TMI Blog2015 (1) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... in the profit and loss account. The AO to ear mark the expenses which can be attributable for earning taxable as well as tax free income. The expenditure incurred exclusively for business activity cannot be included in such attributable expenses for the purpose of disallowance u/s.14A. - Decided partly in favour of assessee for statistical purposes. Taxability of advance licence/duty free replenishment certificate benefit as well as taxability of pass book benefit receivable - CIT(A) deleted the addition - Held that:- An identical issue has been decided by the Hon’ble Supreme Court in case of the assessee for the assessment year 2001- 02 in CIT Versus M/s Excel Industries Ltd. and Mafatlal Industries P. Ltd. [2013 (10) TMI 324 - SUPREME COURT] that it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. - Decided against revenue. - ITA No. 8278/Mum/2011, ITA No. 1067/Mum/2012 - - - Dated:- 2-1-2015 - Shri Vijay Pal Rao, JM And Shri B. R. Baskaran, AM,JJ. For the Appellant : Shri Neilphilip (DR) For the Respondent : Shri K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led for u/s.14A. The AO did not accept the contention of the assessee and held that the rule 8D of I.T. Rules is applicable for the year under consideration and accordingly worked out the disallowance of ₹ 61,51,000/-The assessee challenged the action of the AO before the CIT(A). The CIT(A) confirmed the disallowance made by the AO on the ground that it is to be computed as per rule 8D. 4. Before us, Ld. AR of the assessee has submitted that the investments held by the assessee are old investment, and made from own funds. Therefore, no interest expenditure was incurred for investment in question. The Ld.AR has referred the details of time period when investments were made and submitted that most of the investments are very old even made more than 10 years back. He has further contended that shares in Excel Crop Care Limited have been received as a result of demerger of Excel Industries Ltd. Hence, the investment in shares Excel Crop Care Ltd. was not made out of borrowed funds and accordingly, no expenditure on interest can be attributed to such investment. He has pointed out that the income from shares of Saraswat Co-operative Bank Limited is not tax free income, hence su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses. There is no dispute regarding the direct expenditure which is only ₹ 835/-. The dispute before us is regarding indirect expenditure on account of interest expenses as well as administrative and general managerial expenses. During the year under consideration assessee has shown 7 investments details which are given by the Assessing Officer as under; Sr. No. Name of the Company No. of Shares Amount of dividend (Rs.) Investment (Rs.in lacs) 1. Bank of India 35900 53850 16.16 2. Punjab Chemicals Crop Protection Limited 584977 1462442 309.00 3. Transmetal Limited 888750 1333125 177.75 4. Excel Crop Care Limited 100000 375000 0.40 4. Saraswat Co-op. Bank Ltd. 2500 4500 0.25 6. TIL Limited 4285 12855 1.53 7. Transpek Silox 1067450 4803525 286.08 Out of the above 7 investment only 2 investment viz the Bank of India and TIL Limited are non-group concern. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erification and examination at the level of the AO. Accordingly, AO is directed to verify and decided this issue as per law. As regards the administrative expenses the assessee itself disallowed 10% of the exempt income without applying rule 8D. For the year under consideration the computation of disallowance shall be as per the formula provide under rule 8D and not on the basis of estimation. As we have already directed the AO that the investment in the subsidiary and not yielding taxable income shall be excluded from the average investment therefore, the disallowance on account of administrative expenses shall be computed accordingly. It is made clear that disallowance computed under rule 8D shall not be more than the actual expenditure attributable for earning the tax free income and debited in the profit and loss account. The AO to ear mark the expenses which can be attributable for earning taxable as well as tax free income. The expenditure incurred exclusively for business activity cannot be included in such attributable expenses for the purpose of disallowance u/s.14A. Hence, this issue is partly allowed for statistical purposes. 8. Ground no.2 regarding advance licence b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 36,63,053/- made by the A.O. on account of advance license / duty free replenishment certificate (DFRC)/EFIA benefit receivable by holding that the Hon'ble Tribunal has decided the issue in favour of the appellant in earlier years in assessee's own case. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of ₹ 96,16,892/- on account of pass book benefit receivable by holding that the Hon'ble Tribunal has decided the issue in favour of the appellant in earlier years in assessee's own case. 3. On the facts and in the circumstances of the case and in law, the CIT(A) was justified in deleting the reversal of advance license obligation amounting to ₹ 11,00,942/- by holding that the Hon'ble Tribunal has decided the issue in favour of the appellant in earlier years in assessee's own case. 12. Ground No.1 2 regarding taxability of advance licence/duty free replenishment certificate benefit as well as taxability of pass book benefit receivable. 13. We have heard Ld. DR as well as Ld. AR and considered relevant material on record. It was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been derived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 32. For the aforesaid reasons, we dismiss the civil appeals with no order as to costs, but with the hope that the Revenue implements its litigation policy a little more practically and a little more seriously. This issue is now settled by the Hon ble Supreme Court in assessee s own case. Accordingly ground no.1 2 of the Revenue s appeal are dismissed. 14. Ground no.3 regarding taxability of advance license obligation reversed. 15. We have heard the Ld. AR as well as Ld. DR and considered relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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