TMI Blog2013 (8) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution - 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 a reasonable opportunity to the assessee to place all germane material on the record - Following decision of Commissioner of Income Tax-II Versus M/s Hero Cycles Ltd [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT] and GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided against assessee. Deduction u/s 80IB - Small scale industry - Held that:- There is no condition that new definition of small scale industry is applicable to the new units only - Amount of investment has to be seen as on the last date of previous year - during assessment proceedings the AO noticed that the assessee had raised certain unsecured loans. The Assessing Officer was of the opinion that interest paid was excessive and therefore, restricted the allowance of interest to 12% - However, On appeal the claim of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the ambit of section 10(33) of the Income-tax Act, 1961, as was applicable for the assessment year 2002-03 is not includible in computing the total income of the assessee. Consequently, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total income under the Act, by virtue of the provisions of section 14A(1) ; (ii) The payment by a domestic company under section 115- O(1) of additional income-tax on profits declared, distributed or paid is a charge on a component of the profits of the company. The company is chargeable to tax on its profits as a distinct taxable entity and it pays tax in discharge of its own liability and not on behalf of or as an agent for its shareholders. In the hands of the shareholder as the recipient of dividend, income by way of dividend does not form part of the total income by virtue of the provisions of section 10(33). Income from mutual funds stands on the same basis ; (iii) The provisions of sub-sections (2) and "(3) of section 14A of the Income-tax Act 1961 are constitutionally valid ; (iv) The provisions of rule 8D of the Income-tax Rules as inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the provision of Section 14A the assessee had the right to claim all the expenses if such expenses could not be bifurcated in terms of normal taxable income and exempted income in view of the decision of Hon'ble Supreme Court in case of Rajasthan State Warehousing Corporation V. CIT, 242 ITR 450 but this position changed after the introduction of Section 14A by Finance Act, 2001. The Memorandum explaining the provisions of finance bill reads as under: "Certain income are not includible while computating the total income as these are exempt under various provisions of the Act. There have been cases where deductions have been claimed in respect of such exempt income. This in effect means that the tax incentive given by way of exemptions to certain categories of income is being used to reduce also the tax payable on the non-exempt income by debiting the expenses incurred to earn the exempt income against taxable income. This is again the basic principles of taxation whereby only the net income, i.e., gross income minus the expenditure is taxed. On the same analogy, the exemption is also in respect of the net income. Expenses incurred can be allowed only to the extent they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the Act for such previous year, he hall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely:- A X B/C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year; B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; C = the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A). 12 Before us, the ld. counsel of the assessee submitted that the issue is covered by the decision of the Tribunal in earlier years in ITA No. 803/Chd/2011 and 1059/Chd/2011 in favour of the assessee. 13 W e have heard the rival submissions carefully. We find that identical issue came up for consideration o the Tribunal and the same was decided against the Revenue vide para 9 which read as under: 9. We have heard the rival submissions carefully and find force in the submissions of the ld. counsel of the assessee. We have perused the notification No. 1642(E) dated 29.9.29006 and find that there is no condition that new definition is applicable to the new units only. In fact, Section 80IB(14)(g) reads as under: "small-scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a small scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of1951)." The above clearly shows that the amount of investment has to be seen as on the last date of previous year. In the case before us, the last date of the preceding year is 31.3.2007 and the new limit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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