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2015 (4) TMI 7 - ITAT DELHI

2015 (4) TMI 7 - ITAT DELHI - TMI - Contribution towards provident fund - CIT(A) deleted the addition - Held that:-No contrary evidence has been placed by the Revenue except half heated arguments devoid of facts, we find no infirmity in the impugned order where considering the past history the AO rejected the assessee’s claim and the CIT(A), considering the facts on record relying upon the High Court’s decision upto which stage the issue was settled allowed the claim of the assessee by rejecting .....

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aim of the assessee with regard to the source of investment. To reach at the conclusion that he was not satisfied with the claim of assessee with regard to expenses incurred to earn exempted income, then only he can invoke Rule 8D for working out the disallowance. Therefore, in our considered view, this issue requires a relook at the level of Assessing Officer. The same is restored to the file of the Assessing Officer for deciding de novo after providing an opportunity of being heard to the asse .....

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th these disallowances after providing an opportunity of being heard to the assessee and considering the legal position on these issues. - Decided in favour of revenue for statistical purposes.

Valuation of closing stock of sugar - CIT(A) deleted the addition - Held that:- The assessee is valuing closing stock on cost or net realizable value whichever is lower since 1993. The issue was contested in Assessment Year 1993-94 up to the Hon'ble Delhi High Court wherein the contention o .....

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Taneja, Adv. & Sh.Sumit Jain, CA ORDER Per Diva Singh, JM These are cross appeals filed by the assessee and the Revenue against the order dated 25.03.2013 of CIT(A)-XV, New Delhi pertaining to 2009-10 assessment year. The Revenue before us has come up in the following grounds:- 1. On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 29,14,126/- on account of contribution towards provident fund. 2. On the facts and circumstance of .....

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(A)-XV, being contrary to the facts on record and the settled position of law, be set aside and that of the Assessing Officer be restored. 2. The assessee s grounds in the CO filed read as under:- 1(a). That the learned CIT(A) erred, both on facts and in law in sustaining a disallowance of ₹ 21,15,126/- towards interest u/s 14A of Income tax Act read with Rule 8D of the Income Tax Rules. 1(b) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in applying Rule 8D in a .....

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had been made out of borrowed funds in total disregard of the facts and evidences on record. 1(e) That the ld. CIT(A) has erred in holding that the appellant has not raised any objection on invoking of Rule8D. 2. Tha the ld. CIT(A) has erred in sustaining disallowance of ₹ 11,321/- towards interest on late payment of TDS without appreciating that it an allowable expenditure. 3. That the appellant craves leave to add, amend, alter any grounds of appeal of appeal. 2.1. The ld. AR has stated .....

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ent of ₹ 29, 14, 126/- From the records, it is observed that the Provident Fund Trust of the assessee company namely "INDIAN SUGAR GENERAL INDUSTRY EXPORT IMPORT CORPORATION L TO DELHI PROVIDENT FUND" has not invested the funds as per prescribed rules during AY 2003-04 . Since the PF Trust has not invested the funds as per Rule 67 of the Income Tax Rules, it was not entitled to be considered as "Recognized Provident Fund Trust" In view of the past history, the employers .....

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2003-04 assessment year decided the issue in the following manner:- 5.5 Regarding the Ground No. 5 relating the disallowance out of employees' contribution to Provident Fund, the AO was of the view that since registered PF Trust of the Appellant has not invested the funds as per Rule 67 of the IT Rules, it was not entitled to be considered as recognized Provident Fund Trust. The fact that the PF Trust of the Appellant has been approved as the registered Trust by the competent authority, i.e .....

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the Revenue is in appeal before the Tribunal. 5. Ld. Sr. DR inviting attention to the proviso to section 3 para (A) of the Fourth Schedule of the Income Tax Act, 1961 submitted that the assessee has not filed a fresh application before the concerned authority stating that it satisfies the conditions set out in clause (ea) of Rule 4. Accordingly it was his submission that following the past history the claim cannot be allowed. Ld. AR on the other hand inviting attention to the assessment order an .....

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09 assessment year. Referring to the record it was pointed out that the issue was taken up by the Revenue and the order of the Tribunal was specifically challenged. Referring to the copy of the judgement dated 15.02.2011 filed it was pointed out that the Hon ble High Court decided the issue in assessee s favour and cognizance of this judgement has been taken note of by the CIT(A). Accordingly on facts it was his submission the issue is fully covered in assessee s favour. 5.1. In support of the i .....

