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M/s Wockhardt Hospitals Ltd. Versus Deputy Commissioner of Income Tax – Range 10 (1) , Mumbai

2016 (8) TMI 556 - ITAT MUMBAI

Grant of depreciation - Held that:- We have observed that the assessee company has claimed depreciation on certain assets which were acquired by the assessee company being in the nature of UPS, routers, switches and cables, projector, pipes and racks etc. for which the assessee company is claiming depreciation @ 60%. However, the same was denied by the A.O. The ld. CIT(A) allowed depreciation @ 60% on routers. In our considered view, the assessee company acquired the fixed assets and if the same .....

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ed with a computer, the depreciation is to be allowed @ 60% and for the rest of the items in the list, depreciation @ 15% may be allowed. - Additions made to the book profit computed u/s 115JB of the Act on account of provision for doubtful debts - Held that:- We have observed that Income Tax Act,1961 was amended by Finance Act, 2004 w.e.f 1-4-2001 by substitution of clause (i) of Explanation1 to Section 115JB of the Act whereby the amount or amounts set aside as provision for diminution in .....

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therefore dismissed. - Provisions for gratuity and provision for leave encashment based on actuarial valuation conducted by the acturial is an ascertained liability which shall not be added to Profit of the assessee as per Profit and Loss Account to compute Book profit u/s 115JB - Employees contribution towards provident fund paid by the assessee company before the due date prescribed under the Income Tax Act,1961 for filing return of income u/s 139(1) of the Act be allowed of which th .....

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has reduced the losses by amount of FBT instead of increasing losses to arrive at Book Profit u/s 115JB which has led to double jeopardy to the assessee company. Thus, keeping in view of the afore-stated CBDT Circular, the A.O. is directed to re-compute the losses u/s 115JB of the Act whereby the FBT will be allowed to be added to the losses prior to tax as reflected in the audited Profit and loss account to increase the loss to arrive at the book profit u/s 115JB of the Act. We order accordingl .....

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dated 15-11-2010 and 09-01-2013 for assessment years 2008-09 and 2009-10 respectively , the appellate proceedings before the learned CIT(A) arising from the two separate assessment orders dated 16-04-2010 and 28-12-2011 for assessment years 2008-09 and 2009-10 respectively passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3)(ii) of the Income Tax Act,1961 (Hereinafter called the Act ) . Both the appeals are heard together and disposed of by us by this common order. 2. .....

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IT(A)'] erred in confirming disallowance of depreciation of ₹ 14,76,563 on the 'Management Rights' acquired by the Appellant during the year ending 31 March 2005 and capitalised as intangibles. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of proportionate depreciation amounting to ₹ 12,29,860/- on the addition of assets such as UPS, switches and cables, to the block of "Computers". The l .....

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or interest under the provisions of section 36(1 )(iii) of the Income-tax Act, 1961 ('IT Act') being incurred for the purpose of business. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of interest on borrowing amounting to ₹ 21,52,125 on the presumption that borrowed fund were utilised for providing interest free funds to M/s. Palanpur Holdings and Investments Private Limited. The learned CIT(A) further erre .....

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CIT(A) erred in confirming the disallowance of interest on borrowing amounting to ₹ 4,79,958 on the presumption that borrowed fund were utilised for non-business purpose, i.e. investment in mutual funds. The learned CIT(A) further erred in observing that the appellant has not submitted any details to prove the nexus that owned funds were utilised for making investment. 7. Without prejudice to ground no. 6 above, the learned CIT(A) erred in not appreciating that in the absence of any direct .....

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f ₹ 42,17,911 c. provision for leave encashment of ₹ 17,53,115 The learned CIT(A) erred in observing that the appellant has not explained the balances as per the financial statements and actuarial valuation reports. 3. The brief facts in this case are that the assessee company is engaged in the business of setting up and running a hospital and has expertise in management of health centres and facilities. 4. During the course of assessment proceedings, it was observed by the AO that t .....

