TMI Blog2019 (3) TMI 2010X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits of gas turbine boiler - HELD THAT:- We find that this issue is covered in favour of the assessee by the decision in the case of West Coast Paper Mills Ltd. [ 2014 (7) TMI 554 - ITAT MUMBAI] wherein it was held that deduction u/s. 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. Disallowance of amount being club expenses - HELD THAT:- The observation made by the CIT(A) is justified. AO had given only two days to produce the requisite vouchers and bills. The assessee has also not produced any documents. More so, there was no disallowance in the subsequent year on this count. Considering the totality of the facts and circumstances of the case, the CIT(A) disallowed Rs. 20 lakhs and balance Rs.30,09,299/- was deleted. Hence, we do not find any infirmity in the order of the CIT(A) and confirm the same. This ground of appeal of the Revenue is dismissed. Disallowance of claim of reduction u/s. 35(2AB) - As found that the DS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, ITA No. 268/Coch/2018, C.O. No. 56/Coch/2018 (ITA No. 268/Coch/2018), ITA No. 336/Coch/2018, C.O. No.57/Coch/2018 (ITA No.336/Coch/2018) - - - Dated:- 21-3-2019 - S/Shri Chandra Poojari, AM And George George K., JM For the Revenue : Shri Alok Mitra, CIT(DR). For the Assessee : Shri Salil Kapoor and Mrs. Ananya Kapooor, Adv. ORDER Per CHANDRA POOJARI, AM : These are cross appeals filed by the assessee and the Revenue against different orders of the CIT(A)-I, Kochi for the assessment years 2005-06, 2006-07, 2008-09 and 2009-10. The assessee has also raised cross objections in C.O. No.56/Coch/2018 for the assessment year 2008-09 and C.O. No. 57/Coch/2018 for the assessment year 2009-10. ITA No. 247/Coch/2018 : Revenue s appeal A.Y. 2006-07 2. The Revenue has raised the following grounds of appeal: 1. 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 repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is limited to the power of the assessing officer and does not impinge on the power of the income tax appellate tribunal u/s. 254 of the Income-tax Act 1961. These shall be no order as to costs. In view of the judgment of the Apex Court it is obvious that the power of the Income-tax Appellate Tribunal to entertain an additional claim will not impinge. Therefore, even if the claim of the loss was not made in the return of income the CIT(A) ought to have been admitted the claim as an additional ground and examined the issue on merit. This tribunal also has to entertain the same as an additional ground since the claim was made in the course of assessment proceedings in view of the judgment of the Apex Court in the case of CIT vs. Shelly Products (2003) 261 ITR 367 (SC). In view of the above, the CIT(A) is not justified in rejecting the claim of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee during the year ended 31/3/2006 may be allowed in the assessment year 2006-07 in accordance with the provisions of section 28/37 of the Act. 3.4 On appeal, the CIT(A) directed the Assessing Officer to allow the balance loss of Rs.4,24,29,060/- during the assessment year 2006-07. 3.5 Against this, the Revenue is in appeal before us. 3.6 We have heard the rival submissions and perused the record. For A.Y. 200607, the assessee estimated the loss at Rs.17,34,34,860/- which was disallowed by the Assessing Officer. However, subsequently, it was allowed by the Assessing Officer at Rs. 7 crores in A.Y. 2008-09 and at Rs.6,09,38,800 in A.Y. 2010-11, totaling Rs.13,09,38,800/-. The balance amount of R.4,24,29,060/- was not allowed. It is brought on record that the assessee had received insurance claim to the extent of that amount and offered to tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein it was held that deduction u/s. 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. The assessee also submitted that the gas turbine unit is a separate undertaking and is not a result of splitting up of reconstruction of an already existing unit. The technology used in gas turbine vis- -vis diesel turbine is different from each other. In view of the above, the CIT(A) directed the Assessing Officer to allow the claim of the assessee on gas turbine unit amounting to Rs.10,16,77,289/- and on generation of steam power amounting to Rs.2,06,20,739/-. 4.3 Against this, the Revenue is in appeal before us. 4.4 We have heard the rival submissions and perused the record. We find that this issue is covered in favour of the assessee by the decision of ITAT, Mumbai Bench in the case of West Coast Paper Mills Ltd. vs. ACIT (52 taxman.com 268) wherein it was held that deduction u/s. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the observation made by the CIT(A) is justified. The Assessing Officer had given only two days to produce the requisite vouchers and bills. The assessee has also not produced any documents. More so, there was no disallowance in the subsequent year on this count. Considering the totality of the facts and circumstances of the case, the CIT(A) disallowed Rs. 20 lakhs and balance Rs.30,09,299/- was deleted. Hence, we do not find any infirmity in the order of the CIT(A) and confirm the same. This ground of appeal of the Revenue is dismissed. The appeal of the Revenue in ITA No. 247/Coch/2018 is dismissed. ITA No.339/Coch/2018 : Assessee s Appeal : A.Y. 2006-07 6. The first ground relates to disallowance of claim of reduction u/s. 35(2AB) amounting to Rs.3,67,43,119/-. 