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hould not be allowed to expand the scope and should confine its arguments to the grounds raised and the facts on record and in the absence of any facts to the contrary the arguments should not be allowed to be advanced frivolously. 6. We have heard the rival submissions and perused the material available on record. As would be seen from the reproduction of the relevant extract from the assessment order the AO has specifically made out a case that the investment in 2003-04 assessment year was not .....

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e Tribunal was correct in law and on facts in deleting the addition made by Assessing Officer of ₹ 15,22,234/- on account of disallowance of contribution to employees provident fund? 6.1. Considering the facts the Hon ble High Court decide the issue in favour of the assessee on the following reasoning:- In so far as question no.1 is concerned, the addition made by the Assessing Officer on account of contribution to the Employees Provident Fund was not recognized. The Tribunal reversed this .....

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nt against the aforesaid order. On this basis it is clear that no question of law arises in so far as proposed question no.1 is concerned. 6.2. In view of the above where admittedly no contrary evidence has been placed by the Revenue except half heated arguments devoid of facts, we find no infirmity in the impugned order where considering the past history the AO rejected the assessee s claim and the CIT(A), considering the facts on record relying upon the High Court s decision upto which stage t .....

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that the assessee had shown income of ₹ 2,12,35,847/- by way of interest on UTI Bonds and ₹ 1,33,219/- as dividend on Mutual Funds which were claimed to be exempted, the AO require the assessee to explain why disallowance u/s 14A may not be made. In reply the assessee is found to have stated that the assessee had huge surplus and interest free funds available at its disposal which were more than the investment made and interest expenditure was stated to be incurred in relation to bu .....

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nd restricted the disallowance to ₹ 48,31,968/- and considering the fact that the assessee had itself made disallowance of ₹ 27,60,841/- computed the disallowance of ₹ 21,15,126/-. Aggrieved by this both the assessee and the Revenue are in appeal before the Tribunal whereas the Ld. AR inviting attention to the order of the Co-ordinate Bench in 2008-09 assessment year in ITA No.-2103/Del/2012 & ITA No.-1671/Del/2012 dated 15.09.2013 submitted that the Co-ordinate Bench has r .....

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7 to 7.1 it was submitted that he would have no objection if for computational purposes in judicial propriety the issue is restored to the AO with the direction to apply Rule 8D. 9. We have heard the rival submissions and perused the material available on record. On a consideration of the submission of the parties, we hold that the issue necessarily has to be restored in judicial propriety as the CIT(A) in the impugned order specifically at page 20 & 21 takes note of the fact that certain s .....

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ciding the appeal for AY 2008-09, had held that, the following investments worth ₹ 35 crores were made in FY 2007-08 through mixed funds:- Date of Investment as per Bank Statement Amount of Investment (In Rs.) Investment Name 21.6.2007 14,00,00,000 Birla Mutual Fund 12.07.2007 14,00,00,000 J M Mutual Fund 20.07.2007 1,00,00,000 Optimix Mutual Fund 31.7.2007 3,00,00,000 (Out of 6.25 crores invested) Optimix Mutual Fund 30.10.2007 2,00,00,000 SBI Mutual Fund 19.12.2007 1,00,00,000 (Out of 2 .....

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nvestments of ₹ 10.75 crores alone are being taken, since use of mixed funds could be held only to that extent. The remaining investments made during the year, taxable or tax exempt, were made out of redemption proceeds of investments made in earlier years and thus held to be not from interest bearing funds. 9.2. It is a matter of record that the issue in 2008-09 Assessment year has been restored to the AO by the Co-ordinate Bench with following direction:- 7. We have heard both the sides .....

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s account was with respect to export and import of sugar alone and it was not at all related to any investment activity and it was claimed that no interest was incurred towards the investment activity. The assessee has also relied on the decision of Hon'ble Delhi High Court in the case of assessee s own case for Assessment Year 2001-02 wherein the ITAT s view that no interest has been incurred towards investment activity has been accrued. On this, we hold that the Rule 8D is applicable for A .....

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the Assessing Officers were having discretion to determine expenditure on a reasonable and acceptable method of apportionment of expenditure between the exempt taxable income and exempt income. Now, the legislature has provided in Rules the method of apportionment of expenditure between the exempt income and taxable income, the Assessing Officer as well as the other statutory authorities under the Act are required to determine the amount of expenditure in relation to exempt income according to .....

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TI Bonds and ₹ 55,23,351 as dividend on mutual funds which was claimed as exempt under Section 10 of the Income Tax Act. Vide Questionnaire dated 31/8/2010, the assessee was required to explain why disallowance u/s 14A may not be made. 10. The assessee has mainly submitted that the assessee has hugs surplus and interest free funds available at its disposal which are more than the investments made by the assessee. It has also been submitted by the assessee that interest expenditure is incur .....

