TMI Blog2016 (7) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... restricting the disallowance to the extent of 1% of the exempted income - Held that:- AO has invoked the provision of Sec. 14A has made the disallowance under Rule 8D of the IT Rule without recording any satisfaction. We also find that assessee has sufficient fund in making investment in Indian companies. Therefore we can infer borrowed money has not been utilized in investment in Indian companies. AO has applied the formula given under Rule 8D of the IT Rules even on those investments which were made in foreign companies of the assessee without appreciating that the dividend income from foreign companies is not exempted to tax. Disallowance cannot be made for the investment made in foreign companies. We find that L’d CIT(A) has deleted the disallowance as per Rule 8D of IT Rules after taking into account the investment made in the Indian companies and for this reason, we find no reason to interfere in the order of Ld. CIT(A). Addition on employees’ contribution of PF - delayed payment - Held that:- Before us both the parties relied on the orders of Authorities Below as favourable to them. Considering the above facts and circumstances and relied on the case law of Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in law in deleting the addition made by the AO of ₹ 1,93,07,205/- for non deduction of TDS in respect of payments made to the shipping agents as reflected in the asst order who are assessed to tax in India and the payments received by them are taxable in India. 3. Facts in brief are that assessee in the present case is a Limited Company and engaged in manufacturing, processing, trading and export of tea, jute, coffee, black paper (golmarich) and other spices. The assessee, for the year under consideration has filed its return of income declaring total income at ₹1,20,29,840/-. Thereafter a notice u/s. 143(2)/142(1) of the Act was issued for conducting the scrutiny assessment upon assessee. 3.1 During the year, assessee has made payments for an amount of ₹ 1,93,07,205.00 to Indian Shipping agent of non-resident shipping companies for transportation of goods to the outward country. The said Shipping Companies were non-resident and therefore payment was made through their agents who are based in India. The Assessing Officer during assessment proceedings found that in none of the case TDS was deducted from the payment made to these Shipping Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstand that section 172 of the Act is applicable for the purpose of the levy and recovery of tax in case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. The non-resident shipping companies are liable to pay taxes u/s 172 of the Act and such companies have to discharge tax liability on payments for carriage of goods from India or have to make satisfactory arrangements for discharge of tax liability thereof. Accordingly in case shipping company is taxable u/s 172 of the Act and the obligation to pay taxes arises in the hands of the master of the ship or any agent appointed by assessee in India. In this regard, reliance could be placed upon Circular No. 723 issued by CBDT clarifying the scope of Section 172, 194C and 195 of the act in connection with deduction of tax at source from payments made to foreign shipping companies or their agents. The said Circular No. 723 provides as follows:- The provisions of Section 172 of the Act are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 are not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion he deleted the same. Being aggrieved by this order of L d CIT(A) Revenue is in appeal before us. Before us both the parties relied on the orders of Authorities Below as favourable them. 9. We have heard rival contentions and perused the materials available on record. At the outset, we find that similar issue is already covered in favour of assessee in assessee s own case in ITA No.683/Kol/2012 dated 13.11.2015 relates to AY 2007-08. The relevant extract in para-6 reproduced below:- 6. From the aforesaid discussion, we find that the AO has disallowed the expenses due to the violation of TDS provisions of the assessee. However the transaction for making the advertisement payment and commission are out of the purview of the TDS provisions in terms of the provisions of section 195 of the Act which reads as under : 195. [(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest [(not being interest referred to in section 194LB or section 194LC)] [or section 194LD] [***] or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries [***] shall, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) for ₹ 6,54,807/- and Rule 8D(2)(iii) for ₹ 4,38,670/- together totaling ₹ 10,93,477/-. The appellant has contested application of Rule 8D as it has not incurred any expenditure to earn dividend income of ₹ 25,370/-. The AR has further stated that the appellant has earned only a nominal amount of ₹ 25,370/- and the action of the AO to arbitrarily fixed disallowance of expenditu5re at ₹ 10,93,477/- was unreasonable and bad in law. In support the AR has cited the case of ACIT vs. Punjab state Co-operative and marketing Federation Ltd, 2011 IT No. 548 passed by the Hon'ble ITAT, Chandigarh Bench. I have examined the annual report FY 2007-08 of the appellant and find that the company as on 31.03.2008 had no unsecured loans and the only secured loan was from Karnataka Bank which was to be utilized only towards the working capital of the appellant. Hence, no amount of borrowed fund can be said to have been utilized for the purpose of making investment in shares/mutual funds from which exempt income has been earned. I further notice from the balance sheet as on 31.03.2008 that for making investment the appellant had substantial own funds under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. We have heard the rival contentions and perused the materials available on record. From the foregoing discussion, we find that AO has invoked the provision of Sec. 14A has made the disallowance under Rule 8D of the IT Rule without recording any satisfaction. We also find that assessee has sufficient fund in making investment in Indian companies which are placed on page 153 of the assessee s paper book. Therefore we can infer borrowed money has not been utilized in investment in Indian companies. AO has applied the formula given under Rule 8D of the IT Rules even on those investments which were made in foreign companies of the assessee without appreciating that the dividend income from foreign companies is not exempted to tax. Therefore, the disallowance cannot be made for the investment made in foreign companies. Considering the facts and circumstances of the case and in our considered view, we find that L d CIT(A) has deleted the disallowance as per Rule 8D of IT Rules after taking into account the investment made in the Indian companies and for this reason, we find no reason to interfere in the order of Ld. CIT(A). We also find that this Hon ble jurisdictional Court of Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit has been duly incorporated in Explanation 1 to Section115JB. Explanation 1 does not suggest that disallowances made u/s. 14A is to be added to the book profit of the appellant. I also agree with the case law cited by the AR in the case of Goetze (India) td. Vs. CIT 32 SOT 101 (ITAT, Delhi) where it has been held no addition to the book profit shall be made on account of expenditure incurred to earn exempt income. The AO is directed to recompute MAT u/s. 115JB accordingly. Being aggrieved by this order of L d CIT(A) Revenue is in appeal before us. 22. At the outset, we find that provisions to Sec. 115JB are starred with a non obstante clause which has overriding effect on the other provisions of Act. Therefore, the disallowance made under any other provision cannot be imported to the provision of Sec. 115JB of the Act. In this connection, we rely on the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT 255 (2002) ITR 273 (SC), we find that the issue is squarely covered in favour of the assessee and against the Revenue. Even otherwise, the assessee s issue is also covered by the decision of Hon'ble Apex Court in the case of Apollo Tyr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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