Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 490 - AT - Income TaxDisallowance u/s 14A - investment made out of own funds - HELD THAT:- We note that where the assessee was having a common fund consisting of both own funds and borrowed funds and in case the own funds are sufficient to invest in non-business activities, a presumption is drawn that the said investment is made out of own funds. We note that in the assessee`s case under consideration, the assessment year involved is A.Y.2008-09 hence, Rule 8D of the Income Tax Rules read with section 14A of the Act are applicable to the assessee and the AO may compute the disallowance by applying Rule 8D of the Income tax Rules. So far Rule 8D(2)(i) is concerned, the assessee has not disallowed suo-moto any amount, therefore no any addition under this Rule can be made by assessing officer. Coming to Rule 8D(2) (ii) of the Rules,the own funds of the assessee is far more than the investments and hence it can be safely presumed that the investments were made only out of own funds. Therefore, the AO is directed to delete the addition under rule 8D(2) (ii) of the Rules. Coming to Rule 8D(2) (iii) of the Rules, we note that addition may be made @ 0.50% of the dividend bearing securities as per the law laid down by the Coordinate Bench in the case of REI Agro Ltd [2013 (9) TMI 156 - ITAT KOLKATA] disallowance in such respect should be restricted to the amount only to the extent of the exempt income following the principles decided on the aforesaid matters by various Hon`ble High Courts. Therefore, we restrict the disallowance to ₹ 23,35,776/-, being amount of exempt dividend income earned during the year and hence we direct the AO for both the assessment years, that is A.Y.2008-09 and A.Y.2011-12 to restrict the disallowance to the extent of exempt dividend income earned during the year. Therefore, we dismiss the appeals filed by the Revenue as well as appeals filed by the assessee. Disallowance of provision for Non- Performing Assets (NPA) - HELD THAT:- We agree with the view taken by the Coordinate Bench in it’s earlier order [2019 (2) TMI 1721 - ITAT KOLKATA] . Thus, the issue is squarely covered against the assessee by the decision of Apex Court in Southern Technologies Ltd. [2010 (1) TMI 5 - SUPREME COURT] . Respectfully, following the decision of Apex Court in Southern Technologies Ltd. (Supra), we dismiss the ground raised by the assessee. Provision for leave Encashment in the computation of total income under the normal provisions of the Act - HELD THAT:- We find that though the Hon’ble Calcutta High Court in the case of Exide Industries Ltd vs Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT] had struck down the provisions of section 43B(f) of the Act as unconstitutional, the revenue had carried the matter further to the Hon’ble Supreme Court [2008 (9) TMI 921 - SC ORDER] - Hence from the aforesaid Supreme Court judgement, it could be inferred that the Hon’ble Supreme Court had not stayed the judgement of the Calcutta High Court during Leave proceedings. But the Hon’ble Supreme Court had only passed an interim order on the impugned issue. Hence we deem it fit and appropriate , in the interest of justice and fair play, to remand this issue to the file of the ld AO to pass orders based on the outcome of the main appeal on merits Addition of profit on sale of fixed assets/investments in computing Book Profits under section 115JB - HELD THAT:- As the issue is squarely covered in favour of the revenue by the decision of Special Bench in case of Rain Commodities [2010 (7) TMI 794 - ITAT HYDERABAD] wherein held in the absence of any provision for exclusion of exempted capital gain in the computation of book profit u/s 115JB, the assessee is not entitled to the exclusion claimed and there is no change in facts and law and the ld Counsel is unable to produce any material to controvert the above said findings of the special Bench. Therefore, respectfully following the decision of Special Bench (supra) we dismiss the ground of appeal raised by the assessee. Addition of provision for non-performing assets (NPA) of ₹ 13,71,00,000/- in computing the book profit under section 115JB - HELD THAT:- We note that provision for NPA is made as per Direction 9 of RBI prudential norms and disclosed separately as liabilities in the balance sheet as per Direction 10 of the said prudential norms. The Non- Performing Assets, against which the provision is made remains intact without any reduction. Based on the above factual and legal position, we are of the view that provision for Non-performing assets cannot be said to be provision for diminution in value of assets to attract disallowance as per clause (i) of Explanation 1 to sec. 115JB(2) of the Act. In other words, by making a provision for NPA, there will be no reduction in NPA. Hence, clause (i) of Explanation to Sec. 115JB(2) does not apply since there is no reduction in value of asset. Accordingly, this ground of the assessee is allowed and Assessing Officer is directed to delete addition made in computing book profit u/s 115JB of the Act. These grounds of assessee are allowed. Education Cess as an allowable expenditure u/s 37(1) - HELD THAT:- We accept the submissions of the assessee concurring with the decisions of Rajasthan High Court M/S. CHAMBAL FERTILIZERS AND CHEMICALS LTD., GADEPAN, DISTT. KOTA. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] and binding favourable decisions of Jurisdictional Tribunal and thus we allow the claim of the education cess. The AO is directed to allow the claim of education cess in computing total income of the assessee company. MAT Applicability - whether Assessee company prepares books of accounts as per RBI Rules. Section 115JB of the Act is not applicable to the assessee company, as it does not prepare books of accounts as per part II and part III of Schedule VI of the Companies Act,1956? - HELD THAT:- . Even though the assessee has prepared its accounts following the RBI guidelines and the accounts so prepared is strictly not in accordance with provisions of Part II & Part III of Schedule VI of the Companies Act, 1956, yet it cannot be said that provisions of Sec 115JB would not be applicable to the assessee company. The assessee company has incorporated under the Companies Act and prepared its accounts in accordance with provisions of Part II & Part III of Schedule VI of the Companies Act, 1956. Since there is no such observations by the Auditors also in their Audit Report, we do not agree with ld AR for the assessee and therefore, we confirm the earlier order passed by this Tribunal dated 27-02-2019. Accordingly, this ground of the assessee is dismissed as devoid of merit. Amount transferred to Special Reserve in compliance with the provisions of Section 45IC of the Reserve Bank of India Act, 1934 to be excluded in computing total income under the normal provisions of the Act - HELD THAT:- A transfer to a specific reserve cannot be charge on profit. It is not expenditure. It is appropriation of profit. Respectfully following the Judgment of the Hon’ble Delhi High Court [2015 (2) TMI 545 - DELHI HIGH COURT] in assessee`s own case, we dismiss the ground raised by the assessee. Addition on account of the amount transferred to special reserve, (out of statutory compulsion in accordance with section 45-IC of RBI Act) while computing book profit u/s 115JB - HELD THAT:- Tribunal in its earlier order [2019 (2) TMI 1721 - ITAT KOLKATA] had disallowed the ground relying on the decision of Delhi High Court in assessee’s own case for A.Y 2006-07 & 2007-0 [2015 (2) TMI 545 - DELHI HIGH COURT] . In the absence of any other judgment pointed out by the A.R in favour of the assessee, we agree with the view of the earlier bench and accordingly the ground is decided in favour of the revenue Addition of interest paid on loans which were advanced interest free to subsidiaries of the Assessee Company - HELD THAT:- Assessee advanced interest free loans to its wholly owned subsidiaries out of commercial expediency for the purpose of utilizing the same in the business of the subsidiaries is a allowable deduction in terms of the decision of Hon’ble Apex Court in the case of S.A Builders Ltd. -vs.- CIT(Appeals) & Another [2006 (12) TMI 82 - SUPREME COURT] . The said stand has been further affirmed by the Jurisdictional High court in the case of Dalmia Cement [2001 (9) TMI 48 - DELHI HIGH COURT] & Bharti Televenture Ltd [2011 (1) TMI 326 - DELHI HIGH COURT] relying on the decision of the Apex Court. From perusal of the Balance Sheet and the Audited accounts of the company, it leaves beyond doubt, the fact that the assessee had sufficient own funds for advancing such funds to its subsidiary company. Thus, based on the above factual as well as judicial pronouncements, the AO is directed to delete the disallowance made. Addition on account of disallowance u/s 14A while computing book profit u/s 115JB - HELD THAT:- The provisions of section 115JB relating to computation of book profit are amply clear and unambiguous. These provisions do not leave any room for adjustment by the assessing officer other than those mentioned in Explanation 1 to section 115JB to the net profit reflected in the accounts of any assessee and adjustment by way of disallowance u/s 14A is not included in the said explanation. This issue is also covered by the judgment of the Special Bench of Tribunal in the case of ACIT Vs. Vireet Investments (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] . Therefore, such upward revision in the sum of ₹ 26,53,10,000/-to the book-profit by making disallowance section 14A read with rule 8D is not permitted that being so, we decline to interfere with the order of Id. CIT (A) deleting the aforesaid addition. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Interest u/s 234C of the Act should be charged on the tax due on returned income. Therefore, we direct the assessing officer to charge interest u/s 234C of the Act on the tax due on returned income. Admitting debentures redemption reserve as allowable expenses u/s 115JB - HELD THAT:- We are of the view that the DRR is ascertained liability and not a reserve. Accordingly, the revenue’s ground is dismissed.
|