TMI Blog2016 (4) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted before the Hon’ble High Court. The assessee has filed declaration under section 158A(1) claiming that identical question of law is pending before the Hon’ble High Court and whatever may be the final decision on the question of law, the same shall be followed and assessee will not raise any question before any appellate authority or before the High Court under section 260A. - Decided against assessee. Disallowance of expenditure under section 14A r.w. Rule 8D - Held that:- So far as disallowance under section 14A is concerned, the same is required to be made, as the assessee has earned exempt income for which no expenditure has been allocated or offered for the purpose of disallowance under section 14A. Only issue canvassed before us by the Ld. Counsel is that, investment made in the partnership firm should be removed from the working of Rule 8D and accordingly disallowance should be calculated and modified. To this extent, we agree with the contention raised by the Ld. Counsel and direct the AO that, in so far as investment in partnership firm is concerned, which is a strategic investment, the same should be excluded from the working of the value of average investment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3) for the assessee year 2008-09 along with other assessment year. Since commons issues are involved in both the appeals, therefore, same were heard together and are being disposed off by way of this consolidated order. For the sake of ready reference, the grounds of appeal in ITA No.2390/Mum/2014 is reproduced herein below:- Ground No. 1: TAXING OF SALES TAX BENEFIT RECEIVED UNDER POWER POLICY IN RESPECT OF WIND MILLS: (a) On the facts and circumstances of the case and in law, the teamed Commissioner of Income-tax (Appeals) {C.I.T. (A)} erred in confirming the action of the Assessing Officer of treating the sales tax subsidy being sales tax benefit of ₹ 56,00 835/- as revenue receipt liable to tax which was received by the appellant under power Policy of the State Government as incentive for setting up windmills in the Maharashtra State. He further erred in not accepting the contentions of the appellant that the said receipt was a capital receipt not liable to tax. (b) The ld. C.I.T. (A) erred in not appreciating the fact that the said subsidy was for the purpose of giving an incentive to set up the infrastructure in the form of windmill to generate power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee by the Tribunal and the matter is admitted before the Hon ble High Court. The assessee has filed declaration under section 158A(1) claiming that identical question of law is pending before the Hon ble High Court and whatever may be the final decision on the question of law, the same shall be followed and assessee will not raise any question before any appellate authority or before the High Court under section 260A. The revenue has also given its report on such declaration, which is reproduced hereunder:- The copies of declaration under section 158A(1) for AYs 2006-07, 2007-08 2008-09 submitted by the assessee before the ITAT and appeal filed by the assessee under section 260A for AY 2005-06 vide ITA No.1167 of 2014, have been perused. The assessee s contention is that its ground of appeal against the CIT(A) confirming the additions made by treating sales tax benefit as revenue receipt in AY 2005-06, 2006-07 2008-09 respectively, is identical to the question of law involved in its appeal filed u/s 260A before the Hon ble Bombay High Court, For AY 2005-06, which is pending as on date. The year-wise additions made in respect of Sales-tax Subsidy are as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is also exempt from tax. The AO, worked out the disallowance of ₹ 20,009/- in accordance with the Rule 8D, which has been confirmed by the CIT(A) also. 4. Before us, the Ld. Counsel submitted that, so far as the investment in partnership firm is concerned, the same was purely in the nature of strategic investment and no share income has been received in this year and therefore, to the extent of investment made in partnership firm same should be removed from working of Rule 8D. In support, he relied upon the decision of Hon ble Bombay High Court in the case of CIT vs Delite Enterprises. 5. On the other hand, Ld. DR strongly relied upon the order of the CIT(A). 6. After considering the rival submissions and on perusal of the relevant finding given in the impugned orders of the authorities below, it is noticed that so far as disallowance under section 14A is concerned, the same is required to be made, as the assessee has earned exempt income for which no expenditure has been allocated or offered for the purpose of disallowance under section 14A. Only issue canvassed before us by the Ld. Counsel is that, investment made in the partnership firm should be removed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay High Court in Vidyut Corp. (supra), the assessee was an industrial undertaking eligible for deduction under section 80IB. It has received interest on delayed payment on sale price of its product had claim deduction under section 80IB on such interest. In that case also, the Department has held that interest received could not be regarded as being derived from the industrial undertaking for the purpose of section under section 80IB. The Jurisdictional High Court, after referring to the decision of the Hon'ble Supreme Court in Liberty India (supra), held as under: Held, that what was received by the assessee from the purchaser was a component of interest towards delayed payment of the price of the goods sold, supplied and delivered by the assessee. There could be no dispute about the position that the price realized by the assessee from the sale of goods manufactured by the price realized by the assessee from the sale of goods manufactured by the industrial undertaking constituted a component of the profits and gains derived from the eligible business. The purchaser, on account of the delay in payment of the sale price also paid interest to the assessee. This formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such applying the purpose test as defined by the Supreme Court in the case of CIT versus Ponni Sugars Chemicals Ltd. 1[2008] 306 ITR 392 (SC)}, the same was in the nature of capital subsidy not liable to tax. Ground No. 2: DISALLOWANCE OF EXPENSES U/S. 14-A READ WITH RULE 8-D: (a) On the facts and circumstances of the case and in law, the ld. CIT(A) erred in not deleting the disallowance of ₹ 9,57,983/- made by the A.O. u/s. 14-A read with Rule 8-D instead directing him to make the disallowance as per Rule 8-D. (b) The ld. CTT(A) failed to appreciate that the AO has neither recorded any satisfaction with regard to correctness of the claim of the appellant having regard to the accounts nor did any further verification as to which expenses had any nexus with the exempt income of the appellant and as such no disallowance could have been made u/s. 14A of the Act. (c) The ld.CIT(A) erred in not following the decisions relied upon by the appellant including of the ITAT, Mumbai in the case of Raj Shipping Agencies Ltd. Vs. Addl. CIT reported in [2013] 38 taxmann.com 345 (Mumbai) for A Y 2009-10. Ground No. 3: DISALLOWANCE OF CLAIM FOR DEDUCTION U/S. 80-IA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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