TMI Blog2015 (11) TMI 1823X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been recorded and we proceed to decide the issue on merits. Whether any disallowance is warranted out of dividend income received on account of dividend on mutual funds? - In view of the binding preceding being available in assessee s own case with regard to the investments, which admittedly were not made in the instant assessment year, but were brought forward from the earlier years, then disallowance if any worked out in the preceding year is to be applied for the year under consideration also since the funds have been deployed in the earlier years and not in the current year. Accordingly, we direct the Assessing Officer to compute the disallowance, if any, in the hands of the assessee in line with working of the disallowance under section 14A(2) of the Act read with Rule 8D(ii) of the Rules in the preceding year. Further, no bifurcation of investments and stock in trade was raised in earlier year, hence this plea is dismissed as investments are old. Disallowance under section 14A of the Act i.e. the administrative expenses relatable to earning of exempt income - From the details, it is not clear that as to whether any disallowance was made under Rule 8D(iii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover of respective businesses. The Tribunal upheld the order of lower authorities. However, directions were given to the Assessing Officer to re-calculate the computation of disallowance on the basis of working that may be furnished by the assessee. The said directions were given by the CIT(A) and were upheld by the Tribunal. Following the same parity of reasoning, we uphold the order of CIT(A) in this regard. However, in line with earlier directions, we direct the Assessing Officer to recompute the disallowance in line with directions of the Tribunal in assessment year 2008-09. The ground of appeal raised by the assessee are decided as indicated above. Deduction u/s 80IA(4) on account of profit earned from the business of windmill power business - HELD THAT:- The Tribunal had allowed the claim of the assessee by following the earlier decision of Pune Bench of Tribunal in Serum International Ltd.[ 2013 (1) TMI 688 - ITAT PUNE] wherein the issue had been decided following the ratio laid down by the Hon ble Madras High Court in Velayudhaswamy Spinning Mills (P) Ltd. [ 2010 (3) TMI 860 - MADRAS HIGH COURT] - Before us also, no other contrary decision has been brought to our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals in ITA Nos.1522/PN/2013 and 1524/PN/2013. 5. The assessee in ITA No.1522/PN/2013 has raised the following grounds of appeal :- 1. In the facts and circumstances of the case and in law, the learned C.I.T.[A] has grossly erred in confirming the disallowance of ₹ 18,83,404.00 made by the learned Assessing Officer u / s 14 A of the I.T. Act 1961 r.w. Rule 8 of I.T. Rules 1962 . The said disallowance being patently illegal, bad in law, arbitrary, perverse and devoid of merits and being legally unsustainable the same may please be deleted. 2. The learned C.I.T.[A] has miserably failed to appreciate that the investment in shares / mutual funds was made by the appellant out of own funds and hence no disallowance for alleged notion interest on borrowed funds was warranted even u/s 14 A of the I.T. Act 1961 r.w. Rule 8 of I.T. Rules 1962. The disallowance made u/s 14 A of the I.T. Act 1961 may please be deleted. 3. The learned C.I.T.[A] has miserably failed to appreciate that the appellant had not incurred an administrative expenses for earning the tax free dividend income, which was being directly credited in bank accounts and furthermore there was no additional inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal, if deemed necessary at the time of hearing of the appeal. 6. The Revenue in ITA No.1524/PN/2013 has raised the following grounds of appeal :- 1. The order of the learned Commissioner of Income tax (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The learned Commissioner of Income tax (Appeals) grossly erred in allowing to the assessee deduction of ₹ 8,75,979/- under section 80IA(4) of the Income tax Act, 1961 on account of profit earned from the business of wind-power generation, instead of confirming the disallowance made by the Assessing Officer 3. The learned Commissioner of Income tax (Appeals) grossly erred in failing to appreciate that by virtue of the overriding provision of section 80IA(5), as per which the eligible business has to be considered as the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year, the assessee did not have any actual profit from its business of wind power generation, as had been clearly demonstrated by the Assessing Officer in his order, and thus the assessee was not entitled to deduction ujs.80IA(4). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. Act 1961 being legally unsustainable, the learned C.IT.[A] ought to have deleted the said disallowance. 5. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal. ITA No.1522/PN/2013 8. The issue in the ground of appeal Nos.1 to 5 raised by the assessee is against the disallowance under section 14A of the Act. 9. Briefly, in the facts of the present case, the assessee was engaged in the business of finance and investments, power generation and supply of power. For the assessment year 2009-10, the assessee furnished return of income declaring total income of ₹ 75,94,013/-. During the course of assessment proceedings, the Assessing Officer noted that in the computation of income, the assessee had declared exempt income of ₹ 15,47,936/- on account of dividend on mutual funds and amount of nil on account of profit on sale of mutual funds. The Assessing Officer further noted that the assessee had not debited any expenses in the books of account against the said exempt income. The assessee was thus, requested to explain the reasons for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the percentage of interest free funds available was to the extent of 90% of the total funds available and only 10% of the funds were