TMI Blog2012 (11) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt was inchoate – Held that:- assessee filed revised computation to exclude interest on refund, which was originally granted by taking the loss on export as ‘Nil’ - there is not even a whisper regarding method of accounting regularly followed by the assessee in accounting interest on refund granted by the Department - matter remanded Interest u/s 234D of the Act – Held that:- CIT(A) did not pass a speaking order on the issue and merely observed that levy of interest u/s 234D is only consequential in nature. Since subsequently refund has been granted to the assessee - matter remanded back to the file of the ld. CIT with the directions to pass a speaking order - ITA nos.1822 & 2215/Del./2011 - - - Dated:- 13-1-2012 - SHRI R.P. TOLANI SHRI A.N. PAHUJA, JJ. Assessee by S/Shri Ashwani Taneja, Kunal Nagpal and Sumit Jain, ARs Revenue by Shri R. I .S. Gill, CIT- DR ORDER A.N. Pahuja :- These cross appeals filed on 15.04.2011 by the assessee and on 04.05.2011 by the Revenue against an order dated 18.02.2011 of the ld. CIT(A)- XXX, New Delhi for the AY 2007-08 , raise the following grounds:- I.T.A. No.1822/D/2011 [Assessee] 1A) That the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t treating it to be unrecognized. 4) On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.4,72,66,000/- on account of 14A of the Income-tax Act with rule 8D of I.T. Rule. 5) On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.2,35,00,178/- on account of value of closing stock of sugar declared by the assessee. 6) The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 2. Adverting first to ground no.1 in the appeal of the Revenue , facts, in brief, as per relevant orders are that return declaring income of Rs.32,62,97,076/-filed on 28.10.2007 by the assessee, engaged in the business of export and import of sugar, after being processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) was selected for scrutiny with the service of a notice u/s 143(2) of the Act on 16th September, 2008. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the conveyance deed in respect of leasehold office building and car parking at Ansal Plaza was yet to be executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 625 (SC) has to be taken as a trendsetter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term owned is occurring in sec. 32(1) of the Income Tax Act. The term owned is occurring in sec. 32(1) of Income Tax Act, must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. In view of the decision of Hon ble Supreme Court for the purpose of sec. 32(1), the assessee is owner of the property and is entitled for depreciation. Merely because the property has not been registered in the name of the assessee, disallowance of depreciation cannot be made. The decision in the case of Tamil Nadu Civil Supplies Corporation Ltd. (supra) is not applicable to the facts of the case before us as in that case the assessee had not acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Hon ble Tribunal and CIT(A) XIII orders in assessee s own case in earlier years, the disallowance of Rs.15,21,592/- is deleted. 8. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the decision dated 15.11.2011 in the assessee s own case in ITA nos.5943 5960/Del./2010 for the AY 2005-06. 9. We have heard both the parties and gone through the facts of the case and as also the aforesaid decision dated 15.11.2011 in ITA nos.5943 5960/Del./2010 for the AY 2005-06 wherein while adjudicating an identical issue, the ITAT concluded as under:- 13. We have heard both the parties and perused the material on record. 14. From the AO s order, it is clear that the AO has disallowed the traveling expenses to attend the conferences for the reasons given by him in A.Y. 2002- 03, 2003-04 2004-05. The identical additions were deleted by the ld. CIT(A) in earlier years against which department did not file any appeal before the Tribunal except filing an appeal before the Tribunal in the A.Y. 2003-04. The ld. CIT(A) s order passed in A.Y. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to above, I hold that the assessee has contributed to recognized provident fund trust and hence the contributions made to such recognized provident fund trust are allowable under the provisions of the Income-tax Act. Accordingly the disallowance of Rs.11,26,848/- is being deleted. 12. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the decision dated 15.11.2011 in the assessee s own case in ITA nos.5943 5960/Del./2010 for the AY 2005-06. 