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l asset, which was confirmed by the ld. CIT(A) in the first appeal filed by the assessee company . It was submitted before the learned CIT(A) that as per terms of the agreement, the assessee company has acquired significant commercial and business rights from Dr. Bais Surgical and Medical Institute Private Limited for a period of 10 years , extendable for another two terms of 10 years at the option of the parties. The assessee company submitted that as per provisions of Section 32(1)(ii) of the .....

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so held that the assessee company has capitalized the payments made for the acquisition of management rights in its books of accounts and hence the same is not allowable as expenses u/s 37(1) of the Act. 5. Aggrieved by the order of the ld. CIT(A) , the assessee company is in appeal before the Tribunal. 6. At the outset, the ld. Counsel for the assessee company submitted that this ground is squarely covered by the decision of the Mumbai Tribunal in assessee company s own case in ITA No. 2376-237 .....

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i Tribunal in assessee company s own case for the assessment year 2005-06 to 2007-08. 8. We have considered the rival contentions and perused the material available on record including the afore-stated Mumbai Tribunal orders. We find that as submitted by the ld. Counsel for the assessee company , this ground is covered in favour of the assessee company by the decision of co- ordinate bench of this Tribunal in assessee company s own case in ITA no. 2376-2378/Mum/2011 vide orders dated 10-07-2015 .....

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dated 10-7-2015, wherein at para 10, the Tribunal has restored assessee s ground for claim of depreciation on management rights for deciding as per the order of the Tribunal in assessee s own case in the preceding year. However, there is no order of the Tribunal in assessee s own case, therefore, it amounts to mistake apparent from record. The Tribunal in its order dated 10-7-2015 at para 9 has quoted various decisions of the Hon ble High Courts and Tribunal, wherein depreciation was allowed in .....

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will is eligible for claim of depreciation. Respectfully following the afore-stated decision of the co-ordinate Bench of this Tribunal in afore-stated orders, we allow the claim of depreciation of ₹ 14,76,563/- on management rights made by the assessee company. This disposes of ground no. 1 raised by the assessee company in the grounds of appeal filed in memo of appeal with the Tribunal. We order accordingly. 9. The next ground relates to disallowance of proportionate depreciation on fixed .....

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2,496 ii. Cable DTE male 10.10.2007 4,068 iii. Cable DTE male 30.11.2007 4,068 iv. Cable DTE male 25.01.2008 4,068 v. Cat Cable 30.11.2007 5,148 vi. Cable Cat5 31.10.2007 5,350 vii. Batteries for UPS 31.03.2008 32,868 viii. Supply of UPS 31.10.2007 39,870 ix. 10KVA UPS 10.10.2007 40,378 x. Modular Router 10.10.2007 56,740 xi. Modular Router 30.11.2007 56,740 xii. Modular Router 25.01.2008 59,010 xiii. Projector 26.10.2007 66,375 xiv. Modular Router 10.10.2007 78,384 xv. 6KVA UPS 31.10.2007 82,0 .....

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,047 Depreciation @60%/2 16,39,814 Depreciation @15%/2 4,09,954 Excess claim 12,29,860 As per the AO, the fixed items like UPS, Routers, Switches and cables, are not computers and hence ineligible for claim of depreciation @60%. The AO observed that the assessee company has claimed depreciation @60% depreciation instead of 15%. The A.O. was of the opinion that routers are used to connect different cable lines of telephone/internet and UPS is just a battery/inverter which supplies electric power .....

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relied on the decision of ITAT, Mumbai Bench in the case of DCIT v. Datacraft India Ltd., [2010] 40 SOT 295 (Mum) and ITAT,Delhi in the case of ACIT v. Cnicom Systems India Private Limited in ITA no. 1543(Del)/2008 dated 13.04.2009. The ld. CIT(A) considered the submission of the assessee company and held that the assessee company is entitled to depreciation @ 60% on routers only , but however the items like UPS, cable, batteries, projector, pipes and racks, trays, switches etc. the assessee fai .....

