TMI Blog2019 (6) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D - HELD THAT:- As noted that during the period under consideration, the assessee has shown the exempt income of ₹ 61,43,033/-. The Assessing Officer invoked the provisions of Rule 8D and disallowed ₹ 1,19,20,701/-. We have further noted that similar disallowance was made by revenue in Assessment Year 2005-06 and on appeal before the Tribunal; the disallowance was restricted to 2% of the dividend income. Considering the facts of the year under consideration and respectfully following the decision of co-ordinate bench in assessee s own case for Assessment Year 2005-06, the disallowance for the Assessment Year in the present appeal is restricted to 2% of the dividend income. The Assessing Officer is directed accordingly. Adjustment of book profit u/s 115JB of disallowance of Rule 14A - HELD THAT:- this ground of appeal is covered in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. . [ 2017 (6) TMI 1124 - ITAT DELHI] wherein held that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Therefore, respectfully follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Y. 2006-07, which we have allowed. There is no much variation on facts for the year under consideration. Therefore, following the principle of consistency, this ground of appeal is allowed with similar direction. The Assessing Officer is directed to restrict the disallowance under section 14A to the extent of 2% of exempt income earned by assessee during the relevant period under consideration. In the result, this ground of appeal is partly allowed. MAT credit under section 115JAA - HELD THAT:- Section 143(1) provides that where a return is made under section 139 and any tax or interest is found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to provisions of sub-section (2), an intimation will be sent to the assessee specifying the amount so payable and such intimation shall be deemed to be a notice of demand under section 156 and all the provisions of the Act shall apply thereto. This section itself makes it clear that whilst the AO determines the tax payable, he has to give credit for all taxes paid either by way of deduction at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the subsidiary company is under constant managerial, financial and administrative control of the Appellant company since its incorporation in the year August, 1960. 2. The Assessing Officer erred in deciding that since there was no business with the subsidiary company in the year under consideration, the advances given in earlier years are not in connection with business. Ground B DISALLOWANCE U/S 14A r.w.r. 8D - ₹ 1,19,20,701/- 3. In the facts and circumstances of the case, the Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in applying retrospectively the methodology prescribed in Rule 8D, which was inserted by the I.T. (Fifth Amdt.) Rules, 2008 w.e.f. 24.3.2008 and disallowed a sum of ₹ 1,19,20,701/-, being expenditure for earning dividend and income from mutual funds of ₹ 61,68,033/- for the Assessment Year 2006-2007. 4. Since Rule 8D inserted by the inserted by the LT. (Fifth Arndt.) Rules, 2008 w.e.f. 24.3.2008 is not retrospective in nature, for the Assessment year 20062007 the Assessing Officer should have applied the reasonable disallowance of 0.4% of gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions of the DRP, erred in adding the unutilized cenvat credit of ₹ 2,91,87,584/- to the total income of the Appellant as the Appellant valued the inventory as per method of accounts regularly employed and the Auditors have also certified that deviation from valuation method prescribed under sec. 145A has no impact on the profit of the Appellant. Moreover, addition of amount of unutilized cenvat credit will distort the real profit since consistency in valuation of inventory is disturbed. Ground G DISALLOWANCE V/S 40(a) (ia) - ₹ 2,58,19,665/-. 11. The Assessing Officer; in the order passed in pursuance of directions of the DRP, erred in not allowing the claim of the Appellant to allow deduction of amount of addition made u/s 40(a) (ia) in assessment year 2005-06 since the Appellant reversed those excess expenses' provision and credited the same in respective expenditure accounts in the assessment year 2006-07. 12. The Assessing Officer also failed to appreciate that the order u/s 143 (3) making disallowance u/ s 40 (a) (ia) was passed on 26/12/2008 after the time limit prescribed u/s 139(5) i.e. on 31.3.2008 and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 and ignoring the decision of the Bombay High Court for the Asst. Year 2001-02 and the reasonable expenses determined in earlier assessment years in Appellant's own case. GROUND: C: POOJA EXPENSES - ₹ 11,84,378/- On the facts and in the circumstances of the case, the Assessing Officer and the Dispute Resolution Panel should not have disallowed pooja expenses of ₹ 11,84,378/- treating it as non-business expenditure. GROUND: D: DISALLOWANCE U/S 40A(9) - ₹ 49,649/- On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed contributions to various Employees' Welfare funds being statutory payments that are not covered under section 40A(9) of the Income tax Act, 1961. GROUND: E: UNUTILISED CENVAT CREDIT - (₹ 2,95,78,424/- (-) Rs.l,49,82,050) Rs.l,45,96,374/- (i) On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have added unutilized Cenvat Credit to the total income of the Appellant. (ii) Without Prejudice to above, on the facts and in the circumstance of the case, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer made a reference to Transfer Pricing Officer (TPO) for computation of Arms Length Price. The TPO passed its order under section 92CA(3) on 15.05.2009. After receipt of order of TPO, the Assessing Officer passed draft assessment order under section 143(3) read wit section 144C (1) dated 3.11.2009. The assessee was served with the copy of the draft assessment. In the draft assessment order, the Assessing Officer made addition/disallowances consisting of disallowance under section 36(1)(ii), disallowance under section 14A r.w.r 8D, disallowance of Pooja Expenses, Club Expenses, disallowance under section 40A(9) , addition on account of Cenvat credit, disallowance under section 40(a)(ia). The assessee exercised its option for filing objection before the ld. DRP. The DRP after hearing the assessee granted partial relief on disallowance under section 36(1)(iii) and on addition of Cenvat credit in its direction dated 15.07.2010, however, the other remaining additions / disallowances were sustained. On receipt of direction from ld. DRP, the Assessing Officer passed the final assessment order under section 143(3) r.w.s 144C(13) dated 24.09.2010. Aggrieved by the various additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of business expediencies. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer worked out the disallowance of ₹ 22,42,759/- under section 36(1)(iii). The ld. DRP granted the partial relief to the assessee on the loan and advances given to Greaves Leasing Company holding that the advances were given to supply of equipment, therefore, it was in normal business operation and the Assessing Officer was directed to modify the assessment order accordingly. We have noted that the assessee s own fund consisting of share capital and reserve and surplus was ₹ 175.11 Crore. The assessee has given loans and advance to is subsidiaries i.e. Dee Greaves of ₹ 2,13,55,159/- only. The Hon ble Bombay High Court in Reliance Utility Power Ltd. (supra) held that if the assessee have funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interestfree fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. Therefore, in view of the decision of jurisdiction High Court as referred above, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nn.com 415) (Delhi-Trb SB), wherein it was held by special bench that computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. 12. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 13. We have considered the submission of both the parties and have gone through the orders of authorities below. We have noted that this ground of appeal is covered in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. (supra), wherein Special Bench of Delhi Tribunal that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Therefore, respectfully following the decision of Special Bench, we direct the Assessing Officer to follow the decision of Vireet Investment Ltd. (supra) and pass the order for adjustment under section 115Jb of the Act accordingly. 14. In the result, this ground of appeal is also allowed for statistical purpose. 15. Ground no. C-(6) relates to Pooja Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities. 20. We have considered the submission of the parties and have gone through the orders of authorities below. We have noted that the assessee has claimed club Expenses of ₹ 79,170/-. The assessee claimed club expenses of ₹ 7,07,477/-. The Assessing Officer disallowed the expenses by following the decision of earlier years. The ld. DRP directed the Assessing Officer to allow the club membership fees only. The club membership fees was only ₹ 6,04,00/-, accordingly, the Assessing Officer disallowed the balance amount (₹ 7,07,477 6,04,000). We have noted that in assessee s own case for A.Y. 1982-83 similar disallowances was allowed vide order dated 21st January 1992 in R.A No. 2569(Bom.)/1991 in ITA No. 6154/Bom/1987. Similar relief was granted to the assessee in appeal for A.Y. 1990-91 in ITA No. 7619/Bom/1993 dated 13.02.2002. We have further noted that after the decision of Hon ble Bombay High Court in Otis Elevator Co. Ltd. (supra), this issue is no more res-integra wherein the Hon ble High Court while considering the question of law about the allowance of club fees incurred/paid to employees, allowed the question in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the order of earlier Assessment Years and made addition of ₹ 2.91 Crore. The ld. DRP also followed their order for earlier years. We have noted that the co-ordinate bench of Tribunal in assessee s appeal for A.Y. 2005-06 in its order dated 15.03.2019 in ITA No. 2482/Mum/2015 set-aside the order to the file of Assessing Officer for examination of figures furnished by assessee for reconciliation of statements. Therefore, considering the order of Tribunal for A.Y. 2005-06, the ground of appeal is also restored to the file of Assessing Officer to examine the issue afresh and pass the order by following the order of Tribunal dated 15.03.2019. In the result, this ground of appeal is allowed for statistical purpose. 26. Ground No. G (11 to 14) relates to disallowance under section 40(a)(ia) of ₹ 2,58,19,665/-. The ld. AR of the assessee submits that and amount of ₹ 2,58,19,665/- was disallowed under section 40(a)(ia). During the course of hearing, the assessee furnished certificate of C.A. that disallowance for A.Y. 2005-06 was Nil. The Assessing Officer made the disallowance of ₹ 2,58,19,665/- in A.Y. 2005-06. The said provision was reversed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. ITA No. 8533/Mum/2011 for A.Y. 2007-08 32. Ground No. A relates to disallowance under section 36(1)(iii). We have noted that this ground of appeal is identical to the ground no. A of appeal for A.Y. 2006-07, which we have allowed. No variations of facts are brought to our notice, therefore, following the principle of consistency, this ground of appeal is allowed with similar observation. In the result, this ground of appeal is allowed. 33. Ground No. B relates to disallowance under section 14A. We have noted that this ground of appeal is identical to the ground no. B of appeal for A.Y. 2006-07, which we have allowed. There is no much variation on facts for the year under consideration. Therefore, following the principle of consistency, this ground of appeal is allowed with similar direction. The Assessing Officer is directed to restrict the disallowance under section 14A to the extent of 2% of exempt income earned by assessee during the relevant period under consideration. In the result, this ground of appeal is partly allowed. 34. Ground No. C relates to Pooja Expenses. We have noted that this ground of appeal is identical to the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, then the set off of such tax credit follows as a matter of course once the conditions mentioned in section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the Assessing Officer save and except that the ultimate amount of tax credit to be allowed will be dependent upon the final determination of the total income for the first assessment year. There is no provision under section 115JAA which postpones the right of the assessee to claim set off to the determination of the total income by the Assessing Officer in the first assessment year. Entitlement/right to claim set off is different from the quantum/quantification of that right. Entitlement of MAT credit is not dependent upon any action taken by the department. However, quantum of tax credit will depend upon the assessment framed by the Assessing Officer. Thus, the right to set off arises as a result of the payment of tax under section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year. Further, an assessee has a right to take into account the set off even while estimating its liability to pay advance tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