13. We have heard both the parties and gone through the facts of the case and as also the aforesaid decision dated 15.11.2011 in ITA nos.5943 5960/Del./2010 for the AY 2005-06 wherein while adjudicating an identical issue, the ITAT concluded as under:- 20. The identical issue has been decided in favour of the assessee in A.Y. 2003-04 by the Tribunal by observing and holding as under: - 7. We have heard the parties and considered the material available on record. Sec. 36(1)(iv) provides as under: (iv) any sum paid by the assessee as an employer by way of contribution towards a recognized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue and ground nos.1A and 1B in the appeal of the assessee relate to disallowance u/s 14A of the Act. During the course of assessment proceedings, the AO noticed that the assessee earned dividend income from interest free bonds of Rs.3,64,16,291/-, claimed exempt u/s 10 of the Act. To a query by the AO, regarding working of disallowance u/s 14A of the Act read with Rule 8D of I.T. Rules, 1962,the assessee replied that huge surplus and interest free funds available on its disposal, were more than the investments made by the assessee. Though the assessee contended that Rule 8D of I.T. Rule, 1962 was not applicable in the year under consideration, the AO did not accept the contentions of the assessee and computed disallowance of Rs.4,72,66,600/- in terms of Rule 8D of I.T. Rules, 1962, following the decision of Special Bench of the ITAT in the case of ITO vs. Daga Capital Management Pvt. Ltd. (2009) 312ITR AT 1. 15. On appeal, the learned CIT(A) reduced the disallowance to Rs.Rs.10 lacs in the following terms:- 7.2 I have gone through the submissions of the assessee and order of Tribunal in assessee's case in AY 2001-02 and orders of AY 2005-06 and A Y 2006-07 by my pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest debited to income expenditure of Rs.4,82,06,272/-. Further on going through the Balance Sheet of the appellant it is observed that the Opening General Fund (Reserves) of the appellant as on 31/3/2006 is Rs.231.59 Crores and Closing General Fund as on 31/3/2007 is Rs.271.31 Crores. The Investments of the assessee as at 31/3/2006 is Rs.209.50 Crores and 31/3/2007 is Rs.249.17 Crores respectively. Further during the year, the assessee has earned cash profits during the year. In Reliance Utilities Power Ltd. 313 ITR 340 (Born) (supra), the High Court has held that "if there be interest free funds available to an assessee sufficient to meet its investments and that at the same time the assessee had raised a loan it can be presumed that the investment were from the interest free funds available" From the above discussions of the balance sheet of the appellant it is observed that the ratio of the decision of Reliance Utilities is applicable and therefore on this aspect also, there is no question of attribution of "interest expenditure" for earning of tax exempt income u/s 14A in appellant's case. 7.4 The other issues to be considered is whether or not provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law which would apply to an assessment year is the law prevailing on the first day of April. Consequently, Rule 8D which has been notified on 24 March 2008 would apply with effect from Assessment Year 2008-09(Para 67) Even prior to Assessment Year 2008-09, when Rule 8D was not applicable, the Assessing Officer has to enforce the provisions of sub section (1) of Section 14A. For that purpose, the Assessing Officer is duty bound to determine the expenditure, which has been incurred in relation to income, which does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing (ft reasonable opportunity to the assessee to place all germane material on the record; The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income / income from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment (Para 74). Thus Bombay High Court in case of Godrej Boyce (Supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le inviting our attention to the findings of learned CIT(A) contended that the ld. CIT(A) was not justified in reducing the disallowance. On the other hand, learned AR on behalf of the assessee reiterated their submissions before the learned CIT(A) while referring to decision dated 15.11.2011 of the ITAT for the AY 2005-06. 17. We have heard both the parties and gone through the facts of the case. We find that while adjudicating a similar issue, the ITAT upheld the findings of ld. CIT(A) in the AY 2005-06 in their order dated 15.11.2011 ,in the following terms:- 28. We have heard both the parties and perused the material on record. On perusal of AO s order, we find that the AO has worked out the proportionate expenses incurred for earning the exempted income at Rs. 6,45,404/-. However, he disallowed the sum of Rs.10 lakh in the light of the disallowance sustained by ld. CIT(A) in A.Y. 2002-03. However, in the present assessment year, the ld. CIT(A) has worked out the disallowance, by allocating the various expenses to exempt income, at Rs. 6,49,336/- which is more than the working of Rs. 6,45,404/- worked out by the AO. The AO s action in disallowing the expenses to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable in the year under consideration in view of aforesaid decision of Hon ble Bombay High Court. 