TMI Blog2011 (6) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... the finding of Hon. ITAT that meaning of industry under the Industrial Development Regulation Act cannot be imported under the Income Tax Act to grant benefit u/s. 36(1)(viii). It is submitted that production of milk and milk products is considered as an industry under the Income Tax Act itself in Notification No. SO627 (E) dated 4-8-1999 issued by the Central Board of Direct Taxes (CBDT) and accordingly entitled to allowance u/s. 36(1)(viii). It is submitted that it be so held now. 2.2. The Ld. CIT (A) has erred in upholding that in absence of share capital, no deduction u/s. 36(1)(viii) can be allowed to the appellant. It is submitted that proviso to section 36 (1)(viii) limits deduction that can be allowed and in absence of share capital, such limitation only would become inapplicable (rather than the whole section becoming inapplicable). It is submitted that it be so held now. 2.3. Without prejudice to above, it is submitted that the limit of deduction should be computed by treating share capital as Nil . It is submitted that it be so held now. 5. The Assessing Officer followed the decision in Assessment Year 2003-04 of the ITAT Ahmedabad Bench in Revenue s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT (A) has erred in confirming the disallowance of grant of ₹ 2,29,25,823/- given to various cooperative societies and other organizations as deductible expenditure u/s. 36(1)(xii) of the Income Tax Act. It is submitted that the amount represents an expenditure incurred by the appellant for the purpose of objects of the appellant and thereby fulfills all conditions of section 36 (1)(xii) of the Income Tax Act ad accordingly it is entitled to deduction u/s. 36(1)(xii). It is submitted that it be so held now. 3.1. The Ld. CIT (A) has erred in upholding that the amount is not irretrievably gone and accordingly cannot be treated as expenditure . It is submitted that, in the facts and circumstances of the case, the amount is debited to Income and Expenditure Account only when the amount is irretrievably gone and there exists no possibility of its conversion into loan. Accordingly, it is submitted that the amount debited to Profit and loss account represents expenditure incurred by the appellant. It be so held now. 3.2. In any event the same is allowable u/s. 37/28 of the Income Tax Act and therefore, the same ought to have been allowed as deduction. It be so held now. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rectification of the mistake in the order and the Tribunal vide order dated 28-8-2009 recalled the earlier order of the Tribunal and fixed the same for fresh disposal (P.B. page No.131) and the Tribunal vide order dated 21-4-2011 (P.B. page No.140) reconsidering the issue restored the matter to the file of A.O. with direction to re-decide the above issue by giving reasonable and sufficient opportunity of being heard to the assessee. He has submitted that the matter is still pending before the A.O. for reconsideration. He has submitted that since the A.O. decided the issue against the assessee on the basis of the order passed for Assessment Year 2003-04, therefore, matter could be remanded to the file of the A.O. for reconsideration. 12. The Ld. D.R. did not oppose to the request of the Ld. Counsel of the assessee. 13. On consideration of the above facts and submissions of the parties, we are of the view that it would be reasonable and proper to restore this issue to the file of the A.O. for re-adjudication. The A.O. followed the order for Assessment Year 2003-04 for rejecting the claim of the assessee and also noted that the Tribunal also decided the issue against the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee before the A.O. was that no expenses were incurred for earning the exempt income, however, it was conceded later that expenses of ₹ 27,000/- may be directly attributed to earning of tax free interest income. The A.O. found assessee s contention in the return of income that no expenses at all were incurred in relation to earning of tax free income and subsequent submission that at the most, payment of one clerk s salary be attributed to earning of tax free income to be unacceptable. The A.O. relied on the decision in the case of Southern Petro Chemical Industries vs. DCIT (2005) 93 TTJ 161, upholding the part of the administrative and managerial expenses as attributable to earning of dividend income. The A.O. also relied upon the decisions in the case of Kalptaru Construction Overseas Pvt. Ltd., 13 SOT 194 (Mum.) and Prakash Heat Treatment Industries Pvt. Ltd., (2007) 14 SOT 348 (Mum.) holding that term expenditure occurring in section 14A would take in its sweep not only direct expenditure but also other forms of expenditure regardless of whether they are fixed, variable, direct, indirect, administrative, managerial or financial. The AO further observed that in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is that Assessing Officer has failed to demonstrate as to how and why he was not satisfied about the correctness of the claim of the appellant regarding no expenses as attributable to earning of tax free income. The appellant had, initially through submission dated 12-11-2008 before the Assessing Officer contended that no expenses were incurred for earning the exempt income. Later, through