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TMI Blog2012 (8) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... t during the previous year relevant to the assessment year only to the extent of Rs. 61.25 crore. The other balance sheet figures were also put forth before the A.O. to bring home the point that no disallowance was called for u/s 14A. The Assessing Officer noticed that the total interest expenditure incurred by the assessee was to the tune of Rs. 19.41 crore. By considering the total amount of interest bearing borrowings, the Assessing Officer worked out average rate of interest at 13.63%. Such rate was applied to the investments made by the assessee in shares for working out disallowance at Rs. 6,38,37,708. The learned CIT(A) observed that only the dividend income received from a domestic company is exempt u/s 10(33) of the Act. As the assessee had invested inter alia in equity shares of Strides Inc., USA, Arcolab SA - Switzerland, Infra Industri, Brazil and Solara Farmaceutica, Mexico, the learned CIT(A) held that interest in relation to investment in the shares of such foreign companies was not liable to be considered u/s 14A. It was still further noted that the assessee had invested in three domestic companies, namely, Dena Bank, Kothari Pioneer Infotech and Kothari Pioneer Blu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year ending 31.03.2000. It shows that no fresh investment was made by the assessee during the current year in the shares of these companies. The assessee's annual accounts for the current and also the earlier relevant years are available in the paper book. Page 11 is copy of Profit and loss account for the year ending 31.03.2001 as well as 31.03.2000. Out of the total investments of Rs. 2.84 crore, the assessee had made investment in shares of Dena Bank to the tune of Rs. 12.57 lakh, thereby leaving remaining investment of Rs. 2.72 crore made in the year ending 31.03.2000 in the shares of Kothari Pioneer Infotech and Kothari Pioneer Blue Chip Fund. A close look at the Profit and loss account of the assessee-company for the corresponding date of 31.03.2000 divulges that the assessee earned profit for the said year amounting to Rs. 24.56 crore. The amount of depreciation itself for that year stands at Rs. 6.07 crore which is a non-cash item. When we consider the magnitude of profit with the company and the investments made in these shares of Kothari group, it can be easily noticed that the profit for the relevant year itself was much more than the amount of investment. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustained for which the amount was deposited by the assessee beyond the grace period but before the due date prescribed u/s 139(1) of the Act. Both the sides are in appeal against their respective stands. 6. After considering the rival submissions and perusing the relevant material on record we find that the Hon'ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. [(2009) 319 ITR 306 (SC)] has held that the amendment to first proviso and the omission of the second proviso to section 43B by the Finance Act, 2003 is retrospective. In that view of the matter any amount referred to in section 43B, being the sum payable by the employer shall be allowed as deduction if it is paid before the due date of filing of the return. The Hon'ble Delhi High Court in the case of CIT v. Aimil Ltd. [(2010) 321 ITR 508 (Del.)] has held that if employees' share is deposited before the due date then no disallowance is called for. In reaching this conclusion, the Hon'ble Delhi High Court relied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. [(2007) 213 CTR (SC) 268] in which it was held that the amount of employees contribution etc. deposited before the filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Assessing Officer in entirety cannot be sustained. The impugned order to the extent it is against the assessee is vacated and to the extent it is against the Revenue is upheld. The assessee's ground is allowed and Revenue's ground is dismissed. 11. Ground no.6 of the Revenue's appeal is against netting of interest receipts for the purpose of deduction u/s 80HHC. The Assessing Officer, while computing deduction u/s 80HHC considered the gross amount of interest. The learned CIT(A), however, overturned this finding by holding that only the net amount of interest was to be considered. Having heard the rival submissions it is noticed that this issue has been settled by the Hon'ble Supreme Court in Associated Capsules Pvt. Ltd. v. CIT [(2012) 343 ITR 89 (SC)] by holding that netting of interest is permissible. The reliance of the ld. DR on the judgment in the case of CIT v. Asian Star Co. Ltd. [2010] 326 ITR 56 (Bom) is misconceived as the same has been reversed by the Hon'ble Supreme Court in the afore noted case. As such no fault can be found with the impugned order on this score. This ground is not allowed. 12. Ground no.7 of the Revenue's appeal is against the direction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of attribution is applicable to cases falling u/s 80HHC(3)(b) and therefore, part of indirect cost has to be apportioned to expenses incurred for earning export incentives. 10% of total income has been held as fair estimate in this case. As the view taken by the learned CIT(A) matches with that of the Hon'ble Supreme Court in the aforenoted case, we are of the considered opinion that no interference can be made in the impugned order on this issue. This ground is not allowed. 