THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-6(4), MUMBAI vs. M/S SINNAR THERMAL POWER LTD, MUMBAI

The present appeal filed by the assessee is directed against the order passed u/s 250 of the Income Tax Act, 1961 ([hereinafter “the Act”] by the Learned Commissioner of Income Tax (Appeals)- 54 [hereinafter „the CIT(A)‟] dated 10.06.2022 for A.Y. 2018-19. 2. The assessee has raised the following grounds of appeal :-

"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing A.O. to exclude the part of investment (which has not generated exempt income during the year), for the purpose computing average investment for P a g e | 2 ITA No. 2444/Mum/2022 AY 2018-19 DCIT, CC-6(4) v/s M/s Sinnar Thermal Power Ltd.

"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not appreciating the clause (f) to explanation [1] of sub-section (2) of section 115JB of the Act, which states that the amount of expenditure relatable to any income which does not form part of income to be included in the book profit determined u/s. 115JB."

"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of depreciation on bogus capitalization." 5 "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in treating payment to M/s Shri Ram Builders, M/s Ruby Construction, M/s Varun Earth Movers, M/s J.K. Construction and M/s Shree Infra as genuine despite the fact that all the above entities were not traceable and were not confirmed by them." "The appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal if need be.

The fact in brief is that the return of income declaring net loss of ₹4037,17,85,464/- was filed on 18.11.2018. The case subject to P a g e | 3 ITA No. 2444/Mum/2022 AY 2018-19 DCIT, CC-6(4) v/s M/s Sinnar Thermal Power Ltd.

Ground No. 1 [Disallowance u/s 14A r.w.r. 8D of the Act]

1 The aggrieved the assessee filed appeal before the CIT(A) the Ld. CIT(A) has allowed the appeal of the assessee.

2 Heard both the sides and perused the material on record. The Ld. Counsel contended that the assessee had made investment from its own funds that were not bearing any cost or interest. Investment yielding exempt income were made during the year wholly out of own funds of the assessee company. The Ld. Counsel submitted that only investments which yielded exempt income need to be considered for calculation of average investment for making disallowance u/s 14A of the Act. The Ld. CIT(A) directed the AO to consider the investment which has yielded exempt dividend to work out the disallowance u/s 14A of the Act. During the course of appellate proceedings before us the Ld. Counsel also filed copy of order of ITAT in the case of the assesses for A.Y. 2017-18 vide ITA No. 253/Mum/2020 dated 05.05.2021 wherein on identical issue the ITAT has decided issue in favor of the assessee. The Hon‟ble Delhi High court in the case of ACB India Ltd V.ACIT [2015] 62 taxmann.com 71 [Delhi] held that while working out disallowance under section 14A only those investment on which exempt income is received are required to be considered. In view of the above fact and findings we do not find any merit in this ground of appeal of the Revenue and same is dismissed.

Ground No. 2 and 3 [Not considering expenditure disallowed u/s 14A for computing book profit u/s 115JB of the Act.

1 During the course of assessment proceedings the AO had added the amount of disallowance of Rs. 50,67,700/- made u/s 14A for the purpose of computing book profit u/s 115JB of the Act. The assessee company has filed appeal before the Ld. CIT(A). The Ld. CIT(A) has directed the AO not to make any adjustment in respect of disallowance u/s 14A while computing book profit u/s 115JB of the Act.

2 Heard both the sides and perused the material on record. The special bench of Delhi Tribunal in the case of ACIT v/s Vireet Investment Pvt. Ltd. vide 165 ITD 27 held that the disallowance made u/s 14A of the act is not to be added for computing the book profit u/s 115JB of the Act. The ITAT Mumbai in the case of the assessee itself for A.Y. 2017-18 vide ITA No. 253/Mum/2020 dated 05.05.2021 after following the decision of the Special Bench of the ITAT in the case of Vireet Investment Pvt. Ltd. has decided the similar issue in the favour of the assessee. Following the decision of co-ordinate bench as supra, we do not find any merit in the appeal of the revenue. Therefore, both these ground of appeal are dismissed.

Ground No. 4 &5 [disallowed disallowance depreciation]

1 During the course of assessment the AO on verification of records of the earlier years observed that similar claim of depreciation from FY 2010-11 to FY 2015-16 was disallowed by the AO by treating the transaction of purchases made with Shri Ram Builders, M/s Ruby Constructions, M/s Varun Earth Movers, M/s J K Constructions and M/s Shree Infra on the basis of which depreciation claimed as non-genuine.. However Ld. CIT(A) after following the decision of ITAT In the case of the assessee for A.Y. 2017-18 dated 5/5/2021as referred supra in this order held that transactions with the referred parties were genuine. Therefore, the claim of the assessee for depreciation was allowed.

2 Heard both the sides and perused the materials on record. The AO on the basis of earlier year assessment order has disallowed the claim of depreciation on the assets purchased from the parties as referred above in this order. We have perused the decision of ITAT in the case of the assessee itself for A.Y. 2017- 18 vide ITA No. 253/Mum/2020 date 05/05/2021 wherein at Para 12.13 of the order of the ITAT similar claim of depreciation of the assessee company was allowed. The relevant extract of the para is reproduced as under:

In view of the aforesaid elaborate observationson facts together with the relevant statutory provisions and respectfully following the various judicial precedents relied upon hereinabove, we find that the Id CITA had rightly deleted the disallowance of business expenditures made on protective basis in the hands of IIC Limited and had rightly deleted the disallowance of depreciation on such expenditure made on substantive basis in the hands of Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited). Accordingly, the issue framed in para 5.1 (F) above is decided in favour of the assessee and grounds raised by the revenue in the case of IIC Limited and Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited) are dismissed for various assessment years in this regard. We find issue raised before us, in this year is similar to preceding assessment year, therefore, the issue on hand is securely covered, therefore following the principle of consistency, we do not find any merit in the appeal of the revenue. Accordingly, these grounds of appeal of the revenue are dismissed.

In the result the appeal filed by the revenue is dismissed.