Gail (India) Ltd. Vs DCIT (ITAT Delhi)
So far as the satisfaction of relevant conditions u/s 32 is concerned, the AO in the original order had expressed reservation on the grant of investment allowance during the current year as in his view, 75% of the reserves were not created in the current year. In terms of the provisions of sub-section (4) of section 32A of the Act, an assessee is required to debit an amount equivalent to 75% of investment allowance to P&L A/c and credit it to investment allowance reserve of any previous year in respect of which deduction under that section is being claimed or in any earlier previous year.
The appellant has claimed that since 1989-90, it had claimed in different years, aggregate amount of investment allowance of Rs.351.41 Crores, while during the same period, it had created investment allowance reserve of Rs.413.01 Crores, which is more than 118% of the aggregate amount of investment allowance claimed by the appellant during this period. In view of this, the appellant satisfies this condition as well.
The Ld. AO is directed to verify only the aggregate amounts of investment allowance and investment allowance reserve, respectively, claimed by the reliant during this period. If the aggregate amount of reserves created are more than 75% of the aggregate amount of investment allowance claimed by the appellant, the claim of deduction u/s 32A is to be allowed. Accordingly, this ground is allowed in favour of the appellant.
Outcome: Remand
FULL TEXT OF THE ITAT JUDGEMENT
ITA No. 4657/Del/ 2014 and ITA No. 5091 Del 2014 are cross appeals by the assessee and the revenue preferred against the order of the CIT(A)-LTU, New Delhi dated 30.06.2014 pertaining to assessment year 1997-98. Both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity.
2. We will first address to the appeal of the assesee in ITA No. 4657/D/2014. The grievance of the assesee read as under :-
1. That the Commissioner of Income-tax (Appeals) (CIT(A)) erred on facts and in law in holding that “Lean gas” is manufactured/ produced only at the two LPG Plants at Vaghodia (Gujarat) and Vijaipur (MP) for the purpose of allowing deduction under sections 801/ 801A of the Income-tax Act, 1961 (“the Act”) and not at various customer terminals, as claimed by the appellant following the order of CIT (A)for the preceding assessment year.
1.1 That on facts and circumstances of the case and in law, the CIT(A) erred in holding that the activities undertaken by the appellant at its customer terminals did not constitute “manufacture or production of any article or thing”, so as to be eligible for deduction under sections 801, 80IA and 80HH of the Act.
1.2 That on the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the various activities/ processes undertaken by the appellant, including removal of impurities, condensate and moisture and for regulating temperature and pressure at various customer terminals, as part of mandatory contractual obligations, in order to render lean gas in usable state and tradable condition, constituted “manufacture”/ “production” of processed “Lean Gas”.
1.3 That on the facts and circumstances of the case and in law, the CIT(A) erred in holding that the aforesaid activities undertaken by the appellant at customer terminals were merely for the enabling supply of lean gas at customer terminals , which could not be regarded as “manufacture or production of any article or thing”.
1.4 That on the facts and circumstances of the case and in law, the CIT(A) erred in holding that the AO had not allowed the deduction under section 80HH, 801 & 801A in the initial assessment year 1992-93.
2. That on the facts and circumstances of the case and in law, the CIT(A) erred in holding that no deduction under section 80HH of the Act was admissible in respect of the customer terminals situated in backward areas, on the ground that “no manufacturing is carried out at the customer terminals” thereby disallowing claim of the appellant.
3. That on facts and circumstances of the case and in law, the CIT(A) erred in holding that interest income of Rs. 14260.93 lakhs (except interest on customers outstanding and interest on loans and advances given to employees of LPG Plants Vijaipur and Vaghodia) and miscellaneous income of Rs.81.85 lakhs, was not eligible for deduction under sections 80HH, 80I and 80IA of the Act, on the ground that the said receipts were not “derived from” the eligible business of the appellant.
4. That on facts and circumstances of the case and in law, the CIT(A) erred in not directing the assessing officer to reduce the amounts capitalized and transferred to “expenditure during construction” from interest and miscellaneous income excluded from eligible profits for the purpose of computing deduction under sections 80HH, 801 and 80IA of the Act.
5. That on the facts and circumstances of the case and in law, the CIT(A) erred in deleting addition to the extent of Rs. 2,68,16,119/- only on account of reimbursement of expenses received from MGL instead of Rs. 3,01,17,428/- which was added to income of the appellant.
6. That on the facts and circumstances of the case and in law, the CIT(A) erred in disallowing guarantee fee of Rs 13,07,71,000/- debited as prior period interest in the relevant assessment year on the ground that the said liability had not crystallized during the year under consideration.
6.1 That the CIT(A) erred on facts and in law in holding that appellant was not bound by the directions of C& AG and that it was just a constitutional body whose advice was internal and subject to revision.
6.2 That the CIT(A) erred on facts and in law in not appreciating that the claim of the appellant should have been allowed in the relevant assessment year as the same has been offered to tax in assessment year 2007-08 and also accepted by the assessing officer.
3. Briefly stated the facts of the case are that the appellant is engaged in the business of production/processing transmission and distribution of various gases. The appellant has set up and operates gas pipeline running /located in north western India known as HBJ pipeline. The appellant acquires rich natural gas at Hazira which is transmitted to its 2 LPG plants located at Vaghodia (Gujarat) and Vijaipur (MP) and various customer terminals.
4. The appellant claimed deduction u/s 80-IA and 80HH on production of LPG and Lean Gas undertaken at LPG plants and various customer terminals by treating the same as separate and independent units. The deduction claimed is as under :-
