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The Commissioner of Income Tax, Mumbai Versus M/s JSW Energy Ltd.

2015 (5) TMI 823 - BOMBAY HIGH COURT

Disallowance u/s 14A - Tribunal setting aside and restoring back the issue to the file of the AO for denovo adjudication by relying on the judgment of M/s. Godrej & Boyce Mfg. Co. Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Held that:- The tribunal directed that the matter is required to be reconsidered by the assessing officer. He shall examine the relevant accounts, the nature of term loans and availability of interest free funds with the assessee. After examining all these details and account .....

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panies, then, the assessing officer must take those accounts into consideration. If the assessee has not debited any actual expenditure relating to the earning of the exempt income, therefore, the provisions of section 14A cannot be imported into the computation of book profit under section 115JB of the Income Tax Act, 1961. Therefore, even clause (f) of Explanation to section 115JB which refers to those amounts which are debited to the Profit and Loss account, alone can be added to the book pro .....

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The facts and circumstances being identical, we do not think that the appeal should be entertained on question nos.1 and 3 above - Decided against revenue.

Interest under section 234B - Held that:- The liability to pay interest would only arise on default and is really in the nature of a quasi punishment. The liability to tax although credited retrospectively could not entail the punishment of payment of interest with retrospective effect.We do not think that the assessee before us ca .....

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ed:- 30-4-2015 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Appellant : Mr Tejveer Singh For the Respondents : Mr Porus Kaka, Sr Counsel along with Mr Manish Kanth and Mr Melvyn Fernandes JUDGMENT P. C. 1. We have heard Mr.Tejveer Singh in support of this appeal. This appeal by the revenue challenges the order passed on 22nd February, 2013 by the Income Tax, Appellate Tribunal, Bench at Mumbai in Income Tax Appeal No.244 of 2010. The assessment year is 2006-07. The following three questions .....

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the case and in law, the Hon'ble Tribunal is right in law to hold that no interest u/s.234B can be levied consequent to inclusion of various items while computing the book profit as per in the Explanation to section 115JB which has been brought on the statute by the Finance Act, 2008 with retrospective effect from 01, April 2001 ? (3) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal is right in law in deleting the addition of ₹ 8,94,26,63 .....

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e had earned dividend income of ₹ 6,42,35,165/- from shares in JSW Steels Ltd. The total investment of the assessee company from which the dividend was receivable has been illustrated in the assessment order. However, the assessing officer noted that the total interest expenses were shown by the assessee at ₹ 49,74,06,913/- during the year and investment to the tune of ₹ 154.47 crores made on 29th March, 2005 was directly related to the loans. After referring to the requisite d .....

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under this provision. The assessee submitted detailed explanation as to why interest and other expenditure cannot be disallowed for earning of the dividend income. However, the assessing officer after applying Rule-8D calculated the disallowance of ₹ 8,94,26,131/-. The assessing officer while making MAT calculation under section 115JB has also added the expenditure to the book profit. Aggrieved by this order of the assessment officer, the appeal was preferred to the Commissioner of Income .....

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al deleted addition of ₹ 8,94,26,631 made by the assessing officer under section 14A read with Explanation 1 of section 115JB of the said Act for the purpose of computing book profit under that provision of Income Tax Act, 1961. Therefore, question nos.1 and 3 are substantial questions of law. 6. Mr.Kaka, learned Senior Counsel appearing on behalf of the assessee submitted that very questions were projected and proposed as substantial questions of law in the case of M/s. Essar Teleholdings .....

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r restoration back to the assessing officer. 7. Mr.Tejveer Singh would submit that clause (f) of Explanation (1) to section 115JB of the said Act cannot be lost sight of and the assessing officer must take note of it while reconsidering the issue. Hence the substantial of law would arise for determination and consideration. 8. We have found from reading of the impugned order of the Tribunal that insofar as the first question is concerned, the relevant facts have been referred in paragraphs 2 and .....

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ans and availability of interest free funds with the assessee. After examining all these details and account, and only if some reasonable disallowance can be adopted that should be worked out and in relation to earning of the dividend. The asssesee was also directed to furnish necessary details and working before the assessing officer. 9. However, the tribunal also noted that by way of additional ground the assessee challenged disallowance under section 14A in calculation of book profit under se .....

