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2017 (1) TMI 1249 - ITAT MUMBAI

2017 (1) TMI 1249 - ITAT MUMBAI - TMI - Quantum of deduction allowable u/s. 80IB and 80IC - Held that:- 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 forwa .....

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sue and direct the AO to restrict the aggregate amount of deduction u/s 80IB and 80IC of the Act to the aggregate amount or the Gross Total 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 ₹ .....

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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 required to be preferred over the division bench. Accordingly we are of the view that this issue requires fresh examination in accordance with the deci .....

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together and hence they are being disposed of by this common order, for the sake of convenience. 2. The assessee is engaged in the business of manufacturing of telecom cables, telecommunication equipments, ally/aluminum conductors and networking solutions. 3. We shall first take up the appeals relating to A.Y. 2008-09. At the time of hearing, learned counsel appearing for the assessee did not press ground No. 1 & 2 urged in the appeal of the assessee and hence they are dismissed as not press .....

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orward loss at ₹ 4,04,32,385/-. The Gross total income of the assessee came to be computed at ₹ 6,53,71,905/-. The Assessing Officer, by placing reliance on the decision of Hon'ble Supreme Court in the case of SYNCO Industries Ltd. (2008) 299 ITR 444 and also provisions of section 80AB of the Act, took the view that the aggregate amount of deduction allowable u/s. 80IB and 80IC of the Act should be restricted to the amount of business income computed. Accordingly, he restricted t .....

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rores. 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 .....

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ra) and submitted that the tax authorities were right in restricting the deduction to the amount of income from business included in the gross total income. 7. We heard the parties on this issue. We notice that the AO has placed reliance on the decision rendered by Hon ble Supreme Court in the case of SYNCO Industries Ltd (supra) in order to restrict the amount of deduction to the amount of Business income included in the Gross total income. A careful perusal of the above said decision would sho .....

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in any case, exceed the gross total income of the assessee. The expression Gross Total income has been defined in sec. 80B(5) of the Act to mean the total income computed in accordance with the provisions of the Act before making any deduction under Chapter VI-A of the Act . The Hon ble Supreme Court in the above cited case held that the losses suffered should be adjusted while working out gross total income and if the gross total income is NIL, then the assessee shall not be entitled to deduct .....

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of deduction allowable u/s 80IB and 80IC cannot exceed the business income, since it is the amount of profits and gains included in the Gross total income. In our view, the Ld CIT(A) has misdirected himself in interpreting the provisions of sec.80AB of the Act. A study of history of provisions 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 parliame .....

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ofits 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 sec. 80A(2) of the .....

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dend income of ₹ 4,35,008/- and claimed the same as exempt. The assessee did not disallow any expenditure relatable to exempted income as per the provisions of sec.14A of the Act. The AO computed the disallowance as per Rule 8D of the I.T Rules and accordingly disallowed interest expenses to the tune of ₹ 23,85,447/- and administrative expenses to the tune of ₹ 3,08,000/-. The Ld CIT(A) deleted the disallowance of interest expenses by holding that no part of interest bearing fu .....

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in view of the decision of Hon ble Bombay High Court rendered in the case of HDFC Bank Ltd (366 ITR 505), there is no requirement to make interest disallowance under rule 8D(2)(ii) of the IT Rules. Accordingly we confirm the order passed by Ld CIT(A) on this issue. 13. With regard to the expenses, we notice that the assessee has made investment only in its subsidiary companies during the year under consideration. In the preceding year, it had also made investment in units of two mutual funds an .....

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d 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 .....

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relief granted by Ld CIT(A) in respect of ESOP expenses. The assessee claimed deduction of a sum of ₹ 4.47 crores relating to the discount given on the stock option issued to employees. The AO noticed that identical issue was considered in the preceding years and the assessing officer had taken the view that the expenditure has not crystallized and accordingly disallowed the claim. Accordingly, by following the view taken in the earlier years, the AO disallowed the claim. The Ld CIT(A) not .....

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parties on this issue. We notice that an identical issue was considered by the Special bench of Bangalore in the case of M/s Biocon Limited Vs. DCIT (ITA No.368/B/2010 dated 18-07-2013)(25 ITR (Trib) 602) and the Special bench has 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 .....

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is directed to furnish the details that may be called for by the AO in this regard. 19. We shall now take up the appeal filed by the assessee for AY 2009-10. The first issue urged by the assessee relates to the claim for deduction u/s 80IC of the Act on the receipts from sale of scrap. This issue has been decided in favour of the assessee in the following cases:- (a) CIT Vs. Sadhu Forging Ltd (336 ITR 444)(Delhi) (b) CIT Vs. Harjivandas Juthabhai Zaveri (258 ITR 785)(Guj) Following the above sai .....

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e 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 .....

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crores made in the subsidiary company from the preceding year. During the year under consideration, the assessee has made fresh investment in the units of various mutual funds. Under these set of facts, as opined by us in the preceding AY, we are of the view that there is no requirement to apply the provisions of Rule 8D in view of the specific details available on record. The assessee has furnished a working as per which a sum of ₹ 2.00 lakhs has been worked out as disallowance u/s 14A of .....

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