TMI Blog2018 (2) TMI 1734X X X X Extracts X X X X X X X X Extracts X X X X ..... om State Government and the Government is allowing the grant from time to time and also allowing the assessee to adjust these liability against amounts payable to the government on account of lease rentals as well as development charges received from allottees. Prior period expenses disallowance - Held that:- CIT(A) has allowed the claim of the assessee by following the decision of this Tribunal in assessee’s own case. Therefore, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. We further note that the Hon’ble jurisdiction High Court in case of Pr. CIT vs. Rajasthan state Seed Corporation Ltd. [2016 (9) TMI 59 - RAJASTHAN HIGH COURT] has also decided this issue an identical issue in favour of the assessee. Disallowance of contribution to State Renewal Fund - contribution made to State Renewal fund is allowable u/s 37(1) Deduction u/s 80IA in respect of the interest and penal interest income - Held that:- Hon’ble Gujarat High Court in case of CIT vs. Suzlon Engery Ltd. (2013 (7) TMI 697 - GUJARAT HIGH COURT) we hold that the interest and penal interest received from debtor due to late payment is part of profit of industrial undertaking e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at:- Expenditure incurred in the said case was towards primary level society member which it is engaged in procurement of milks and therefore, the purpose of incurring the expenditure was for increasing procurement of milks and protecting the dairy farmers. On the other hand in the case of the assessee there is no nexus between the expenditure and the objects and business activity of the assessee. The expenditure has no direct connection/nexus with the business activity of the assessee then, in the absence of any provisions in the Income Tax Act the same cannot be allowed prior to the insertion of explanation 2 to section 37(1) w.e.f. 01.04.2015. No error or illegality in the order of the authorities below qua this issue. - ITA No. 311/JP/2014, 420/JP/2014, 323/JP/2016, CO No. 07/JP/2016, ITA No.313/JP/2014, 421/JP/2014, 93/JP/2015, 207/JP/2015, 94/JP/2015, 208/JP/2015 - - - Dated:- 23-2-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM Assessee by : Shri P.C. Parwal (C.A.) Revenue by : Shri Varinder Mehta ( CIT) ORDER PER BENCH: These are five sets of cross appeal/ cross objection are directed against the orders of ld CIT(A) dated 05.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) confirmed the addition made by the AO on account of difference in opening and closing stock of disputed land. 3. Before us, the ld. AR of the assessee has submitted that the assessee is having large chunk of land at various industrial area spread over throughout the Rajasthan. Some of the land situated at various industrial area is under litigation and/or under encroachment and these lands are not under the possession of company since long time. Unless and until land is evacuated and all disputes are resolved/ settled by the courts, corporation is not in position to occupy the said land. The detail of these land measuring 340.34 acres valuing to ₹ 1,258.75 lakhs is at PB 73-75. Copies of the reports of the unit in-charge of the Industrial area indicating the reasons why these lands were considered under litigation/encroachment along with necessary evidence for the same were filed before the AO comprising of 802 pages in two volumes. On some of the encroached land temple/tribal hostel/ cremation ground is constructed, on some area there is dispute with the forest department and some area are under the court litigation. The basic principal of valuation of stock is to va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs can be considered as the value of the encroachment/litigation under land. 4. On the other hand, ld. DR has submitted that the value of the land cannot be nil even if it is under encroachment/litigation. The assessee was earlier valuing the stock of land at cost prior to the assessment year 2006-07, therefore, the AO has rightly taken the value of land at cost. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as relevant material on record. At the outset we note that this Tribunal in assessee s own case for the assessment year 2007-08 vide order dated 24.06.2011 in ITA No. 1267 1387 of 2010 has considered this issue in para 5.7 as under:- 5.7 During the course of hearing, the ld. AR was asked as to whether land which has been valued at nil as on 31-03-07 to the extent of ₹ 145.33 11 crores was purchased during the year. We were informed that the land was not purchased in this year. We are not having the details of the litigation in respect of land for which valuation has been taken at nil from 31-03-06 to 31-03- 07. It is true that encroachment and litigation will have an impact on the on the valuation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of litigation or encroachment and the period when such lands were acquired and when the assessee became aware of encroachment or litigation. Hence, the issue of addition of ₹ 145.33 lacs is restored back on the file of the AO. We do feel that litigation and encroachment will affect the valuation of the 13 stock and such stock cannot be valued at cost price. With this observation, the matter is restored back on the file of the AO. In view of the earlier decision of this Tribunal and to maintain the rule of consistency, we are of the view that the addition made by the AO for the under year under consideration is dependent on the outcome to the addition made by the AO on this account in the earlier year. Therefore, in the facts and circumstances of the case we set aside this issue to the record of the Assessing Officer for deciding the same afresh in terms of the directions as given by the Tribunal for the A.Y. 2007-08. 6. Ground No. 1.1 is regarding alternative plea. Since the main issue is set aside to the record of the AO accordingly the alternative claim/ plea of the assessee is also required to be considered by the AO while adjudicating the issue of valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries area is not allowable. At the outset we note that the Tribunal in assessee s own case for the assessment year 2005-06 vide order dated 08.1.2010 in ITA No. 138/JP/2009 has considered and decided this issue in para 5 to 9 as under:- 5. The contention of the Id. A/R before us remained that the issue in the present case is to be decided as to whether the claim of the assessee can be disallowed on account of the expenditure being prior period expenses and whether in the circumstances the amount written off during the year can be allowed in - this year or not. He submitted that the assessee has been incurring the maintenance cost on the said industrial area and debiting it to the account of State Govt, under the hope that it would be reimbursed by State Govt. The State Govt, reimbursed a part of such expenditure in earlier year by way of grant in aid. After adjusting the same an amount of ₹ 770.62 lacs was outstanding as Expenditure Recoverable from Transferred Area ' as on 31.03.04. The assessee pursued for reimbursement of said amount with the Govt, but the same was not acceded to, as maintenance of industrial area was the object and activity of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. He referred to the minutes of the meeting held in the Chamber of Additional Chief Secretary, Finance on 19.08.2003, the extract of which is as under:- Minutes of the meeting held in the Chamber of the Additional Chief Secretary, Finance on 19th August, 2003 The issue relating to transferred industrial areas being maintained by RIICO was discussed at length in the meeting held in the chamber of the Additional Chief Secretary, Finance on 19' August, 2003. Following officers were present: 1. Shri M.D. Kaurani, Additional Chief Secretary, Finance In Chair 2. Shri S.P. Gupta, CMD, RIICO 3. Shri Ashok Jain, Commissioner. Industries 4. Shri R.K. Sharma, ED, RIICO 5. Shri Mahaveer Singh, OSD. Finance 6. Shri B.L. Garg, DS, Finance 7. Shri S.C. Vyas. FA. RIICO CMD, RIICO apprised the participants of the following background: 1. A number of 37 industrial areas developed and maintained by the Government were transferred to RIICO in September, 1979 for upkeep and maintenance. 2. An annual maintenance giant was provided by Government to RIICO for this work. 3. RIICO was also collecting development charges and economic rent from the allottees of plot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas being maintained by RIICO from 1st April, 2004. 9.The ld. A/R referred to the letter of the State Government dated 19.04.2006 wherein it has refused to make payment of the aforesaid amount. It is under these circumstances, the ld. A/R stated that, the Board of Directors of the assessee company have approved the write off of ₹ 770.62 Lacs recoverable from the State Government on account of expenditure incurred by the assessee on maintenance of transferred industrial area while approving the accounts for the year under consideration. Considering these material facts of the issue, we are of the view that the lower authorities were not justified in making and upholding the disallowance of ₹ 770.62 Lacs by treating it as prior period expenditure. We thus while setting aside the orders of the lowers authorities in this regard, direct the AO to accept the above claim of the assessee. The Ground no. 1 is this allowed. We further note that right from the beginning the assessee has been incurred expenditure for maintenance of the transferred area and showing the same as receivable from Government. Against which the State Government has permitted adjustment of liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical issue in favour of the assessee. 