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2016 (8) TMI 906 - ITAT MUMBAI

2016 (8) TMI 906 - ITAT MUMBAI - TMI - Reduction in Quantum of MAT Credit U/sec 115JAA - reduction on account of exclusion of Educational cess and surcharge - Held that:- The income tax includes surcharge and educational cess for giving the credit u/s.115JAA of the Act. No law contrary to the above said finding has been produced before us. Accordingly, we set aside the order passed by the CIT(A) on this issue and decide this issue in favour of the assessee and against the revenue and direct the .....

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sional services in addition to commission paid for export. 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 .....

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gment 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 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 wheth .....

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ons of section 14A cannot be applied. Accordingly, we delete the addition disallowance made by AO u/.s14 A r.w. Rule 8D - Decided in favour of the assessee. - Disallowance u/s.35 in respect of the capital expenditure on research and development - claim of the assessee was declined on the ground of that the assessee received the approval late and the assessee should claim the exemption by filing the revised return which the assessee had not done - Held that:- CIT(A) is of the view that no dou .....

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efore, we are of the view that the CIT(A) has decided this issue 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. - I.T.A. No.4072/Mum/2014 - Dated:- 13-7-2016 - SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Shri Dalpat H. Shah For The Department : Shri S. Senthil Kumaran ORDER PER AMARJIT SINGH, JM: The assessee as well as revenue have filed the abov .....

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st 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 .....

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.9 and Sec.195 on the ground that no agreements between the parties were submitted to establish that the payments were towards Commission and not for any professional services . The C.I.T.(Appeal) erred in not considering the agreements submitted before him to establish that the payment was for commission for services rendered outside India and therefore erred in not considering the fact that the same being towards commission charges for services rendered outside Indi and was not liable to T.D.S .....

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ecting the Assessing Officer to allow depreciation of ₹ 10,86,873/- after working out the WDV of assets for earlier years as decided by the appellate authorities without appreciating the facts that before any allowance of deduction under Chapter VIA of the I.T.Act, 1961, the depreciation has to be allowed from the gross total income? 2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 10,19,830/- made u/s.14A .....

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see s appeal):- 4. The brief facts of the case are that the assessee filed his return of income on 13.10.2012 declaring 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 Assessi .....

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ities 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, Pune 4 Ajman Branch 5 PPMF (Fiber), Pune 6 MBD Pune 7 100% EOU at Pune (4th Year 10B Unit) 8 GEO Synthetic (Pune) 9 Aviation 10 Fish net division, Wai (Old deduction u/s.80-IB expired) 11 DTA Unit (Wai) 12 100% EOU at Wai (8th Year 10B Unit) 13 Silvassa Division (5th Year 80IB) 14 USA Branch 15 Citadini The assessment w .....

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1/- u/s.9 r.w.s.195 and Sec.40(a)(i) of the Act. The said addition was confirmed by the CIT(A), therefore the assessee has filed the present appeal before us. ISSUE NO.1:- 5. Under this issue the assessee has raised the question to the fact that the CIT(A) has erred in computing MAT credit available for setoff u/s.115JAA of the Act for A.Y.2008-09 and A.Y.2009-10 to the tune of ₹ 2,82,56,883/- as against the sum of ₹ 3,50,03,841/- claimed by the appellant, resulting into a reduction .....

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. CIT (ITA No.7287/Mum/2012) J Bench, Mumbai. On the other hand the learned representative 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 .....

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rcharge 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 the tax liability inclusive of surcharge and cess and not the tax payable before the surcharge and cess. The relevant portion of law mentioned above in CIT Vs. Vacment India 369 ITR 304 (All.) is hereby reproduced bel .....

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on cess, including secondary and higher educational cess 8. Gross tax liability (5+6+7) 6. The aforesaid entries leave no manner of ambiguity in regard to the method of computation of tax liability. Entry 3 requires computation of the gross tax payable. Under entry 4, credit is required to be given under section 115JAA of the Act of the tax paid in earlier years. Entry 5 requires a computation of the tax payable after credit under section 115JAA of the Act. The matter is placed beyond doubt by t .....

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ed by the Commissioner {Appeals} was plainly in accordance with the methodology as provided in ITR-6. The Tribunal in confirming the order of the Commissioner (Appeals) has, hence, not committed any error. The appeal will not give rise to any substantial question of law and is, accordingly, dismissed. 7. Accordingly, it is quite clear that the income tax includes surcharge and educational cess for giving the credit u/s.115JAA of the Act. No law contrary to the above said finding has been produce .....

