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TMI Blog2019 (3) TMI 2010X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) erred in allowing loss incurred by the assessee during the previous year ended 31.03-2006 on account of loss of raw materials in fire which was rejected by the AO relying upon the decision of Hon'ble Supreme Court in the case of Goetze (India] Ltd Vs. CIT reported in 284 ITR 323 wherein it is held that after the filing of the return of income the assessing authority has no authority to entertain any claim made otherwise than by way of revised return. 3. In the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) erred in allowing deducting u/s. 80IA on gas turbine unit 'other than steam' and gas turbine unit 'steam profit' as claimed by the assessee on power generation activities of gas turbine units. The CIT(A) has not appreciated the fact that the gas generation unit does not have an independent existence and is not an 'undertaking' capable of, having profits. 4. In the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) erred in allowing club expenses which was disallowed by the AO in absence of vouchers for ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. However, since the assessing officer has not considered the matter on merit, this tribunal is of the considered opinion that the matter has to be adjudicated by the assessing officer at the first instance. Accordingly, the orders of the lower authorities are set aside and the issue of loss of Rs.18,26,47,613/- on account of fire is remitted back to the file o the assessing officer. The assessing officer shall consider the issue on merit and thereafter decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee." 3.2 The assessee was granted an opportunity to explain with regard to the above issue and submitted that since the loss of Rs.17,34,34,860/- was incurred during the previous year ended 31.3.2006, hence the loss is allowable u/s. 26/37 of the Act, during the assessment year 2006-07, i.e., the year in which the same was incurred. The assessee submitted that the accounting treatment given by the company in the books of account was not relevant for the allowability of the expenditure incurred in the income-tax assessment. Hence, even though the loss was shown as recoverable in the books during the previous year ended 31/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during A.Y. 2008-09. However, the claim of the balance loss of Rs.4,24,29,060/- for the assessment year 2006-07 was not allowed by the Assessing Officer on the reason that the assessee had not claimed it in the revised return. However, the same was allowed by the CIT(A) as the assessee had offered the receipt of insurance claim during the subsequent year, i.e., 2008-09. Being so, it is revenue neutral. We find no infirmity in the order of the CIT(A) in allowing the claim of loss of the assessee, though there was no revised return of income filed by the assessee. Thus, this ground of appeal of the Revenue is dismissed. 4. The next ground relates to disallowance of claim of deduction made on the profits of gas turbine boiler amounting to Rs.2,06,20,739/-. 4.1 The facts of the case are that the assessee filed return of income and claimed deduction u/s. 80IA on its power generation plants as under: Diesel generation unit Rs. 71,20,803/- Gas Turbine unit Rs.10,16,77,289/- Total Rs.10,87,98,092/- During the course of assessment proceedings, the assessee made another claim of Rs.2,06,20,739/- as profit on generation of steam from gas turbine unit. The Assessing Officer disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IA is allowable in respect of captive power consumption units and generation of steam amounts to generation of power for the purpose of deduction u/s. 80IA. We do not find any infirmity in the order of the CIT(A) and confirm the same. Accordingly, this ground of appeal of the Revenue is dismissed. 5. The next ground is with regard to disallowance of amount of Rs.50,09,299/being club expenses. 5.1 The facts of the case are that the Assessing Officer treated the club expenses as personal in nature and disallowed them. The CIT(A) allowed these expenses. Against the Revenue's appeal, the Tribunal set aside the issue to the file of the Assessing Officer stating that entrance fees, subscription fees etc. be treated as business expenditure and for balance expenditure, commercial expediency be verified. During the course of re-assessment, the Assessing Officer asked for bills, vouchers etc. and gave time of only two days. The same was produced but they were not admitted as the assessee was aware that these verifications were required to be carried out by the Assessing Officer. 5.2 On appeal, the CIT(A) confirmed the addition of Rs. 20,00,000/- and balance Rs.30,09,299/- was deleted be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that the there was sufficient cause for the delay in filing the appeal before the Tribunal. Accordingly, we condone the delay of 52 days and admit the appeal for adjudication. 