ii) shall not be interpreted to mean that it impliedly restrict the additional depreciation to be allowed in the subsequent assessment year. We are of the view that the assessee now is entitled for 50% additional depreciation, because in the year in which the machinery was first put to use the assessee claimed only 50% of additional depreciation for the reason that the same was put to use for less than 180 days, in this assessment year for the balance of depreciation. 7.4 I have considered the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) of section 32(1). This additional allowance u/s. 32(1)(iia) is made available as certain percentage of actual cost of new machinery and plant acquired and installed. This provision has been directed to the setting up new industrial undertaking making or for expansion of the industrial undertaking by way of making more investment in capital goods. Thus, these are incentives aimed to boost new investments in setting up and expanding the units. The proviso to section 32(1)(iia) restricts the benefits in respect of following- 'Provided that no deduction shall be allowed in respect of-(A) Any machinery or plant which, before its installation by the assesses was used either within or outside India by any other person; or (B) Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house or (C) Any office appliances or road transport vehicle, or (D) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s. 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s. 32 shall definitely not exceed the total cost of plant machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit. In view of the above, we feel no need to interfere with the order passed by Ld. CIT(A) in respect of deletion of disallowance on account of additional depreciation of Rs. 4,98,859/- also and the order passed by Ld. CIT(A) is hereby upheld. 6.5 Considering the series of Authorities relied upon by the appellant and as extracted above, it is imperative to hold that the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining to foreign investment made by the assessee. The Ld. CIT(A) had directed exclusion of foreign investment made for the purpose of computation of disallowance u/s. 14A as per Rule 8D of the Income Tax Rules 1962 holding that the dividend earned from the said foreign investment was not exempt from tax. 52. The Ld. D.R. was unable to controvert the above findings of the Ld. CIT(A). 53. In view of the above, we see no reason to interfere in the order passed by the Ld. CIT(A) deleting the disallowance made u/s. 14A read with Rule 8D of the Rules with respect to foreign investment made by the assessee. 53.1. Ground No. 4 is dismissed. 54. In effect, appeal of the Revenue is dismissed. 55. We shall now take up the Assessee's appeal in ITA No. 2472/Ahd/2017 for A.Y. 2013-14 56. The solitary issue raised in the present appeal it was pointed out related to disallowance of expenses made for the purpose of earning exempt income as per Section 14A read with Rule 8D of the Income Tax Rules 1962. The grounds read as under: 1. The learned CIT(A) has erred in partly confirming the addition made by the learned Assessing Officer to the total income of the appellant u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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