borrowed funds. The CIT(A) noted that the entire arguments of the assessee were based on attribution of interest expenditure to the earning of exempt income. However, the approach of the assessee was found to be not acceptable, in turn relying on the observations of the Hon ble Bombay High Court in Godrej Boyce Vs. DCIT reported in 328 ITR 81 (Bom). The CIT(A) further noted that the Hon ble High Court s decision in K. Raheja Corporation Pvt. Ltd. (supra) on the contrary though passed subsequently was for assessment year 2000-01 i.e. prior to the introduction of Rule 8D of the Rules and was not applicable. The CIT(A) further noted that even otherwise, as discussed in the assessment order, there are no fresh investments made during the year and therefore, the issue, is seen to have no relevance to the case laws cited by the learned Authorized Representative for the assessee. Further, referring to the provisions of section 14A of the Act, the vide para 5.4, the finding of the CIT(A) was that section 14A(3) of the Act says that sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest expenditure, in turn relying on the decision of Pune Bench of Tribunal in Kasat Securities Pvt. Ltd. Vs. ACIT in ITA No.922/PN/2011, relating to assessment year 2006-07, order dated 25.06.2013. The third objection of the learned Authorized Representative for the assessee was that where the Assessing Officer is not recorded his satisfaction that the books of account were incorrect, there was no merit in the said disallowance. Reliance was placed on the ratio laid down by the Hon ble Delhi High Court in Maxopp Investment Ltd. Vs. CIT (2012) 347 ITR 272 (Del), which dealt with the amended provisions of the Act and also in CIT vs. Taikisha Engineering India Ltd. (2015) 370 ITR 338 (Del). The last contention of the assessee in this regard was that since the investment in the old shares was old and in the absence of any decision making, no part of the administrative expenses could be disallowed. Our attention was drawn to the list of investments placed at page 58 of the Paper Book. 12. The learned Departmental Representative for the Revenue in turn, pointed out that the provisions of section 14A of the Act are attracted since the assessee has mixed funds, where the investment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. The perusal of the assessment order in the case of assessee, very clearly reflects that the Assessing Officer vide para 3.1 had noted the fact that the assessee had declared the exempt income, but had not debited any expenses in the books of account against the said exempted income. In view thereof, the assessee was requested to explain the reasons for the same and as to why the provisions of section 14A of the Act read with Rule 8D of the Rules should not be invoked. In view of the same, we find no merit in the plea of the assessee in this regard. The satisfaction is deemed to have been recorded and we proceed to decide the issue on merits. 14. The second aspect of the issue is whether any disallowance is warranted out of dividend income of ₹ 15,47,936/- received on account of dividend on mutual funds. The assessee for the year under consideration had declared an investment of ₹ 7.50 crores as on 31.03.2009 and the closing stock balance of the said investment as on 31.03.2008 was ₹ 7.50 crores. The assessee has placed the list of investments at page 58 of the Paper Book, perusal of which reflects that the investment in shares and mutual funds is brought f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factual aspects of the case, held as under:- 17. We have carefully considered the rival submissions. In the present case, only one limb of the disallowance pertaining to the interest expenditure is sought to be assailed by the assessee. The defence of the assessee is that the interest expenditure debited to the P L Account is not relatable to the funds utilized to acquire shares/mutual funds, which have yielded the impugned exempt income. Factually, the aforesaid was asserted before the Assessing Officer, as is evident from the submissions of the assessee dated 09.12.2010 which have been reproduced in the assessment order. The assertion of the assessee was that the interest was paid on deposits which were either not raised during the year under consideration or for a deposit which was specifically used for the purposes other than the acquisition of shares/mutual funds in question. It has also been pointed out by the learned counsel at the time of hearing that in the past years there has been no disallowance by invoking section 14A of the Act. In our considered opinion, the plea of the assessee involves factual appreciation, which has been glossed-over by the authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to compute the disallowance, if any, in the hands of the assessee in line with working of the disallowance under section 14A(2) of the Act read with Rule 8D(ii) of the Rules in the preceding year. Further, no bifurcation of investments and stock in trade was raised in earlier year, hence this plea is dismissed as investments are old. 16. Now, coming to the next aspect of disallowance under section 14A of the Act i.e. the administrative expenses relatable to earning of exempt income. The assessee in the preceding year was not aggrieved by the said disallowance made in the hands of assessee under rule 8D(iii) of the Rules. The Tribunal has noted that the assessee had only agitated the disallowance of interest expenses under Rule 8D(ii) of the Rules. For the year under appeal, the assessee is aggrieved by the said disallowance. From the details, it is not clear that as to whether any disallowance was made under Rule 8D(iii) of the Rules in the hands of assessee in the preceding year. In view thereof, in case no such disallowance is made in the hands of assessee in the earlier years, then we hold that no disallowance was warranted in the year under consideration. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et expenses of Mrs.S.P. Pawar and no other expenses such as boarding, local travelling and accommodation expenses were incurred and claimed by the assessee. The CIT(A) noted that no details were filed before the Assessing Officer. The CIT(A) further noted that similar expenditure was disallowed in the earlier years by the Assessing Officer and upheld by the CIT(A). However, the Tribunal had allowed the appeal of the assessee to the extent of 50% of the expenses claimed to have been incurred on foreign travel for assessment year 2006-07 in assessee s own case in ITA No.1292/PN/2010, order dated 28.02.2012. The CIT(A) further noted that the Tribunal had not disputed the proposition that primary onus was upon the assessee to justify the requisite evidence that the expenditure incurred was related to carrying on the business activity. However, the Tribunal further held that the expenditure on foreign travel is not expenditure, which is alien to the carrying on of the business by any business entity and the bonafides of the claim could not be faulted. The CIT(A) vide para 8.4 noted that during the appellate proceedings, the learned Authorized Representative for the assessee reiterated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the order of CIT(A). 23. We have heard the rival contentions and perused the record. The claim of the assessee before us is two-folds that the foreign travel expenses incurred by the assessee on the foreign tour trip undertaken by the director Mrs. P.S. Pawar claimed at ₹ 10,09,253/- should be allowed in the entirety as the expenditure was incurred in order to tap the foreign market or to attract foreign investment, which was for the purpose of business and hence, allowable under section 37(1) of the Act. The second plea raised by the learned Authorized Representative for the assessee was that the Tribunal on similar circumstances had restricted disallowance to 50% of the expenditure claimed and the same should be upheld. 24. Under the provisions of section 37(1) of the Act, the assessee is entitled to the claim of expenditure, which is incurred in relation to carrying on of the business. However, the onus is upon the assessee to establish that the expenditure, if any, incurred is for business purposes. In the facts of the present case before us, the assessee claims that it had incurred an expenditure of ₹ 10,09,253/- on foreign travel of Mrs. P.S. Pawar, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the said expenses, in turn following the earlier ratio. 25. The facts of the present case before us are at a variance. First of all, as mentioned by the Assessing Officer in the assessment order, the assessee is engaged only in the business of finance and investment, power generation and supply of power. Apparently, there is no business of promoters and builders carried on by the assessee during the year. In the initial year i.e. 2006-07, the assessee had explored the market for acquisition of properties and to find buyers for the proposed ownership scheme, whereas during the year under consideration, there is no such business carried on by the assessee. The assessee on the other hand, claims that the director of the company had visited foreign countries for tapping the markets for foreign investments, possibility of foreign investment and / or for expansion of business. The assessee is making this plea from assessment year 2006-07 onwards, but till the instant assessment year i.e. 2009-10, no such investment has been made by the assessee. The statement by the assessee is without support of any iota of evidence and hence, cannot be accepted. Even during the course of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld by the Tribunal. Following the same parity of reasoning, we uphold the order of CIT(A) in this regard. However, in line with earlier directions, we direct the Assessing Officer to recompute the disallowance in line with directions of the Tribunal in assessment year 2008-09. The ground of appeal Nos.7 and 8 raised by the assessee are decided as indicated above. 29. The Revenue is aggrieved by the order of CIT(A) in allowing deduction under section 80IA(4) of the Act on account of profit earned from the business of windmill power business at ₹ 8,75,979/-. 30. Briefly, in the facts relating to the issue raised by the Revenue, the assessee was engaged in power generation business through windmills along with its object of dealing in business and the profits derived from the windmill business were claimed as deductable under section 80IA(4) of the Act. During the year under consideration, the assessee had claimed deduction to the extent of ₹ 8,75,979/-. The Assessing Officer however, during the course of assessment proceedings, called for a separate trading account for windmill project and the Assessing Officer was of the view that the assessee had actually not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 38 DTR 57 (Mad). Before us also, no other contrary decision has been brought to our notice, therefore, in the above said background and in view of the identical issue having been decided in assessee s own case for assessment years 2006-07 and 200809 (supra), we find no merit in the grounds of appeal raised by the Revenue and the same are dismissed. The grounds of appeal raised by the Revenue are thus, dismissed. 33. The facts and issues in ITA Nos.1523/PN/2013 and 1525/PN/2013 are identical to the facts and issues in ITA Nos.1522/PN/2013 and 1524/PN/2013 and our decision in ITA Nos.1522/PN/2013 and 1524/PN/2013 shall apply mutatis mutandis to ITA Nos.1523/PN/2013 and 1525/PN/2013. 34. In ITA Nos.1127 and 1128/PN/2013 , the only issued raised by the assessee is against invoking of provisions of section 14A of the Act. 35. The learned Authorized Representative for the assessee had squarely admitted that the issue raised in the present appeal was identical to the issue raised before the Tribunal in Lap Finance Consultancy Pvt. Ltd. (supra). The learned Authorized Representative for the assessee before us had relied on the theory of own funds and investments being made, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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