TMI Blog2019 (8) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... B in an independent manner. AR submitted that the investment held by the assessee had been brought forward from earlier years and most of the investments have been made long back. During the year under consideration, the assessee has earned dividend income and has also sold some of its shares. Thus we notice that there is no much of activity for the purpose of earning exempt income. In order to put this issue at rest, we are of the view that the amount of disallowance computed u/s 14A of the Act, in the facts and circumstances of the case, would meet the requirements of clause (f) of Explanation 1 of sec.115JB of the Act. We make it clear that we have held so only to put this issue at rest for the year under consideration, as it is an old matter. Accordingly direct the AO to adopt the 2% of the dividend income for the purpose of computing disallowance under Clause(f) of Explanation (1) to Section 115JB TP Adjustment - comparable selection of M/s. Escorts Ltd.- HELD THAT:- TPO has rejected M/s. Escorts Ltd., only for the reason that the data was not available for the period under consideration, since M/s. Escorts Ltd., was following different financial year. Since M/s. Escor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. However, the computations given by the assessee requires verification. Accordingly we restore this issue to the file of the AO for the limited purpose of examining and satisfying himself with the figures furnished in the reconciliation statement filed by the assessee. In case of variation, the AO may make the addition to the extent of variation. Addition made u/s. 50C - HELD THAT:- Since the submissions made by assessee relate to factual aspects, we are of the view that the same requires verification at the end of the AO, since the DVO has omitted to consider important aspect that the stamp duty valuation is different for Pillaiyar Koil Street and Old Mahabalipuram Road. When question as to whether this difference was not brought to the notice of Stamp valuation authority, since the Stamp valuation authority also appears to have adopted the valuation applicable to Old Mahabalipuram Road, the Ld A.R submitted that the stamp duty was paid by the purchaser and further the purchaser, being a software company, it was getting concession of stamp duty also. Since the assessee is bringing new facts, we are of the view that this issue requires fresh examination at the end of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aran, Accountant Member And Shri Amarjit Singh, Judicial Member For the Appellant : Mrs. Arti Vissanji For the Respondent : Shri Vikash Kumar Agarwal ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: These cross appeals are directed against the order dated 24-02-2015 passed by the Ld. Commissioner of Income Tax (Appeals)-56, Mumbai and they relate to the AY. 2005-06. 2. The facts relating to the issue are stated in brief. The assessee is engaged in the business of manufacturing of marine and industrial gearboxes, diesel engines and generating sets etc. The assessee filed its return of income for the year under consideration declaring total income at NIL under the normal provisions of the Income Tax Act (Act) and declaring ₹ 8484.51 Lakhs as book profits u/s. 115JB of the Act. The AO completed the assessment by making various additions. 3. In the appeal filed by the assessee before the Ld. CIT(A), the assessee got partial relief. 4. Aggrieved by the order passed by the Ld. CIT(A), both the parties are in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly by following the decision rendered by the Hon'ble Bombay High Court in the case of CIT Vs. Godrej Agrovet Ltd (supra), we modify the order passed by the Ld. CIT(A) and direct the AO to restrict the disallowance u/s. 14A of the Act to 2% of the dividend income earned by the assessee. 6. The next common issue relates to disallowance of expenditure relating to exempt income for the purpose of computing book profits u/s. 115JB of the Act: 6.1. The AO adopted disallowance made by him u/s. 14A of the Act while computing total income, for the purpose of computing the book profit also. The Ld. CIT(A) also directed the AO to add the amount of disallowance confirmed by him u/s 14A of the Act, for the purpose of computing book profit under Section 115JB of the Act. 6.2. Both the parties are aggrieved. 6.3. We heard both the parties on this issue. Ld. AR placed reliance on the decision rendered by the Delhi Special Bench of ITAT in the case of Vireet Investment Pvt. Ltd., [165 ITD 27] and contended that the amount computed u/s. 14A of the Act cannot be adopted for the purpose of Section 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has ended on 31.3.2005. Accordingly, the TPO made an adjustment of 122.41 Lakhs. Ld. CIT(A) also confirmed the same. 7.2. Ld. AR submitted that M/s. Escorts Ltd., is functionally comparable company and only reason given by the TPO for rejecting the same is non-availability of data for the period under consideration. 7.3. Ld. AR submitted that M/s. Escorts Ltd., was accepted as a comparable by the Tribunal in assessee s own case for the AY. 2004-05 and the matter was restored to the file of AO for examining the same afresh. Ld. AR further submitted that the AO/TPO in the order giving effect to the order of ITAT, did not make any adjustment. Accordingly, Ld. AR submitted that M/s. Escorts Ltd., also be directed to be accepted as comparable. 7.4. Ld. DR on the contrary supported the order passed by the Ld. CIT(A). 7.5. We noticed that the issue relating to M/s. Escorts Ltd., was examined by the Co-ordinate Bench in assessee s own case in ITA No. 7356/Mum/2011 relating to AY. 2004-05, wherein the matter has been restored to the file of AO/TPO for examining the same. We further noticed that the TPO has rejected M/s. Es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the record. For the reasons stated in the preceding paragraph, we prefer to restore the issue back to the file of AO. We noticed that Coordinate Bench has restored the identical issue in assessee s own case for the AY. 2004-05 with the following directions: 23. We have considered the rival submissions and also perused the relevant material on record. The issue involved in the present case is relating to the determination of arm's length price in relation to the international transactions involving payment of royalty by the assessee company to its associated enterprises. As provided in section 92C of the Act, such arms's length price is to be determined by one of the methods prescribed, which is found to be the most appropriate method having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as may be prescribed. The manner in which such most appropriate method is to be applied for determination of arm's length price is prescribed in Rule 10B of Income-tax Rules, 1962. In the present case, it appears from the TP report submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier year and accordingly directed the AO to do the same. 9.2. Before us, the Ld A.R submitted that the assessee has been following exclusive method of accounting for accounting Centvat amount. She submitted that there will be no impact on profit, even if inclusive method is followed, i.e., even if the Cenvat amount is included in the opening stock, purchases, sales and closing stock as per the provisions of sec.145A, there would be no impact on the profit. Accordingly she submitted that impugned addition should be deleted. The Ld A.R also referred to the workings given in page no.80 of the paper book to support her contentions. 9.3. We have heard Ld D.R and perused the record. The provisions of sec.145A require following of inclusive method of accounting the duties and taxes for the purpose of taxation. The assessee has followed exclusive method, by which the Cenvat was accounted separately without including the same with purchases, sales, stock. Both are recognised methods of accounting. The question of making any addition would arise only if the method employed by the assessee is having any effect on profit. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luing the property, without considering this important aspect. The Ld. AR also furnished a copy of stamp duty valuation downloaded from the website of Registration Department of Government of Tamil Nadu to show that there is difference in valuation for Old Mahabalipuram Road and Pillayar Koil Street. The Ld. AR also invited our attention to the map placed at Pg. No. 118 of the Paper Book in order to demonstrate that the portion of land sold by the assessee is accessible only from Pillaiyar Koil Street. 10.4. We have heard the Ld. DR and perused the record. Since the submissions made by assessee relate to factual aspects, we are of the view that the same requires verification at the end of the AO, since the DVO has omitted to consider important aspect that the stamp duty valuation is different for Pillaiyar Koil Street and Old Mahabalipuram Road. When question as to whether this difference was not brought to the notice of Stamp valuation authority, since the Stamp valuation authority also appears to have adopted the valuation applicable to Old Mahabalipuram Road, the Ld A.R submitted that the stamp duty was paid by the purchaser and further the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the provisions of sec.28(iv) would not apply to the impugned transaction, since the provisions of sec.28(iv) has been held to be applicable only when the benefit is received otherwise than in cash as per the decision of Hon ble Supreme Court rendered in the case of CIT vs. Mafatlal Gagalbhai Co. (219 ITR 644). We agree with the contentions of the Ld A.R. Though the AO has stated that the decision rendered by Hon ble Bombay High Court in the case of Mahindra and Mahindra (261 ITR 501) is based on the facts of that case, yet the Hon ble Bombay High Court has held in clear terms that Section 28(iv) does not apply to benefits in cash or money (see CIT v. Alchemic Pvt. Ltd.). 11.3. The Ld A.R further submitted that the provisions of sec.41(1) also would not apply, since the waiver relates to the term loan and further the assessee has not claimed corresponding amount as deduction. However, from the observations made by Ld CIT(A), we notice that the assessee has failed to demonstrate the user of the loans taken from Bank of Baroda, i.e., it was not shown that the loan amount was used for acquiring capital assets. Further it is not clear as to whether the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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