TMI Blog2016 (8) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The provision relating about the payment on professional fees is dealt by different section i.e. under the provision of section 9 r.w.s. and 195 of the Act but so far as the commission paid for export is concerned the same is required to be dealt with by the provision of the explanation 2 to clause (VII) of section 9 of the Act. In this regard we also support law settled in CEAT International S.A. Vs. CIT (1998 (11) TMI 111 - BOMBAY High Court ) and CIT Vs. Sara International Ltd. [2008 (3) TMI 686 - DELHI HIGH COURT] and CLSA Ltd. Vs. ITO (International Taxation) [2013 (1) TMI 796 - ITAT MUMBAI]. Since the expenditure has not been differentiated in professional services and commission paid for exports, therefore, we are of the view that the matter is required to be examined afresh at the end of Assessing Officer to decide the expenditure incurred for professional services and commission paid for exports in the light of the judgment mentioned above by giving an opportunity of being heard to the assessee accordingly this issue is decide in favour of the assessee against the revenue. Disallowance u/s 14A - Held that:- There should be a proximate relationship between the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the learned CIT(A) ] relevant to the A.Y.2010-11 2. The assessee has raised the following grounds:- Ground No.1 : Reduction in Quantum of MAT Credit U/sec 115JAA by ₹ 67,46,958/ - 1.1. The Ld. C.I.T. (Appeals)-9, Mumbai, erred in computing MAT credit available for set-off U/sec 115JAA for A.Y.2008-09 and A.Y.2009-10 at ₹ 2,82,56,883/- as against the sum of ₹ 3,50,03,841/- claimed by the appellant, resulting into a reduction by ₹ 67,46,958/- on account of exclusion of Education Cess and Surcharge paid on the ground that the tax U/s.115JAA is exclusive of the same. 1.2. The said CIT(Appeal) ought to have considered the fact that Education Cess and Surcharge are part of tax only as provided in Sec 2(43) r.w.Sec 4 of the Income Tax Act and as held by the Hon ble Supreme Court in the case of CIT V/s. K.Srinivasan 83 ITR 346. 1.3. Without Prejudice to the above, the said C.I.T.(Appeal) erred in not giving direction to the A.O. to allow the brought forward MAT credit after giving effect to the appellate orders of earlier years and not as per order U/s.143(3). Ground No.2 : Disallowance of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring total income to the tune of ₹ 17,16,87,458/- and the current year s Long Term Capital Gain loss of ₹ 3,435/-. The return was processed u/s.143(1) of the Income Tax Act, 1961 (in short the Act ). The case was selected for scrutiny under CASS. Notice u/s.143(2) of the Act dated 27.08.2011 was issued and served upon the assessee. Due to change of incumbency the Assessing Officer issued the notices u/s.143(2) 142(1) and served upon the assessee. The assessee company is engaged in the business of manufacturing and sale of the following products:- Synthetic yarn made out of high-density polyethylene, polypropylene, nylon and polyester. Synthetic Twines made out of aforesaid yarns. Synthetic Ropes made out of aforesaid twines. Fishnets made out of aforesaid twines. Machineries. Geo Synthetic. The manufacturing facilities of the company were carried out from the following divisions:- Sr.No. Name of the Division 1 DTA Unit (Pune) 2 100% EOU Pune (deduction u/s.10B Expired) 3 Terry Towel Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative of the assessee has argued that only income tax credit is required to be given as tax credit u/s.115JAA of the Act therefore the CIT(A) has rightly passed the order which is not required to be interfere with at this appellate stage. Keeping in view of the argument advanced by the learned representative of the parties and perusing the record, we find that there is a limited issue before us which needs to be adjudication on the point of that the Income tax includes surcharge and educational cess or not. Copy of ITR 6 has been placed on record in which it is mentioned that the MAT credit is required to be given on surcharge and educational cess and upon the income tax payable by the assessee. The representative of the assessee has placed reliance on law settled in CIT Vs. Vacment India 369 ITR 304 (All.) in which it is held that the MAT credit should be given from the gross tax payable and on the surcharge and educational cess to be computed only on the amount of tax payable to the MAT credit. He has also rendered section 115JAA and submitted that the MAT credit has also in accordance with provision of this section. Alternatively, the amount of MAT credit is allowable against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue and direct the Assessing Officer to allow the MAT credit against the tax liability of the assessee including of surcharge and educational cess. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.2 :- 8. Under the issue no.2 the assessee has challenged the disallowance of commission of ₹ 50,90,141/- U/s.9 r.w.s.195 and section 40(a)(i) of the Act. The Assessing Officer was of the view that the assessee made the payment towards the professional services charges to non-resident which is in respect of the services used in respect business in India and earn income in India. The Assessing Officer considered as technical fees paid to the non-resident for the income accrued or earned in India u/s.9r.w.s.195 attracting TDS provision u/s.195 of the Act. Since no TDS was deducted and deposited, therefore the provision u/s.40(a)(i) of the Act was attracted, therefore, the amount to the tune of ₹ 50,90,141/- claimed as expenses was not assessed as revenue expenditure and added to the income of the assessee. The said finding was confirmed by the CIT(A) in the order in question. 