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M/s. Beach Minerals Company Pvt Ltd. Versus The Assistant Commissioner of Income Tax, Company Circle I (2) , Chennai

2015 (8) TMI 1031 - ITAT CHENNAI

Disallowance of expenses claimed under head Mining & Production/Processing - Held that:- As nothing was produced by the Ld. A.R to substantiate the claim of these expenses, therefore we have no other option but to confirm the addition. Accordingly, we hereby confirm the disallowance of expenditures made by the Ld. Assessing Officer towards mining and production/processing - Decided against assessee.

Disallowance of the proportionate interest due to interest free loan advanced to siste .....

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ts made by the assessee company for ₹ 71,55,33,570/- aggregating to ₹ 77,15,79,467/- has flowed from the assessee’s own fund of ₹ 97.72 crores which does not bear any cost. Therefore, we hereby delete the addition made for ₹ 1,03,98,313/- made by the Ld.A.O toward the proportionate interest attributable to the interest free loan advanced by the assessee to its sister concern because the funds advanced by the assessee does not bear any cost as it is assessee’s own funds. - .....

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the assessee and no cost can be attributed for the management of such funds. Therefore, we hereby delete the addition made by the Ld. Assessing Officer invoking the provisions of section 14A of the Act. - Decided in favour of assessee.

Disallowance of depreciation - assessee had only submitted the depreciation schedule computed under the Companies Act and not under the Income Tax Act - Held that:- it is pertinent to mention that the Ld. Assessing Officer ought to have given the benefi .....

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the Income Tax Act before the Ld.Assessing Officer.- Decided in favour of assessee for statistical purposes.

Computation of book profit U/s.115JB - MAT computation - giving effect to the disallowance of expenditure made invoking the provisions of the Section-14A and also the disallowance of expenditure under the normal provisions of the Act - Held that:- while computing the “Book Profit” of the company under the provisions of section 115JB of the Act; any disallowance made under the n .....

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le for the benefit of Section-10B of the Act, therefore as discussed herein above we hereby hold that the assessee will be entitled for the benefit of Section 10B of the Act even for the increase in profit arising out of any disallowances of expenditure made by the Revenue. However we also make it clear that while computing the profit of the 100% export orientated Undertaking for the purpose of deduction under Section 10B of the Act, any disallowance based on any fiction of the provisions of the .....

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r of assessee.

Disallowance u/s 40(a)(ia) - non-deduction of tax towards commission paid to foreign agents outside India in foreign currency and for services rendered outside India - CIT(A) deleted addition - Held that:- This issue is squarely covered by the decision of CIT Vs. Fazian Shoes Pvt. Ltd. reported in (2014 (8) TMI 170 - MADRAS HIGH COURT ) wherein it is held that “on a reading of Section.9(1)9vii), commission paid by the assessee to the nonresident agents would not come un .....

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ligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non resident agent did not provide technical services for the purpose of running of the business of the assessee in India. Therefore, the commission paid to the nonresident agents would not fall within the definition of ”fees for technical services” and the assessee was not liable to deduct tax at source on payment of commis .....

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e Learned Commissioner of Income Tax (A)-I, Chennai, dated 26.05.2014 in ITA No.342/13-14/A-1 passed under section 143(3) read with section 250 of the Act. 2.1 The Assessee has raised Six grounds in its appeal, however, the cruxes of the issues are concised as follows:- 1. The Ld. CIT (A) erred in upholding the order of the Ld. Assessing Officer who had disallowed expenses claimed under the head mining, production and processing for want of evidence. 2. The Ld. CIT (A) erred in upholding the ord .....

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₹ 71,55,33,570/- for earning exempt income. 4. The Ld. CIT (A) erred in upholding the order of the Ld. Assessing Officer who had disallowed the claim of depreciation of ₹ 10,64,87,188/- being depreciation worked out under Companies Act since the assessee had not submitted the depreciation schedule as per the Income Tax Act. 5.(a) The Ld. CIT (A) erred in upholding the order of the Ld. Assessing Officer who had enhanced the book profit for computing the tax payable U/s.115JB of the A .....

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8,313/-, Disallowance of expenditure for earning exempt income U/s.14A of ₹ 3,11,34,630/-, & Disallowance of depreciation ₹ 10,64,87,188/-. 2.2 The Revenue has raised three grounds in its appeal, however, the crux of the issues is concised as follows:- The Ld. CIT (A) had erred in deleting the addition made by the Ld. Assessing Officer being payment made towards sales commission for ₹ 15,72,434/- (Payment made to M/s.Titanic Sands consulting ₹ 9,73,594 & Global Co .....

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ny and survey was also conducted in the assessee s premises on 23.03.2010. Thereafter, the assessment was completed on 28.03.2013 U/s.143 (3) of the Act wherein the Ld. Assessing Officer made certain additions. Now the assessee is in appeal before us against the order of the Ld. CIT (A) who had confirmed the additions made by the Ld. Assessing Officer. 4.1. Ground No.1 - Disallowance of expenses claimed under head Mining, ₹ 1,18,14,359/- & Production/Processing ₹ 4,12,843/-. Duri .....

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d. Assessing Officer. Before us also, nothing was produced by the Ld. A.R to substantiate the claim of these expenses, therefore we have no other option but to confirm the addition. Accordingly, we hereby confirm the disallowance of expenditures made by the Ld. Assessing Officer towards mining and production/processing of ₹ 1,18,14,359/- & ₹ 4,12,843/- respectively. Thus, the ground No.1 of the assessee is dismissed. 5.1. Ground No. 2 - Disallowance of the proportionate interest .....

