RAMCO CEMENTS LIMITED,RAJAPALAYAM vs. ACIT, MADURAI

आदेश /O R D E R

Per Mahavir Singh, VP:

This appeal by the assessee is arising out of final assessment

order No. ITBA/AST/S/143(3)/2021-22/1033604762(1) dated 22.06.2021

passed by the Deputy/Assistant Commissioner of Income Tax, National

Faceless Assessment Centre, Delhi u/s. 143(3) r.w.s. 144C(13) r.w.s.

144B of the Income Tax Act, 1961, (hereinafter referred to as “Act”)

pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru

(DRP) u/s 144C(5) dated 31.03.2021.

- 2 - IT(TP)A No.46/Chny/2021 2. At the outset, learned counsel for the assessee drew our attention

to withdrawal of additional ground vide letter dated 14.08.2024, wherein

the assessee has raised issue of non-mentioning of DIN number in the

order of DRP as additional ground and now, he wants to withdraw the

additional ground and pursuing the appeal on merits. The Ld.CIT DR

has no objection to the same. Hence, we dismiss the additional ground

as withdrawn.

regards to order of the AO/DRP confirming disallowance of railway

siding expenditure amounting to Rs.40,62,97,239/- by treating the same

as capital expenditure, contrary to the accounting standards and judicial

pronouncements. For this, the assessee has raised various grounds,

which are argumentative, factual and exhaustive in nature and hence,

need not be reproduced.

facts and circumstances of the case. We noted from the assessment

order that the Assessing Officer, after going through the details and

explanation filed towards railway siding expenditure, the assessee

claimed that they have spent huge amount towards railway siding and

claimed the same as revenue expenditure, as the asset did not belong to

the assessee, but, the Assessing Officer has not accepted explanation

- 3 - IT(TP)A No.46/Chny/2021 of the assessee and therefore, the same was treated as capital

expenditure and depreciation was allowed by observing in para 5.3 and

5.4 of the order as under:-

“5.3 Hence, the expenditure of Rs.40,62,97,239/- relating to expenditure on railway sidings incurred at their vizag grinding unit to facilitate transfer of clinker through railways and also transportation of cement to destinations is treated as capital expenditure.

5.4 Theassessee capitalized the expenditure of Rs.40,62,97,239/-relating to expenditure on railway sidings in its books of account on 31/03/2016. Hence, the depreciation of 7.5% amounting to Rs.3,04,72,293/- and additional depreciation of 10% amounting to Rs.4,06,29,723/-is allowed to the assessee. In total the depreciation of Rs.7,11,02,016/- is allowed to the assessee.”

Aggrieved, the assessee went in objections before the DRP and the

Ld.DRP also agreed with the Assessing Officer and dismissed

objections raised by the assessee. Aggrieved, the assessee in appeal

before the Tribunal.

the issue is no longer res integra, as this issue is now covered by the

decision of the co-ordinate Bench of this Tribunal in assessee’s own case

and he referred to the decision in ITA No.2196/Chny/2019 for the

assessment year 2014-15 dated 03.07.2024, wherein the Tribunal

considering the facts in entirety adjudicated the issue vide its order in

para 4 to 4.3 as under:-

“4. Disallowance of railway sidings expenses 4.1 The assessee incurred expenditure of Rs.129.09 Lacs for extension of railway tracks, Rs.169.43 Lacs for

