TMI Blog2016 (10) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... rected to delete the disallowance - Assessee's Ground no. 1 and 1.1 are allowed. Disallowance invoking the provisions of section 14A r.w.r. 8D - HELD THAT:- AO has made disallowance by invoking the provisions of Rule 8D of the IT Rules, 1962 towards interest. There is no dispute with regard to the provisions. If the assessee uses its own non-interest bearing funds, in that event it would not be open to the AO to make disallowance in respect of the interest by invoking the provisions of rule 8D of the Income Tax Rules. The ld. Counsel for the assessee has made reliance on the judgment of the Hon ble Bombay High Court rendered in the case of CIT vs. K. Raheja Corporation P. Ltd. [ 2011 (8) TMI 148 - BOMBAY HIGH COURT ] wherein held that in the absence of any material or basis to hold that the interest expenditure directly or indirectly was attributable for earning the dividend income, the decision of the Income Tax Appellate Tribunal in deleting the disallowance of interest under section 14A cannot be faulted. In the present case both the authorities below have proceeded merely on the basis of presumption which is not supported by any material. Computation of book prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al [ 2014 (9) TMI 163 - ITAT JAIPUR ] for the assessment year 2008-09. Therefore, he prayed that ground no. 1 of the revenue s appeal be rejected. Deduction u/s 80IB on sale of scrap - HELD THAT:- As scrap has been generated in the normal course of business of operation and maintenance of the toll highway and is a normal business transaction which in any case could not be held as non-business receipt. The scrap include the metal crash barriers, pedestrian guard rails etc. which are fixed on the toll road and got damaged in the accidents taken place and being not remained for use as such become scrap. Had there been no business of operating and maintaining of the toll highway, there would be no question of generation of any such scrap, thus the income from sale of scrap is normal business income and therefore is eligible for deduction u/s 80IB - Decided against revenue. - ITA No. 761/JP/2014 And ITA No. 14/JP/2015 - - - Dated:- 21-10-2016 - Shri Kul Bharat, JM And Shri Vikram Singh Yadav, AM Assessee by: Shri Manish Agarwal (C.A) And Shri O.P. Agarwal (CA) Revenue by: Shri Rajendra Singh (Addl.CIT) ORDER Shri Kul Bharat, These are two cross appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has further erred in ignoring the fact that assessee under contractual obligation could not repay the amount of loan taken from financial institutions/banks, therefore, the disallowance made deserves to be deleted. 3. On the facts and in the circumstances of the case ld. CIT (A) further erred in confirming the addition to the book profit computed u/s 115JB with the amount of disallowance made u/s 14A arbitrarily. Hence the Book Profit deserves to be accepted as declared by the appellant. 4. On the facts and in the circumstances of the case ld. CIT (A) / Assessing Officer erred in rejecting the assessee s claim of deduction u/s 80IB on the Misc. Income to the tune of ₹ 1,40,300/- by treating the same as Income from Other Sources without appreciating the fact that the deposit was received in normal course of business, thus deduction u/s 80IB ought to have been allowed on such income. 5. On the facts and in the circumstances of the case ld. CIT (A) erred in holding the interest income of ₹ 2,40,27,526/- earned from regular business activities of the assessee company as Income from Other Sources without appreciating the nature of income, thus the same deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trary, the ld. D/R has supported the orders of the authorities below. 5.3. We have heard rival contentions and perused the material available on record. We find that the Hon ble Calcutta High Court in para 16 of its judgment has struck down section 43B(f) being arbitrary, unconscionable and de hors the Apex Court decision in the case of Bharat Earth Movers (2000) 245 ITR 428 (SC). This judgment was duly brought into the notice of the ld. CIT (A). However, the ld. CIT (A) without taking note of the ratio laid down by the Hon ble Calcutta High Court proceeded to sustain the finding of the AO. The ld. CIT (A) has recorded the fact that the AO has disallowed the claim as per provisions of section 43B(f) of the Act and it has been struck down by the Hon ble Calcutta High Court. In our considered view, the ld. CIT (A) was not justified and acted beyond his jurisdiction. Therefore, the order of ld. CIT(A) on this issue is set aside. The AO is directed to delete the disallowance in the light of judgment of Hon ble Calcutta High Court rendered in the case of Exide Industries Ltd. Others vs. Union of India Others (supra). Ground no. 1 and 1.1 are allowed. 6. Ground no. 2 is against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng part of total income. 