9911796707
TMI Blog2019 (12) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... law in not appreciating that the liability having crystallized and discharged by the appellant, section 43B of the Act could not have been invoked. 1.2 That CIT(A) erred in not appreciating that the said amount was deposited on specific directions of the Hon'ble Orissa High Court and there was actual outflow of cash from the Appellant, which tantamounts to actual payment for the purposes of Section 43B of the Act. 3. Apropos these grounds, ld counsel for the assessee, in all fairness, submitted that ITAT, Cuttack Bench vide order dated 13.6.2015 in ITA No.521/CTK/2013 for assessment year 2009-2010 has dismissed similar grounds of the assessee on identical facts. Ld counsel further submitted that the assessee has filed appeal before the Hon'ble Jurisdictional High Court and the Hon'ble High Court vide order dated 8.2.2016 passed in ITA No.20/2014 has admitted the appeal of the assessee on substantial question of law. Ld counsel further explained that subsequently, ITAT, Cuttack Bench in assessee's appeal in ITA No.230/CTK/2017 for assessment year 2007-08 order dated 10.8.2018 has restored the issue to the file of the AO on filing of Form No.8 regarding declaration by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing deduction of payment of electricity duty by erroneously invoking Section 43B of the Act without appreciating that the said sum is a crystallized liability and deposited in a 'no lien' account pursuant to the directions of the Hon'ble Orissa High Court? D) Whether on facts and circumstances of the case and in law, the ITAT erred in confirming the action of the AO and the CIT(A) in disallowing expenditure incurred on foreign travel of Directors of the Appellant without appreciating that the same has been undertaken wholly and exclusively for the business of Appellant Company? Issue notice to the respondent by speed post with A.D. making it returnable within four weeks. Requisites for issue of notice be filed within one week. List this matter four weeks after. The Registry is directed to call for the L.C.R. from the Tribunal in the meantime". We considering the declaration filed by the assessee in Form No.8 and the observations of the Hon'ble High Court and the provisions of law, restore this issue to the file of Assessing Officer to consider based on the final outcome of the assessee's appeal in identical issue pending before the Hon'ble High Court for the assessment e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said provisions without appreciating that no proper satisfaction was recorded by the AO having regard to the correctness of books of account of the assessee that certain expenditure was actually incurred for earning the exempt dividend income. Ld counsel also submitted that the authorities below are not correct and justified in ignoring the fact that since there is no proximate nexus between earning of the exempt dividend income and the expenditure incurred, no expenses could be said to be relatable to earning of exempt dividend income. Ld counsel lastly submitted that the ld CIT(A) was also not reasonable in holding that the satisfaction of the AO is discernible in the assessment order and in confirming the findings of the AO that interest bearing or mixed funds have been diverted for generating exempt income without appreciating that no material or evidence has been brought on record by the AO to support that the funds have been diverted. 9. Replying to above, ld CIT DR vehemently supported the assessment order and submitted that the AO in para 7 of the assessment order has made detailed enquiry regarding the relevant facts and explanation of the assessee, which constitute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34) of the Act. On perusal of the balance sheet it is found that the assessee's investment which was at Rs. 93.I0 crore as on 01.04.2009 has increased to Rs,I37.79 crores as on 31.03.2010. During the year under consideration assessee has claimed interest and financial charges at Rs. 40.39 crores in the Profit & Loss account. On perusal of balance sheet it is found that assessee's interest bearing loan fund has increased from Rs. 352.38 crore as on 01.04.2009 to Rs. 426.9I crore as on 31.03.2010. Though there is increase in share capital, reserve and surplus from Rs. 458.33 crore as on 01.04.2009 to Rs. 606.63 crore as on 31.03.2010 but there is also increase in fixed assets from Rs. 449.60 crore as on 01.04.2009 to Rs. 635.69 crores as on 31.3.2010. There is CWIP at the end of year to the tune of Rs. 272.I0 crore as on 31.3.2010. Looking to the source of fund and its utilization it is clear that the assessee has no such huge surplus fund which is utilized for investment purpose. Vide questionnaire dated 27.11.2012, assessee was asked to furnish reply regarding disallowance u/s.I4A of the Act for which assessee in its reply dated 28.01.2013 submitted as under. "We wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Finance Act, 2006 in section 14A and rule 8D inserted by the Income Tax (5th amendment) Rules, 2008 following the principle of " contemporaneous exposition". The assessee has earned dividend income during the year. In the light of above, disallowance of expenses for income not includible in total income as per Rule 8D is calculated as under: 11. Further from para 5.2 of the CIT(A) order, we observe that the ld CIT(A) after considering the submission and contention of the assessee confirmed the addition with the following observations and findings: " I have considered the matter. I find some merit in the submission of the appellant in so far as computation of disallowance under Rule 8D r.w.s. 14A is concerned. The appellant's submission that the AO has not recorded his satisfaction for resorting to the disallowance under Rule 8D r.w.s. 14A is not supported with any material or evidence. Even otherwise, the satisfaction of the AO Is discernible in the assessment order itself when the AO has given a finding that interest bearing funds or mixed funds have been diverted for investment activities generating exempt income. However,-the computation of disallowance by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the assessee has used interest bearing borrowed funds, over draft and other trading funds for the purpose of investment which earned exempt dividend income of the assessee. It was also observed by the authorities below that investment activities and business activities has its separate nature in principle and no expenditure is allowable on investment activities, which brings exempt dividend income of the assessee. The AO went up to the extent to observe that if the interest bearing fund would have not utilised for investment purpose, the interest payment expense would have been reduced in accordance with the taxable income of the assessee. 13. In this scenario, we are inclined to hold that the AO was right in invoking the provisions of section 14A r.w. rule 8D of I.T.Rules. However, the ld CIT(A) after accepting the alternate plea of the assessee and the computation made thereto by the AO, restricted the disallowance to the amount of Rs. 48,17,000/- under Rule 8D. After carefully considering the orders of lower authorities, especially para 5.2 of the CIT(A) order, we are of the view that the CIT(A) was right in restricting and confirming the addition to the tune of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually deposited. The cumulative effect of notifications under the Employees‟ Provident Funds Act, 1952 and the Employees State Insurance Act, 1948 was that in respect of the EPF Scheme contributions the deductions were to be deposited within 15 days of the succeeding wage period with a grace period of 5 days; for ESI contributions the deposit with the concerned statutory authority had to be made within three weeks of the succeeding wage month/period. The CIT in this case confirmed the additions - made by the AO based on the entire amounts that were disallowed. The ITAT however granted complete relief. 8. Having regard to the specific provisions of the Employees‟ Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace peri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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