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TMI Blog2020 (8) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Commissioner of Income Tax (Appeals) {CIT (A)} dated 14.07.2014. The assessee has filed Cross Objection bearing C.O. No.37/Del/2019 against the Department's Appeal. ITA No.4390/Del/2016 is the assessee's appeal for Asst. Year: 2011-12 which has been preferred against the order of the Ld. CIT (A) dated 21.06.2016 whereas ITA No.4816/Del/2017 is the Department's cross appeal for the same year. ITA No.4122/Del/2017 is assessee's appeal for Asst. Year: 2012-13 which against the order of the Ld. CIT (A) dated 01.05.2017 whereas ITA No.4911/Del/2017 is the Department's Cross appeal for the same year. ITA No.4122/Del/2017 is assessee's appeal for Asst. Year: 2013-14 which challenges the order of the Ld. CIT (A) dated 01.05.2017 and ITA No.4912/Del/2017 is the Department's Cross Appeal for Asst. Year 2013-14. ITA No. 4123/Del/2017 is assessee's appeal for Asst. Year: 2014-15 and challenges the findings of the Ld. CIT (A) as contained in order dated 01.05.2017. The Department's cross appeal for Asst. Year: 2014-15 is captioned as ITA No.4913/Del/2017. 2.1 The respective grounds raised by both the parties for the captioned assessment years are as under: 2.2 ITA No.4916/Del/2014 for A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of Rs. 1,06,54,85,768/- made by the AO on account of disallowance of 40% of general license fee, holding that the same as not incurred wholly and exclusively for the purpose of business of the assessee. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in reducing the disallowance made u/s 14A from Rs. 31,21,639/- to 30,72,696/- thereby granting relief to the extent of Rs. 48,943/- 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 2,59,26,734/- made by AO denying the claim of depreciating in respect or pollution control equipment as there was no evidence submitted to indicate that they were pollution control equipments. 4. The appellant craves leave to, add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 2.5 ITA No.4912/Del/2017 for A.Y.2013-14 (Department's appeal): 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of Rs. 1,17,83,98,395/- made by the AO on account of disallowance of 40% of general license fee, holding that the same as not incurred w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act was recorded by the AO. d. The respondent craves leave to add, amend, alter or vary from the above grounds at or before the time of hearing. 2.8 ITA No.4121/Del/2017 for A.Y.2012-13 (Assessee's appeal): 1. That the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and in law in upholding the action of the assessing officer ['AO'] in disallowing expenditure of Rs. 30,72,696 under section 14A of the Income-tax Act, 1961 ['the Act'] read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 ['the Rules']. 1.1 That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. 1.2 That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law was recorded by the AO before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act. 1.3 That without prejudice, the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any, under section 14A of the Act, had to be restricted to Rs. 17,02,026/- as per computation provided by the appellant. The appellant craves leave to add, alter, amend or vary the above grounds of appeal at or before the time of hearing. 2.11 ITA No.4390/Del/2016 for A.Y.2011-12 (Assessee's appeal) : 1. That the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and in law in upholding the action of the assessing officer ['AO'] in disallowing expenditure of Rs. 17,58,758/- under section 14A of the Income-tax Act, 1961 ['the Act'] read with Rule 8D (2)(iii) of the Income-tax Rules, 1962 ['the Rules']. 1.1 That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. 1.2 That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law was recorded by the AO before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act. 1.3 That without prejudice, the CIT (A) erred on facts and in law in not appreciating that disallowance, if any, under section 14A of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- (b) Disallowance of license fee - Rs. 90,77,99,068/- (c) Disallowance u/s 14A - Rs. 18,33,783/- (d) Disallowance of depreciation - Rs. 52,55,604/- (e) Total additions - Rs. 91,48,88,455/- (f) Assessed income - Rs. 11,01,61,69,655/- (iii) Assessment Year: 2012-13 (a) Returned income - Rs. 12,53,68,36,330/- (b) Disallowance of license fee - Rs. 1,06,54,85,768/- (c) Disallowance u/s 14A - Rs. 31,21,639/- (d) Disallowance of depreciation - Rs. 2,59,26,734/- (e) Total additions - Rs. 1,09,45,34,141/- (f) Assessed income - Rs. 13,63,13,70,471/- (iv) Assessment Year:2013-14 (a) Returned income - Rs. 12,40,55,72,280/- (b) Disallowance of license fee - Rs. 1,17,83,98,395/- (c) Disallowance u/s 14A - Rs. 33,42,193/- (d) Disallowance of depreciation - Rs. 4,50,01,287/- (e) Total disallowance - Rs. 1,22,67,41,872/- (f) Assessed income - Rs. 13,63,23,14,155/- (v) Assessment Year: 2014-15 (a) Returned income - Rs. 15,43,73,93,380/- (b) Disallowance of license fee - Rs. 1,25,91,03,440/- (c) Disallowance u/s 14A - Rs. 21,18,404/- (d) Disallowance of depreciation - Rs. 41,66,502/- (e) Total disallowance - Rs. 1,26,53,88,346/- (f) Assessed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT (A) are depicted in the following chart: ASST. YEARS DIVIDEND INCOME (in Rs.) DISALLOWANCE OFFERED BY THE COMPANY, ON SUO MOTO BASIS (in Rs.) DISALLOWANCE UNDER 14A MADE BY THE ASSESSING OFFICER [A+B] (in Rs.) Disallowance of 14A under Rule 8D(2)(iii), deleted by CIT(A) [A] Disallowance of 14A under Rule 8D(2) (iii), sustained by CIT(A) [B] (in Rs.) 2010-11 3,27,60,532 11,52,656 