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on the following judicial decisions:- 1. DCIT v. Datacraft India (P) Ltd., [2010] 40 SOT 295 (Mum)(SB) 2. IBAHN India (P.) Ltd. v. DCIT, ITA No. 4932/Mum/2015 3. American Express Services India Ltd. v. DCIT, (2013) 57 SOT 22(Del-Trib). 4. GE Capital Business Process Management Services (P.) Ltd. v. ACIT, (2016) 136 ITD 239 (Del-Trib). 5. ACIT v. Global Healthline (P.) Ltd., ITA No. 3319/Del/2012 (Del- Trib.) 11. The ld. D.R., on the other hand, relied upon the order of the learned CIT(A). 12. W .....

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considered view, the assessee company acquired the fixed assets and if the same are forming an integral parts of the computer system which can be used along with a computer and when their functions can be integrated with a computer, depreciation is to be allowed @ 60%. However it should be segregated as indicated above and as such we set aside matter back to the file of the A.O. with a direction to review the entire list of fixed items and the items which are an integral parts of the computers w .....

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se of acquisition of 100% share capital of Kanishka Housing Development Co. Ltd.(herienafter called Kanishka ) , which were confirmed by the ld.CIT(A).It was observed by the AO that the assessee company has made investment of ₹ 13,93,90,000/- in a subsidiary company M/s Kanishka. The assessee company submitted that the said investment was made to acquire 100% shareholding of Kanishka which had a huge piece of land, which was required for constructing hospital. The said land has been utiliz .....

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ideration. The AO disallowed the interest on proportionate basis as the assessee company had mixed pool of own funds and interest bearing borrowed capital, aggregating to ₹ 92,83,374/-. The learned CIT(A) upheld the disallowance following the preceding year s order for assessment year 2004-05 passed by learned CIT(A). 14. At the outset, the ld. Counsel for the assessee company submitted that this issue is squarely covered by the decision of the co-ordinate Bench of this Tribunal in assesse .....

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July, 2015 has set aside the matter back to the file of the A.O. for deciding the same afresh in accordance with law. The Tribunal in the afore- stated order observed as under:- 4. The next issue pertains to disallowance of interest paid on borrowings utilized for purpose of acquisition of 100% share capital of Kanishka Housing Development Co. Ltd. 5. It was contended by ld. AR that no disallowance under section 14A can be made since the assessee has not earned any dividend income. For this purp .....

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m) ix) Shree Shamkamal Finance & Leasing Co. P. Ltd., 21 SOT 42 (Mum) and x) ACIT Vs. Lafarge India Holdings (P) Ltd.,19 SOT 121 (Mum) 6. It was further brought to our notice that assessee has acquired shares of Kanishka in order to acquire its land to build-up hospital on it. The investments were not made with the intention of earning dividend income nor any dividend was earned during the year as well as in future years. In these circumstances, by relying on the following the decisions, ld. .....

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n view the judicial pronouncements referred by the ld. AR, we restore the matter back to the file of AO for deciding afresh as per law. 16. Respectfully following the afore-stated decision of the co-ordinate Bench of this Tribunal in assessee s own case in preceding assessment year as detailed above, we set aside and restore the issue back to the file of the A.O. for deciding the issue afresh as per law as indicated in the afore-stated Tribunal s order in ITA No. 2376-78/Mum/2011 dated 10-07-201 .....

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alanpur Holdings & Investments P. Ltd. on which no interest was charged by the assessee company. The assessee company submitted that the loan was given for the purpose of building a hospital in Palanpur and the funds were given out of assessee company s own funds. It was submitted that in the presence of mixed funds availability, the assessee company has option of beneficial appropriation . The A.O. was of the opinion that it was not proved by the assessee company that the said sum was given .....

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submitted that the said amount was advanced not from any borrowings from the third party and the same had been sourced from assessee company s own funds. It was submitted that the intention of the assessee company was to assist in building a hospital in Palanpur and to get the rights for its operation and management. It was submitted that the A.O. has not proved any direct nexus between the interest bearing borrowed funds and the advanced amount. The assessee company has also furnished a chart .....

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itted that the assessee company has advanced a sum of ₹ 5.80 crores to M/s Palanpur Holdings & Investments Pvt. Ltd. as interest free funds for setting up a Hospital in Palanpur. The A.O. observed that the interest free advances were sourced from mixed funds only including the interest bearing funds hence disallowance was made on average rate of interest. The assessee company submitted that it has sufficient own funds which were reflected in the balance sheet , out of which the loans a .....