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profit under section 115JB of the Income Tax Act, 1961. Therefore, even clause (f) of Explanation to section 115JB which refers to those amounts which are debited to the Profit and Loss account, alone can be added to the book profit, cannot apply. Then, the tribunal referred to the order passed in the case of Essar Teleholdings Ltd. (supra). Mr.Kaka, learned Senior Counsel is right that in case of Essar Teleholdings when similar issue was raised this Court did not entertain the appeal and in tha .....

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P. C. 1. We have heard Mr Ahuja, learned counsel appearing on behalf of the Appellant on the questions which have been termed as substantial questions of law. They are formulated in this Memo of Appeal by the Revenue at page 3. They read as under: "(A) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in setting aside and restoring back the issue to the file of AO for de novo adjudication in light of the provisions of Rule 8D ? (B) Whether on the f .....

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adopted after restoration by the Assessing Officer. The Tribunal should not have done this. In such circumstances, the Appeal raises substantial questions of law. We are of the view that the Tribunal had only reiterated in paragraph 8 of the order under challenge delivered on 29th July 2011 the finding on the expenditure as per rule 8D r/w section 14A of the Income Tax Act 1961. In relation to that, the Tribunal held that Rule 8D is not applicable to the A.Y. Under consideration. Hence, applying .....

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e. In these circumstances and when the Assessing Officer is expected to determine the claim afresh and in accordance with law, we do not see any basis for the apprehension and which is voiced by Mr Ahuja. With this additional clarification, the Appeal does not raise any substantial question of law. Appeal is dismissed. No costs. ( B.P. COLABAWALLA J.) (S.C. DHARMADHIKARI J.)" 10. Having held that the matter is sent back to the assessing officer for reconsideration and while working out the .....

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d that in relation to question no.2, the findings require detailed probe by this Court. He submits that the Tribunal was not right in law when it held that no interest under section 234B of the I.T. Act can be levied. Though several items have to be calculated while computing book profit and in terms of explanation to section 115JB of the I.T. Act, that explanation has been brought on the statute book and with retrospective effect from 1st April, 2001, therefore, this calculation of the tribunal .....

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d be recovered wherein advance tax for the assessment year fails to take note of the amendment to the Income Tax Act which is brought in subsequently. When the Parliament stepped into to amend the Act though with retrospective effect but in 2008, then, there is no default in payment of advance tax for the assessment year 2006-07. The computation of income based on which the advance tax was paid was in tune with the law prevailing on the date on which tax was due and payable. Any further addition .....

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it read as under: "4. Substituted for the portion beginning with the words "if any amount referred" and ending with the words "as reduced by -" by the Finance Act, 2008, w.r.e.f. 1.4.2001." Prior to its substitution, read as under: "If any amount referred to in clauses (a) to (g), is debited to the Profit and Loss account, and as reduced by …." 15. The Tribunal in this regard noted rival contentions and the admitted facts. It also relied upon and fo .....

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t, it must be established that the assessee had the liability to pay advance tax as provided under sections 207 and 208 of the I.T. Act within the time prescribed under section 211 of that Act. Noting the rival contentions, the Calcutta High Court proceeded to hold that the last date of relevant financial year was 31st March, 2001 and on that date, admittedly, the appellant before it had no liability to pay any amount of advance tax in accordance with the then law prevailing in the country. Cons .....

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tion (h) to section 115JB were brought in by the Finance Act, 2008 with retrospective effect from 1st April, 2001. The assessee cannot be held to be liable for failing to make a provision for payment of advance tax which was not possible on the last date as per the law then prevailing. Thus, clause (h) which is reproduced above having been brought in with retrospective effect but by Finance Act 2008, the advance tax computation by the assessee for the year 2006-07 cannot be faulted and it cannot .....

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id not broadcast. The Commissioner, however, held against the appellant. The matter was carried before the Commissioner of Income Tax (Appeals) and during pendency of appeal the Finance Act, 2001 was amended by the Finance Act, 2002. The effect of amendment, inter alia, was to make an agent, such as the appellant, before the Supreme Court, liable to pay service tax as broadcaster. 19. The Supreme Court noted that the Appellants' appeal pending before the Commissioner was rejected by him on t .....

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erest. It is in that regard that the Hon'ble Supreme Court held as under: "7. In any event, it is clear from the language of the validation clause, as quoted by us earlier, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well established that while it is permissible for the Legislature to retrospectively legislate, such, retrospectivity is normally not permissible to create an offence retrospectively .....

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