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TMI Blog2015 (12) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008, amounts transferred to Revenue and other reserves from the profits for the relevant year amounted to Rs. 651,05 Cr and the same was maintained thereafter without being withdrawn and hence the compliance of condition mentioned in sec 36(1)(viii) has been fulfilled. The Ld CIT(A) failed to appreciate that the requirement to transfer to a special reserve is only an act of making an accounting entry which has been duly complied with and further the amount so transferred have been maintained thereafter and merely because the reserve was not christen as special reserve deduction otherwise allowable ought not to have been disallowed. 2.1 Without prejudice to above, the Ld CIT(A) failed to appreciate that in the financial year 2008-09 following the current financial year 2007-08 the appellant had as a matter of abundant caution transferred a sum of Rs. 200 Crores from profits to reserve to be maintained as a special reserve and hence based on the decision of ITAT Delhi in the case of Power Finance Corporation Ltd -( 2008-TIOL-475-ITAT-DEL ) the claim of the appellant should have been allowed. 3.1 The Ld CIT(A) erred in confirming the disallowance of provision towards liability ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had only transferred the amount towards the general reserve. Aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). 4. After considering the submissions of the assessee, the Ld. CIT(A) observed that there was no dispute regarding the eligibility of the assessee to claim deduction under section 36(1)(viii) of the Act. The assessee had claimed that it had transferred Rs. 651.05 crores to revenue and other reserves during the Financial Year 2007-08 relevant to A.Y. 2008-09 i.e. the year under consideration and claimed that the transfer of profit to such general reserves fulfill the condition of transfer to special reserve as per the provisions of section 36(1)(viii) of the Act. It was also claimed that in the subsequent period i.e. on 31.03.09, the assessee had transferred more than the required amount i.e. Rs. 200 crores to the special reserve created as per the requirement of section 36(1)(viii) of the Act. The Ld. CIT(A), however, observed that as per the relevant provisions, the assessee was required to transfer the 20% of the profit in the special reserve during the year itself. However, the assessee had transferred the required amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has transferred the amount of Rs. 200 crores in the special reserve created during the subsequent year, out of the general reserve created during the year under consideration, whereas the claim of deduction has been made in respect of the amount of Rs. 161 crores only. The issue under consideration is thus squarely covered by the decision of the co-ordinate Delhi bench of the Tribunal (supra). We, therefore, direct the AO to allow the claim for the deduction to the assessee in the light of the decision of the co-ordinate bench of the Delhi Tribunal in the case of "M/s. Power Finance Corporation Ltd. vs. JCIT" (supra). Ground Nos.3.1 & 3.2 6. Ground Nos.3.1 & 3.2 relate to the disallowance of provision towards liability arising on account of wage revision payable to employees. According to the assessee the provision made for excess payment of wages payable to the employees was towards the ascertained liability. It was submitted that after every five years, charges are revised as per the policy and agreement reached with the unions. Therefore, the wage revision for the year under consideration was must and certain. However, the negotiation was going on with the union and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest disallowance is required to be made in relation to the investments made by the assessee out of his own funds. In relation to the disallowance of administrative expenses under rule 8D(2)(iii), the Ld. A.R. has submitted that the AO had included the investments which were taken as stock in trade in the accounts while computing the disallowance under rule 8D(2)(iii) of the Act. He had relied upon the decision of the Hon'ble Bombay High Court in the case of "CIT vs. India Advantage Securities Ltd." in ITA No.1131 of 2013 vide order dated 17.03.2015 wherein the Hon'ble Bombay High Court has upheld the finding of the Tribunal holding that while making the disallowance under rule 8D, the shares held as stock in trade should not be considered, only the shares taken as investment in the account be considered for computation of disallowance of expenditure under rule 8D. The Ld. A.R. has submitted that the dividend earned in respect of shares held in stock in trade is incidental to the business of the assessee and the investment in the shares held as stock in trade was not made for earning of exempt income. 9. We have considered the rival submissions. It may be observed that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that investments would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investment. Similar view has been taken in the case of "CIT vs. HDFC Bank Ltd." in ITA No.330 of 2012 decided on 23rd July 2014 by the Hon'ble Bombay High Court. 12. Further, we find that this Tribunal in the case of "DCIT vs. India Advantage Securities Ltd." in ITA No.6711/M/2011 vide order dated 14.09.2012 while relying upon the decision of the Hon'ble Kerala High Court in the case of "CIT vs. Smt. Leena Ramachandran (339 ITR 296) and further on the decision of the Hon'ble High Court of Karnataka in the case of "CCL Ltd. vs. JCIT" 250 CTR 291 has held that disallowance under section 14A in relation to dividend received from trading shares cannot be made. The said finding of the Tribunal has been upheld by the Hon'ble Jurisdictional Bombay High Court in the case of "CIT vs. India Advantage Securities Ltd." in ITA No.1131 of 2013 vide order dated 17.03.2015 (supra). The said decision holds binding precedent upon this Tribunal. In view of our above discussion of the matter, we direct the AO to decide this issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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