Gail (India) Ltd. Vs Addl. CIT (ITAT Delhi)
The rebuttal of the assessee have been considered thoroughly with the relevant documentary evidences referred therein and placed in the paper book. Considering the facts in totality, we are of the considered view that assessee has successfully commissioned the Jamnagar Loni Pipeline and the LPG Gas Processing Plant Gandhar and is very much eligible for claim of depreciation on the capitalised cost thereon. We accordingly, direct the AO to allow the depreciation of Jamnagar Loni Pipeline and Gandhar Plant. Ground No. 10 is accordingly allowed.
FULL TEXT OF THE ITAT JUDGEMENT
ITA Nos. 301/Del/2006; 858/Del/2006 & 859/Del/2006 are 03 separate appeals filed by the Assessee against the 03 separate orders of the Ld. CIT(A), New Delhi for the assessment years 200001, 2001-02 & 2002-03 respectively. Since common grounds are involved in all these appeals which were heard together and are being disposed of by this common order for the sake of convenience.
1.1 We first address the Assessee’s Appeal i.e. ITA No. 301/Del/2006 (AY 2000-01). The assessee has raiSed the following grounds:-
1. That on facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) – XV {briefly “the CIT (A)”}erred in holding that appellant was not entitled to deduction under sections 80I & 80 IA of the Act amounting to Rs.156.5 crores.
2. That on the facts and circumstances of the case and in law, having accepted that appellant is engaged in manufacture of LPG for which 80%(appx.)of gas was processed, the authorities below erred in holding that appellant is not an industrial undertakings engaged in manufacture or production of different article or thing.
3. That on the facts and circumstances of the case and in law, the CIT (A) erred in confirming the disallowance of 50%of LPG profits on an estimated basis amounting to Rs. 41.32 Crores.
4. That on the facts and circumstances of the case and in law the CIT(A)erred in confirming the disallowances of Rs.40.55 lakh on account of amortization of the cost of lease hold land as a capital expenses.
5. That on the facts and circumstances of the case and in law, CIT (A) erred in upholding the sales, interest and miscellaneous income of Rs.1125.11 lakh relating to pre-commencement stage of plant as income from other sources, rather than abating the same from the construction cost of the plant.
6. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance of the provision for wages of Rs.1118.24 lakh on account of wage settlement of pay revision arrears of staff holding it as contingent expense.
7. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming the expenditure on new projects of Rs.35.80 lakh incurred on purchase of data packages to facilitate in bidding for gas block offered by MOP&NG as capital expenditure in absence of production sharing agreement between GAIL and Central Govt.
8. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the expenditure on consultancy for newly commissioned plant of 803.47 lakh on account of technical fee and traveling to tide over the initial glitches as capital expenditure.
9. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance u/s 14A ofRs.2629.80 lakh on notional interest burden and administrative charge calculated by assessing authority in its own way to earn tax free dividends.
10. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of Rs873.39 lakh of depreciation on account of the capitalization affected due to exchange rate variation.
11. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs.29.16 lakh towards fee paid to M/s ElL for selection of computer configuration for LAN/WAN and for Y2K compliance as capital expenditure.
12. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs.32.06 lakh towards payment of Right of Use treating-these-expenditure as capital.
13. That on the facts and circumstances of the case and in law, the CIT(A)erred confirming foreign exchange variation on Revenue account of Rs, 21.82 lakh on reinstatement of liabilities on account of change in exchange rate.
14. That the orders passed by the Assessing Officer and the CIT(A)are bad in law and void ab-inito.
15. the appellant prays for leave to add, alter, amend or vary any of the grounds either before or at the time of hearing of appeal.
2. The issues raised by assessee in ground nos. 1, 2 & 3 are squarely covered by the order of the Coordinate Bench in ITA No. 4454 and 4642/Del/2013 in assessee’s own case for the assessment year 1996-97 which order has been followed by the tribunal in AY 1997-98 and 1998-99 in ITA No. 4057 and 5091/Del/2014 and 5775 and 5912/Del/2014. For the detailed reasons given therein ground nos. 1, 2 and 3 are allowed.
3. Ground no. 4 relates to amortization of leasehold expenses. During the course of assessment proceedings, the AO noticed that assessee has claimed deduction of Rs. 40.55 lacs on account of amortization of leasehold expenses paid by the assessee to various local government authorities for lease on rent. The AO was of the firm belief that the same is of capital in nature and hence, not allowable. The action of the AO was upheld by the Ld. CIT(A).
3.1 We find that this issue is no more res integra as the same has been decided against the assessee and in favour of the revenue by the Hon’ble Delhi High Court in assessee’s own case in assessment year 1997-98 in ITA No. 956 and 957/2011 vide order dated 5.11.2012 [27 taxman.com 97]. Since the issue has been decided against the assessee by the Hon’ble Jurisdictional High Court, this ground is accordingly dismissed.
4. Ground no. 5 relates to taxation of sales and interest income relating to new plant. The underlying facts of this issue are that during the relevant previous year a new plant namely LPG plant at Pata was commissioned. The trial runs in relation to the above plant, commenced in November, 1999 and were concluded with the commissioning of the above project for commercial production in March, 2000. During this period, the assessee earned the following revenue:-