- 4 - IT(TP)A No.46/Chny/2021 replacement of railway sleepers at Jayanthipuram and Rs.796.45 Lacs for construction of track for clinker wagon loading at Ariyalur. The expenditure aggregated to Rs.1094.98 Lacs. Such expenditure, though capitalized in the books, was claimed in the computation of income as revenue expenditure. In support, the assessee submitted that the aforesaid asset does not belong to the assessee but it was the property of railways which is clear from clause-21 of Railway siding agreement which provide that the assessee has no right to assign or transfer or sublet or permit to be used or enjoyed by any other person in any manner whatsoever any of the rights of benefits conferred upon the assessee. Such assignment, transfer or subletting or permission shall be void and of no effect. The assessee relied on the decision of Tribunal in own case for AYs 2003- 04 and 2011-12. The assessee also referred to the decision of Hon’ble Supreme Court in the case of L.H. Sugar factory and Oil Mills P. Ltd. (125 ITR 293) as well as the decision of Hon’bleGouhati High Court in the case of Bongaigaon Ref. & Petrochemicals Ltd. (222 ITR 208) to support the claim. However, Ld. AO held that enduring benefit would accrue to the assessee and therefore, the expenditure was capital in nature. Further, this matter was restored by Tribunal in AY 2011-12 holding that the assessee was enjoying intangible asset. The assessee disclosed the same as an asset in the Balance Sheet. It was essential to comply with matching concept in order to arrive at correct profit earned by the assessee. Accordingly, Ld. AO disallowed the claim. The Ld. CIT(A) upheld the stand of Ld. AO against which the assessee is in further appeal before us.

4.2 The Ld. AR has submitted that this issue has been decided by Tribunal in assessee’s favor for AYs 1994-95, 1996-97 and 2003-04. However, the issue has been restored back by Tribunal for AY 2011-12. In AY 2003-04, Tribunal approved reliance placed by Ld. CIT(A) on the decision of Hon’ble Supreme Court in the case of Madras Auto Service (233 ITR 468). The Ld. AR also submitted that though expenditure was capitalized in the books of account and depreciation was charged in the books, however, for Income Tax purpose, no depreciation was claimed on the

- 5 - IT(TP)A No.46/Chny/2021 same. The Ld. AR also placed on record relevant railway siding agreements and submitted that the terms of the agreements remain the same as they were in AY 2003-04. As per relevant clauses, the assessee is not the owner of railway siding. There being no change in the same, Tribunal order for AY 2003-04 would apply. The Ld. AR also submitted that the matter in AY 2011-12 was restored back only for the reason that railway siding agreement was not available before Tribunal while deciding the appeal for AY 2011-12. The Ld. AR also submitted that similar treatment was given to such expenditure during AYs 1994-95, 1996-97 and 2003-04.

4.3 After considering the submissions of the assessee as well as upon perusal of relevant documents, in this regard, we concur with the aforesaid plea raised by the assessee. The issue in earlier years stand covered in assessee’s favor. The issue in AY 2011-12 was restored back since relevant agreements were not available on record. Therefore, concurring with aforesaid submissions, we direct Ld. AO to allow the expenditure as revenue expenditure after verifying the fact that the assessee has not claimed depreciation on the same in Income Tax Computations in any of the years. The assessee is directed to demonstrate the same. The corresponding ground stand allowed accordingly.”

- 6 - IT(TP)A No.46/Chny/2021 7. The next issue in the appeal of the assessee is as regards to

order of the Assessing Officer/DRP in directing disallowance of expenses

relatable to exempt income amounting to Rs.1,30,38,035/- by invoking

provisions of section 14A read with Rule 8D of Income Tax Rules, 1963.

circumstances of the case. Brief facts are that the assessee earned

dividend income of Rs.1,29,95,589/- and claimed the same as exempt

u/s.10(38) of the Act. The Assessing Officer noted that no expenditure is

attributable to earning of exempt income and therefore, by invoking

provisions of section 14A read with Rule 8D(2) made disallowance by

going through the formula. Accordingly, the Assessing Officer disallowed

expenditure under Rule 8D(2)(ii) at Rs.73,66,035/- being interest

expenditure and under Rule 8D(2)(iii) i.e., 0.5% of average value of

investments at Rs.56,72,000/- being administrative expenses and

thereby in aggregate disallowed a sum of Rs.1,30,38,035/-. Aggrieved,

the assessee raised objections before the DRP. The Ld.DRP also

confirmed the action of the Assessing Officer. Aggrieved, the assessee

preferred appeal before the Tribunal.

attention to the assessee’s paper book, wherein financials of the

assessee are enclosed. The learned counsel for the assessee drew our

- 7 - IT(TP)A No.46/Chny/2021 attention to balance sheet as on 31.03.2016 enclosed in paper book at

page 159, wherein non-current investments is disclosed at Rs.365.37

crores and the details are given in Schedule 14 at page 175 of the

assessee’s paper book. The total investment in property is at 227.43

crores and this has no bearing on exempt income. The learned counsel

for the assessee drew our attention to investments in ‘quoted’ shares and

‘unquoted’ shares and the aggregate investments is at Rs.137.94

crores. The learned counsel for the assessee stated that assessee’s own

funds in the shape of share capital & reserves and surplus are to the

extent of Rs.3092.63 crores, as against investments in shares giving rise

to exempt income at Rs.137.94 crores. The learned counsel for the

assessee stated that once the investments is out of its own funds, no

disallowance can be resorted to interest under Rule 8D(2). When this

fact was confronted to Ld.CIT DR, he could not controvert the above

facts and situation. Hence, we delete the disallowance of interest

expenses.

expenses amounting to Rs.56.72 Lacs being 0.5% of average value of

investment, the learned counsel for the assessee only made a

submission that the Assessing Officer be directed to compute

disallowance or restrict the disallowance to the extent of investments

giving rise to the exempt income. To this proposition, the Ld.CIT DR

- 8 - IT(TP)A No.46/Chny/2021 stated that the matter can go back to the file of the Assessing Officer for

verification.

Assessing Officer with a direction that the Assessing Officer will include

value of investments which give rise to exempt income for the purpose

of computation of disallowance under Rule 8D(2)(iii). Hence, this issue is

allowed for statistical purposes partly.

order of the Assessing Officer/DRP in disallowing expenses relatable to

exempt income u/s.14A read with Rule 8D while computing book profit

u/s.115JB of the Act.

disallowance u/s.14A of the Act, but, here the Assessing Officer/DRP

has computed disallowance while computing book profit u/s.115JB of

the Act. We noted that this issue is covered by the decision of Special

Bench of the Delhi Tribunal in the case of the Special Bench of the Delhi

Tribunal in the case of ACIT Vs. Vireet Investments Private Ltd. (2017)

82 taxmann.com 415, wherein the Special Bench of the Tribunal has held

as under:-

“6.22 In view of above discussion, we answer the question referred to us in favour of assessee by holding that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the

- 9 - IT(TP)A No.46/Chny/2021 computation as contemplated u/s 14A read with Rule 8D of the Income- tax Rules, 1962.”

computing disallowance of expenses in term of exempt income u/s.14A

r.w.Rule 8D, we direct the Assessing Officer to delete disallowance This

issue of the assessee is allowed.

of appeal no.18 & 19 raised by the assessee, i.e, addition of

Rs.25,40,78,176/- on domestic transfer pricing transaction and omitting

to grant tax credit under MAT to the extent of Rs.1,07,29,53,382/-, the

learned counsel for the assessee stated that as instructed by the

assessee he is not pressing the grounds of appeal 18 & 19 and prayed

that the same may be dismissed as withdrawn. The Ld.CIT DR has no

objection for the same. Hence, both these grounds of appeal 18 & 19

are dismissed as withdrawn.

Order pronounced in the open court on 12th September, 2024

Sd/- Sd/- (महावीर �संह ) (एस.आर. . . . रघुनाथा) (MAHAVIR SINGH) (S.R. RAGHUNATHA) उपा%य& /VICE PRESIDENT लेखा सद#य/ACCOUNTANT MEMBER चे(नई/Chennai, )दनांक/Dated :12-09-2024 DS

- 10 - IT(TP)A No.46/Chny/2021

आदेशक���त+ल,पअ-े,षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकरआयु.त /CIT, Madurai 4. ,वभागीय��त�न1ध/DR 5. गाड�फाईल/GF.