Madras High Court
Commissioner Of Income Tax vs M/S.N.E.P.C. India Limited on 5 February, 2021
T.C.A.No.2100 of 2008
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATE: 05.02.2021
CORAM:
THE HON'BLE MR. JUSTICE M.DURAISWAMY
AND
THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI
T.C.A.No.2100 of 2008
Commissioner of Income Tax,
Chennai. ... Appellant
Vs.
M/s.N.E.P.C. India Limited,
No.36, Wallajah Road,
Chennai – 600 002. ... Respondent
Appeal preferred under Section 260A of the Income Tax Act,
1961, against the order of the Income Tax Appellate Tribunal, Madras,
Bench "B" Chennai, dated 07.03.2008 in I.T.A.No.1266/Mds/2002.
For Appellant : Mr.T.R.Senthil Kumar,
Senior Standing Counsel
For Respondent : Mr.R.Sivaraman
JUDGMENT
Page 1/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
(Judgment was delivered by M.DURAISWAMY, J.)
Challenging the order passed in I.T.A.No.1266/Mds/2002 in
respect of the assessment year 1995-96 on the file of the Income Tax
Appellate Tribunal “B” Bench, the Department has filed the above
appeal.
2.The assessee is a Company engaged in the manufacture and sale
of Wind Turbines Generators (WTG) and it is also in the business of Air
Taxi. For the assessment year 1995-96, the Assessing Officer interalia
disallowed the claim of the assessee Company towards amortization of
expenditure under Section 35D. The Assessing Officer further made an
estimated disallowance of 10% of the general expenses. The Assessing
Officer made disallowance of Rs.2,47,13,490/- towards interest
expenditure and also made addition of Rs.16.13 lakhs towards
information processing charges. Aggrieved by the order of the Assessing
Officer, the assessee filed an appeal before the CIT (Appeals) and the
Appellate Authority allowed the appeal in favour of the assessee.
Aggrieved over the same, the Department filed an appeal before the
Page 2/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
Income Tax Appellate Tribunal and the Appellate Tribunal also
confirmed the order of the CIT (Appeals) and dismissed the appeal.
Aggrieved over the same, the Department has filed the above appeal.
3.The above appeal was admitted on the following substantial
questions of law:
“1)Whether on the facts and circumstances of the
case, the Tribunal was right in allowing deduction of
Rs.14,65,000/- on account of amortization of expenditure
under Section 35D of the Act?
2)Whether on the facts and circumstances of the case,
the Tribunal was right in deleting the addition of
Rs.25,22,985/- being the estimated disallowance out of
general expenses?
3)Whether on the facts and circumstances of the case,
the Tribunal was erred in deleting the disallowance of
interest when the assessee had not produced any evidence to
show that the loan on which the interest was paid was taken
Page 3/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
for the purpose of business of the assessee?
4)Whether on the facts and circumstances of the case,
the Tribunal erred in deleting the addition of Rs.16.13 lakhs
under the head “information and processing charges”?”
4.Heard Mr.T.R.Senthil Kumar, learned senior standing counsel
for the appellant/Department and Mr.R.Sivaraman, learned counsel for
the respondent/assessee.
5.With regard to the 1st substantial question of law, the CIT
(Appeals) found that as per sub-section (3) of Section 35D, the aggregate
amount of expenditure referred to in sub-section (2) exceeds an amount
calculated at 2½% of either the cost of the project or the capital
employed in the business of the respondent, the excess shall be ignored
for the purpose of computing the deduction allowable under sub-section
(1) of Section 35D. The definition “capital employed in the business of
the Company” as defined in explanation (b)(ii) to Section 35D(3) would
apply to the case of the assessee. From the balance sheet of the Company,
Page 4/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
the capital of the Company is Rs.6614.96 lakhs. The loan funds of the
Company are not from ICICI or IFCI. Therefore, they cannot be taken
into consideration. 2 ½% of Rs.6614.96 lakhs comes to Rs.165.37 lakhs.
The respondent is eligible for a deduction of 10% (i.e.) Rs.16.5 lakhs.
The amount written off is Rs.1,05,50,000/- and the Assessing Officer
allowed Rs.1,84,500/-. Therefore, the respondent is eligible for a further
deduction of Rs.14,65,000/-.
6.With regard to the 2nd substantial question of law, the Tribunal
concurred with the Appellate Authority stating that the disallowance is
purely based on estimation without any evidence or material and the
accounts of the respondent were also not rejected by the Assessing
Officer. Further, the Assessing Officer has not proved or brought
anything on record to prove the estimation is wrong.
7.With regard to the 3rd substantial question of law, the Assessing
Officer has held that the respondent did not provide any details in regard
to the compliance of provisions of Section 40(a)(i) in respect of the
Page 5/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
payment of interest or loan. The Tribunal held that the only objection of
the Assessing Officer for disallowing the interest was that the respondent
did not file complete details which was fully examined by the
CIT(Appeals). Before the Appellate Authority, the respondent was able
to substantiate that a mistake occurred in rounding of the rupee figure to
thousands. Further, the interest paid on loans taken from parties outside
India for the purchase of Aircraft, the respondent obtained necessary
clearance for non-deduction of TDS under Section 10(15)(iv)(f). The
issue with respect to the non-payment of TDS was also substantiated
before the Appellate Authority. Thus, the respondent is entitled for the
relief.
8.With regard to the 4th substantial question of law, the respondent
established before the CIT (Appeals) that the amount disallowed was
paid to SITA (a society for airlines, telecommunication and information
services) and the respondent being a member of SITA, had paid for the
services rendered by them in respect of booking air tickets. The Tribunal
having agreed to the findings on fact held that the nature of expenditure
Page 6/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
for availing of the services of SITA is not capital in nature. Further, the
said expenditure is also not for acquiring any capital asset, but for
availing services for better day-to-day business activities of the
respondent.
9.From the above it is clear that the issues involved in the present
appeal is only question of fact and the Income Tax Appellate Tribunal
and the Commissioner of Income Tax (Appeals) have given a categorical
and substantial finding with regard to all the issues. We do not find any
ground much less any substantial question of law to interfere with the
order of the Income Tax Appellate Tribunal. The appeal is liable to be
dismissed. Accordingly, the Tax Case Appeal is dismissed. No costs.
[M.D., J.] [T.V.T.S., J.]
Index : Yes/No 05.02.2021
Internet : Yes
va
M.DURAISWAMY, J.
Page 7/8
https://www.mhc.tn.gov.in/judis/
T.C.A.No.2100 of 2008
and
T.V.THAMILSELVI, J.
va
To
The Income Tax Appellate Tribunal, Madras, Bench "B"
T.C.A.No.2100 of 2008
05.02.2021
Page 8/8
https://www.mhc.tn.gov.in/judis/
