DCIT, NEW DELHI vs. M/S. AVANTHA POWER & INFRASTRUCTURE LTD., NEW DELHI

PDF · subscribers
ITA 4194/DEL/2014Status: DisposedITAT Delhi31 October 2017AY 2010-113 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the depreciation claim was allowable as per the High Court's decision in the assessee's own case for earlier years. It also held that ESOP expenses are revenue in nature, following a Special Bench decision.

What were the facts?

The assessee company, engaged in power generation and distribution, claimed depreciation on assets acquired through a demerger and also claimed Employee Stock Option Plan (ESOP) expenses. The Assessing Officer disallowed excess depreciation and treated ESOP expenses as capital in nature.

What were the issues?

Whether excess depreciation claimed on assets acquired through demerger is allowable and whether ESOP expenses are capital or revenue in nature.

Which sections of the Income-tax Act were involved?

Section 32,Section 43(1),Section 2(19AA)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI

Before: SHRI SUDHANSHU SRIVASTAVA & SHRI PRASHANT MAHARISHI

For Appellant: Shri RC Pandey, Sr. DR
For Respondent: Ms. Reena Lamba, CA, Shri Mohit Bansal, CA, Shri RC Pandey, Sr. DR
Hearing: 28/08/2017Pronounced: 31/10/2017

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the ld Assessing Officer against the order of the ld CIT(A)-V, New Delhi dated 15.05.2014 for AY 2010-11 wherein the following grounds of appeal have been raised:- “1. Whether the ld CIT(A) has erred in law and on facts in deleting the addition of Rs. 114753688/- made on account of disallowance of depreciation u/s 32 of the It Act, 1961 by invoking Explanation 3 of Section 43(1) of the It Act, 1961.

2. Whether the ld CIT(A) has erred in law and on facts in deleting the addition on account of ESoP expenses amounting to Rs. 1817144/- by overlooking the facts that these were capital in nature.

2. The brief facts of the case is that the assessee is a company carrying on the business of generation and distribution of power and it has steam units at Bhigwan, Pune, Balarpur, Nagpur, Srigopal, Yamunagar, Haryana and at Sewa, Orrisa. It filed its return of income on 27.09.2010 showing income of Rs. 42188171/-. The assessment u/s 143(3) of the Act was passed on 28.03.2013 at Rs. 16166559/-. The two main additions contested before us are on account of disallowance of excess depreciation of Rs. 114753688/- consequences of demerger. The further disallowances contested before us is of ESoP expenditure of Rs. 1817144/- . On appeal before the ld CIT(A) both the additions were deleted as covered by appellate authorities and therefore, revenue is in appeal before us.

DCIT Vs. Avantha Power & Infrastructure Ltd (Assessment Year: 2010-11) 3. The ld Departmental Representative relied on the order of the ld Assessing Officer with respect to both the grounds.

4.

The ld Authorised Representative submitted that for ground No. 1 in assessee’s own case for earlier years the issue has been decided in favour of the assessee. They took us to the decision of the Hon'ble Delhi High Court for Assessment Year 2007-08 to Assessment Year 2009-10 wherein, Hon'ble High Court has confirmed the order of ITAT allowing the deprecation. Therefore, it was stated that ground No. 1 of the appeal of the Revenue is covered against revenue by the order of Hon'ble High Court. Regarding the disallowance of ESoP expenditure it was stated that issue is squarely covered in favour of the assessee by the decision of the special bench of ITAT in Biocon Ltd Vs. DCIT 35 Taxmann.com 335.

5.

We have carefully considered the rival contentions and also perused the orders of the lower authorities. The ground No. 1 of the appeal is against the disallowance of depreciation of Rs. 11.47 crores. The brief facts of the case are that pursuant to the scheme of demerger the assessee acquired power division from another company. The assessee capitalized the assets forming the part of undertaking in its books at values based on the valuation report and claimed depreciation. The ld AO did not accept the claim of the assessee but allowed the depreciation on the written down value of the assets as reflected in the books of transferor prior to the demerger. The Assessing Officer disallowed the excess deprecation holding that the scheme of demerger of the assessee did not fall within the scope of “demerger” as defined u/s 2(19AA) of the Act and consequently explanation 7A to Section 43(1) is not applicable. On the identical facts and circumstances of the case the Hon'ble High Court for AY 2007-08 has decided the issue in favour of the assessee and held that there was no infirmity in the order of the coordinate bench and therefore, no substantial question of law arose. The Hon'ble High Court in para No. 8 to para No. 13 has given the reasons for holding so in dated 31.08.2015. The ld Departmental Representative could not show us that issue is not covered by the decision of the Hon'ble High Court in favour of the assessee. In view of this, respectfully following the decision of the Hon'ble High Court, we confirm the finding of the ld CIT(A) in allowing the claim of the assessee of depreciation u/s 32 of the Act of Rs. 114753688/-. In the result ground No. 1 of the appeal of the Revenue is dismissed.

6.

Ground No. 2 of the appeal of the revenue contest the disallowance related of ESoP expenses of Rs. 1817144/-. The claim of the revenue is that the above expenditure is in the nature of capital expenditure. This issue has been considered by the coordinate bench in case of Bharti Airtel Ltd Vs. Addl Commissioner of Income Tax, Range-II, New Delhi in ITA No.

More judgments on Section 32

All 2,762 judgments and leading authorities on Section 32 →

Recent GST High Court judgments

Search GST case law →