TMI Blog2017 (1) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... income, whichever is less. Disallowance made u/s 14A - Held that:- On a careful perusal of the submissions made by the assessee and the Ld D.R, we find merit in the submissions made by Ld A.R. We have noticed the nature of investments and the volume of transactions. Considering these factual details, we are of the view that the disallowance of ₹ 1,65,000/- is reasonable. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance of administrative expenses u/s 14A to ₹ 1,65,000/-. We direct the AO to add the amount disallowed u/s 14A of the Act under the normal provisions of the Act to book profit computed u/s 115JB of the Act. ESOP expenses allowability - Held that:- We notice that an identical issue was considered by the Special bench of Bangalore in the case of M/s Biocon Limited Vs. DCIT [2013 (8) TMI 629 - ITAT BANGALORE] held that the discount on ESOP is allowable as deduction. The Special bench has also prescribed the manner of computation of discount and the adjustments to be made in the succeeding years. There should not be any dispute that the decision rendered by the larger bench of Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egate amount of deduction u/s 80IB and 80IC should be restricted to the amount of Gross Total Income. 5. Learned Counsel submitted that the Assessing Officer has computed allowable amount of deduction u/s. 80IB to the tune of ₹ 21.97 crores and u/s. 80IC to the tune of ₹ 7.92 crores. However, the Assessing Officer has restricted the aggregate amount of deduction to the amount of business income included in the gross total income. By placing reliance on the decision rendered by Hon'ble Jurisdictional High Court in the case of V.M. Salgaocar Brother Pvt. Ltd. (Tax appeal No. 25 of 2007 dated 22.4.2015), learned counsel submitted that the maximum amount allowable u/s. 80IB 80IC of the Act should be restricted to the amount of gross total income and not to the amount of business income included therein, as held by the tax authorities. He further submitted that identical view has been taken by the Hon ble Bombay High Court in the cases of Tridoss Laboratories Ltd. (328 ITR 448), M/s. Eskay Knit (India) Ltd. (I.T. Appeal No. 184 of 2007 dated 25.3.2010) and also by other High Courts. 6. On the contrary, learned Departmental Representative placed reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of sec. 80AB and its predecessor 80AA would show that the same is intended to refer to the Net income , i.e., (Gross income less expenses) included in the Gross total income. The intention of the parliament is that the deduction prescribed in Chapter VI-A should be allowed on the Net income included in the Gross Total income and not on the Gross income derived by the assessee. 10. The adjustment of brought forward losses for the purpose of arriving Income from Business , in our view, cannot be come in the category of determining the Net income of the eligible undertaking for the year under consideration, since the brought forward losses cannot be considered to be expenses incurred to earn the profits and gains of eligible undertakings. The adjustment of brought forward losses is the process prescribed by the statute to determine the Gross total income . Hence we are of the view that, for the purpose of determining the quantum of deduction, the Profits and gains of eligible business of eligible undertaking should be considered before setting off of brought forward losses, but the deduction should restricted to the amount of Gross Total income as per the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount. On a careful perusal of the submissions made by the assessee and the Ld D.R, we find merit in the submissions made by Ld A.R. We have noticed the nature of investments and the volume of transactions. Considering these factual details, we are of the view that the disallowance of ₹ 1,65,000/- is reasonable. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance of administrative expenses u/s 14A to ₹ 1,65,000/-. 14. The next ground urged by the assessee relates to the addition of amount disallowed u/s 14A to the book profit computed u/s 115JB of the Act. We direct the AO to add the amount disallowed u/s 14A of the Act under the normal provisions of the Act to book profit computed u/s 115JB of the Act. 15. We shall now take up the appeal filed by the revenue for AY 2008-09. The first relates to the relief granted by Ld CIT(A) in respect of addition made u/s 14A of the Act. We have already decided this issue by confirming the order passed by Ld CIT(A) in the preceding paragraphs. 16. The next issue urged by the revenue relates to the relief granted by Ld CIT(A) in respect of ESOP expenses. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eri (258 ITR 785)(Guj) Following the above said decision, we set aside the order passed by Ld CIT(A) and direct the AO to allow deduction u/s 80IC of the Act on the receipts from sale of scrap. 20. The next issue urged by the assessee relates to the disallowance made u/s 14A of the Act. The revenue has also urged this issue in respect of relief granted by the Ld CIT(A). During the year under consideration, the assessee received dividend income of ₹ 38,20,962/- and claimed the same as exempt. The AO computed the disallowance as per Rule 8D of the IT Rules and accordingly disallowed a sum of ₹ 70,73,247/- towards interest expenses and ₹ 9,00,500/- towards administrative expenses. The Ld CIT(A) deleted the disallowance of interest on noticing that the interest free funds available with the assessee is in far excess of the amount of investments. However, the Ld CIT(A) confirmed the disallowance made towards administrative expenses. 21. With regard to the disallowance made out of interest expenses, we notice that the interest free funds available with the assessee (Rs.620.94 crores) are in excess of the amount of investments (Rs.92.01 crores). Hence no disallo ..... 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