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nditure 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 formula, A: Amount of Interest Expenditure other than included In clause (I) B: Average 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 first and last date of the assessment year. C: Average Total Assets as appearing in the balance sheet .....

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, as appearing in the balance sheet of the assessee, on 1/4/2007 and 31/3/2008 Average Investments as calculated above : 250,20,59,294 0.5% X 250,20,59,294= 1,25,10,296 Total 5,11,00,925 The total disallowance on this account comes to ₹ 5,11,00,925/-. The same is therefore, being disallowed and added to the total income. From the submissions of assessee and from the orders of the revenue authorities, we find that the Assessing Officer has not considered all relevant facts on record and has .....

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f being heard to the assessee. 7.1 Similarly, in the case of disallowance with regard to the administrative and other expenses being 0.5% of average value of investment, the assessee s claim is that average value of investment taken by the Assessing Officer was ₹ 2,50,20,59,294/- instead of ₹ 41,88,44,725/- which is only 16.94% of the average value of investment taken by the Assessing Officer. Therefore, for this aspect also, we set aside the issue to the file of the Assessing Office .....

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m it appropriate to remand the issue back to the AO to first set out his satisfaction addressing the disallowance computed by the assessee and thereafter pass a speaking order in the light of the direction given by the ITAT in 2008-09 assessment year applying Rule 8D as per law. Needless to say that the assessee shall be given a reasonable opportunity of being heard. Accordingly Ground No.- 2 of the Revenue and Ground No.1 to 1(e) of the assessee are restored back to the file of the AO. 10. The .....

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e has submitted year wise position of closing stock of sugar as follows: AY Qty Rate Method Amount adopted by assessee being lower of cost or net realizable value Amount at cost Difference 2009-10 11962 White 14371 Realization 17,12,59,954 20,71,93,802 3,59,33,848 Total 3,59,33,848 Further, the assessee has submitted that the value of closing stock has been taken as per cost or net realizable value whichever is lower. However, the valuation of closing stock on the basis of cost price amount to & .....

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ve, the difference of ₹ 3,59,33,848/- is disallowed and added back to the total income of the assessee company. Penalty Proceedings u/s 271(1)(c ) of the I.T. Act are initiated on this point for furnishing inaccurate particulars of income. (emphasis in the present proceedings) 11. In appeal before the First Appellate Authority the issue it is seen is decided in assessee s favour in the following manner:- 5.7. Regarding Ground No.7 of the Appeal relating to valuation of closing stock of sug .....

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uch change took place in respect of previous year relating to AY 1993-94, in respect of which the hon'ble ITAT on the facts of the case held that such change was bona fide and is being consistently followed in the subsequent years. The Appeal of the Department in this regard was rejected by the hon'ble Delhi High Court for AY 1993-94 to AY 2003-04. Keeping in view the above, disallowance was not called for and accordingly the addition made in this regard is deleted. 12. The ld.AR has con .....

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see had made the following prayer before the CIT(A) as such it should be verified whether it has been accepted or not:- In the alternative, without prejudice to the aforesaid, it was submitted that a direction may be given to the AO to recomputed the Opening Stock for AY 2009-10 as per the valuation adopted by the department in AY 2008-09. 12.1. The Ld. AR submitted that this was only a without prejudice prayer i.e. the alternate prayer in the eventuality the assessee did not succeed before the .....

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s cognizance of the fact that the AO made the addition as the issue was before the Hon ble High Court. In the light of this fact considering the finding of the CIT(A) which has also been extracted in the earlier part of this order as the Hon ble High Court s decision was available by then which view the record shows was followed by the Coordinate Bench in 2008-09 assessment year. We find the arguments of the Ld. Sr. DR as not maintainable on facts. For ready-reference the relevant extract from t .....

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tated that the Hon'ble ITAT in AY 1993-94 has decided this issue in favour of the appellant. The issue is that the appellant valued the closing stock on cost or net realizable value whichever is lower. This method of valuation of closing stock was followed by the appellant in Assessment Year 1993-94 and had been accepted by the Tribunal. Since the facts of the case are identical to the facts of earlier years and since the appellant is following the method of valuation consistently on cost or .....

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py of the order of the Hon'ble Delhi High Court in ITA No.645/2005 & Ors. wherein the controversy has been decided in favour of the assessee. The question of law framed by Hon'ble High Court vide order dated 30.01.2012 is as under :- Whether Income Tax Appellate Tribunal was correct in law in deleting the addition of ₹ 3,64,584/- made by the Assessing Officer to the income of assessee on account of under valuation of closing stock by rejecting the change made by the assessee in .....

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