TMI Blog2020 (4) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration. The grievance projected by the Revenue in its appeal is that the decision of the Tribunal has not been accepted by the Revenue and a further appeal to the Hon ble High Court is being preferred. We are of the view that the fact that the revenue has preferred appeal against the order of Tribunal is ground no ground not to follow the decision in assessee s own case, especially when the decision of the Tribunal has not been so far reversed by any higher forum. Accordingly, we find no merit in the appeal by the revenue and the same is dismissed. Disallowance of deduction u/s 35D of the Act would go to increase profit of the business on which deduction u/s 10A of the Act was to be allowed to the assessee. - Following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed a sum of ₹ 12,38,00,555/- u/s 35D as deduction from business profit the same was allowed in assessment order. As per the provision of the IT Act, 1961, the assessee has option to calculate the maximum expenses as a percentage of either cost of the project or capital employed in the business of the company. Since the assessee company has shown the cost of acquisition under the investment schedule not as fixed assets the definition cot of project is not applicable. The maximum expenditure available for deduction u/s 35D work out to ₹ 58,64,364/-being 5% of the capital employed (share value of GDRs of ₹ 11,72,87,280/-) Out of this eligible deduction for the said assessment year is spread over a period of 5 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessment year 2008-09 has taken a view that FCCBs are in the nature of debentures and hence are eligible to be included a part of capital employed in the business of the Assessee for allowing deduction u/s 35D of the Act. The assessee also contended that if the deduction u/s 35D of the Act is reduced then it will result in profit of the assessee being assessed at a higher sum then what was declared by the assessee in the return of income on which the Assessee was entitled to deduction u/s 10A of the Act. In other words, it was submitted that any disallowance u/s 35D of the Act would go to increase the profit of the business of the assessee and deduction u/s.10A of the Act had to be allowed on such enhanced profits. This grievance wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, because the Tribunal in assessee s own case for assessment year 2008-09, 2009-10 and 2010-11 has taken a view that for the purpose of computing the capital employed for allowing deduction u/s 35D of the Act, the FCCBs should also be taken into consideration. For the sake of ready reference, we give below the order of Co-ordinate Bench in IT(TP)A No.223(B)/2014 for assessment year 2009-10, wherein it was held as under; 15. As far as claim u/s. 35D is concerned, this issue was raised by the assessee in ground No.10. This is not the first year of claim and original claim was made during AY 2007-08, in which assessee acquired two companies and .has raised capital to through GDR and FCCBs. Assessee has incurred expenditure of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of capital employed 396,239,365 5. 1 1/5Th of 5% of capital employed (claim allowable consequent to Tribunal's order) 79,247,872 * As against the claim of lNR 1,172,873 computed by the Id. AO. We direct the AO to examine the above and allow relief as in earlier years, since claim is arising in earlier years. Thus this, this ground is considered as allowed . 9. The grievance projected by the Revenue in its appeal is that the decision of the Tribunal has not been accepted by the Revenue and a further appeal to the Hon ble High Court is being preferred. We are of the view that the fact that the revenue has preferred appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, we find that two High Courts viz., Hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. (2010) 194 Taxman 192 (Born) and Hon'ble Gujarat High Court in the case of ITO vs. Kewal Construction, 354 ITR 13 (Gui) have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Chapter VIA should be allowed on such increased profit. This position has also been now confirmed by the CBDT in its Circular No.37/2016 dated 02.11.2016 wherein the Board has observed as follows:- 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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