TMI Blog2018 (1) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... for the amount involved, from the facts of the last AY. Therefore, following the order of the Tribunal for that year, and the aforesaid judgment of the Hon’ble Bombay High Court for the same year, we decide the effective ground of appeal in favour of the assessee. Disallowance under section 14A - Held that:- AO has not pointed out as to why the disallowance made by the assessee was not acceptable. In our opinion the provisions of section 14A read with rule 8D of the Rules cannot be applied mechanically. The AO is supposed to give a clear-cut finding as to how and why the provisions of the section14A are applicable and as to why the disallowance made by the assessee is not acceptable. In the cases of Aditya Birla Finance Ltd. (2017 (6) TMI 827 - ITAT MUMBAI), the Tribunal has held that the AO, without giving any finding about the suo motu disallowance made by the assessee, cannot make any addition u/s. 14A r. w. r. 8D of the Rules. Disallowance of expenses incurred on shifting of office, treating it as a capital expenditure - Held that:- We find that the AO and the DRP has held that the expenditure incurred by the assessee was transactional expense, that the assessee has cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exports, that the DRP directed to the AO to allocate the same to Section 10A and Section 10 B units. As the units claiming deduction u/s. 80 IB and 80IC were not engaged in exports and therefore no interest could be allocated to those units. While deciding the appeal, filed by the assessee, for the AY. 2006-07 the Tribunal [2012 (12) TMI 458 - ITAT MUMBAI] held interest could not be allocated to 80IB and 80 IC units also confirmed by HC. Adjusted value of closing stock - Held that:- We are of the opinion that the directions of the DRP do not suffer from any legal infirmity. Closing Balance of an year automatically becomes Opening Balance for the later year. Therefore, we are unable to comprehend the logic behind raising the ground. Secondly, the AO as per the judgment of Goetz India cannot entertain a new claim without filing a fresh return of income. But, the appeallate authorities can allow the new claim made for the first time before them, as held by the Bombay High Court in the case of Pruthvi Brokers & Shareholders (2012 (7) TMI 158 - BOMBAY HIGH COURT) Non allocating interest for working disallowance u/s. 14A - Held that:- As we have endorsed the views of the DRP th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged by the assessee, that that business auxiliary services rendered by the assessee were functionally comparable with the seven comparable companies, namely Ajcon Global Services Ltd. , Brescon Corporate Advisors Ltd. , Epic Energy Ltd. , Sumedha Fiscal Services Ltd , Integrated Enterprises (India) Ltd. and NIS Sparta Ltd. , that no royalty was payable by the assessee in respect of turnover of Beauty, Make-up preparations, Toilet Soaps and Bathing Bars, that the entire technology required in connection with those products was owned and developed by the assessee, that the AO had rightly determined arm's length at NIL for those transactions, that that the assessee ought to have received royalty of ₹ 26, 22, 000/- from Nepal Lever Ltd. The DRP further held that the TDS @15% amounting to ₹ 14. 08 crores service tax amounting to ₹ 7. 94 crores and R D Cess amounting to ₹ 2. 49 crores, paid by the assessee, on royalty remitted to Unilever Plc. -under the Technical Collaboration Agreement, between the assessee and the AE-was excessive. It alternatively held that if royalty were to be bifurcated then the tax payment made by the assessee could not be regarded an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the DRP has inadvertently observed that assessee had not taken any ground before it about business auxiliary services, that grounds number 7 raised by the assessee before it dealt with the issue of business auxiliary services. that detailed submissions were made before DRP in that regard. But, as the issue is part of the umbrella of TP adjustment, so, in our opinion, there is no need to adjudicate the issue separately, raised by the assessee. 3 . Disallowacne of deductions under sections 80IB, 80IC, 10A and 10B of the Act, is the subject matter of second effective ground of appeal (GOA-12 13). 3 . 1 . It was brought to our notice that the ITAT had partly allowed the identical issue in favour of the assessee, while adjudicating the appeals for the AY. 1985-86 to AY. 1997-98 AY. 2006-07. The AR referred to paragraph 8 of the order for the AY. 1996-97(Pg. 78 of the PB), paragraph 5 of the order for the AY. 1997-98(Pg. 88 of the PB)and paras 39 and 40 of the order for the AY. 2006-07(Page no. 33-34 of the PB). He further informed that the department had not preferred any appeal against the relief, granted by the ITAT, before the Hon ble High Court for the AY. 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6 . 1 . The DRP, after considering the objections of the assessee held that out of the total interest expenditure of ₹ 21. 78 crores expense to the tune of ₹ 20. 64 crores, related to export income, should not be considered for working out the disallowance under section 14A of the Act. The AO after considering the disallowance made by the assessee recomputed the disallowance and made an addition of ₹ 2. 85 crores. 6 . 