16,95,310 2,43,995 14,51,315 2011-12 5,15,55,446 10,02,954 18,33,783 75,025 17,58,785 2012-13 7,97,78,187 9,64,928 31,21,639 48,943 30,72,696 2013-14 9,29,02,863 20,13,989 33,42,193 1,11,033 32,31,160 2014-15 12,02,94,974 17,02,026 21,18,404 88,002 20,30,402 3.6.1 The basic contention of the assessee against the disallowance u/s 14A as sustained by the Ld. CIT (A) is that since the assessee had made a suo moto disallowance under the provisions of section 14A, the Assessing Officer could not have made a disallowance in excess of the said suo moto disallowance without recording a satisfaction as to how the assessee's suo moto disallowance was defective. It is also the assessee's plea that the Assessing Officer could not have made the disallowance in absence of him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also related to the Department's challenge to a part deletion of the disallowance by the Ld. First Appellate Authority by holding that no disallowance could have been made in respect of interest expenses as the assessee had accumulated surplus, we find that this issue stands covered in favour of the assesee by the order of the Tribunal in Asst. Year: 2009-10. The relevant observations of the Tribunal are contained in paragraphs 7.1, 7.1.1. The same are being reproduced herein under for a ready reference: "7.1 As far as the assessee's appeal is concerned, ground Nos.1, 1.1, 1.2, 1.3 are related to ground No.2 of the Department's appeal wherein the issue under dispute pertains to disallowance u/s 14A of the Act. The Assessing Officer had made a disallowance of Rs. 39,25,411/- u/s 14A of the Act r.w.Rule-8D of the Rules, 1962 and the Ld. CIT (A) restricted the disallowance to Rs. 32,93,106/- by holding that no disallowance could have been made under the provisions of Rule 8D(2) (ii) in respect of interest expenses as the assessee company had accumulated surplus amounting to Rs. 302 Crores and general reserve of 276 Crores. The Ld. CIT (A) also observed that the opening balance of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stain the disallowance u/s 14A, as offered by the assessee company for the various years under appeal as under: 2010-11 Rs. 11,52,656/- 2011-12 Rs. 10,02,954/- 2012-13 Rs. 9,64,928/- 2013-14 Rs. 20,13,989/- 2014-15 Rs. 17,02,026/- 6.0.3 Accordingly, the ground raised by the assessee stands partly allowed and grounds raised by the Department are dismissed with respect to disallowance u/s 14A in all the five years under consideration. 6.1 The next issue under challenge by the Department is the action of the Ld. CIT (A) in deleting the ad hoc disallowance @ 40 % of the license fee paid by the assessee company to M/s Societe Des Produtis Nestle, SA Switzerland. The Assessing Officer made the following disallowance in respect of the license fee for the different years under consideration: Asst. Years. License Fee 2010-11 Rs. 73,40,98,815/- 2011-12 Rs. 90,77,99,068/- 2012-13 Rs. 1,06,54,85,768/- 2013-14 Rs. 1,17,83,98,395/- 2014-15 Rs. 1,25,91,03,440/- 6.2 The Ld. CIT (A), however, deleted the disallowance by relying on various orders of the Hon'ble High Court and the Tribunal in assessee's own case. It is seen that this issue is squarely covered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -08 Delhi High Court ITA No.502/2014 10.09.2014 2008-09 Delhi High Court ITA No.532/2014 10.09.2014 7.4.2 The Ld. CIT-DR also could not controvert this fact. Therefore, in view of the binding judicial precedents in asssessee's own case as enumerated above, we find no reason to interfere with the findings of the Ld. CIT (A) on the issue. Accordingly, Ground No.1, of the Department's appeal stands dismissed." 6.2.1 Accordingly, in view of the above binding judicial precedents in asseessee's own case and on identical facts, we uphold the findings of the Ld. CIT (A) on the issue and dismiss the ground raised by the Department vis a vis license fee in all the years under consideration. 6.3 The next issue before us is the rate of depreciation to be allowed on UPS. The assessee has claimed deprecation @ 60% in all the years under appeal whereas the AO has restricted the same to 15% in AY 2010-11 and 2011-12. In Asst. Years: 2010-11, the Ld. CIT (A) deleted the disallowance but in Asst. Year 2011-12 the Ld. CIT (A) has upheld the disallowance. We note that this issue is squarely covered in favour of the assessee by numerous orders of the Tribunal as well as of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,734 2013-14 1,17,83,98,395 4,50,01,287 2014-15 1,25,91,03,440 41,66,502 6.4.1 However, the Ld. CIT (A) has deleted these disallowances in all the years under consideration before us. We note that this issue is also covered in favour of the assessee by the order of the Co-ordinate Bench of the ITAT in assessee's own case for Asst. Year: 2009-10 wherein the Tribunal has upheld the findings of the Ld. CIT (A) in deleting the said depreciation disallowance made by the Assessing Officer. The relevant findings of the Tribunal are contained in paragraph 7.6 of the order of the ITAT and the same is being reproduced herein under for a ready reference: "7.6 Ground No.4 of the Department's appeal challenges the action of the Ld. CIT (A) in deleting the disallowance of Rs. 33,90,330/- made by the Assessing Officer by denying the claim of the depreciation in respect of energy saving and pollution control equipment on the ground that it was not put to use. It is seen that the Assessing Officer disallowed the claim of depreciation by alleging that the assessee has only established the factum of purchase of assets and not the condition of assests being put to use. The Assessing Officer f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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