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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, ther .....

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he provision u/s.9 r.w.s. 195 and section 40(a)(i) of the Act is not applicable to the facts of the present case in the interest of justice. In support of these contentions the learned representative of the assessee has placed reliance upon the law settled in CEAT International S.A. Vs. CIT 237 ITR 859 (Bom) and CIT Vs. Sara International Ltd. 217 CTR 491 and CLSA Ltd. Vs. ITO (International Taxation) 56 SOT 254, Mumbai. On perusal of the order passed by the Assessing Officer, it came into notic .....

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the Act. In this regard we also support law settled in CEAT International S.A. Vs. CIT 237 ITR 859 (Bom) and CIT Vs. Sara International Ltd. 217 CTR 491 and CLSA Ltd. Vs. ITO (International Taxation) 56 SOT 254, 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 .....

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d to advert the finding on record to go further:- 5.2. Ground of appeal no.1:- It is noted that an identical issue was decided by my predecessor in the case of the appellant for A.Y.2009-10. The said 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 .....

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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 Hon ble ITAT are in favour of the appellant, the Assessing Officer is directed to allow depreciation as per WDV of fixed asse .....

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the Department. Hon ble Bombay High Court has stated in para 3 as under:- 3. Upto the assessment year 2002-03 the assessee had not claimed depreciation while computing deduction under Chapter VIA of the Income Tax Act, 1961. However, in the assessment year, in question, the assessee computed deduction under Chapter VIA after taking into account the depreciation allowable under the Act. The Assessing Officer was of the opinion that the depreciation has to be computed on the written down value of .....

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sessment orders cannot be faulted. Accordingly, the first question raised by the Revenue cannot be entertained. 5.4. Having regard to the facts and circumstances of the case and in the light of the present matter being squarely covered in favour of the appellant by the appellate orders of Hon ble Bombay High Court, Hon ble ITAT Mumbai Bench and my Ld. Predecessor, ground of appeal no.1 is allowed. 5.2.1 It is admitted even by the A.O. that facts during the year under consideration are almost ide .....

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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 .....

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77; 2,39,855/- made by the assessee. Before discussing the matter of controversy, it is necessary to advert the observations made by the CIT(A) while deciding this issue on record. The finding is hereby mentioned below:- 5.3 Ground of appeal no.2:- It is noted that this issue was also under dispute in immediately preceding A.Y.2009-10, wherein vide order dated 15.01.2014 the Hon ble ITAT has decided this issue. The relevant para 2.4 of the order ITAT is reproduced hereunder:- 2.4 We have conside .....

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d the new plea in the year under consideration that no expenditure had been incurred by the assessee for earning the exempt income or for the investment in question. We find merit and substance in the contention of the assessee on this point because the investment has been made by the assessee in the group concern and not in the shares of any un-related party. Therefore, the primary effect of investment is holding controlling stake in the group concern and not earning any income out of investmen .....

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icit the notion of apportionment in the cases where the expenditure is incurred for composite/indivisible activities in which taxable and non taxable income is received but when no expenditure has been incurred in relation to the exempt income is received but when no expenditure has been incurred in relation to the exempt income 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 expendit .....

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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 b .....

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sideration also, accordingly respectfully following the order of Hon ble ITAT in immediately proceeding year, it is held that the A.O. should exclude the old investments in group concerns of the appellant as the appellant has not incurred any administrative expenses in holding such investments. This ground of appeal is accordingly statistically partly allowed. 12. In view of the observations made by the CIT(A), it is apparent on record that the CIT(A) has passed the order on the basis of the ord .....

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is the strategic investment in the group concern which does not made to earn the exempt income. It is held that the Assessing Officer should exclude the whole investment in group concerns of the appellant. In view of the said circumstances it is quite clear that the matter of controversy has been adjudicated on the basis of the case decided by the ITAT, Mumbai in assessee s own case. We find no reason to dishonor the finding given by the CIT(A) on the basis of the decision of ITAT, Mumbai in th .....

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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 .....

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vised return the appellate authorities can entertain such claim on merit. The Hon ble ITAT, Mumbai in the cases of M/s. Recoh India Ltd. and Pradeep Kumar Harlalka relied upon by the appellant has categorically held that the ratio of the apex court s decision in M/s. Goetz India Ltd. is not applicable on the appellate authorities. In the instant case on merit of the claim of weighted deduction, the AO also has not made any adverse observation on the allowability on weighted deduction u/s.35(2AB) .....

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