9911796707
TMI Blog2014 (1) TMI 1579X X X X Extracts X X X X X X X X Extracts X X X X ..... restricting the disallowance to Rs. 18.75 lakhs as against the disallowance of Rs. 20.17 lakhs worked out by the Assessing Officer as per the provisions of section 14A of the Income Tax Act, 1961 read with Rule 8D of the IT Rules. 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the adjustment of disallowance u/s 14A of the Income Tax Act, 1961 amounting to Rs. 20,17,000/- in the book profit calculation u/s 115JB of the IT Act, 1961 made by the Assessing Officer. 3. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the adjustment of a sum of Rs. 1,40,76,35,917/- in the book profit u/s 115JB of the IT Act, 1961 which has not been claimed as income derived from operations & maintenance of SEZ by assessee. 4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. The brief facts of the case are that the assessee company is engaged in the business of real estate and other allied activities. In the year 2008-09 the Assessing Officer disallowed an amount of Rs. 27,24,000/- u/s 14A as expenses pertaining to earning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est as against this appellant has made investment of Rs. 75 crores in the unit of Mutual Funds. It is also seen that investment of Rs. 24 crores were made in earlier years and during the year investment of Rs. 51 crores were made. It is also seen from the balance sheet that appellant has shown interest income of Rs. 118.12 crores as against that appellant has shown interest payment of Rs. 1.21 crores. Therefore, the appellant had enough non interest bearing funds for making investment in Mutual Funds, hence, no interest can be attributed for earning exempt income and no interest expenditure requires to be disallowed for earning exempt income. The findings of Ld CIT(A) in assessment year 2009-10 are reproduced below:- "Considering the above, the Assessing Officer has applied and disallowance of Rs. 20,17,000/- has been worked out. However, as discussed above the appellant has invested in Mutual Funds out of own funds therefore no interest for making investment calls for disallowance as per provisions of section 14A read with Rule 8D. However, the investment is not a passive activity and expenses on management and administration of investment are embedded in the expenses debited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SEZ project is not to be included for working out of book profits. I agree with the submissions of the appellant that such adjustment is also not provided in explanation contained in section 115JB which provide for certain additions and subtractions from the profit shown in the P&L Account. I, therefore, hold that income of the appellant is from SEZ operations and not to be included from working of book profit u/s 115JB. The appellant gets a relief of Rs. 1,85,48,545/- for working out the book profit u/s 115JB." Similar findings were made in the assessment year 2009-10. 6. The third disallowance was deleted by the Ld CIT(A) by relying upon the Hon'ble Supreme Court judgment in the case of Apollo Tyres Ltd. v. CIT 255 ITR 273. The operative part of Ld CIT(A)'s order is reproduced below:- "I have considered the submissions of the appellant and the case laws relied upon by the appellant in this regard of Hon 'ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT (2002) 255 ITR 27, (SC) wherein the Court has held that Assessing officer while computing the income under section I15 JB of the Income-tax Act, 1961 has no power of examining the books of accounts by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of Section 115-J of the Act then it should be that income which is acceptable to the authorities under the Companies Act. There can not be two incomes one for the purpose of Companies Act and another for the purpose of income tax both maintained under the same Act. If the legislature intended the assessing officer to reassess the company's income, then it would have stated in Section 115J that 'income of the company as accepted by the Assessing Officer. In the absence of the same and on the language of Section 115J, it will have to held that view taken by the tribunal is correct and the High Court has erred in reversing the said view of the tribunal. 9. Therefore, we are of the opinion. the assessing officer while computing the income under Section 115J has only the power of examining whether the books of account arc certifies by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The assessing officer thereafter has the limited power of making increases and reductions as provided for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further argued that Ld CIT(A) has very rightly reduced the amount of interest from the calculation of disallowance as per Rule 8D as the assessee had sufficient interest free funds which is apparent from the findings of Ld CIT(A) in which he has held that instead of interest expense, the assessee had earned net interest income. Defending 2nd & 3rd ground for assessment year 2008-09 & 2009-10 the Ld AR invited our attention to the provisions of clause (6) to sec. 115JB which specifically exempted the income of SEZ for the purpose of calculation of book profit u/s 115JB of the Act. To a query from the Bench as to whether the developer includes Co-developer, our attention was invited to the section 2 of SEZ Act, 2005 which contained the definition of developer and which included a co-developer also. Our attention was also invited to Explanation provided in section 80IAB for the proposition that for the purpose of this section developer and SEZ shall have the same meaning as assigned to them in clauses (g) and (za) of SEZ Act, 2005. Regarding claim of the Assessing Officer that assessee had not claimed deduction u/s 80IAB it was argued that assessee was free to claim the deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This requirement is contained in the section itself. In the present case, the disallowance was made on notional basis under section 14A and therefore Ld CIT(A) has rightly following the order of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) has deleted the disallowance. Moreover, the Hon'ble Tribunal in I.T.A. No. 410/Del/ dated 27th November, 2009 followed the same. The findings are contained in para 6 of this order whicy are reproduced below:- "Coming to the sustenance of disallowance of Rs. 88,290/- u/s 115JB the CIT(A) has upheld the disallowance under clause (f) of Explanation to sec. 115JB (2) of the Act. U/s 115JB of the Act, the assessee is required to pay tax on its book profit subject to certain conditions. The book profit is to be determined u/s 115JB(2) as per Part II & III of Schedule VI to Company's Act 1956. Explanation 1 to sec. 115JB (2) defines the expression 'book profit' and means the net profit as shown in the P&L A/c for the relevant previous year prepared under sub sec. (2) as increased by the amounts specified in clause (a) to (h) of the Explanation-1 . Clause (f) of the Explanation 1 refers to the amount or amounts or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (6) of sec. 115JB we find that clause (6) specifically contains the following provisions:- "The provision of this section shall not apply to the income accrued or arising on or after the Ist day of April, 2005 from any business carried on or services rendered by an entrepreneur or a developer in a unit or SEZ as the case may be." Therefore, there is no dispute that the assessee was eligible for exclusion of income from SEZ business for the purpose of section 115JB. However, we find that the claim of assessee with respect to SEZ income has not been examined by the Assessing Officer or by ld CIT(A). Therefore, in the interest of justice we remit this ground of appeal to Assessing Officer with a direction to examine the claim of assessee in respect of income from SEZ business and after arriving at the amount of profits from SEZ business, allow the same as exclusion for the purpose of determining book profits u/s 115JB of the Act. 16. In view of the above, ground No.2 and ground No.3 in respect of assessment year 2008-09 and 2009-10 is allowed for statistical purposes. 17. In view of the above, the appeals filed by the revenue are partly allowed for statistical purposes. 18. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
