TMI Blog2024 (2) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset, and applying the actual rate of depreciation which relate to these assets. Thus, this ground of appeal of the assessee is allowed for statistical purpose. MAT - addition on account of capital grants and Consumer Contribution while calculating book profit u/s. 115JB - HELD THAT:- We find it fit and proper to remit the issue to the file of the Ld. AO to adjudicating the issue taking into consideration the Capital Grant and subsidies and consumers contribution made by the assessee and pass orders in accordance with law upon granting a reasonable opportunity of being heard to the assessee. Additional depreciation - Disallowance of claim on the ground that the assessee failed to submit the details and establish the genuineness of the expenditure - CIT(A) held that the assessee has not produced the details of additional depreciation before the AO - HELD THAT:- As seen from the submissions made by the assessee detailed submissions on additional depreciation with Annexures were submitted by the assessee. But the lower authorities failed to consider the amended provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Scrap sales is very negligible only. However the lower authorities has not given specific reasons to assess the sale of scrapes as income from other sources . We find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. Disallowance of interest expenditure as attributable to capital work in progress and was liable to be capitalized - CIT(A) deleted the addition - HELD THAT:- We do not find any infirmity in the order passed by the Ld. CIT[A], it is further seen that the addition made by the Ld. AO was only on notional basis of 12% without bringing any evidence on record to show whether the entire Capital Work In Progress was financed by borrowings alone. Whereas the assessee has given the detailed workings of CWIP and also breakup of the amount capitalized during the year. Further in the earlier assessment years the workings given by the assessee were accepted and no additions made by the Ld. AO. CIT DR could not place on record any justifiable reason to sustain the addition, thus the ground raised by the Revenue is devoid of merits and liable to be dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d partly confirmed the addition. Aggrieved against the appellate order, both the Assessee and Revenue are in appeal before us. 3.1. The Grounds of Appeal are raised by the Assessee in ITA No. 330/Ahd/2023 are as follows: 1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of Rs. 60,71,40,000/- on account of Capital Grants Subsidies and Rs. 88,88,08,000/- on account of Consumers' Contribution on the ground that the appellant should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the appellant. The learned Commissioner (Appeals) erred in law and on facts in not considering that the facts of the year under consideration were totally different from that of all the earlier years where similar additions were made. 1.1 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed similar additions made under section 115JB of the IT Act despite the fact that in all the earlier years the additions have been deleted. 2.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance, which has been confirmed by the Ld. CIT(A). Hence the assessee is in appeal before us. 4.1. Ld. Counsel for the assessee submitted that this issue was considered by the Co-ordinate Bench of this Tribunal in assessee s own case in ITA Nos. 553 to 555/Ahd/2020 and Ors. dated 17.02. 2023 which has followed earlier years order in ITA No. 2858/Ahd/2015 and Ors. dated 22.07.2022 relating to the Assessment Years 2010-11 to 2012-13 wherein this issue was set aside to the Ld. A.O. as follows: 16. We find that on the identical issue as submitted by the Ld. A.R. in ITA No. 652/Ahd/2013 for A.Y. 2009-10 the Coordinate Bench has been pleased to set-aside the issue to the file of the Ld. AO for adjudication afresh for verifying the proportionate amount of grant relevant to different asset. The relevant observation of the Coordinate Bench is as follows: 13. The Learned AO finalized the issue by making an addition of Rs. 24,17,88,400/- which was, in turn, confirmed by the Learned CIT(A) and added to the total income of the assessee. While confirming the addition, the Learned CIT(A) observed as follows: 6.3 I have considered the submissions. It has been accepted by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f grant relating to different asset. The Learned AR prayed for similar relief. The argument advanced by the Learned AR has been failed to be contradicted by the Learned DR. We find following observation was made by the Hon ble Co-ordinate Bench while granting relief to the assessee: 15. The ground no.3 of the appeal of the assessee is directed against the order of the CIT(A) in confirming the action of the AO in transferring 15% of the capital grants as income although the disallowance made under this head has been restricted to Rs. 18,93,11,850/- as against the disallowance of Rs. 30,97,61,800/- made by the AO. 16. The brief facts of the case are that on verification of subsidies and grants, the AO observed that the assessee has shown deferred government grants, subsidies, contribution at Rs. 7305.70 lakhs as on 1.4.2007 and the assessee had shown Rs. 15941.67 lakhs at the end of the year i.e. as on 31.3.2008. On show cause by the AO to explain the treatment in accounts of the subsidy, grants the assessee stated that during the year capital grant received from Government of Gujarat and other. The assessee submitted that in order to improve various functions associated with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the position of law was very clear. Since the assessee failed to reduce the capital grant against the cost of capital assets, and claimed excess depreciation, which was disallowed and worked out at 15% of the capital assets. 17. On appeal, the CIT(A) held that in assessee s case, 10% of grant under three heads namely Subsidy towards cost of capital assets , Grants towards cost of capital assets and Consumer contribution for capital assets i.e. the grants appearing in Schedule -3 of the balance sheet as on 31.3.2008 were offered for tax. The amount of grant on which 10% was calculated was on the opening balance of grants of Rs. 73,05,70,492/-, and the grants received during the year was Rs. 103,56,34,226/-, aggregating to Rs. 176,62,04,718/-. As these grants were towards cost of capital assets, 15% of the same should have been reduced from the depreciation claimed on account of making adjustment in the actual cost of assts as per Explanation 10 below section 43(1). Since the assessee has already offered for tax, 10% of the opening balance of grants plus grants received during the year under these three heads of Schedule-3 grants, such amount offered for tax was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with law. We, therefore, set aside the orders of the lower authorities on this issue, and restore the matter back to the file of the AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset, and applying the actual rate of depreciation which relate to these assets. Thus, this ground of appeal of the assessee is allowed for statistical purpose. Hence, in the absence of any changed circumstances as it appears from the records, we find no other alternative but to remit the issue to the file of the Learned AO for re-adjudication of the same and to pass order upon verification of the proportionate amount of grant relating to different assets and upon applying the actual date of depreciation relates to those assets. Hence, this ground of appeal preferred by the assessee is allowed for statistical purposes. 4.2. Respectfully following the decision taken by the Coordinate Benches of this Tribunal, we find it fit and proper to remand the issue to the file of the Ld. AO for re-adjudication of the same and to pass orders upon verification of the proportionate amount of grant relating to different assets and to pass orders accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book which reads as follows: With respect to the additional depreciation, it is submitted that there is Commissioning of new plant and machinery of Rs. 68,44,53,100/- during the financial year 2016-17. Hence, additional depreciation of Rs. 495, 26, 60,000. (₹. 496,26,60,000 x 0.10) on new additions of plant and machinery of 15%. Also, it is submitted that the company has not purchased any Old/secondhand/used fixed asset during the year. In this context, it may be noted that the earlier claim was allowable only to the manufacturing concerns. The generation of power was also treated as manufacturing activity and hence the claim was also extended to generation companies by the courts. Accordingly to settle down the controversies and in order to further encourage Investment in the power sector Amendment was made to the relevant section 30 212A of the IT act by including the words generation or generation and distribution of power. It may, thus be noted that the legislative, intent behind introducing/amending the provision was broadly to extend the benefit to the power sector. This apart the addition of word distribution itself, clarify that the claim it inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Therefore, in the interest of Principle of Natural Justice, we hereby set aside this issue to the file of Jurisdictional Assessing Officer to verify the claim of additional depreciation and allow the same in accordance with the provisions of amended law. In the result Ground No. 2 raised by the assessee is allowed for statistical purpose. 8. Ground no. 3: The assessing officer treated interest income Rs. 83,43,000/= received on the loans and advances to staff loans as income from other sources instead of business income . 8.1. The Ld. Counsel fairly submitted that identical issue has been decided against the assessee by the Co-ordinate Bench in the case of Gujarat Transmission Corporation in ITA No. 652/Ahd/2013 for the Assessment Year 2009-10. However the Hon ble Odisha High Court in the case of Odisha Power Generation Corporation Ltd. vs. ACIT, Circle-2(2) in ITA No. 1 of 2015 and Ors., wherein the Hon ble High Court held in favour of the assessee as follows: .. 