IN THE ITAT CHENNAI

V. DURGA RAO, J.M. & MANJUNATHA. G, A.M.

Manali Petrochemical Ltd. v. Dy. CIT

ITA No.: 3203/Chny/2017

10, May 2023

Appellant by: R. Vijayaraghavan, Advocate

Respondent by: P. Sajit Kumar, JCIT

Manjunatha. G, A. M.

This appeal filed by the assessee is directed against the final assessment order passed by the Assessing Officer, Under Section. 143(3) read with section 144C of the Income-tax Act, 1961 (hereinafter referred to as the Act) dated 5-10-2017, in pursuant to directions of the Dispute Resolution Panel-2, Bengaluru, dated 22-9-2017 and pertains to assessment year 2013-14.

2. The assessee has raised the following grounds of appeal:

1. The order of the Assessing Officer / DRP is contrary to law, facts and circumstances of the case.

2. Disallowance of subsidy receipt of Rs.84,00,000

2.1 The Assessing Officer/DRP erred in confirming the action of the assessing officer in adding back to the total income the subsidy receipt of Rs.84,00,000 treating the same as a revenue receipt.

2.2 The Assessing Officer / DRP ought to have appreciated the fact that the appellant had installed a 4.2 MW Biomass co-generation captive power plant(capitalized during the financial year 2008- 09) for captive use and the above capital subsidy has been sanctioned by Govt of India for attracting investment in non-conventional renewable energy devices and hence the same is a capital receipt, and not taxable.

2.3 The Assessing Officer /DRP ought to have appreciated that this was for promotion of biomass co-generation and not a subsidy for helping running of industries and therefore it is a capital receipt.

3. Disallowance Under Section 14A - Rs.4,07,267 under normal provisions and Rs.5,62, 106 under Section 115.JB

3.1 The Assessing Officer / DRP erred in confirming the disallowance of Rs. 4,07,267 under normal computation as expenditure incurred in relation to the income which does not form part of the total income under Section 14A of the Income Tax Act, 1961 by applying Rule 8D.

3.1 The Assessing Officer / DRP ought to have appreciated that the Appellant has made the current investment in Mutual funds from out of its surplus funds available with the appellant from time to time and therefore disallowance of expenditure Under Section.14A read with Rule 8D both under normal provisions and Section 115JB does not arise.

3.2 The Assessing Officer / DRP ought to have appreciated that there was no fresh investment during the year and the profit for the year after tax was Rs.27.31 crores and with depreciation of Rs.6.36 crores resulted in cash profit of Rs.33.67 crores. Hence there can be no disallowance of interest in making the said investments. HDFC Bank Ltd. v. Dy. CIT(2016) 383 ITR 529 (Bom): 2016 TaxPub(DT) 1316 (Bom-HC).

3.3 The Assessing Officer /DRP ought to have appreciated that no expenditure was incurred by the Appellant Company for earning the exempt income, as they are deposited to the bank account. Canara Bank v. ACIT (2014) 265 CTR 385 (Kar) : 2014 TaxPub(DT) 1410 (Karn-HC)