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TMI Blog2015 (1) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned AR of the assessee stated that the present issue is squarely covered by the decision of the co-ordinate Bench of the Tribunal in the assessee's own case for A.Y. 2006-07. The Tribunal, vide its order dated 17.09.2013 in ITA Nos. 6575 & 6266/Mum/2010, has restored the issue to the file of the AO observing as under: "6. We have examined the issue. There is no dispute with reference to assessee earning interest income but adjusting the same towards cost of project. The issue of having direct nexus with the borrowings has not been examined by the AO at all. In case the assessee has utilised the borrowed funds for earning the income to that extent, the interest has to be given set off to the interest paid on the borrowed funds. It was the contentions of the assessee that there is a direct nexus and these funds are not surplus funds so as to consider as income from other sources. This aspect requires examination by the AO and in case there is direct nexus with the earning of interest income with that of the borrowals, then only net interest can be brought to tax or adjusted in the construction account. Therefore, without going into the various case law relied upon by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be observed that in the case of 'Godrej & Boyce Manufacturing Co. Ltd.' 328 ITR 81, the Hon'ble Bombay High Court has held that Rule 8D r.w.s. 14A(2) is not arbitrary or unreasonable and also not retrospective and applies from A.Y. 2008-09. It has been further held that under section 14A of the Income Tax Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. The satisfaction of Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Sub section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect such expenditure is correct. The satisfaction of the Assessing Officer must be arrived at on an objective basis. In a situation where the accounts of the assessee furnish an objective basis for the Assessing Officer to arrive at a satisfaction in regard to the correctness of the claim of the assessee, there would be no warrant for taking r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the AO excluded the subsidy on the ground that it was incentive profit received from Government of India, hence not eligible for deduction u/s. 80IB. The learned CIT(A) upheld the order of the AO. 10. We have heard both the parties and have gone through material available on record. We find that the Tribunal in the assessee's own case, vide its order dated 17.09.2013 in ITA Nos. 6575 & 6266/Mum/2010, has restored the issue to the file of the AO observing as under: "17. We have considered the issue and examined the facts as placed on record. There is no dispute with reference to the claim and the amount of reimbursement to the assessee. It was stated that total subsidy was apportioned to the eligible units. The basis of apportionment is not placed on record nor mentioned in the order. The nexus of reimbursement by way of subsidy is to be established so as to consider the claim of assessee that reimbursement infact reduces the interest claim. As seen from the record how the amounts are quantified, whether the amount is part of the unit interest cost claimed earlier were not examined/ not on record. After considering the arguments of both the sides, we deem it proper to set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Yakub Saiyed had accepted that, out of the total contract value, he had paid back Rs. 65,00,000/- to Mr Suredra Jiwarajka, Director of Alok Industries Ltd. in cash. The assessee has also failed to submit any evidence before the AO as well as ld CIT(A) to rebut this statement." "Further, this is not matter of account payee cheques or transaction reflecting in the books of account, this is a matter of cash paid back of Rs. 65,00,000/- to the director of M/s. Alok Industries Ltd which was categorically accepted by Shri Mohammad Yakub Saiyed in his statement." The AO considered the submissions made before him and though the assessee denied the receipt of cash by its director the same was not accepted as Shri Mohammad Yakub Saiyed had categorically stated on oath of making payment of cash to the director of the assessee. The learned CIT(A) has discussed the issue at length and has held as under: "6.3 .................. The second issue is relating to the addition of Rs. 65 lacs, the cash payment made to Mr Surendra Jiwarajka, Director of the company, by Shri Mohammad Yakub Saiyed, partner of M/s. Zayba Construction Co. In the statement recorded during the course of survey, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of Rs. 65 lakhs from the value of assets and calculate the depreciation accordingly. We do not find any infirmity in the order of the CIT(A). It is accordingly upheld. 14. Ground no.3 relates to the computation of disallowance made u/s. 14A for computing book profit u/s. 115JB. 15. It may be observed that coordinate bench of the Tribunal, incidentally consisting of both of us (Members), in the case of "M/s. Godrej Consumer Products Limited" ITA No.4963/M/11 (A.Y. 2007-08), decided on 20.11.13 while dealing with the identical issue, has held that the amount of expenditure disallowable under section 14A is to be added back while computing book profit under clause (f) of the explanation (1) to section 115 JB observing as under: "24. Vide ground No.5 of its appeal, the assessee has agitated the action of the ld. CIT(A) in relying upon the provisions of section 14A of the Act while computing the amount of expenditure for earning exempt income which is liable for being added back to the book profits as per the provisions of section 115JB of the Income Tax Act. The submissions of the ld. A.R. has been that section 115JB of the Act is a separate code by itself and the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure incurred by the assessee in relation to income". These words have the same meaning. We may also add here that section 14A contains two more sub-section, sub-section (2) and sub-section (3), which do not find a place in the clause (f). Therefore, insofar as computation of adjusted book profit is concerned, provisions of subsection (2) and sub-section (3) of section 14A cannot be imported into clause (f)." 28. From the perusal of the above reproduced observations of the Delhi bench of the ITAT, it can be gathered that the Delhi bench of the Tribunal has categorically held that the provisions of sub-section (1) of section 14A and clause (f) of the explanation to section 115JA are similar in nature and have the same meaning. However, it has been observed that the other two sub sections of 14A i.e. sub section (2) and sub section (3) do not find a place in clause (f) of the explanation to section 115JA, hence it was held that so far the computation of adjusted book profit is concerned, provisions of sub section (2) and sub section (3) of section 14A cannot be imported into clause (f). With due respect to the finding given by the Delhi bench of the ITAT, we may observe that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r issue in RBK Share Broking (P) Ltd. has observed as under: "6. Be that as it may, we will proceed to decide this ground on merits as well because it involves a pure legal issue as to whether the amount disallowed u/s 14A can be added while computing the book profit u/s 115JB of the Act. The learned AR relied on certain decisions to bring home the point that the amount disallowed u/s 14A cannot be added to net profit for computing `book profit' u/s 115JB. On the other hand, the learned Departmental Representative took us through the language of clause (f) of Explanation (1) to section 115JB, as per which the amount of expenditure relatable to any exempt income is to be added back to the net profit shown in the profit and loss account. At this juncture, it would be relevant to note that `Book profit' u/s 115JB is computed as per Explanation (1) to sub-section (2) of section 115JB. This Explanation provides that "book profit" means net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2) as increased by certain amounts specified under clauses (a) to (i) if debited to the profit and loss account and clause (j) if not cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressly refers to the amount specifically debited to the profit and loss account nor there can be an implication in this regard. What has been contemplated by the provision is the amount of the expenditure `relatable to' the exempt income. Further, the amount disallowable u/s 14A is always part of the expenses specifically debited to the profit and loss account. It is axiomatic that unless any expenditure is incurred and claimed as deduction, there can be no question of any hypothetical disallowance u/s 14A. It, therefore, follows that the amount disallowable u/s 14A is covered under clause(f) of Explanation (1) to section 115JB(2). Our view is fortified by another order dated 29 August, 2012 passed by the Mumbai Bench of the tribunal in the case of Esquire P. Ltd, Mumbai (ITA No.5688/Mum/2011). As the assessment year under consideration is assessment year 2008-2009 in which disallowance u/s 14A is required to be computed as per Rule 8D and further it is this amount which has been disallowed and also added to the amount of net profit for computing `book profit' u/s 115JB, we see no reason to disturb the impugned order on this issue. This ground fails." 29. The view take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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