13. Ground No. 3 is regarding disallowance made by the AO in respect of contribution to State Renewal Fund was allowed by the ld. CIT(A). 14. We have heard ld. DR as well as AR and considered the relevant material on record. At the outset we note that an identical issue has been considered by this Tribunal in assessee s own case for the assessment year 2005-06 as well as for the assessment year 2007-08. The Tribunal vide order dated 24.06.11 in ITA No. 1267/JP/2010 for the assessment year 2007-08 has considered and decided this issue in paras 3.1 to 3.2 as under:- 3.1 The second ground of the Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 10.00 lacs made by way of disallowance of contribution to state renewal fund despite the fact that it was application of income and not business expenditure. 3.2 This issue has also been decided in favour of the assessee by the Tribunal while deciding the appeal for the assessment year 2005-06. The Tribunal at para 25 vide its order dated 8th Jan. 2010 has decided the issue in favour of the assessee and the same is reproduced as under:- 25. After conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hable as in this case the amount was set apart for the shareholders of the society whereas in the present case amount was provided for the benefit of the employees. In view of this the contribution made to State Renewal fund is allowable u/s 37(1). In view of above, we while setting aside the orders of the lower authorities in this regard, direct the AO to delete the addition of ₹ 10,00,000/- in question. 3.3 Following the order of the Tribunal, we hold that the ld. CIT(A) was justified in deleting the addition of ₹ 10.00 lacs Accordingly, in view of the earlier orders of this Tribunal in assessee s own case we do not find any error or illegality in the impugned order the ld. CIT(A) qua this issue. ITA No. 323/JP/16 and CO No. 07/JP/2016 arising from reassessment order: 15. The Revenue has raised the following grounds:- 1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in allowing deduction of ₹ 8,83,09,666/- on interest income (including penal interest income ₹ 8,83,09,666/- and other income of ₹ 56,05,249/-) 2. The appellant craves its rights to add, amend or alter any of the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e debtor timely the interest is charged from them for delayed payment. Therefore, ld. AR has submitted that the interest is received from the debtors and is part and parcel of the payment received by the assessee from the allottees and hence, the same is eligible for deduction u/s 80IA of the Act. In support his contention he has relied upon the decision of Hon ble Gujarath high Court in case of Nirma Indistries Ltd. vs DCIT 283 ITR 402 as well as decision of Hon ble Gujarat High Court in case of CIT vs. Suzlon Engery Ltd. 354 ITR 630 and submitted that the Hon ble Gujarat High Court has held that the interest received from trade debtors towards late payment of sales consideration is required to be included in the profits of the industrial undertaking for the purpose of deduction u/s 80IB of the Act. The ld. AR has submitted that the Hon ble Gujarat High Court has delivered the discussion after considering the decision in case of liberty India Ltd. vs. CIT (Supra). He has relied upon the decision of Hon ble Punjab and Haryana High Court in case of Phatela Cotgin Industries (P) Ltd. vs. CIT 303ITR 411. The ld. AR has also relied upon the decision of Hon ble Supreme Court in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Nirma Industries Ltd. (supra). In the said decision, the Court has held and observed as under :- However, the parties having made elaborate submissions the matter may be examined from a slightly different angle. When the assessee enters into a contract for sale of its products it could either stipulate (a) that interest at the specified rate would be charged on the unpaid sale price and added to the outstanding till the point of time of realisation, or (b) that in case of delay the payment for sale of products worth ₹ 100/- to carry the sale price of ₹ 102/- for first month's delay, ₹ 104/- for second month's delay, ₹ 106/- for third month's delay and so on. If the contention of revenue is accepted, merely because the assessee has described the additional sale proceeds as interest in case of contract as per illustration (a) above, such payment would not be profits derived from industrial undertaking, but in case of illustration (b) above, if the payment is described as sale price it would be profits derived from the industrial undertaking. This can never be, because in sum and substance these are only two modes of realising sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business. Such nexus cannot be only incidental. It therefore found, on the facts before it, that by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Obviously, the sale consideration therefrom could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not relate to manufacture or sale of the products of the undertaking, but related only to an event which was postmanufacture namely, export. On an application of the aforesaid test to the facts of the present case, it can be said that as all the four subsidies in the present case are revenue receipts which are reimbursed to the assessee for elements of cost relating to manufacture or sale of their products, there can certainly be said to be a direct nexus between profits and gains of the industrial undertaking or business, and reimbursement of such subsidies. However, Shri Radhakrishnan stressed the fact that the immediate source of the subsidies was the fact that the Government gave them and that, therefore, the immediate source not being from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct but is one step removed. Also, the object behind DEPB entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertaking or business itself. 21. The Calcutta High Court in Merinoply Chemicals Ltd. v. CIT [1994] 209 ITR 508, held that transport subsidies were inseparably connected with the business carried on by the assessee. In that case, the Division Bench held:- We do not find any perversity in the Tribunal's finding that the scheme of transport subsidies is inseparably connected with the business carried on by the assessee. It is a fact that the assessee was a manufacturer of plywood, it is also a fact that the assessee has its unit in a backward area and is entitled to the benefit of the scheme. Further is the fact that transport expenditure is an incidental expenditure of the assessee's business and it is that expenditure which the subsidy recoups and that the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, we are concerned in this case with the transport and interest subsidy which has a direct nexus with the manufacturing activity inasmuch as these subsidies go to reduce the cost of production. Therefore, the judgment in the case of Liberty India v. Commissioner of Income Tax has no manner of application. The Supreme Court in the case of Sahney Steel and Press Works Ltd. Others versus Commissioner of Income Tax, reported in [1997] 228 ITR at page 257 expressed the following views:- . . . . . Similarly, subsidy on power was confined to 'power consumed for production'. In other words, if power is consumed for any other purpose like setting up the plant and machinery, the incentives will not be given. Refund of sales tax will also be in respect of taxes levied after commencement of production and up to a period of five years from the date of commencement of production. It is difficult to hold these subsidies as anything but operation subsidies. These subsidies were given to encourage setting up of industries in the State of Andhra Pradesh by making the business of production and sale of goods in the State more profitable.' 23. We are of the view that the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. A Delhi High Court judgment was also cited before us being Dharam Pal Prem Chand Ltd.'s case (supra) from which an SLP preferred in the Supreme Court was dismissed. This judgment also concerned itself with Section 80-IB of the Act, in which it was held that refund of excise duty should not be excluded in arriving at the profit derived from business for the purpose of claiming deduction under Section 80-IB of the Act. 28. It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as the subsidies that are received by the respondent, would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies which are reimbursed on the incurring of costs relatable to a business, are under the head income from other sources , which is a residuary head of income that can be availed only if income does not fall under any of the other fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties would be included in the profit of undertaking eligible for deduction u/s 80IA of the Act. The Mumbai Benches of the Tribunal in case of ITO vs. Hiranandani Builders (supra) has analyzed this issue and held in para 15 as under:- 15. The next item of receipts relates to the Tender fees received by the assessee on sale of tender forms. The Ld CIT(A) has noticed that the assessee has availed the services of various sub-contractors for the purpose of carrying our various works in the IT parks and SEZ. In order to select the vendors (subITA contractors), the assessee has followed tender system and in that process, it has collected money on sale of tender forms. Hence, the Ld CIT(A) has held that the activity of inviting tender is very much part of the development and operation of SEZ and accordingly held that the sale of tender forms shall be eligible for deduction u/s 80IA of the Act. Since the tenders have been invited in connection with the development and operation of IT parks and SEZ, we are of the view that the Ld CIT(A) was justified in holding that the tender fees are eligible for deduction u/s 80IA of the Act. Accordingly, the income from all these activity associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before the hearing. 25. Grounds of the assessee s appeal is common to the ground raised by the assessee for the assessment year 2009-10. Accordingly in view of our finding on the adjudication of the issue for the assessment year 2009-10 the same stands set aside to the record of the Assessing Officer on the same terms. 26. Ground No. 1 of the Revenue s appeal is common to the ground raised for the assessment year 2009-10. Accordingly, in view of our decision on this issue for the assessment year 2009-10 the ground No. 1 of the Revenue s appeal stands dismissed. 27. Ground No. 2 is regarding the contribution to State Renewal Fund. This ground of Revenue s appeal is common to the ground raised for the assessment year 2009-10. Accordingly, in view of our decision on this issue for the assessment year 2009-10 the ground No. 2 of the Revenue s appeal stands dismissed. 28. Ground No. 3 is regarding the contribution to Centre for Development of Stones. During the year under consideration the assessee has claimed deduction of ₹ 1 crore on account of contribution to Centre for Development of Stones (CDOS). The assessee contended that the main object of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon ble jurisdiction High Court in case of ACIT vs. Rajasthan Spinning weaving Mills Ltd. 274 ITR 463. 31. We have considered the rival submissions as well as relevant material on record. The main object of the assessee is provided to developing, maintaining and operating industrial parks/SEZ units. Therefore, the assessee is in the business of providing infrastructure facilities to the industries in the State. The Centre for Development of Stones though is brought into existence for promotion and providing various facilities to a particular industry being Indian stones however, it is undisputed fact that the state of Rajasthan is heaving the majority of stone business in India and any steps taken for promotion of the stone industries will have a direct impact on the development of industries in the State of Rajasthan. The Hon ble jurisdiction High Court in case of ACIT vs. Rajasthan Spinning weaving Mills Ltd (supra) had the occasion to deal with a question whether the expenditure incurred on computerization of Mines Department of the Government of Rajasthan of ₹ 50 lacs does not qualify to be an expenditure expended wholly and exclusively for the purpose of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the Considering the above submissions, we are of the view that undisputedly assesseecost be awarded to the assessee. 33. Ground No. 1 is regarding contribution for construction of the Rajasthan Bhawan in Mumbai. The assessee has debited a sum of ₹ 2 Crores under the head contribution for construction of Rajasthan Bhawan, Mumbai. The AO observed that the expenditure is not incurred wholly and exclusively in connection with the assessee s business of Industrial area development and long term financing. It is merely an application of income and thus, not allowable u/s 37(1) of the Act. Accordingly, the AO disallowed the claimed of the assessee. On appeal, the ld. CIT(A) has confirmed the disallowance made by the AO. 34. Before us, ld. AR of the assessee has submitted that the contribution was made by the assessee for construction of Rajasthan Bhawan at Mumbai at the directions of the State Government of Rajasthan. The buildings after construction will not be available for use by the Officers of the assessee for official work which would result in the reduction of cost of lodging and boardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rooms were also in the hands of the State Government who has been charging the same on annual basis from the assessee. Thus in a sense only the facilities to use those allotted four rooms to the assessee were purchased on a lump-sum payment. It is an established position of law that in a case of ownership against immovable property, the unconditional interest in absolute term with freedom to sell, alienate ect. is transferred by the seller to the purchaser, which is admittedly not the case over here. Under these circumstances we are of the view that the Ld. CIT(A) has rightly come to the conclusion that no capital assets have been created to the assessee but only a privilege or a reservation of four rooms were made on permanent basis to the assessee. Therefore, the provisions og guest house at Delhi was in the normal course of business and expenditure incidental to it is of revenue nature. The ld. CIT(A) has rightly observed further that the AO has not appreciated the facts properly that total expenditure of ₹ 40,00,000/- was deferred in five equal instalments and only ₹ 8,00,000/- was debited in A.Y. 2003-04. Thus, the entire addition of ₹ 40,00,000/- need to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in the guest house as relevant factor set aside the issue to the record of the AO to examine the accommodation facility available to the assessee in Rajsthan Bhawan at Mumbai. 36. Since this letter dated 24.10.2017 was not available before the Coordinate Bench in case of Rajasthan Renewal Energy Corporation Ltd. (Supra) therefore, the AO was asked to examine the fact. However, in view of the said letter dated 24.10.2017 it is clear that the assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees visiting at Mumbai. Accordingly, in view of the earlier decision of this Tribunal in assessee s own case as well as in view of the fact that the assessee has received the benefit in the shape of accommodation against the said expenditure for construction of Rajasthan house we hold that the claim of the assessee is an allowable expenditure u/s 37(1) of the Act. 37. Ground No. 2 is regarding disallowance of deduction u/s 80IA of the Act. Ground No. 2 of the assessee s appeal is common to the ground raised by the assessee for the assessment year 2009-10. Accordingly in view of our finding on this issue for the assessment year 2009-10 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be invoked for disallowance merely because the assessee has incidental dividend income. He has further contended that even otherwise when the assessee has not incurred any expenditure for earning the dividend income then, no disallowance is called for. The ld. AR has referred to the assessee s own interest free funds which is more than 14 times of the investment of the value of stock and investment. Therefore, the ld. CIT(A) has rightly deleted disallowance on account of interest income. He has relied upon the decision of Hon ble Karnataka High Court in case of CCI Limited vs. DCIT 206 taxman 563, decision of Hon ble Punjab and Haryana High Court in case of PCIT vs State bank of Patiala 391 ITR 218 as well as decision of the Kolkata Benches of the Tribunal in case of DCIT vs. Gulsan Company Ltd. 86 DTR 262. 40. On the other hand, ld. DR has relied upon the order of the Assessing Officer. 41. We have considered the rival submissions as well as relevant material on record. The assessee provides long term finance to the industries by way of loan and equity participation. The shares held by the assessee under the equity participation as well as other securities are stock-in-trade. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that dividend also should be excluded from expenditure. In that view of the matter, the orders passed by the authorities are legal and valid. 5. When no expenditure is incurred by the assessee in earning the dividend income, no notional expenditure could be deducted from the said income. It is not the case of the assessee retaining any shares so as to have the benefit of dividend. 63% of the shares, which were purchased, are sold and the income derived therefrom is offered to tax as business income. The remaining 37% of the shares are retained. It has remained unsold with the assessee. It is those unsold shares have yielded dividend, for which, the assessee has not incurred any expenditure at all. Though the dividend income is exempted from payment of tax, if any expenditure is incurred in earning the said income, the said expenditure also cannot be deducted. But in this case, when the assessee has not retained shares with the intention of earning dividend income and the dividend income is incidental to his business of sale of shares, which remained unsold by the assessee, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r earning tax free income; that the tax free income was only incidental to the assessee's main business of sale and purchase of securities and, therefore, no expenditure had been incurred for earning such exempt income; the expenditure would have remained the same even if no dividend or interest income had been earned by the assessee from the said securities and that no expenditure on proportionate basis could be allocated against exempt income. The assessee also contended that in any event it had acquired the securities from its own funds and, therefore, section 14A was not applicable. 5. The Assessing Officer restricted the disallowance to the amount which was claimed as exempt income and added the same to the assessee's income by applying section 14A. The Assessing Officer accordingly applied rule 8D for determining the expenditure to be disallowed as per section 14A. He computed the exempt income as claimed by the assessee, namely, about ₹ 12.20 crores. The Assessing Officer found the total expenses allocated against exempt income to be ₹ 40.72 crores, but held that the same should not exceed the exempted income and, therefore, he restricted the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The assessee carves right to add, alter, amend, and modify any of the grounds of appeals. 6. The appropriate cost be awarded to the assessee. 44. For the assessment year 2012-13 the Revenue has raised the following grounds:- 1. Whether on the facts and in circumstances of the case the Ld. CIT (A) was justified in deleting the addition of ₹ 20,00,000/- made by disallowing contribution to State Renewal Fund. 2. Whether on the facts and in circumstances of the case the Ld. CIT (A) was justified in deleting the addition of ₹ 33,85,622/- on account of prior period expenses. 3. Whether on the facts and in circumstances of the case the Ld. CIT (A) was justified in deleting the addition of ₹ 3,00,00,000/- on account of contribution to SDOS. 4. Whether on the facts and in circumstances of the case the Ld. CIT (A) was justified in allowing deduction u/s 80IA(4) on interest income including penal interest income and on other income. 5. Whether on the facts and in circumstances of the case the Ld. CIT (A) was justified in allowing relief to the assessee out of addition made u/s 14A of the Income Tax Act. 45. Ground no. 2 of the assessee s appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely for the purpose of business. 49. Before us, the ld. AR of the assessee has submitted that the assessee is constituted with the main object of development of industries and entrepreneurs in the State of Rajasthan. In pursuance of these objects the assessee also carries various training and other programs for the development of entrepreneurial skills so there is growth of industries in the state of Rajasthan. The assessee has accordingly incurred expenditure of ₹ 53,48,000/- by providing assistance for 2,674 trainees @ ₹ 2,000/- per trainee to Apparel Training Development Centre. The expenditure has been incurred by the assessee for the purpose and object for which the assessee has been established and therefore, such expenditure is allowable business expenditure. In support of his contention he has relied upon the decisions of Hon ble jurisdiction High Court of CIT vs. Rajasthan Cooperative Dairy Federation Ltd. 229 taxman 34 as well as decision in case of ACIT vs. Rajasthan Spinning weaving Mills ltd. 274 ITR 463. 50. On the other hand, ld. DR has submitted that the expenditure incurred on Corporate Social Responsibility is not allowable expenditure under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, there was close nexus between the expenditure and business activity of the assessee. In case of CIT vs. Rajasthan Cooperative Dairy Federation Ltd. (supra) the High Court as held observation in paras 9 to 12 as under:- 9. We have considered the submissions of the ld. officer, appearing on behalf of the appellant-revenue and gone through the impugned order as also the order of the lower authorities. 10. In our view, the ITAT as well as CIT(A) have arrived at a finding of fact that the genuineness of the expenses is not doubted by the appellant-revenue and thus, when genuineness of the expenses has not been doubted by the appellant-revenue, then it is a finding of fact. We may further add that the respondent-assessee, as referred to herein above, is an apex body responsible for development of dairy activities in cooperative sector in the State of Rajasthan and the fundamental objectives of the respondent-assessee, as per its bye-laws, are as under: 3.1.To carry out activities for promoting production, procurement, processing and marketing of the milk and milk products for economic development of the animal husbandry/farming community. 3.2. Development and expansion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thus, in our view, these expenses are directly related to the business of the respondent-assessee and incurred for commercial expediency. It is also a finding of fact that the respondentassessee has also charged 'Cess' @1% of the sale value from milk unions for which receipts of ₹ 9,12,27,490/- have been offered as income by the assessee and when income has been offered by the respondent-assessee, then the said expenditure is certainly allowable as business expenditure. Furthermore, when such income of ₹ 9,12,27,490/- is already offered for taxation then question of adjustment against grant from NDDB does not arise. 12. We have also gone through the judgment relied by the officer of Kerala High Court in Season Rubber Ltd. (supra), however, the said judgment is totally distinguishable and not even remotely applicable to the facts of the instant case. Thus, it is clear that the expenditure incurred in the said case was towards primary level society member which it is engaged in procurement of milks and therefore, the purpose of incurring the expenditure was for increasing procurement of milks and protecting the dairy farmers. On the other hand in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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