Assistant Commissioner of Income-tax, Circle -7, Pune V. Kirloskar Brothers Ltd., Pune

ITA 673/PUN/2022

AI Insights

The case involves the Assistant Commissioner of Income Tax, Circle 7, Pune as the appellant and Kirloskar Brothers Ltd. as the respondent. The primary issues in the appeal were the allowance of further deductions under sections 80IA(4)(iv) and 35(2AB) of the Income-tax Act, 1961 for the assessment year 2014-15. The CIT(A) had allowed the deductions which the Revenue contested. The Tribunal agreed with the CIT(A) on the deduction under section 35(2AB) but remanded the issue of section 80IA(4)(iv) back to the Assessing Officer for further verification of the depreciation figures used in the calculations.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137853 (ITAT-PUNE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 08-03-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 08-09-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Competent authority; Capital expenditure
• Section: 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, „A‟ PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA No. 673/PUN/2022 : A.Y. 2014-15 The Asstt. C.I.T. Circle 7, Pune : Appellant Vs. Kirloskar Brothers Ltd., Yamuna, Survey No. 98/3-7, Pune City, Pne-411 045. PAN; AAACK7300E : Respondent Appellant by : Keyur Patel, CIT- DR Respondent by : S/Shri Sharad A. Shah & Rohit S. Tapadiya Date of hearing : 09-03-2023 Date of pronouncement : 10-03-2023 ORDER PER R.S. SYAL, VP : This appeal by the Revenue is directed against the order passed by the ld. CIT(A) on 03-06-2022 in relation to the assessment year 2014-15. 2. The first issue agitated in this appeal is against allowing further deduction u/s 80IA(4)(iv) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) amounting to Rs. 95,42,473/-. 3. Succinctly, the factual matrix of the case is that the assessee is engaged in manufacture of Power Driven Pumps, Valves, Hydro Turbines and project execution & services. It filed return declaring total income of Rs. 47.95 crore/ Rs.75.37 crore under the normal /MAT provisions of the Act. The assessment was completed at a total income of Rs. 51.61 crore/Rs. 79.03 crore under the normal/MAT provisions. The assessee claimed deduction in the return, inter alia, u/s 80IA(4)(iv) of the Act amounting to Rs. 3,61,70,943/-. During the course of assessment proceedings, the assessee lodged a claim for deduction under the provision at Rs. 4,57,13,416/-. The A.O did not entertain such claim in ITA No.673/PUN/2022 Kirloskar Brothers Ltd. A.Y. 2014-15 2 the absence of the assessee having filed any revised return. The assessee raised such issue before the ld. CIT(A) contending that it inadvertently computed the amount of profit eligible for deduction u/s 80IA(4)(iv) at Rs. 3.61 crore by reducing the amount of depreciation as per books of accounts under the Companies Act as against the required deduction of depreciation under the Act. A calculation of the revised eligible profit was submitted adding back the amount of depreciation as per Companies Act to the tune of Rs. 95,43,673/- and reducing the amount of depreciation under the Act at Rs. 1,200/-, leading to enhancement in the amount of eligible profit and the consequential deduction by Rs. 95,42,473/-. The ld. CIT(A) accepted the assessee‟s claim and granted further deduction u/s 80IA(4)(iv) for this sum, which has been agitated by the Revenue in the instant appeal. 4. Having heard the rival submissions and gone through the relevant material on record, it is seen that the assessee claimed deduction u/s 80IA(4)(iv) for a sum of Rs. 3.66 crore in respect of its income from eligible project, which was duly allowed by the A.O. This shows that the assessee otherwise satisfied all the eligibility conditions of the deduction. The dispute is only on quantification part. The claim was revised upward by a sum of Rs. 95,42,473/- on the ground that, the assessee, in the original calculation of eligible profits, wrongly reduced the amount of depreciation under the Companies Act for a sum of Rs. 95.43 lakhs as against the required deduction under the Income-tax Act at Rs. 1,200/-. 5. Section 80IA(1) provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), there shall be allowed a deduction for ten consecutive assessment years of an amount equal to 100% of the profits and gains derived from such business. Sub-section (5), opening with a non ITA No.673/PUN/2022 Kirloskar Brothers Ltd. A.Y. 2014-15 3 obstante clause, provides that the profits and gains of an eligible business to which sub-section (1) applies, shall, for the purposes of determining the quantum of deduction under that sub-section, be computed as if such eligible business were the only source of income of the assessee during the relevant previous years. Nitty-gritty of the relevant sub-sections of section 80IA is that full profit of the eligible business, computed under the provisions of the Act on a stand-alone basis, qualifies for deduction for the