ZF Steering Gear (India) Ltd. Vs DCIT (ITAT Pune)
ITAT Pune held that lease rent paid for acquiring mining rights is capital in nature and hence deduction against the same is not allowable.
Facts- Return of the assessee was assessed and vide order passed u/s 143(3) various disallowances were made. Being aggrieved by the disallowances, an appeal was filed before CIT(A), who vide impugned order confirmed addition u/s 14A and also confirmed the disallowance of claim for allowance of balance of additional depreciation in the subsequent assessment year. However, CIT(A) held that the subsidy received by the appellant company from the Government of Maharashtra under Package Scheme of Incentive, 2007 is capital in nature, but directed AO to reduce the same from the actual cost of the depreciable asset for the purpose of allowing the depreciation. CIT(A) also confirmed the addition on account of amortization of leasehold premium paid.
Being aggrieved by the decision of the ld. CIT(A), the appellant is in appeal before us in the present appeal.
Conclusion- We find merit in the contention the appellant that for the purpose of computation of amount of disallowance under Rule 8D(2)(iii), the value of such investments which yielded exempt income alone has to be considered.
Held that it is settled by the decision of the Hon’ble Supreme court in the case of Aditya Minerals Pvt. Ltd. vs. CIT (236 ITR 39)(SC), wherein, the Hon’ble Apex Court held that lease rent paid for acquiring mining rights is capital in nature and cannot be allowed as a deduction. In the light of the judgment of the Hon’ble Supreme Court in the case of Aditya Minerals Pvt. Ltd. (239 ITR 817) the impugned amortization of lease premium cannot be allowed as “revenue expenditure”.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-11, Pune [‘the CIT(A)’] dated 11.01.2019 for the assessment year 2014-15.
2. The appellant raised the following grounds of appeal :-
“1. The learned Commissioner of Income Tax (Appeals) -11, Pune [‘the Id. CIT(A)’] has erred in law in upholding disallowance of expenses made u/s 14A of the Income Tax Act, 1961 (‘the Act’) applying Rule 8D of the Income Tax Rules 1962 (‘the Rules’). The ld. CIT(A) ought to have appreciated the fact that the provisions of subsection (2) of section 14A of the Act could be invoked only if the ld. AO, having regard to the accounts of the assessee, was not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act. The ld. AO has not brought on record dissatisfaction about the reasonableness of indirect expenses disallowed by the appellant in the return of income u/s 14A of the Act.
2. Without prejudice to the Ground No. 1, the ld. CIT(A) has erred in law and on facts in not reducing the amount of strategic investments from the average value of investments while calculating disallowance under Rule 8D(2)(iii) of the Rules. [Amount of disallowance of expenses – Rs.25,59,498/-]
3. The ld. CIT(A) has erred in law in confirming disallowance of the claim of additional depreciation of Rs. 15,64,711/- to the extent of 50% in respect of plant & machineries acquired and installed in immediately preceding financial year 2012-13 for less than 180 days.
4. The ld. CIT(A) has erred in law and on facts in holding that subsidy received from the Government of Maharashtra under Package Scheme of Incentive, 2007 to be reduced from the actual cost of asset applying explanation 10 to section 43(1) of the Act and depreciation to that extent should be disallowed. [Amount of disallowance of depreciation – Rs. 9,82,175/-]
5. The ld. CIT(A) has erred in law and on facts in confirming disallowance of the claim of expenses of Rs.24,33,339/- towards amortisation of leasehold premium paid in respect of land acquired from Gujarat Power Corporation Limited, Gujarat for Solar project on leasehold basis.”
3. The appellant also raised the following additional ground of appeal :-
“1] The assessee submits that the investments which did not yield any exempt income during the year under consideration should be reduced while computing the disallowance u/s 14A r.w.r. 8D.”
4. Briefly, the facts of the case are as under :-
The appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing mechanical and power steering gears & spares thereof for commercial vehicles, passengers-buses, multi-utility vehicles, passenger-cars and tractors. The Return of Income for the assessment year 2014-15 was filed on 29.11.2014 declaring total income of Rs.42,58,29,650/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Central Circle-1(1), Pune (‘the Assessing Officer’) vide order dated 28.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) after making the following disallowances :-