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section 36(1)(iii) of the Act. The Ld. CIT (A) confirmed the order of the Ld. Assessing Officer by agreeing to his view. At the outset we find that the addition made by the Ld. Assessing Officer is not sustainable because from the order of the Ld. CIT (A) it is clearly revealed in para 6.2.1 that the assessee had ₹ 87.72 crores of Reserves & surplus and equity share capital of ₹ 10 crores aggregating to ₹ 97.72 crores as on 31.03.2010 being the assessee s own interest free .....

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he assessee to its sister concern because the funds advanced by the assessee does not bear any cost as it is assessee s own funds. This ground raised by the assessee is allowed in its favour. 6.1. Ground No.3 - Disallowance of expenditure by invoking the provisions of section 14A of the Act for ₹ 3,11,34,630/- since the assessee had made investments of ₹ 71,55,33,570/- for earning exempt income. At the outset, we find that there is no merit for the Revenue to make addition of ₹ .....

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g the provisions of section 14A of the Act. This ground raised by the assessee is allowed in its favour. 7.1. Ground No.4 - Disallowance of depreciation of ₹ 10,64,87,188/- since the assessee had only submitted the depreciation schedule computed under the Companies Act and not under the Income Tax Act. The Ld. Assessing Officer had disallowed the entire claim of the assessee towards depreciation of ₹ 10,64,87,188/- because the assessee has not submitted before him the schedule of dep .....

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the assessee as provided under the Income Tax Act instead of disallowing the entire claim of depreciation because the details of the items on which the depreciation is claimed is before him and normally rate of depreciation allowable as per the Income Tax Act is higher than the rate of depreciation prescribed under the Companies Act. Further to simplify the proceedings of the Revenue, we hereby direct the assessee also to furnish the schedule of depreciation computed as per the Income Tax Act b .....

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ions of section 115JB of the Act made additions to the book profit with respect to the disallowance made U/s.14A of the Act read with Rules-8D of the Income Tax Rules. On appeal, the Ld. CIT (A) citing the provisions of clause (f) of Explanation-1 to Section-115JB, confirmed the order of the Ld. Assessing Officer. The relevant portion of the order of the Ld. CIT (A) is reproduced herein below for reference:- 10.2 I have gone through the facts and circumstances of the case. The Assessing Officer .....

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n in the P&L A/c. Reliance is placed on the latest decision of the ITAT Mumbai in the case of Dabur India Ltd., 37 taxmann.com 289. Reliance is also placed on the latest decision of the ITAT Mumbai in the case of RBK Share Broking P. Ltd in ITA No.6678 & 7546/Mum/2011 dated 24.7.2013 wherein it was held that the amount disallowable U/s.14A can be added back while computing book profit under Explanation-1 to s. 115JB(para 6). Respectfully following the above decisions, I uphold the additi .....

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(f) the amount or amounts of expenditure relatable to any income to which [Section-10 (other than the provisions contained in clause (38) thereof] or section 11 or section 12 apply; (g) To (j) - From the above it is apparent that the aforesaid provision of the Act does not refer to any disallowance made U/s.14A of the Act while arriving at the Book Profit for the purpose of Section-115JB(2) of the Act. Further Section 14A of the Act is a provision with fiction disallowing the deemed expenditure .....

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d the addition made U/s.14A, increasing the book profit will not arise. Further the decision of Hon ble Apex Court cited by the assessee in the case M/s.Apollo Tyres Ltd. Vs. CIT reported in 255 ITR 273 is also squarely applicable to the case of the assessee. The gist of the same is reproduced herein below for reference:- The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, has only the power of examining whether the books of accoun .....

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of Parts II and III of Schedule VI to the Companies Act in section 115J was made for the limited purpose of empowering the Assessing Officer to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provided by that Act and the same to be scrutinised an .....

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decision it is clear that while computing the Book Profit of the company under the provisions of section 115JB of the Act; any disallowance made under the normal provisions of the Act also cannot be given effect to for arriving at the Book Profit for the purpose of Section 115JB of the Act. Accordingly, this ground raised by the assessee is allowed in its favour. 8.1.2 Ground No.5(b) - Not giving the benefit of exemption under Section-10B of the Act for the increase in profit arising out of the .....

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consecutive years beginning with the assessment year in which the undertaking beings to manufacture or produce articles or things or computer software as the case may be from the total income of the assessee. Therefore, even if there are some disallowances of expenditure under the normal provisions of the Act due to which the profit of the export undertaking increases, the assessee will be entitled for the benefit of Section-10B on the entire profit arrived by the Ld.A.O because there are no pr .....

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computing the profit of the 100% export orientated Undertaking for the purpose of deduction under Section 10B of the Act, any disallowance based on any fiction of the provisions of the Act like Section 40(a)(ia) of the Act etc., cannot be given effect because Section 10B is also a provision with fiction and a provision with fiction cannot be superimposed on any other provision with fiction. However in this case this observation will not be relevant because we have held in the following paragrap .....

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India. During the course of assessment proceedings, it was noticed by the Ld. Assessing Officer that the assessee has paid sales commission of ₹ 9,73,594/-, and ₹ 5,98,840/- to M/s.Titanic Sand Consultations and M/s.Global Commodity trading respectively. Since the assessee had not deducted tax at source on the aforesaid amount paid to non-residents, invoking the provisions of section 40(a)(ia) of the Act, the Ld. Assessing Officer added the aggregate amount of ₹ 15,72,434/- to .....

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the nature of commission and other payments. It is no way falling under the categories of interest, royalty and technical fee to attract charging section as per the amended provisions of section 9 The Assessing Officer has failed to establish how commission payment to non-resident will attract disallowance U/s.40(a)(ia). Therefore, I am of the view that the decision in the case GE India Technology is squarely applicable (327 ITR 456)(SC) which says that the TDS provisions U/s.195 are not applic .....

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