6.1 There was a delay of 52 days in filing this appeal before the Tribunal. The Ld. AR has filed condonation petition accompanied by an affidavit citing the reasons for the delay in filing the appeal. On perusal of the affidavit, 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 adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by the CIT(A), then the deduction u/s. 35D amounting to Rs.12,972,451 [1/5th of (63,607,257 + 1,250,000)] should be allowed as the said expenditure is incurred for expanding the current business of tyre manufacture and hence clearly covered u/s. 35D of the Act. 7.3 We find that the reason explained by the assessee for not raising this ground on earlier occasion is bona fide. Hence, we admit the additional ground for adjudication. 7.4 The facts of the case are that the Assessing Officer disallowed deduction u/s. 35D of the Act since such deduction was available only for initial setting up or in connection with setting up a new industrial unit but not for meeting the expanding needs of the business. 7.5 On appeal, the CIT(A) considered the allowability of this expenditure u/s. 37(1) of the Act and allowed it. However, the CIT(A) has not considered the allowability of expenditure u/s. 35D of the Act. 7.6 Thus, on the issue of allowability of expenditure u/s. 37(1) of the Act, the Revenue is in appeal before us in ITA No. 302/Coch/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 add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Appeals)-I, Kochi are opposed to the facts and circumstances of the case. 2. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in allowing weighted deduction of 50% u/s. 35(2AB) of the Act and failed to appreciate that expenses certified by statutory auditor have to be allowed as deduction and the expenses incurred on the in house R D Centre are only eligible for weighted deduction u/s. 35(2AB) of the Act. 3. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in allowing disallowance of pre-operative expenditure as claimed by the assessee for setting up a new manufacturing plant at Chennai, since this expenditure is related to the erection and construction of plant and machinery and building and can be the part of the cost of plant and machinery and of building. 4. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in directing the TPO to recalculate the Transfer Pricing adjustment @ 0.6% as claimed by the assessee and to remove the three companies out of five companies arrived by the TPO, which are broadly engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s having lower profit margin. 3 In the fact and circumstances of this case, Commissioner of Income Tax (Appeals) erred in holding that once the amounts written off have not been carried forward to the balance sheet of the subsequent years, the write off needs to be allowed 3.1 The learned Commissioner of Income Tax(Appeals) ought to have appreciated the fact that the assessee has carried forward the bad debts to the subsequent Assessment Years. 4. The learned Commissioner of Income Tax(Appeals) is erred in holding that Gas turbine units are eligible for deduction u/s. 80IA. 4.1 The learned Commissioner of Income Tax(Appeals)'s stand is without appreciating the factual matrix brought on record by the Assessing Officer. The Ld. Commissioner of Income Tax (Appeal) erred in not appreciating the fact that Gas Turbine units are not new units as claimed by the assessee and they are merely reconstruction of old units. And the profit calculated in Form 10CCB is on the notional basis. 5. 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional ground raised by the assessee. 10.2 In the present case, originally, the assessee came in appeal before the Tribunal for both the assessment years. The Tribunal remitted the matter to the file of the Assessing Officer to examine the issue afresh after giving reasonable opportunity of hearing to the assessee. Consequently, the Assessing Officer passed the assessment order for the assessment year 2008-09 u/s. 143(3) r.w.s. 144C and for the assessment year 2009-10 on 31/12/2013. 10.3 Now the contention of the Ld. AR is that the Assessing Officer directly passed the final order without passing the draft assessment order u/s. 144C of the I.T. Act which is invalid. As such, the final assessment order dated 02/03/2018 is bad in law. 10.4 We have heard the rival contentions and perused the record. We find that this issue has come up for consideration in various Courts and Supreme Court as follows: (a) In the case of JCB India Ltd. vs. DCIT (398 ITR 189) (Delhi), the Delhi High Court held that section 144C(1) is unambiguous. It requires the Assessing Officer to pass a draft assessment order after receipt of the report from the TPO. There is nothing in the wording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Eaton Fluid Power Ltd. (96 taxman.com 512) (ITAT, Pune), the Tribunal held that the impugned order passed by Assessing Officer was contrary to mandatory provisions of section 144C and thus same was to be declared as one without jurisdiction, null and void. (h) In the case of Addl. CIT vs. Oracle India (P) Ltd. (93 taxmann.com 8) (DelhiTrib.), the Tribunal held that if draft assessment order has not been passed in accordance with the procedure laid down in section 144C(1) and instead final assessment order has been passed though within limitation time, then such an order cannot be cured after limitation has expired by any subsequent rectification proceedings or corrigendum and in such a situation all subsequent proceedings and final assessment order will get invalidated. 10.5 In view of the above decisions, the facts of the present case being similar to that considered by the various Courts and Supreme Court, we hold that when the final assessment order is passed without passing the draft assessment order, it is illegal and without jurisdiction. Accordingly, we quash the assessment orders for both the assessment years. This ground of appeals of the Revenue is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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