9. The learned representative of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal no.1 has been decided vide para 5.2. pages 6 to 7 of the relevant appellate order, which are reproduced as under for the sake of ready reference. 5.2 Ground of appeal no.1 : This issue is covered by the decision of Ld. Predecessor in appellant s own case in preceding assessment year 2008-09. He has decided this issue in para 2.1 of the appellate order dated 16.09.2011 which may be extracted as under:- 2.1. The Assessing Officer has discussed this issue at page 3 and 4 of the assessment order. This issue was also involved in assessment year 2007-08 wherein my predecessor has decided this issue in favour of the appellant as under:- The appellant is claiming that in assessment year 2001-02 ITAT has decided the issue in favour of the appellant and held that depreciation cannot be forced where an assessee chosen not to claim depreciation while computing its taxable income. In view of these facts, the Assessing Officer is directed to allow depreciation as per opening WDV of fixed assets for this year determined after taking into consideration appeal orders of higher appellate. These grounds are partly allowed. Since the decision of Ld. CIT(A) and Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Bombay High Court and Hon ble ITAT Mumbai Bench. In view of the above precedent, the ground of appeal no.1 is allowed. No distinguishable facts has been placed on record by the revenue to which it can be assumed that the learned CIT(A) has decided the matter wrongly and illegally. The CIT(A) has decided the issue on the basis of order passed by the Income Tax Appellate Tribunal, Mumbai and by the order of Hon ble High Court in the assessee own case. Reliance is placed upon the law settled in the assessee s own case for A.Y.2003-04 and 2004-05 in case of CIT Vs. Garware Wall Ropes (ITA No.5555 of 2010 and ITA No.5556 of 2010) passed by the Hon ble Bombay High Court. In view of the said circumstances we find no ground to interfere with observations made by the CIT(A) in the order under challenged, therefore, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which does not require to interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.2 :- 11. The issue no.2 is in connection with the deletion of disallowance of ₹ 10,19,830/- made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by deducting the expenditure incurred to earn the exempt income. In the case in hand it is not the case of the revenue that the assessee has incurred any direct expenditure or any interest expenditure for earning the exempt income or keeping the investment in question. If there is expenditure directly or indirectly incurred in relation to exempt income the same cannot be claimed against the income which is taxable. For attracting the provisions of section 14A there should be proximate cause for disallowance which has relationship with the tax exempt income as held by the Hon ble Supreme Court in case of CIT Vs. Walfort Share and Stock Brokers P. Ltd. (326 ITR 1). Therefore, there should be a proximate relationship between the expenditure and the income which does not form part of the total income. In the case in hand the assessee has claimed that no expenditure has been incurred for earning the exempt income, therefore, it was incumbent on the AO to find out as to whether the assessee has incurred any expenditure in relation to income which does not form part of the total income and if so to quantify the expenditure of disallowance. The AO has not brought on record any fact or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.35 of the Act in respect of the capital expenditure on research and development. Before discussing the matter of controversy further it is necessary to advert the finding of the CIT(A) on record:- 5.6 Ground of appeal no.5 :- It is noted that during the assessment proceeding the initial claim of deduction u/s.35 of the I T Act was enhanced from 100% to 150% u/s.35(2AB), however, the AO did not entertain the enhanced claim of deduction on the ground that such claim has been made by the appellant after the due date of filing of revised return. Accordingly, the AO rejected the same on the ground that in the light of decision of Goetz India Ltd. such claim cannot be accepted without revised return. On the other hand the claim of the appellant is that it could enhance the claim only after approval u/s.35(2AB) was received and by that time the limitation of revising the return was lapsed. After considering the rival submissions, I agree with the contention of the appellant that even if a genuine claim is made during the assessment proceedings after the time limit of filing of revised return the appellate authorities can entertain such claim on merit. The Hon ble ITAT, M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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