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and investments were to the tune of ₹ 13.93 crores as at 31-03-2008 , which shows that the assessee company has sufficient own funds. The ld. D.R., on the other hand, relied on the order of the A.O. 19. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee company has stated that the assessee company had advanced an amount of ₹ 5.80 crores to M/s Palanpur Holdings & Investments Pvt. Ltd. as interest free fu .....

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0 of 2012 ((2014) 366 ITR 505(Bom. HC) ) and CIT v. HDFC Bank Limited(WP no. 1753 of 2016)((2016) 67 taxmann.com 42(Bom.HC). Keeping in view of the facts and circumstances of the case, We are inclined to set aside and restore the matter to the file of the A.O. for verification of the contentions of the assessee company and the AO is directed to decide the matter in the light of the decision of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (supra) and HDFC Bank Ltd. ( .....

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of the year. It was submitted that the investments have been made out of internal accruals and the borrowed funds have not been utilized for the purpose. The assessee company could not prove that the interest free funds were utilised for making invetsment and it was a mixed pool of funds whereby the assessee company had interest bearing borrowed funds also and the AO made disallowance of ₹ 4,79,958/- towards interest@6.66%, which was confirmed by learned CIT(A). 21. At the outset, the ld. .....

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wn case in ITA No. 2376 to 2378/Mum/2011 for assessment years 2005-06 to 2007-08 vide orders dated 10th July, 2015 has set aside the matter back to the file of the A.O. for deciding the same afresh in terms of the judicial pronouncements cited therein. The Tribunal in the afore-stated order dated 10-07-2015 observed and held as under:- 23. The next grievance of the assessee relates to disallowance of interest expenditure u/s.14A amounting to ₹ 18,00,412/-. The AO applied rule 8D and comput .....

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ial pronouncements. **** **** 27. The ground taken for A.Y. 2007-08 are common as discussed in the assessment year 2005-06. With regard to the ground taken for disallowance of interest u/s 14A amounting to ₹ 3,54,011/- , following the reasoning given hereinabove, we restore the matter back to the file of AO for deciding afresh. Respectfully following the afore-stated decision of the co-ordinate Bench of this Tribunal, we set aside and restore the issue back to the file of the A.O. for de n .....

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ision for gratuity of ₹ 42,17,911 and provision for leave encashment of ₹ 17,53,115/-. The A.O. has disallowed the provision for doubtful debts of ₹ 15,29,058/-, and added the same to the net profit as per P&L A/c to arrive at the book profit u/s 115JB of the Act in view of amended provisions, which was confirmed by the ld. CIT(A) keeping in view amendment in the Act in Explanation 1 clause (i) to Section 115JB of the Act added by the Finance Act 2009 w.e.f. 1-4-2001. With .....

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the employees retirement age, length of service, compensation etc. of the employees and cannot be categorized as unascertained liabilities, hence, the same cannot be added back as per Explanation 1 clause (c) to section 115JB of the Act. The ld CIT(A) rejected the contention of the assessee company on the ground that the liability was not ascertained properly by the assessee company as per the actuarial valuation report submitted by the assessee company. 24. On appeal before the Tribunal, the l .....

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nt year 2004-05 vide orders dated 27-4-2011 to contend that provision for doubtful debt cannot be added to the profit and per Profit and Loss account to arrive at book profit u/s 115JB of the Act . The ld. D.R. relied upon the order of the learned CIT(A). 25. We have considered the rival contentions and also perused the material available on record including the orders of the Tribunal relied upon. We have observed that Income Tax Act,1961 was amended by Finance Act, 2004 w.e.f 1-4-2001 by substi .....

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to determine book profit as per amended provision of Section 115JB of the Act. This ground of appeal raised by the assessee company is therefore dismissed. We order accordingly. We find that the Tribunal in assessee company s own case in ITA No. 2376 to 2378/Mum/2011 for the assessment years 2005-06 to 2007-08 vide orders dated 10th July, 2015 had deleted the additions so made by the A.O. with respect to the Provision for gratuity and leave encashment by treating the same as ascertained liabili .....

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ble as business expenditure, therefore, there is no infirmity in the order of CIT(A) for considering the provision made for leave encashment and gratuity as ascertained liabilities not includible while computing profit u/s.115JB. There is no infirmity in the order of CIT(A). Our view is supported by the following decisions : i) CIT vs. Enchjay Forgings Ltd., 251 ITR 15; ii) CIT vs. National Hydro Electric Power Corporation Ltd., 45 DTR 117; and iii) Dresser Value India Private Ltd. Vs.ACIT, 30 S .....

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h respect to provision for gratuity and leave encashment. We order accordingly. 26. In the result appeal filed by the assessee company in ITA no.805/Mum/2011 for the assessment year 2008-09 is partly allowed as indicated above. 27. The following grounds of appeal are raised by the assessee company in ITA No. 3002/Mum/2013 for the assessment year 2009-10 in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) which reads as under:- GROUND 1: D .....

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nothing but premium paid for management agreement, which was a non-depreciable capital asset. 2. The Appellant prays that the addition of ₹ 11,07,422/- be deleted and the AO be directed to allow depreciation on the above as claimed by the Appellant. GROUND 11: DISALLOWANCE OF DEPRECIATION UNDER SECTION 32 OF THE ACT, AT A HIGHER RATE ON ADDITIONS MADE TO FIXED ASSETS IN AY 2008-09 AMOUNTING TO ₹ 15,37,326/-: 1. On the facts and in circumstances of the case and in law, the CIT(A) err .....

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ON 32 OF THE ACT AMOUNTING TO ₹ 5,35,427/-, AT A HIGHER RATE ON ADDITIONS MADE TO COMPUTERS IN AY 2009-10: 1. On the facts and in circumstances of the case and in law, the CIT{A) erred in upholding the action of the AO in disallowing depreciation at a higher rate claimed u/s. 32 of the Act amounting to ₹ 5,35,427/- on addition of various fixed assets made to the block of "computers", on the alleged premise that such additions were for the items like UPS, routers, switches a .....

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e amounting to ₹ 1,66,96,008/-, on the alleged ground that the interest expenditure paid on borrowings and claimed under section 36(1)(iii) of the Act by the Appellant corresponds to the amounts utilized (in an earlier) towards purposes which are not in respect of the Appellant's business and hence are not allowable as deduction u/s. 36 (l)(iii) / 14A of the Act. 2. The Appellant prays that the aforesaid disallowance u/s. 36(1)(iii) / 14A of the Act, amounting to ₹ 1,66,96,008/- .....

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that the aforesaid disallowance u/s. 14A of the Act r.w.r. 8D of the Rules of ₹ 6,96,950/- be deleted or be appropriately reduced. GROUND VI: DISALLOWANCE UNDER SECTION 36(1)(va) r.w.s. 2(24)(x) AND TAXING OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND UNDER THE HEAD INCOME FROM OTHER SOURCES AMOUNTING TO ₹ 31,02,711/-: 1. On the facts and in circumstances of the case and in law, the CIT(A) erred in giving the direction that only if the payment is made within the grace period of five d .....

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8377; 82,01,157 on account of provision for fringe benefit tax ('FBT) as claimed in the Return of Income, to the Loss as per Profit & Loss account of ₹ 36,13,64,742/- without appreciating the fact that the loss of ₹ 36,13,64,742/- was before claiming the said provision. 2. The Appellant prays that the learned AO be directed to grant deduction for aforesaid provision for FBT amounting to ₹ 82,01,157/- while computing the book profit u/s. 115JB. GROUND VIII: ADDITION OF P .....

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ofit u/s. l15JB. GROUND IX: ADDITION OF PROVISION FOR DOUBTFUL DEBTS FOR CALCULATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT AMOUNTING TO ₹ 46,07,618/-: 1. On the facts and in circumstances of the case and in law, the (CIT(A) erred in upholding the action of the AO in adding back provision for doubtful debts amounting to ₹ 46,07,618/- to compute the Book Profit u/s l15JB of the Act. 2. The Appellant prays that the aforesaid addition of provision for doubtful debts amounting to .....

