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2021 (2) TMI 608 - AT - Income TaxDisallowance u/ 14A - CIT(A) not granting relief on disallowance under Rule 8D(2)(iii) as relying on SINTEX INDUSTRIES LTD. [2017 (5) TMI 1160 - GUJARAT HIGH COURT] - HELD THAT:- It is crystal clear that in the instant case, the AO has not recorded any objective satisfaction as to why the computation mechanism provided in Rule 8D(2) of the Rules would come into operation, having regard to the accounts of the assessee. To follow the reasons as recorded for earlier years, as done by the AO in the impugned assessment year, is definitely not an objective satisfaction. Therefore, following the ratio laid down in the above decisions of GODREJ & BOYCE MANUFACTURING COMPANY LIMITED [2017 (5) TMI 403 - SUPREME COURT] we set aside the order of the Ld. CIT(A) in respect of disallowance u/s 14A r.w. Rule 8D(2)(iii) and allow the 1st ground of appeal. Disallowance of payment for non-compliance with RBI norms on customer service etc. u/s 37(1) - HELD THAT:- In the instant case, as recorded by the AO the assessee has claimed expenses on account of penalty of ₹ 15,00,000/- imposed by the RBI u/s 47A of the Banking Regulation Act, 1949 and ₹ 94,200/- for non-compliance of guidelines on customer service, guidelines in respect of exchange of coins and small de-nomination notes and mutilated notes. The ratio laid down in the decisions mentioned at para 12 is squarely applicable to the instant case instead of the decision in ANZ Grindlays Bank [2003 (8) TMI 174 - ITAT DELHI-Arelied on by the Ld. DR. Therefore, we delete the disallowance levied by the AO. Accordingly, the 2nd ground of appeal is allowed. MAT Computation - adding the tax on non-monetary perquisite in computing book profits u/s 115JB - whether amount paid represents employee cost and not tax in the hands of appellant - HELD THAT:- Similar issue arose before the Tribunal in Rashtriya Chemicals & Fertilizers Ltd. [2018 (3) TMI 1564 - ITAT MUMBAI]. The Tribunal held that taxes borne by the assessee on non-monetary perquisites provided to employees forms part of Employee Benefit cost and akin to Fringe Benefit Tax since they are certainly not ‘below the line’ items, since the same are expressly disallowed u/s 40(a)(v), the same do not constitute Income Tax for the assessee in terms of Explanation-2 to section 115JB ; therefore, without there being any corresponding amendment in the definition of Income Tax as provided in Explanation-2 to section 115JB, Fringe Benefit Tax was not required to be added back while arriving at Book Profits u/s 115JB of the Act. - we set aside the order of the Ld. CIT(A) and delete the addition made by the AO of tax on non-monetary perquisites provided to the employees to the book profit u/s 115JB of the Act. Thus the 3rd ground of appeal is allowed. Admission of additional ground - Whether amount of education cess and higher & secondary education cess is not tax as covered u/s 40(a)(ii) and accordingly allowable as deduction in computing the income from business or profession? - HELD THAT: -The above additional ground is squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in the case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] and Chambal Fertilizers & Chemicals Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT]. Following the above decisions, we admit and allow the additional ground of appeal filed by the assessee. Disallowance u/s 14A r.w. Rule 8D to earn dividend income in computing book profit u/s 115JB - HELD THAT:- As decided in M/S. BENGAL FINANCE & INVESTMENTS PVT. LTD. [2015 (2) TMI 1263 - BOMBAY HIGH COURT] an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB . Disallowance under Section 40(a)(ia) - provision for expenses under the head ‘repairs and maintenance’ on which tax was not deducted at source - TDS on contingent liability - CIT(A) deleted the additions and held that bills in respect of the provision for expenses were not received during the year - HELD THAT:- In the present case, the expenditure had already been incurred. The CIT(A) observed that the taxpayer maintained the books of accounts on the mercantile basis and shown the income and expenditure on an accrual basis - provisions which were made on the basis of properly ascertaining the liability was to be allowed under Section 37(1) - taxpayer had only made the provisions in the account but had not credited the same in the accounts of concerned parties and, therefore, the provisions of Section 40(a)(ia) of the Act would not be applicable. The Tribunal upheld the order of the CIT(A). Aggrieved, the tax department filed an appeal before the High Court. The Hon’ble Gujarat High Court observed that the tax was not deducted on the aforesaid expenses since the same were a contingent liability and for which bills were not issued. Subsequently, as and when the final bills were received/issued, the tax was deducted. Accordingly, the High Court deleted the disallowance under Section 40(a)(ia) of the Act and upheld the orders of the Tribunal as well as the CIT(A). As relying on SANGHI INFRASTRUCTURE LTD. [2018 (7) TMI 2072 - GUJARAT HIGH COURT] we affirm the order of the Ld. CIT(A) and dismiss the 2nd ground of appeal of revenue.
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