TMI Blog2015 (1) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... o the file of the AO with a direction that the AO will give opportunity to the assessee to place on record all the relevant facts including its accounts and then examine the computation/calculation made in this regard by the assessee having regard to the accounts of the assessee. - Decided in favour of assessee by way of remand. Deduction u/s. 80IB on the Technology Up-gradation Fund [TUF] subsidy denied - Held that:- After considering the arguments of both the sides, we deem it proper to set aside this particular issue to the file of the AO with the direction to examine whether the reimbursement of interest cost is reimbursement of revenue expenditure debited to the P & L Account of that eligible unit to that extent either in this year or in any earlier years. If it is so then due to reimbursement the expenditure incurred by the assessee is reduced, to the extent the profit of the industrial undertaking will increase. - Decided in favour of assessee by way of remand. Deduction u/s. 35AC disallowed - Held that:- Restore this issue is also restored to the file of the AO with a direction that the assessee will produce necessary evidence regarding the deduction claimed on this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest income of ₹ 22,12,69,000/- taxed under the head Income from other sources instead of adjusting it against the interest expenditure capitalized to Incidental Expenditure during Construction (EDCP) account as both have direct nexus. At the outset, 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 examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied Rule 8D. Even though the CIT(A) observed that the assessee had much more own funds for the purpose of investments, did not delete the interest disallowance but gave only partial relief. 5. We have considered the rival submissions of the learned representatives of the parties. It may 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology Up-gradation Fund [TUF] subsidy received amounting to ₹ 1,87,46,299/-. The assessee claimed that the TUF subsidy was received as part of Technology Up-gradation Fund Scheme, wherein the lending agency reimbursed 5% interest cost to the borrower upon satisfaction of certain conditions. However, 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored to the file of the AO for decision a fresh in accordance with law. 13. Ground no.2 reads as under: On the facts and in the circumstances of the case and in law, the ld CIT(A) has ignored the fact that the addition made by AO on the basis of loose paper impounded during the course of survey and also Mr. Mohammad Yakub Saiyed had accepted that, out of the total contract value, he had paid back ₹ 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 ₹ 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 discusse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. We have heard the parties and have gone through the material available on record. The ld. CIT(A) after going through the evidences on file has held that the addition on this account was not sustainable as all the payments were made through account payee cheques and were duly reflected in the books of accounts. He however has rightly directed to reduce the amount of ₹ 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 actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in relation to income which does not form part of the total income under this Act. Since we are dealing with the issue of expenditure relating to dividend income, a matter falling under Chapter III, it becomes clear on perusal of these two provisions that they are similar in nature. Clause (f) uses the words expenditure relatable to any income , while section 14A uses the words expenditure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When we read the provisions of section 14A along with section 115JB, it becomes clear that the expenditure relatable to exempt income as provided under sub section (1) of section 14A is required to be added back while computing book profit under section 115JB. We do not find any confliction in the above said two provisions of the Act. The Mumbai bench of the Tribunal while dealing with the similar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses disallowed cannot be traced to the profit and loss account and hence it cannot be covered within the mischief of clause (f) of the Explanation. We fail to find any logic in this submission because of the clear language of the Explanation 1, which provides in unequivocal terms that the amount of expenditure `relatable to' the exempt income shall be added back. Neither the language of clause (f) 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered and decided by the Tribunal in the assessee s own case for A.Y. 2006-07 (supra). We find that the Tribunal has restored the matter to the file of the AO observing as under:- 18. Grounds No. 14 15 are additional grounds raised by the assessee that the amount received under TUF scheme is capital in nature and not chargeable to tax. The facts of the TUF scheme were stated by the AO in the order and accordingly there is no dispute with reference to applicability of TUF scheme. The assessee received, as per its statement, an amount of ₹ 45 crores but in the ground it is stated that the amount of subsidy of ₹ 4.93 crores is capital in nature. However, the ground is with reference to amount of ₹ 4.93 crores which is to be considered as capital in nature as per the submissions of the assessee. Since this issue was not examined by the AO at all, we admit the additional ground and restore the matter to the file of the AO to examine the claim afresh keeping in mind the principles laid down by the Hon'ble Supreme Court on the issue of subsidy and also other case laws. Also to be kept in mind the issue in grounds 12 and 13 above where assessee claimed deduct ..... 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