submission dated 2-12-2008, appellant conceded that expenses of ₹ 27,000/- were directly attributable to earning of tax free income. Thus, appellant s stand before the Assessing Officer was not consistent. Further, as held by ITAT, Chennai Bench in the case of Southern Petro Chemicals Industries (2005) 93 TTJ 161 and other decisions relied upon by the Assessing Officer, whether to invest or not were strategic decisions taken by the top management and hence part of administrative and managerial expenses had to be held as attributable to earning of tax free income from such investments. Appellant s claim of having incurred no expenses or only ₹ 27,000/- for earning tax free income of ₹ 17.84 crores for which no separate accounts were maintained, was prima facie not accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h have been notified with effect from March 24, 2008, would apply with effect from assessment year 2008-09.Even prior to assessment year 2008-09, when rule 8D was not applicable, the Assessing Officer had to enforce the provisions of sub-section (1) of sectgion14A. For that purpose, the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record. The proceedings for the assessment year 2002-03 would stand remanded to the Assessing Officer. The Assessing Officer should determine as to whether the assessee had incurred any expenditure (direct or indirect) in relation to dividend income/ income from mutual funds which does not form part of the total income as contemplated under section 14A.The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer should provide a reasonable opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted it be so held now. 23. The AO noted from form No.3CD Audit Report that employees contribution to PF/ESI was deposited late by the assessee to the extent of ₹ 6,97,273/-. In view of this specific provision of section 36(1)(va), the AO held late payments to be not allowable as expenses and observed that amendment to section 43B w.e.f. 1-4-2004was with regard to employer s contribution only. Addition was accordingly made. It was submitted before the Ld. CIT (A) that the employees contribution to PF was made within the grace period to the extent of ₹ 4,90,339/- and after grace period to extent of ₹ 1,34,853 and due date but within the financial year to the extent of ₹ 72,081/-. It was submitted that the payments made beyond the grace period have been disallowed. It was further explained that amount was paid within the grace period and further contribution in respect of Junagadh Dairy of ₹ 72,081/- was for the months of October,2005 and January, 2006 and was made in February, 2006 after the fund was approved by the Commissioner of Income Tax. Ld. CIT(A) considering the decision of the Gujarat High Court and ITAT Ahmedabad Bench held that the payments wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound No.5 of the appeal of the assessee is allowed for statistical purposes. 27. There is no other main ground raised in the ground of appeal by the assessee. 28. The assessee raised following Additional Grounds of appeal:- 1. The Ld. A.O. CIT(A) have erred in not granting depreciation on the closing Written down value of the block of assets for the A.Y. 2005-06. 2. The Ld. A.O and Ld. CIT (A) has erred in taxing interest earned on a North Kerala Project Development fund, amounting to ₹ 1,08,11,269/- as income of the appellant. It is submitted that in the facts and circumstances of the case, the appellant is acting as a nodal agency and income is diverted at source and does not belong to the appellant. 2.1. Without prejudice to above, if the interest is considered as income of the assessee, direction be given to allow the expenditure in the same year in which they are incurred as deduction. It be so done now. 3. The Ld. AO and Ld. CIT(A) has erred in making disallowance of ₹ 4,64,341/- being contribution made to Employees Recreation Trust by invoking provisions of section 40A(9) is not applicable and no disallowance was required to be made. 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for hearing. 31. On the other hand Ld. D.R. submitted that these grounds have already been decided against the assessee by the Tribunal and that assessee conceded the taxability of these issues before the A.O. Therefore, assessee has no grievance for filing any appeal before the Tribunal, therefore, additional ground may be dismissed. 32. We have considered rival submissions and material available on records. As regards additional ground No.1, it is admitted fact that it was not raised either before the A.O. or before the CIT (A). It is raised for the first time before the Tribunal. It is also fact that no facts are available on record to adjudicate upon this issue. On additional ground No.1 the matter requires fresh adjudication by probing the facts which are not on record. Further on additional Ground No.2 and 3, the A.O. noted that the Tribunal has already decided the issue against the assessee in Assessment Year 2003-04 and the assessee also conceded before him that additions may be made accordingly vide letter dated 21-8-2008. Even Ld. Counsel for the assessee admitted before us during the course of hearing that this issue is covered against the assessee vide paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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