2 . Before us, the AR contended that without giving any adverse finding on the amount offered by the assessee suo-motu the AO had made the disallowance, that in the absence of rebutting of assessee's claim of expenses, disallowance under Rule 8D was not sustainable. He relied upon the cases of Godrej Boyce Manufacturing Company Ltd. (394 ITR 449) (SC), Aditya Birla Finance Ltd. (165 ITD 659)Smartchem Technologies Ltd. (85 taxmann. com 43). The DR stated that the matter could be decided on merits. 6 . 3 . We find that while making the disallowance under section 14A of the Act, the AO/DRP has not dealt with the objections raised by the assessee, that AO has not pointed out as to why the disallowance made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No . 390 / Kol / 2013 ) order dated 02 / 03 / 2016, M / s Raptakos Brett Co . Ltd . vs Addl . CIT ( A ) ( ITA No . 7490 / Mum / 2013 ) order dated 10 / 11 / 2016 supports the case of the assessee . The ratio laid down in M / s Fedex Finance Pvt . Ltd . vs DCIT ( ITA No . 1073 and 1067 / Mum / 2013 ) and M / s White Water Mass Media vs ACIT ( ITA No . 2963 / Mum / 2013 ) supports the case of the assessee . It is also noted that during assessment proceedings, the report of the accountant, specifying the basis for calculating the amount disallowable u / s 14A of the Act was submitted by the assessee and the Ld . Assessing Officer without rejecting the report mechanically applied Rule - 8D and computed the amount of disallowance, which cannot be said to be justified . At best, the disallowance may be restricted as suo - moto made by the assessee . Thus, no further disallowance was required to be made . Respectfully following the above two orders of the Tribunal, we decide effective grounds 17- 18(Gs. OA 26-28)in favour of the assessee. 7 . Next ground of appeal is about CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure incurred by the assessee was transactional expense, that the assessee has claimed that expenditure was incurred for a temporary site and that before shifting to the new office premises the assessee had incurred the expenditure. From the order of the AO the factual position is not emerging clearly. Therefore, we are of the opinion that matter needs to be further verified by the AO. In the interest of Justice, we are restoring back the issue to the file of the AO for fresh adjudication. The assessee is directed to file the details of expenditure incurred to prove that same was incurred for shifting the office to a temporary site. It should also file the chronology of shifting of office premises along with the necessary documentary evidences. If the claim made by the assessee is found correct, then the AO should not make any addition to the income of the assessee. Accordingly, we decide the ground in favour of the assessee, in part. 9 . Ground no. 21 is about incorrect disallowance u/s 36(1)(va)of the Act. Before us, it was submitted that PF/ESIC dues were paid by the assessee within grace period, that no dis - allowance was called for. The assessee placed relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case. So, no hard and fast rule can be made in that regard. In the matter under considerationthe DRP has given a finding of fact that assessee was not in the business of money lending, that the surplus funds available with it were kept in various deposits on which interest income had been earned. Nothing has been brought on record that finding given by the DRP is not based on facts. In our opinion, if surplus available with an assessee earns interest from the deposits made by it, then it cannot be taxed under the head business income. In short, the DRP has rightly observed that the assessee is not in the business of money-lending/earning income from its business. Therefore, in our opinion there is no need to disturb the directions of the DRP. Last ground of appeal is decided against the assessee. ITA / 1445 / Mum / 14, AY . 2009 - 10 : 11 . First effective ground of appeal(Gs. AO-1 to 3), raised by the AO, is about TP adjustments. The DRP had directed the AO to delete the TP adjustments on the ground that the variation was within 5% limit of ALP specified. 11 . 1 . We have already observed in the earlier part of our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of opening stock in subsequent year. We are of the opinion that the directions of the DRP do not suffer from any legal infirmity. Closing Balance of an year automatically becomes Opening Balance for the later year. Therefore, we are unable to comprehend the logic behind raising the ground. Secondly, the AO as per the judgment of Goetz India cannot entertain a new claim without filing a fresh return of income. But, the appeallate authorities can allow the new claim made for the first time before them, as held by the Bombay High Court in the case of Pruthvi Brokers Shareholders(349 ITR 336). Considering the above, we decide both the grounds against the AO. 14 . Last ground of appeal is about not allocating interest for working disallowance u/s. 14A of the Act. While completing the assessment the AO had made 14A disallowance, as stated in the earlier paragraphs of our order. 14 . 1 . Deciding the objections, filed by the assessee, the DRP held that the interest pertained to exports. It directed the AO to allocate the same to Section 10A and Section 10B units. 14 . 2 . Before us, the DR supported the order of the AO and the AR relied upon the directions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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