17. Last ground of the Revenue's appeal is against the direction of the learned CIT(A) to reduce export profits based on book profit in the ratio of export turnover to total turnover and not the quantum of deduction as worked out u/s 80HHC for the purposes of working out 'book profit' liable for MAT u/s 115JB of the Act. 18. After considering the rival submissions and perusing the relevant material on record we find that this issue is directly covered in favour of the assessee by the judgment of the Hon'ble Supreme Court in the case of Ajanta Pharma Ltd. v. CIT [(2010) 327 ITR 305 (SC)] in which it has been held that clause (iv) of the Explanation to section 115JB covers full export profits of 100% as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34D to the tune of Rs. 5,24,101. The assessee has challenged the levy of interest u/s 234D. 23. We have heard the rival submissions and perused the relevant material on record. Section 234D was inserted by the Finance Act, 2003 with effect from 01.06.2003 providing for the levy of interest on excess refund. Sub-section (1) reads as under:- '234D. Interest on excess refund.-(1) Subject to the other provisions of this Act, where any refund is granted to the assessee under sub-section (1) of section 143, and- (a) no refund is due on regular assessment ; or (b) the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on regular assessment, the assessee shall be liable to pay simple interest at the rate of one-half per cent. on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. (emphasis supplied by us) 24. Doubts were expressed in certain quarters about the significance of the date of 1.6.2003, by which this provision became a part of the statute by the Finance Act, 2003. It was interpreted by some persons as an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied by us) 26. The rationale of the insertion of Explanation 2 has been explained in the Memorandum explaining the provision of Finance Bill 2012 as under:- Clause 85 of the Bill seeks to insert a new Explanation to section 234D of the Income-tax Act relating to interest on excess refund. The existing provisions of sub-section (1) of the aforesaid section 234D provides that where any refund is granted to the assessee under sub-section (1) of section 143 and no refund is due on regular assessment, or the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on regular assessment, then, the assessee shall be liable to pay simple interest at the rate of one-half per cent. on the whole or the excess amount so refunded for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. ** ** ** It is proposed to insert a new Explanation so as to clarify that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date." This amendment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not impressed with this submission. The ld. AR is reading the word 'is' in only half of the provision, thereby leaving the other part of the sentence as such. In fact, sub-section (1) as reproduced above, has two clauses (a) and (b) and the full stop comes only at the end of sub-section. Clause (a), which is immediately next to the line '...where any refund is granted to the assessee...' also uses the word 'is'. When we meticulously read the relevant parts of the sub-section in entirety, what emerges is that : '...where any refund is granted to the assessee under sub-section (1) of section 143, and no refund is due on regular assessment ...., the assessee shall be liable to pay simple interest .... for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment.' An overview of this provision indicates that it has three major segments, viz., first, where any refund is issued u/s 143(1); second, the amount of refund is eradicated or reduced in regular assessment; and third, which is a corollary of the first two, is the levy of interest. As each of the first two segments use the word 'is', there can be no logic in ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our client are filing their Return of Income without incorporating there in the assessable profit and gain of the said company vice M/s Bombay Drug & Pharma Ltd. On receipt of the Court order, our client will file a revised return incorporating therein the assessable profit & gain of the said M/s Bombay Drug & Pharma Ltd., which may please be noted." 34. Thereafter a revised return was filed in view of the note given in the original return. The said return was accompanied by copy of annual account of Bombay Drugs & Pharma Ltd. merged with the assessee-company. The learned AR contended that the Assessing Officer has failed to give tax credit earned by Bombay Drugs & Pharma Ltd. which got amalgamated with it. On a pertinent query it was admitted that this ground was not taken before the learned CIT(A). It was, however, maintained that all the relevant facts in this regard are available on record which is apparent from the assessment order itself whereby the said note has been reproduced by the A.O. The ld. AR requested that the A.O. be directed to allow the tax credit in respect of Bombay Drugs & Pharma Ltd. The learned Departmental Representative did not raise any objection to it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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