6.2 The facts of the case are that this claim was not made in the original return of income or through a revised return of income. The claim was made during the course of assessment proceedings. For the reasons, already discussed above, the Assessing Officer refused to entertain this claim. On appeal, the Tribunal directed the Assessing Officer to entertain the claim on merits. On verification, the Assessing Officer found that the DSIR approval was not there for 2006-07. The deduction was not allowable for this assessment year This disallowance was also confirmed by the CIT(A) for the assessment year 2007-. 6.3 On appeal, the CIT(A) confirmed the disallowance of Rs.3,67,43,119/-. 6.4 Against this, the assessee is in appeal before us. 6.5 We have heard the rival submissions and perused the record. As rightly observed by the CIT(A), the assessee was not granted DSIR approval for the assessment year 2006-07. Hence, there is no question of granting reduction u/s. 35(2AB) of the Act. Hence, this ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch/2018 and on the allowability of expenditure u/s. 35D of the Act, the assessee is in appeal before us in ITA No.249/Coch/2018 by way of additional ground. 7.6.1 With regard to allowability of expenditure u/s. 37(1), we are of the opinion that this issue was already settled by the Supreme Court in the case of Brooke Bond India Ltd. vs. CIT (225 ITR 798) wherein it was held that expenditure incurred by a company in connection with issue of shares, with a view to increase its share capital, is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making. Being so, we are inclined to reverse the finding of the CIT(A) on this issue. Accordingly, we allow the ground taken by the Revenue. 7.7 With regard to allowability of expenditure u/s. 35D, the assessee claimed expenditure of Rs.6,36,07,257/- on issue of shares and Rs.12,50,000/- incurred on ROC fees and submitted that it should be allowed u/s. 35D of the Act. This issue was raised for the first time before us. The Assessing Officer had no occasion to examine the same. Hence, we remit this issue to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remove the three companies out of five companies arrived by the TPO, which are broadly engaged in similar services and therefore functionally comparable. 5. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in allowing deduction u/s. 80IA on gas turbine unit 'other than steam' and gas turbine unit 'steam profit' as claimed by the assessee on power generation activities of gas turbine units, since the gas turbine generation unit does not have an independent existence and is not an 'undertaking' capable of having profits. Further, profit from gas turbine unit is a notional basis and not as per the provisions of the Act. 6. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the Commissioner of Income Tax(Appeals) may be set aside and that of the Assessing Officer restored. 9.1 The Revenue has raised the following grounds in ITA No.336/Coch/2018: 1. Whether on the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) is right in law holding that expenditure incurred during the setup period of the unit at Chennai and pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax(Appeals) may be set aside and that of the Assessing Officer restored. 10. The assessee has also raised common additional ground in C.O. Nos. 56&57/Coch/2018 which reads as follows: Ground No. 2: that the Assessing Officer erred in not passing a draft assessment order, which is a mandatory requirement as per section 144A. Hence, the order passed by the Assessing Officer dated 02/03/2016 is illegal, bad in law and without jurisdiction. Ground No. 3 : That not following the mandatory procedure vititates the entire proceedings and renders the order dated 02/03/2016 illegal, void abinitio and hence liable to be quashed. 10.1 The issue raised in the additional ground in C.O. Nos. 56&57/Coch/2018 which is a legal issue and goes to the root of the matter, it is to be admitted. We also place reliance on the judgment of the Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (229 ITR 383) (SC) wherein it was held that under section 254 of the Income Tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO. There is nothing in the wording of section 144C(1) which would indicate that this requirement of passing a draft assessment order does not arise where the exercise had been undertaken by the TPO on remand to it, of the said issue, by the Tribunal. It was then contended by the revenue that the assessment order passed by the Assessing Officer should not be declared to be invalid because of the failure to pass a draft assessment order u/s. 144C. In this regard, reference is made to 292B of the Act. As already noted, the final assessment order of the Assessing Officer stood vitiated not on account of mere irregularity but since it was an incurable illegality, section 292B would not protect such an order. (b) In the case of Addl. CITvs. Nokia India (P) Ltd. (259 taxman 81 (SC), the Supreme Court held that once there is a clear order of setting aside of an assessment order with requirement of Assessing Officer/TPO to undertake a fresh exercise of determining the arm's length price, failure to pass a draft assessment order, would violate section 144C(1). (c) In the case of International Air Transport Association vs. DCIT (290 CTR 46) (Bom.), the Bombay High Court held that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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