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. The Appellant prays that the disallowance of aforesaid provision for gratuity amounting to ₹ 31,86,681/- be deleted while computing the book profit u/s. 115JB. GROUND XI: ADDITION OF PROVISION FOR LEAVE ENCASHMENT FOR CALCULATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT AMOUNTING TO ₹ 12,82,436/-: 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in upholding the action of the AO in adding back provision for leave encashment amounting to ₹ 12 .....

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f the AO in adding back interest and other expenses disallowed u/s. 14A of the Act amounting to ₹ 1,73,92,958/- while computing the book profit u/s. 115JB of the Act. 2. The Appellant prays that the aforesaid addition of ₹ 1,73,92,958/- be deleted while computing the book profit u/s. 115JB. GROUND XIII: LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT: 1. The AO erred in levying interest u/s. 234B and 234C of the Act. 2. The Appellant prays that the aforesaid addition be delet .....

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mmon order shall apply mutatis mutandis to the assessee company s appeal in ITA No. 3002/Mum/2013 for the assessment year 2009-10 wherein the facts are identical . We allow this ground of appeal filed by the assessee company in the memo of appeal filed with the Tribunal. We order accordingly. 29. With respect to ground No. II and III regarding disallowance of depreciation at higher rates i.e. 60% claimed u/s 32 of the Act on addition to fixed assets to the block of computers being items such as .....

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2009-10 wherein the facts are identical . Thus, this issue is restored back to the file of AO for fresh determination as indicated in our afore-stated order for assessment year 2008-09. We order accordingly. 30. Ground No. IV is with regard to the disallowance of interest expenditure u/s 36(1)(iii)/14A of the Act amounting to ₹ 1,66,96,008/- being expenses incurred which are not for business purposes with respect to investment of ₹ 13,93,90,000/- in a subsidiary company Kanishka to .....

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cal . Thus, this issue is restored back to the file of AO for fresh determination as indicated in our afore-stated order for assessment year 2008-09. We order accordingly. 31. Ground No. V is with regard to the disallowance of indirect expenditure i.e. administrative and other expenditure incurred for earning exempt income u/s14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 amounting to ₹ 6,96,950/- @ 0.50% of average investment of ₹ 13,93,90,000/- . The Rule 8D of .....

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36(1)(va) r.w.s. 2(24)(x) of the Act and taxing the employee contribution to the tune of ₹ 31,02,711/ under the head Income from other sources . The A.O. observed that the employees provident fund payment has not been paid by the assessee company within the stipulated due date under the PF Act as per explanation to Section 36(1)(va) of the Act, hence, the payments made after the due date as provided under the PF Act were treated as income of the assessee u/s 2(24)(x) of the Act and taxed .....

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he Hon ble Bombay High Court in the case of Hindustan Organics Chemicals Ltd., ITA No.399 of 2012. The assessee company also submitted that this issue has been decided by the Tribunal in assessee company s own case in ITA No. 2376-2378/Mum/2011 for assessment years 2005-06 to 2007-08 vide order dated 10th July, 2015. 33. We find that the Tribunal in assessee company s own case in ITA No. 2376 to 2378/Mum/2011 for assessment years 2005-06 to 2007-08 vide orders dated 10th July, 2015 deleted the a .....

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and also by the decision of Hon ble Delhi High Court in the case of Onward Technologies Ltd., ITA No.5235/Mum/2010. In view of these judicial pronouncements we do not find any merit for disallowance of employees contribution of ₹ 55,519/-. Respectfully following the decision of the co-ordinate Bench of this Tribunal, we allow this ground raised by the assessee company and direct that the employees contribution towards provident fund paid by the assessee company before the due date prescrib .....

