TMI Blog2018 (2) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] Addition made for computing profit u/s. 115JB in respect of expenditure relatable to exempt income - Held that:- Revenue by Hon'ble Bombay High Court in the case of Bangalore Finance and Investments Pvt. Ltd. (2015 (2) TMI 1263 - BOMBAY HIGH COURT). AO was not justified in adopting the disallowance made by him u/s. 14A of the Act for the purpose of computing book profit under section 115JB of the Act. Hence, the learned CIT(A) was justified in deleting the addition so made by the Assessing Officer. Rejection of claim for deduction of Service tax liability - Held that:- There appears to be no dispute with regard to the fact that the “input tax credit” relatable to exempt services are not eligible for input tax credit, since the AO himself has observed so in the assessment order. In the instant case, the assessee has provided both taxable and exempt services. Since the “input tax credit” relatable to exempted services are not eligible for input credit, the same has been charged to the Profit and Loss account. We have observed earlier that the service tax paid by the assessee is otherwise eligible for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D of the I.T. Rules which worked out to ₹ 125.43 lakhs. Accordingly he enhanced the disallowance u/s 14A to ₹ 125.43 lakhs. 4. Before the learned CIT(A), the assessee submitted that the own funds available with it is more than the value of investmenta and hence no disallowance u/r. 8D(2)(ii) out of interest expenditure is called for. The assessee also submitted that the disallowance made by it would meet requirements of Rule 8D(2)(iii). The learned CIT(A) was convinced with the contentions of the assessee and accordingly deleted enhancement made by the Assessing Officer. 5. The Learned Departmental Representative placed strong reliance on the order passed by the Assessing Officer. 6. On the contrary, the learned AR submitted that the disallowance u/s. 14A should not exceed dividend income as held by Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. (2015) 59 Taxman 295. He submitted that an identical issue was considered by the Coordinate Bench of the Tribunal in one of the sister concerns of the assessee named M/s. Morgan Stanley India Co. Pvt. Ltd. (ITA No. 1576/Mum/2016 dated 20.12.2017), wherein the Coordinate Bench followed the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% deducted by the assessee u/s. 194C of the Act. Hence, the Assessing Officer, by invoking provisions of section 40(a)(ia) of the Act, disallowed the amount of ₹ 2230.48 lakhs. 9. The learned CIT(A) noticed that an identical issue was adjudicated by him in the assessee s own case in A.Y. 2009-10, wherein the learned CIT(A) has deleted disallowance by following the decision rendered by Hon'ble Kolkata High Court in the case of S.K. Tekriwal (361 ITR 432), wherein it was held that disallowance u/s. 40(a)(ia) of the Act cannot be made in a case of shortfall in the case of tax deduction at source. Accordingly, the learned CIT(A) deleted the disallowance made by the Assessing Officer u/s.40(a)(ia) of the Act in AY 2009-10. Accordingly, by following the order passed by him in AY 2009- 10, the Ld CIT(A) deleted the disallowance made by the AO u/s 40(a)(ia) of the Act. Aggrieved by the order passed by the learned CIT(A), the Revenue has filed this appeal before us. 10. We heard the parties on this issue. We noticed that the Revenue had challenged the order passed by the learned CIT(A) in A.Y. 2009-10 by filing appeal before the ITAT. The Tribunal, vide its order dated 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default under section 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. Accordingly, we confirm the order of the Commissioner of Income-tax (Appeals) allowing the claim of the assessee and this issue of the Revenue's appeal is dismissed. 2. We find no substantial question of law is involved in this case and, therefore, we refuse to admit the appeal. Accordingly, the appeal is dismissed. Similarly, Hon'ble Gujarat High Court in the case of CIT vs. Prayas Engineering Ltd. in Tax appeal No. 1237/2014 dated 17.11.2014, deleted the disallowance on similar facts. Respectfully following the decision of Hon'ble Calcutta High Court in the case of S K Tekriwal (supra) and that of Hon'ble Gujarat High Court in the case of Prayas Engineering Ltd (supra), we confirm the order of the CIT(A) deleting the disallowance. 11. We noticed that the Coordinate Bench has followed the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The Learned Departmental Representative, on the contrary, placed reliance on the order passed by the Assessing Officer. 15. We noticed that the plea of the Revenue has been decided against the Revenue by Hon'ble Bombay High Court in the case of Bangalore Finance and Investments Pvt. Ltd. (supra). Accordingly, the Assessing Officer was not justified in adopting the disallowance made by him u/s. 14A of the Act for the purpose of computing book profit under section 115JB of the Act. Hence, the learned CIT(A) was justified in deleting the addition so made by the Assessing Officer. 16. Now we shall take up the appeal filed by the revenue for AY 2011-12. The first issue contested by the revenue relates to the disallowance made u/s 14A of the Act. During this year, the assessee declared dividend income of ₹ 40.02 lakhs. The assessee disallowed a sum of ₹ 60.85 lakhs u/s 14A of the Act. The AO, however, computed the disallowance as per Rule 8D, which worked out to ₹ 100.30 lakhs. Accordingly, the AO enhanced the disallowance made u/s 14A of the Act to ₹ 100.30 lakhs. 17. The Ld CIT(A) noticed that the own funds available with the assessee was ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered by us in the earlier paragraphs while dealing with the appeal of the revenue filed for AY 2010-11, wherein we have upheld the view taken by Ld CIT(A) for the reasons discussed therein. Accordingly, by following the same, we uphold the order passed by Ld CIT(A) on this issue. 23. We shall now take up the appeals filed by the assessee. The solitary issue urged by the assessee in both the years relate to the rejection of claim for deduction of Service tax liability. The facts relating to the same are discussed in brief. The assessee is liable to pay service tax on the services provided by it. Some of the services are taxable and some of the services are exempt under the Service tax Act. Accordingly the assessee was collecting Service tax on the taxable services rendered by it. 24. The assessee was also paying service tax on some of the services availed by it from other persons. As per the provisions of Service tax Act, the assessee would be eligible to avail input tax credit of the Service tax paid by it against the Service tax collected by it, i.e., the assessee would be eligible to deduct the input tax credit from the tax payable by it and accordingly the net amount s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt services to the Profit and Loss account, since it cannot be claimed as credit as per Service tax Rules. The Ld A.R also carried us through the paper book to show the workings furnished by the assessee before the AO, which depicts the segregation of total input credit amount between taxable services and exempt services. He also took us to the Profit and loss account to show that the assessee has duly transferred the Service tax relatable to the exempt services to the Profit and loss account. The Ld A.R also took us through the Service tax returns to show that the assessee has availed input credit relatable to taxable services only. 28. On the contrary, the Ld D.R supported the orders passed by the tax authorities. 29. We have heard rival contentions on this issue and perused the record. There should not be any doubt that the service tax paid by the assessee on the services availed by it, is normally allowed as deductible item of expenditure. As per the provisions of Service tax Rules, the assessee was allowed input tax credit in respect of service tax paid by it on the services availed by it. There appears to be no dispute with regard to the fact that the input tax credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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