12. The Assessee offered an explanation regarding interest income earned by it, from advances given to its employees as well as provision of electricity and water charges collected from water throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees, sale of Tender forms, supervision charges received, forfeiture of earnest money/security deposit, unclaimed deposits of customers, etc. are all related to the business income of the assessee. Therefore the same has to be treated as incidental to the business activity of the assessee and therefore treated as business income only. However both the Assessing Officer and the Ld. CIT(A) denied the above claim and held that the miscellaneous receipts have no nexus with the business carried out by the assessee. 10.1. The Ld. Counsel thus submitted that in the light of the judgment rendered in the case of Odisha Power Generation Corporation Ltd., this issue be remanded back to the file of the Assessing Officer for fresh consideration as done by the Co-ordinate Bench of this Tribunal in ITA No. 553/Ahd/2020 for the A.Yrs. 2013-14 and 2015-16. The Ld. D.R. has no serious objection in setting aside the matter back to the A.O. for fresh verification. 11. We have given our thoughtful consideration and perused the materials available on record. The Hon ble Madras High Court in the case of CIT vs. New India Maritime Agencies (P.) Ltd., 124 Taxmann.com 801 wherein it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the asset value of the assessee company and the nature of transmission business the claim of Scrap sales is very negligible only. However the lower authorities has not given specific reasons to assess the sale of scrapes as income from other sources . In the light of the above, we find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. 13. In the result, this ground no. 3 raised by the Assessee is partly allowed. 14. Ground No. 4 is Initiation of penalty u/s. 270A and Ground no. 6 is general ground, which are not pressed by the assessee. Hence both the grounds no. 4 6 raised by the assessee are dismissed as not pressed. 15. Ground no. 5 is charging of interest u/s. 234B, 234C and 234D of the Act which were consequential in nature the same is also not pressed by the assessee and therefore no separate adjudication is required on this ground. 16. In the result, the assessee appeal is allowed for statistical purpose. ITA No.331/Ahd/2023 (Assessee s appeal for A.Y. 2018-19) 17. Ground no. 1 is confirming the addition of 15% Capital Grants as against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of Scrapes as income from other sources instead of business income . This identical ground has already been considered by us in ITA No. 330/Ahd/ 2023 for Assessment Year 2017-18 in Paragraph 12.1 of this order. As similar issue is being involved herein, this issue is set aside to the Ld. Assessing Officer for fresh consideration. 21. Ground no. 4 6 are identical ground has already been considered by us in ITA No. 330/Ahd/2023 for Assessment Year 2017-18 in Paragraph 14 of this order. The same are dismissed as not pressed. 22. Ground no. 5 is identical ground has already been considered by us in ITA No. 330/Ahd/2023 for Assessment Year 2017-18 in Paragraph 15 of this order. Charging of interest u/s. 234B, 234C and 234D are consequential in nature, therefore no separate adjudication is required on this ground. 23. In the result, the assessee appeal is allowed for statistical purpose. ITA No. 404/Ahd/2023 (Revenue s appeal for A.Y. 2017-18) 24. Solitary ground raised by the Revenue in its Grounds of Appeal is as follows: Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployee and General Administration overheads and also capitalizing interest cost as and when applicable. In view of the above facts, the assessee claimed that no further disallowances out of the interest expenditure shown in the Profit Loss Account are warranted. 25.2. However the Ld. AO capitalized interest expenditure to the tune of Rs. 2226.58 lacs i.e. @12.00% of Rs. 18554.86 lacs. Further, considering that the assessee, itself has capitalized an amount of Rs. 589.17 lacs out of total amount of total capitalization of interest of Rs. 6899.88 lacs, net capitalization of interest and disallowance of revenue expenditure towards interest is worked out at Rs. 1637.41 lacs. The AO also held that depreciation on the amount of Rs. 1637.41 lacs will be allowed to the assessee once the CWIP is capitalized. 26. Aggrieved against the addition, the assessee filed an appeal before Ld. CIT(A), who directed the AO to delete the addition and allowed the assessee appeal by observing as follows: 5.4.1. It is seen that the A.O. has computed and capitalized the interest expenditure on notional basis without bringing any evidence on record to show that entire Work-in-progress was finance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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