relevant assessment years. The fortiori is that the eligible profit can be computed by considering the amount of depreciation allowable under the Act and not as per the Companies Act. Ergo, we agree, in principle, with the assessee‟s point of view, as countenanced in the first appeal, that deduction u/s 80IA(4)(iv) is to be computed on the amount of profit determined by considering the amount of depreciation under the Income-tax Act. 6. Howbeit, it is observed that the ld CIT(A) allowed the claim without examining the veracity of the amount of depreciation under the Act as well under the Companies Act and further without calling for any remand report from the A.O. This shows that the figures of depreciation under the Companies Act at Rs. 95.43 lakhs and under the Act at Rs. 1,200/- in the fresh revised claim, have not passed out the verification test either by the ld. CIT(A) or the AO and further such figures are also not forthcoming from either the Computation of income or the Annual accounts for the year for verification at our end. In such a scenario, we are satisfied that it would be just and fair if the impugned order is set aside on this score and the matter is remitted to the file of the A.O for examining the correctness of these two figures. We order accordingly. If such figures turn out to be correct, then the view taken by the CIT(A) in this regard has to be countenanced. Needless to say, the assessee will be allowed an opportunity of hearing during such proceedings. ITA No.673/PUN/2022 Kirloskar Brothers Ltd. A.Y. 2014-15 4 7. The other issue which survives in this appeal is against granting of further deduction u/s 35(2AB) amounting to Rs 7,00,38,178/-. The assessee claimed deduction u/s 35(2AB) for a sum of Rs. 5,07,22,898/- in its return of income. A sum of Rs. 7,00,38,178/- was not claimed as deduction under this section for want of receipt of approval from the Competent authority at the time of filing the return of income. Necessary approval was received after the filing of the return and the assessee made claim for the same during the course of assessment proceedings. The A.O did not entertain such claim in absence of the assessee having furnished any revised return. The ld. CIT(A), however, allowed it by examining the necessary documents and the certificates issued by the Government of India. Aggrieved thereby, the Revenue has come up in appeal before the Tribunal on this ground. 8. Section 35(2AB) provides for granting weighted deduction on qualifying amount spent on an approved in-house research and development eligible unit. The assessee furnished return of income on 28.11.2014 claiming the weighted deduction in respect of Kirloskar wadi unit. Necessary approval was already there in respect of such unit before the filing of return. The assessee claimed weighted deduction for such unit in the return, which was also allowed by the AO. The assessee had carried out in-house R&D in two other units, namely, Dewas and Baner. Necessary approval anent to such units was awaited at the time of filing the return, which was received by the assessee from the Government of India, Ministry of Science and Technology on 15-02-2016. Copy of necessary approvals etc. issued by the Government of India, Department of Scientific and Industrial Research, New Delhi in Form No. 3CL dated 15.2.2016 and Form No. 3CM dated 16.12.2014 are available on record. This shows that the approval was granted after filing of the return by the assessee. Form No. 3CL indicates the amount of capital expenditure in respect of Dewas and Baner ITA No.673/PUN/2022 Kirloskar Brothers Ltd. A.Y. 2014-15 5 units at Rs. 14.31 lakhs and Rs.7.25 lakhs respectively and the amount of recurring expenditure for these two units at Rs. 108.62 lakh and Rs. 548.63 lakh respectively for the A.Y. 2014-15. The amount of further weighted deduction allowed in the first appeal to the tune of Rs. 7.00 crore is based on such amounts sanctioned by the Government of India, Ministry of Finance and Technology in respect of Dewas and Baner Units. Since the further claim is fully verifiable from the amount sanctioned by the Government of India, Ministry of Science and Technology, we are satisfied that no interference is warranted in the impugned order on this count in granting deduction on the basis of such certificates. We uphold the impugned order on this score. 9. In the result, appeal is partly allowed for statistical purposes. Order pronounced in the Open Court on 10 th March, 2023. Sd/- sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT Pune; Dated : 10 th March, 2023 Ankam Copy of the Order is forwarded to: 1. The Appellant; 2. The Respondent 3. 4. The CIT(A)-13 Pune The Pr. CIT-4 Pune. DR, ITAT, „A‟ Bench, Pune 5. Guard file. BY ORDER, Senior Private Secretary ITAT, Pune /// TRUE COPY /// ITA No.673/PUN/2022 Kirloskar Brothers Ltd. A.Y. 2014-15 6 Date 1. Draft dictated on 09-03-2023 Sr.PS 2. Draft placed before author 09-03-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *