TMI Blog2019 (10) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... de-novo after considering the issue in correct perspective. AO is directed to appreciate the suo-moto disallowance offered by the assessee and if not satisfied, recompute the disallowance keeping in view the ratio of binding judicial pronouncements and principals laid down regarding the same. The adjustment of disallowance u/s 14A while computing Book Profits u/s 115JB, in terms of clause (f) to explanation-1 to Sec 115JB(2), would be attracted only in case it is established that the assessee has actually debited any expenditure in profit loss account relatable to earning of any exempt. Resultantly, the ground stand allowed for statistical purposes. Treatment of lease rental income - HELD THAT:- Matter may be restored back to the file of Ld. AO on same lines as done by the Tribunal in assessee s own case for AY 2011-12. Therefore, following the earlier view of Tribunal for AY 2011-12, this matter stand restored back to the file of Ld. AO for fresh adjudication on similar lines as directed by Tribunal vide paras 4 to 6 of the stated order. This ground also stand allowed for statistical purposes. Interest disallowance u/s 36(1)(iii) - HELD THAT:- For this the Ld. AR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient interest free funds to carry out investments and hence no borrowed funds were utilized for purpose of investments; 3.No disallowance ought to made in respect strategic investments, not acquired with an intention of earning exempt income. 2.2. The learned CIT(A) grossly erred in not following the decision passed by the Jurisdictional Bombay High Court in the case of HDFC Bank Ltd. ([2014] 366 1TR 505 (Bombay) and wrongly relied on the decision of his learned Predecessor for AY 2011-12 while dismissing the appeal, without appreciating that the Predecessor CIT(A) had allowed the ground in favor of the Appellant for AY 2011-12. 2.3. Without prejudice to the above, the learned CIT (A) grossly erred in not rectifying the errors in calculating amount of disallowance u/s 14A as per Rule 8D. 2.4. Without prejudice to the above, the disallowance u/s. 14A ought to be substantially reduced. 3. Re: Reducing disallowance made u/s. 14A read with Rule 8D while computing 115JB: 3.1The CIT(A) failed to appreciate that the provisions of sec.115JB and sec. 14A are deeming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Appellant has leased out all its assets therefore the said assets have ceased to be business assets, without appreciating the fact that the said assets are the commercial assets of the Appellant. 4.3 On the facts and in the circumstances of the case and in law, the CIT(A) ought to have appreciated that the Appellant has actively pursued business of manufacture of chemicals and the allegations of the Assessing Officer that the Appellant has practically discontinued business are factually incorrect, hence lease income from lease of certain plant machinery and building should be treated as business income and not as income from other sources. 4.4 Without prejudice to the above, the learned CIT(A) failed to appreciate that pursuant to the Scheme of Arrangement between Anushakti Chemicals Drugs Ltd. and Spack Chemicals Pvt. Ltd. and Aarti Healthcare Ltd. approved by the Hon'ble High Court of Mumbai vide its order dated 10th August, 2011, the manufacturing business undertaking of Anushakti Chemicals Drugs Ltd. got demerged and demerged manufacturing business undertaking along with Spack Chemicals Pvt. Ltd. got merged simultaneously into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee earned exempt income of ₹ 15.99 Lacs against investments of ₹ 12.50 Crores but did not offer any disallowance u/s 14A. The assessee was show-caused as to why the disallowance u/s 14A read with Rule 8D was not to be made considering the investments so made. However, the assessee failed to submit any details. Hence, not satisfied, Ld. AO, applying Rule 8D, computed aggregate disallowance of ₹ 31.34 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for ₹ 27.12 Lacs and expense disallowance u/r 8D(2)(iii) for ₹ 4.21 Lacs. The said disallowance was added back while computing income under normal provisions as well as while computing Book Profits u/s 115JB. 2.3 As per stand taken in earlier years, it was found that the assessee leased out its building and Plant Machinery to an entity namely Aarti Industries Ltd. As per the terms of agreement, the assessee practically discontinued its business operations since then. The assessee offered lease rental income of ₹ 3 Crores as Business Income . However, following the stand taken in earlier years, the said income was brought to tax under the head income from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of Mumbai Tribunal in Dabur India Ltd. 145 ITD 175 which held that disallowance u/s 14A was covered under clause (f) to explanation 1 to Section 115JB(2). 3.2 Regarding treatment of lease rental, the assessee contended that letting out of commercial assets was business activity for the assessee and the assessee was engaged in commercial exploitation of the property for a set period of time with no intention of discontinuing its normal business activities. The attention was drawn to the fact that entire business unit was let out on as is where is basis. However, following the decision of its predecessor for AYs 2009-10 to 2011-12, Ld. CIT(A) confirmed the stand of Ld. AO on this count. 3.3 Regarding interest disallowance u/s 36(1)(iii), it was submitted that no borrowings were made to acquire the fixed assets rather the assessee had sufficient interest free funds to make capital advances. In the alternative, it was pointed out that the disallowance was to be restricted as per the actual usage of funds for capital advances and CWIP. Reliance was placed on the decision of Hon ble Bombay High Court rendered in Reliance Utilities 18 DTR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption was to be drawn in assessee s favour that own funds were used to make the investments. However, no such exercise emanates from quantum assessment order. 5.4 Therefore, upon carful perusal of facts and circumstances, we find that matter of disallowance u/s 14A has not been properly addressed by lower authorities. Therefore, on the facts and circumstances, we deem it fit to remit the matter of disallowance u/s 14A while computing income under normal provisions as well as while computing Book Profits u/s 115JB to the file of Ld. AO for adjudication de-novo after considering the issue in correct perspective. The Ld. AO is directed to appreciate the suo-moto disallowance offered by the assessee and if not satisfied, recompute the disallowance keeping in view the ratio of binding judicial pronouncements and principals laid down regarding the same. The adjustment of disallowance u/s 14A while computing Book Profits u/s 115JB, in terms of clause (f) to explanation-1 to Sec 115JB(2), would be attracted only in case it is established that the assessee has actually debited any expenditure in profit loss account relatable to earning of any exempt. Resultantly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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