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he fact that the loss of ₹ 36,13,64,762/- was before claiming the deduction of said provision of FBT. The AO added the FBT amount to the Profit as per P&L Account to arrive at Book Profit u/s 115JB of the Act. The ld. CIT(A), however, directed the A.O. to follow Circular No. 8 of 2005 dated 29th August, 2005 issued by the CBDT in question no. 103 where it is stated by the CBDT that for the computation of book profit u/s 115JB of the Act, fringe benefit tax is an allowable deduction for .....

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361364742/- and the assessee made adjustment of FBT which is reflected after profit before taxes in audited Profit and loss to arrive at Profit after tax and the assessee increased the loss as per profit and loss account by FBT amount of ₹ 82,01,157/- of its own in computation of income to arrive at Book Profit u/s 115JB of the Act which was stated by the assessee to be correctly done as per circular no 8 of 2005 dated 29-08-2005 issued by CBDT to arrive at Book Profit u/s 115JB of the Act .....

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, 1961. This circular seeks to provide a harmonious, purposive and contextual interpretation of the provisions of the Finance Act, 2005 relating to the FBT so as to further the objective of this levy. **** **** Whether FBT would be allowable deduction while computing book profit under section 115JB? 103. FBT is a liability qua employer. It is an expenditure laid out or expended wholly and exclusively for the purposes of the business or profession of the employer. However, sub-clause (ic) of clau .....

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submitted that the A.O. has adjusted the said amount of FBT in the Profit Before tax to reduce losses to arrive at Book Profit u/s 115JB of the Act which has led to double jeopardy i.e. instead of increasing loss before tax as per CBDT circular as set out above, the AO reduced the losses to arrive at Book Profit u/s 115JB of the Act , which has led to double addition of the same amount . We find merit in the contention of the assessee company after going through the records before us and have ob .....

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allowed to be added to the losses prior to tax as reflected in the audited Profit and loss account to increase the loss to arrive at the book profit u/s 115JB of the Act. We order accordingly. 35. The next ground is with respect to the addition of provision for wealth tax for computation of book profit u/s 115JB of the Act amounting to ₹ 95,938/-. The AO made adjustment to Profit(Loss) as per Profit and Loss account by adding the provision for wealth tax of ₹ 95,938/-to arrive at Bo .....

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t placed at paper book page 7 and computation of the income which is placed at paper book page 75. The A.O. disallowed the claim which has been confirmed by the ld. CIT(A) for computation of the Book Profit u/s 115JB of the Act. The ld. Counsel relied upon the following judicial pronouncements:- 1. CIT v. Echjay Forgings (P.) Ltd., (2001) 166 CTR 100 (Bom) 2. JCIT v. Usha Martine Industries Ltd., (2001) 251 ITR 15 (Bom) 3. DCIT v. Microlabs Ltd., (2015) 70 SOT 774 (Bang-Trib) The learned DR reli .....

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no.805/Mum/2011 for the assessment year 2008-09 which is adjudicated by us in preceding para s vide this common order, hence, our decision in ITA no. 805/Mum/2011 for the assessment year 2008-09 vide this common order shall apply mutatis mutandis to the assessee company s appeal in ITA No. 3002/Mum/2013 for the assessment year 2009-10 wherein the facts are identical . Thus, this ground of appeal raised by the assessee company lacks merit and is hereby dismissed and decided against the assessee .....

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ommon order shall apply mutatis mutandis to the assessee company s appeal in ITA No. 3002/Mum/2013 for the assessment year 2009-10 wherein the facts are identical . Thus, this issue raised by the assessee company in grounds of appeal is allowed in favour of the assessee company. We order accordingly. 38. Ground No. XI is regarding addition of provision for leave encashment for computation of book profit u/s 115JB of the Act amounting to ₹ 12,82,436/-. The facts and circumstances of the iss .....

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peal is allowed in favour of the assessee company. We order accordingly. 39. Ground No. XII is regarding addition of amount computed u/s 14A amounting to ₹ 1,73,92,958/- in computing book profit u/s 115JB of the Act. This ground is consequential to ground No. IV & V of this appeal, wherein we upheld the addition of ₹ 6,96,950/- made by the AO and as sustained by learned CIT(A) u/s 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 , while the addition of ₹ 1 .....

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