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2015 (8) TMI 1031 - AT - Income TaxDisallowance of expenses claimed under head Mining & Production/Processing - Held that:- As nothing was produced by the Ld. A.R to substantiate the claim of these expenses, therefore we have no other option but to confirm the addition. Accordingly, we hereby confirm the disallowance of expenditures made by the Ld. Assessing Officer towards mining and production/processing - Decided against assessee. Disallowance of the proportionate interest due to interest free loan advanced to sister concern U/s.36(1)(iii) - Held that:- addition made by the Ld. Assessing Officer is not sustainable because from the order of the Ld. CIT (A) it is clearly revealed that the assessee had ₹ 87.72 crores of Reserves & surplus and equity share capital of ₹ 10 crores aggregating to ₹ 97.72 crores as on 31.03.2010 being the assessee’s own interest free funds. In this situation, it is evident that ₹ 5,60,45,897/- advanced by the assessee to its sister concern and the investments made by the assessee company for ₹ 71,55,33,570/- aggregating to ₹ 77,15,79,467/- has flowed from the assessee’s own fund of ₹ 97.72 crores which does not bear any cost. Therefore, we hereby delete the addition made for ₹ 1,03,98,313/- made by the Ld.A.O toward the proportionate interest attributable to the interest free loan advanced by the assessee to its sister concern because the funds advanced by the assessee does not bear any cost as it is assessee’s own funds. - Decided in favour of assessee. Disallowance of expenditure by invoking the provisions of section 14A - Held that:- There is no merit for the Revenue to make addition of ₹ 3,11,34,630/- invoking the provisions of section 14A of the Act because the investment made of ₹ 71,55,33,570/-, bears no cost in the form of interest or whatsoever, since the funds by which the investment is made is assessee’s own funds. Further, these investments are made only with sister companies of the assessee and no cost can be attributed for the management of such funds. Therefore, we hereby delete the addition made by the Ld. Assessing Officer invoking the provisions of section 14A of the Act. - Decided in favour of assessee. Disallowance of depreciation - assessee had only submitted the depreciation schedule computed under the Companies Act and not under the Income Tax Act - Held that:- it is pertinent to mention that the Ld. Assessing Officer ought to have given the benefit of depreciation to the assessee as provided under the Income Tax Act instead of disallowing the entire claim of depreciation because the details of the items on which the depreciation is claimed is before him and normally rate of depreciation allowable as per the Income Tax Act is higher than the rate of depreciation prescribed under the Companies Act. Further to simplify the proceedings of the Revenue, we hereby direct the assessee also to furnish the schedule of depreciation computed as per the Income Tax Act before the Ld.Assessing Officer.- Decided in favour of assessee for statistical purposes. Computation of book profit U/s.115JB - MAT computation - giving effect to the disallowance of expenditure made invoking the provisions of the Section-14A and also the disallowance of expenditure under the normal provisions of the Act - Held that:- while computing the “Book Profit” of the company under the provisions of section 115JB of the Act; any disallowance made under the normal provisions of the Act also cannot be given effect to for arriving at the “Book Profit” for the purpose of Section 115JB of the Act. See M/s.Apollo Tyres Ltd. Vs. CIT reported in [2002 (5) TMI 5 - SUPREME Court] - Decided in favour of assessee. Not giving the benefit of exemption under Section-10B of the Act for the increase in profit arising out of the disallowance of expenditures - Held that:- From the order of the Ld. CIT (A) we find that he has held the appellant to be eligible for the benefit of Section-10B of the Act, therefore as discussed herein above we hereby hold that the assessee will be entitled for the benefit of Section 10B of the Act even for the increase in profit arising out of any disallowances of expenditure made by the Revenue. However we also make it clear that while computing the profit of the 100% export orientated Undertaking for the purpose of deduction under Section 10B of the Act, any disallowance based on any fiction of the provisions of the Act like Section 40(a)(ia) of the Act etc., cannot be given effect because Section 10B is also a provision with fiction and a provision with fiction cannot be superimposed on any other provision with fiction. However in this case this observation will not be relevant because we have held in the following paragraph with respect to payments made to foreign agents for services rendered outside India in foreign currency provisions of Section 40(a)(ia) of the Act cannot be invoked.- Decided in favour of assessee. Disallowance u/s 40(a)(ia) - non-deduction of tax towards commission paid to foreign agents outside India in foreign currency and for services rendered outside India - CIT(A) deleted addition - Held that:- This issue is squarely covered by the decision of CIT Vs. Fazian Shoes Pvt. Ltd. reported in (2014 (8) TMI 170 - MADRAS HIGH COURT ) wherein it is held that “on a reading of Section.9(1)9vii), commission paid by the assessee to the nonresident agents would not come under the term “fees for technical services”. For procuring orders for leather business from overseas buyers, wholesalers or retailers, as the case may be, the non-resident agent was paid 2.5%, commission on free on board basis. This was a commission simpliciter. What was the nature of technical services that the non-resident agents had provided abroad to the assessee was not clear from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non resident agent did not provide technical services for the purpose of running of the business of the assessee in India. Therefore, the commission paid to the nonresident agents would not fall within the definition of ”fees for technical services” and the assessee was not liable to deduct tax at source on payment of commission - Decided in favour of assessee.
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