Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2017 (9) TMI 1228

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... of investments - Held that:- Referring to assessee's pleadings that in case the disallowance is to be made, then the value of strategic investments made by the assessee in Special Purpose Vehicles needs to be excluded for computing the aforesaid disallowance, we find merit in the plea of assessee in this regard and accordingly, direct the Assessing Officer to re-compute the disallowance in the hands of assessee. The assessee has suo moto disallowed ₹ 6,01,956/- which may be considered as disallowance under Rule 8D(2)(iii) of the Rules. Accordingly, the ground of appeal No.1 raised by the assessee is partly allowed. Disallowance of Donation payment - Held that:- The assessee is carrying out the activities of upliftment of public at large and by way of making contributions for upgradation of Science lab or providing ambulance to organizations or contributing to the society by purchasing paintings, etc., then such activities of assessee are to create and establish image of assessee company in the eyes of public. The business carried on by the assessee is relatable to public at large, where the tenements built by the assessee were to be picked up by the public. Hence, the exp .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 52,13,941/- on account of donation paid by the appellant. 3. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and facts in confirming the disallowance of ₹ 1,10,81,202/- on account of provisions for leave encashment u/s.43B of the Act. 4. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and facts in confirming the disallowance of ₹ 41,58,745/- on account of employees compensation expenses. 5. The appellant craves leave of your Honour to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal. 3. The assessee has also raised the following additional ground of appeal:- 1. The Learned CIT(A) ought to have appreciated that the income of ₹ 13,82,94,326/- offered by the appellant in the return has also been assessed substantively in the hands of Vascon Hadapsar Ventures for A.Y. 2008-09 by its Assessing Officer and hence the said income cannot be assessed in the hands of the appellant as the same would amount to double taxation of the same income. 4. The additional ground of appeal raised by the assessee is against assessability of profits of ₹ 13,82,94,326/- offered by the assessee .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... capital and reserves and interest free funds in the form of current liabilities, against which the total investments considered by the Assessing Officer for calculating disallowance are only ₹ 41.25 crores. The plea of assessee was that since the own funds were sufficient and more than the amount invested, then no disallowance is to be made under section 14A of the Act. Reliance was placed on the ratio laid down by the Hon ble Bombay High Court in HDFC Bank Ltd. Vs. DCIT (2016) 383 ITR 529 (Bom). Another plea raised by the assessee before us was that strategic investments were made by the assessee in the said Special Purpose Vehicles i.e. being subsidiaries, joint ventures and partnership firms. The profits arising from investments of such Special Purpose Vehicles were shared by the assessee and other JV partners and the same should be excluded from total investments considered for the disallowance under section 14A r.w.s. 8D of the Rules. 10. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 11. We have heard the rival contentions and perused the record. The issue which arises in the present a .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... rpose of business under section 37(1) of the Act. The assessee claimed that where it was engaged in the business of development and construction of residential and commercial projects and several labourers were working at various sites of the assessee, the labourers often asked for contribution towards festival donations like Ganpati, Diwali and community celebrations, etc. Further, certain Donations were made to various organizations viz. Rotary Club, Educational Institutions, etc. The assessee claims that the said exercise was to build and establish better image of the company in the eyes of public. The assessee claimed that the expenditure was allowable as business expenditure under section 37(1) of the Act and the provisions of section 80G of the Act were mutually exclusive to section 37(1) of the Act. The Assessing Officer however, disallowed the claim of assessee in the absence of any receipts on account of 80G. 15. The CIT(A) upheld the order of Assessing Officer. 16. The assessee is in appeal against the order of CIT(A). 17. The learned Authorized Representative for the assessee stressed before us that the Donations were paid to various organizations around his bui .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... upliftment of public at large and by way of making contributions for upgradation of Science lab or providing ambulance to organizations or contributing to the society by purchasing paintings, etc., then such activities of assessee are to create and establish image of assessee company in the eyes of public. The business carried on by the assessee is relatable to public at large, where the tenements built by the assessee were to be picked up by the public. Hence, the expenditure incurred by the assessee in this regard is duly to be allowed as business expenditure in the hands of assessee. The facts before the Hon ble High Court of Allahabad in Electra India Ltd. Vs. CIT (supra), where advertisement material was given in the last three days of accounting year and where it was not possible to publish or advertise the name through medium of Board, then such expenditure was held to be being marginal advertisement content and was disallowed in the hands of assessee. However, the facts before us are at variance and we find no merit in the reliance placed upon by the learned Departmental Representative for the Revenue in this regard. Accordingly, we direct the Assessing Officer to allow the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... th vesting period of three years. Thus, total discount on issue of ESOPs to various employees was ₹ 1,24,76,235/-. The said expenditure was amortized over a period of three years starting from assessment year 2008-09 to 2010-11. The assessee during the year had claimed 1/3rd of total expenditure towards discount on issue of ESOPs to employees. The Assessing Officer did not allow the claim of assessee as no Fringe Benefit Tax (FBT) was paid on the said sum of ₹ 41,58,745/-. The plea of assessee that allowability of ESOP expenses and payment of FBT for ESOPs were two different aspects, was not accepted. The assessee also explained that shares were allotted in assessment year 2010-11 and hence, no FBT was due in the year under consideration. The claim of assessee was not allowed by the Assessing Officer and the CIT(A). 24. Before us, the learned Authorized Representative for the assessee pointed out that the Special Bench of Bangalore Tribunal in Biocon Ltd. Vs. DCIT (LTU) reported in 144 ITD 21 (Bang.) and the Pune Bench of Tribunal in Sandvik Asia Pvt. Ltd. Vs. ACIT in ITA Nos.1841 1842/PN/2012 and in cross appeals in ACIT Vs. Sandivk Asia Pvt. Ltd. in ITA Nos.2053 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates