TMI Blog2018 (9) TMI 1743X X X X Extracts X X X X X X X X Extracts X X X X ..... e to exclusive method of accounting followed, we do not see any error in the conclusion drawn by the CIT(A). Disallowance of interest under s.14A - Held that:- We find merit in the plea of the assessee that Rule 8D(2)(ii) shall have no application in the given facts where the interest income earned outweigh the interest expenditure. In consonance with the decision of the Hon’ble Gujarat High Court in PRINCIPAL COMMISSIONER OF INCOME TAX-3 VERSUS NIRMA CREDIT AND CAPITAL PVT. LTD [2017 (9) TMI 485 - GUJARAT HIGH COURT], we decline to interfere with the conclusion drawn by the CIT(A) on the issue in favour of the assessee. MAT - adjustments in the book profit computed under s.115JB of the Act following the disallowance under s.14A - Held that:- We direct the AO to delete the adjustments made on account of estimated disallowance determined under s.14A of the Act while computing ‘book profit’ under u/s.115JB of the Act. - I.T.A. Nos. 1623/Ahd/2013 & 2895/Ahd/2014, CO No. 190/Ahd/2013 - - - Dated:- 6-9-2018 - Shri Pradip Kumar Kedia, Accountant Member And Smt. Madhumita Roy, Judicial Member For the Appellant : Shri Saurabh Singh, Sr. D.R For the Respondent : Shri Var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ora of decisions of the co-ordinate bench on the issue. 6. Learned DR however relied upon the order of the AO. 7. We have carefully considered the rival submissions on the issue towards applicability of Section 145A of the Act as well as perused the orders of the lower authorities. While it is the case of the AO that the element of excise duty / CENVAT etc. would represent part of the closing stock of the assessee in terms of Section 145A of the Act, it is the case of the assessee, on the other hand, that Section 145A of the Act has no application to the facts of the case. It is further case of the assessee that it follows exclusive method of accounting for valuation of inventory and therefore, entire exercise would be tax neutral. We notice that Section 145A falls under the Chapter XIV procedure for assessment. It essentially deals with method of accounting and is in the nature of machinery provision. Section 145A inter alia provides that inventory of goods shall be valued in accordance with method of accounting regularly employed by the assessee. We observe that the CIT(A) has examined the issue on facts and binding judicial precedents and concluded the issue in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is required to be factored for the purpose of ascertaining the amount of expenditure incurred by the assessee by way of interest, we find merit in the plea of the assessee that Rule 8D(2)(ii) shall have no application in the given facts where the interest income earned outweigh the interest expenditure. In consonance with the decision of the Hon ble Gujarat High Court, we decline to interfere with the conclusion drawn by the CIT(A) on the issue in favour of the assessee. 14. In the result, Ground No.2 of the Revenue s appeal is dismissed. 15. In the result, appeal of Revenue in ITA No.1623/Ahd/2013 for AY 2009-10 is dismissed. Assessee s Cross Objection No. 190/Ahd/2013-AY 2009-10 16. The grounds of appeal raised by the assessee in the captioned cross objection concerning AY 2009-10 reads as under:- 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the disallowance to the extent of ₹ 165,150 u/s. 14A of the I.T. Act. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the disallowance of ₹ 1,23,000 made by the Assessing Officer u/s.40(a)(ia) of the I.T. Act under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of facts as well as submissions before the CIT(A) (in para no. 3.4 page no.24 of the order of the CIT(A)), the assessee has asserted that as against the interest expenditure of ₹ 67.97 Crores considered for making disallowance, the assessee has earned taxable interest income of ₹ 68.71 Crore. It is thus the case of the assessee that the assessee has not incurred any interest expenditure effectively which calls for disallowance under Rule 8D(2)(ii) of the IT Rules. The assessee has also contended before the CIT(A) that the interest free funds available at the disposal of the assessee far exceeds the corresponding investments giving rise to the tax free income. The CIT(A) has followed the conclusion rendered in AY 2009-10. Consistent with our view taken in AY 2009-10 on similar facts, we find no infirmity in the conclusion drawn by the CIT(A) granting relief to the assessee on this count. We thus decline to interfere. 23. In the result, Ground No.3 of the Revenue s appeal is thus dismissed. 24. Ground No.4 concerns adjustments in the book profit computed under s.115JB of the Act following the disallowance under s.14A of the Act. 25. The AO has increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are disposed to assign merits to the contentions on behalf of the assessee. At this juncture, we pause to note the concern of revenue seeking to plead possible redundancy of clause(f) to Explanation to s.115JB in the event of disagreement with the action of AO. We are alive to such concerns. However, as noted, we are governed by the superior wisdom available in this regard. Hence, remedy to revenue, if any, perhaps lies elsewhere. Accordingly, respectfully following the decisions governing the field, we direct the AO to delete the adjustments made on account of estimated disallowance determined under s.14A of the Act while computing book profit under u/s.115JB of the Act. 7. In the result, appeal of the assessee is allowed. By the same token, the appeal of the Revenue integrated to same point requires to be decided in negative and against the Revenue. 27. In the light of the aforesaid decision of the co-ordinate bench relied upon by the assessee, we do not see any error in the conclusion drawn by the CIT(A). 28. In the result, Ground No.4 of the Revenue s appeal is dismissed. 29. In the result, appeal of the Revenue concerning AY 2010-11 is dismissed. 30. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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