17.2 As regards disallowance out of various expenses to the extent of 10 lacs, we do not find any infirmity in the approach of the learned CIT(A) in upholding the disallowance to that extent especially when the assessee admitted in his submissions dated 2.12.2010 before the ld. CIT(A) to the fact of part of such expenses have been incurred for earning exempt income and accordingly, provided its own working of such expenses relating to Head office at Ansal Plaza, Delhi There is no material before us to take a different view in the matter. In the course of hearing of this appeal, the ld. AR on behalf of the assessee did not point out any irregularity or defect in working given by the ld. CIT(A). It is not in dispute that the assessee has incurred various expenses for earning exempt income. The expenditure incurred by the assessee in earning exempt income has been worked out by the ld. CIT(A) at Rs.10 lacs on a reasonable basis. We, therefore, find no reason to interfere with the order of ld. CIT(A) in sustaining the disallowance to the extent of Rs.10 lacs 17.3 In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the order for AY 1993-94, the appellant's arguments and method of valuation of closing stock of sugar at lower of cost or market price was accepted. It was also submitted that in the preceding previous years also my predecessor having considered the decision of ITA T Delhi has deleted such addition and accordingly it is submitted that the addition made in the year under consideration should also be deleted. The appellant has also made elaborate submission on this issue which is not repeated since in the instant case there is no dispute as to the fact that the appellant has been following the method of valuing closing stock at lower of cost or market value consistently and more so the method so adopted is the recognized method of valuation of stock prescribed by the Institute of Chartered Accountants of India as per AS (Accounting Standard) - 2. Respectfully following the decision of the IT AT Delhi in the appellant's own case in A Y 1993-94, 1995-96, 1996-97, 1997-98, A Y 2001-02, AY 2003-04 as well as my predecessors in AY 2002-03/AY 2003-04/AY 2004-05/2005-06/2006-07, addition made in this regard of Rs.2,35,00,178 in the current year as well is deleted. 20. The Revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11/-. Though the assessee in the original return offered interest on Income Tax refund to tax, in the revised return filed on 16th March, 2009, the assessee reduced the aforesaid interest of Rs.12,27,94,011/- on the ground that the receipt was inchoate. However, the AO did not accept the submissions of the assessee on the ground that appeals in the preceding year were pending in higher forums.. 24. On appeal, the learned CIT(A) upheld the findings of the AO, rejecting the contentions of the assessee while concluding that interest on income tax refund is taxable as and when received by the assessee.. 25. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee merely relied upon the decision dated 19.03.2010 of the ITAT in I.T.A. nos.4159 and 4361/D/2006 for the assessment year 2003-04. On the other hand, the ld. DR supported the findings of the ld. CIT(A) relied on the impugned order. 26. We have heard both the parties and gone through the facts of the case as also the aforesaid decision of the ITAT. As is apparent from the findings in the assessment order, interest of Rs.12,27,94,011/- relates to the ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rues in the year in which interest on refund is received by the assessee. Following the said judgment, a co-ordinate Bench in their decision in Zuari Industries Ltd. vs, ACIT ,298 ITR (AT) 97 decided the issue against the assessee. In view of the foregoing, especially when there is not even a whisper regarding method of accounting regularly followed by the assessee in accounting interest on refund granted by the Department, either in the impugned order or before us nor the ld. CIT(A) had any occasion to consider the aforesaid decisions, we consider it fair and appropriate to vacate the findings of the ld. CIT(A) and restore the matter to his file with the directions to re-examine in the issue in accordance with law in the light of our aforesaid observations, after allowing sufficient opportunity to the assessee and thereafter pass appropriate orders ,considering the status of proceedings in further appeals for the AYs 1993-94,1995-96,1999-2000 2003-04 . With these observations ground nos.3(a) in the appeal of the assessee is disposed of while alternate ground no. 3(b) does not survive for our adjudication at this stage nor the ld. AR made any submissions before us on this alter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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