6.3. We have heard rival contentions and perused the material available on record. The ld. CIT (A) has decided the issue in para 7.3 of his order by observing as under :- 7.3. I have carefully considered the findings of the AO as also the submission of the appellant. It is noted that the assessee has made investment in mutual funds etc. amounting to ₹ 439086770/- and on such investments dividend income of ₹ 5423370/- was shown. It is also noted that the assessee claimed interest payment of ₹ 224709675/-. There is no dispute on the fact that if investment in mutual fund would not have been made, the funds available would have reduced the interest liability. The appellant case is that investment in securities and in mutual funds was made out of excess surplus funds available with the assessee from excess fee reserve, surface renewable coat of the roads and debt services. On the other hand the AO s case is that the contention of the assessee that surplus funds were available did not justify investment in mutual funds and not repaying the existing loan in as much as the repayment of loan could have been made on some pre-payment conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of total income under the Act. Therefore, the first requirement of invoking the provisions of section 14A is that the assessee should have claimed expenditure related to the income which does not form part of the total income under the Act. The AO under section 14A(2) is required to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the such method as prescribed, if the AO having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act. Therefore, as per this provision, the AO has to satisfy himself on the accounts placed before him that the claim of expenditure with regard to the income that does not form part of the total income is not correct. In that event, the AO is empowered to proceed to determine the expenditure incurred in relation to such income as per the prescribed method. The AO has not expressed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of ₹ 22,47,09,675/- in its Profit Loss Account. The contention of the assessee is that this investment has been made out of surplus funds i.e. non-interest bearing funds. In support of this contention, the ld. Counsel for the assessee has pointed out that the assessee company was having share capital reserve and surplus of ₹ 402.60 crores. Outstanding amount at the end of the year was of ₹ 225.10 and the investment made during the year is of ₹ 43.91 crore. This has not been controverted by the revenue and remained undisputed. It is further contended that the borrowed funds was completely utilized in construction of road and no fresh loans have been taken by the assessee during the year under appeal which itself proves that borrowed funds have not been utilized for making investment in mutual funds. The AO has made disallowance by invoking the provisions of Rule 8D of the IT Rules, 1962 towards interest. There is no dispute with regard to the provisions. If the assessee uses its own non-interest bearing funds, in that event it would not be open to the AO to make disallowance in respect of the interest by invoking the provisions of rule 8D of the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sc. Income of ₹ 1,40,300/- represents unclaimed security deposit written back in the books, which was received in normal business transaction and its forfeiture/written off in the books of accounts is in the normal course of business and such written off cannot be held as income from other sources. In the circumstances it is submitted that the written off of security deposit is normal business transaction, therefore, deserves to be eligible for deduction u/s 80IB. It is also submitted that assessee was having income of similar nature n preceding assessment years where after considering the submission made no disallowance, therefore by following the principle of consistency the same should have been allowed in the year under appeal also. The ld. Counsel also submitted that in earlier years no disallowance was made. 8.2. On the contrary, the ld. D/R supported the orders of the authorities below. 8.3. We have heard rival submissions and given our thoughtful consideration to the rival contentions of the parties. As per section 80IB, the deduction is available in respect of the profits and gains derived from any business referred to in sub-section 3 to 11, 11(A) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (2009) 308 ITR 356 (Bom.) the deduction ought to have been allowed on this earning. We find that the AO has rejected the claim by holding that the interest income on deposits out of surplus has to be assessed under the head Income from Other sources and not as Business income. The contention of the assessee is that the assessee has no other alternative but to deposit the amount in the form of FDRs as per the terms of agreement. Therefore, the earning out of this fund deposited in the fixed deposits under the term of contract, which was lying idle at some point of time would certainly be the income derived from the eligible business. We find some merit in the contention of the ld. Counsel for the assessee, but the fact whether there was such term of contract forcing the assessee to deposit the amount in the form of FDR requires to be verified at the end of the AO. Therefore, we set aside the order of ld. CIT (A) on this issue and restore the issue to the file of the AO for decision afresh. This ground of the assessee s appeal is allowed for statistical purposes. 10. In the result, appeal of the assessee is partly allowed. 11. Now we take up the revenue s appeal in ITA No. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f scrap. 14.1. The ld. D/R has relied on the order of the A.O. 14.2. On the contrary, the ld. Counsel for the assessee submitted that the scrap has been generated in the normal course of business of operation and maintenance of the toll highway and is a normal business transaction which in any case could not be held as non-business receipt. The scrap include the metal crash barriers, pedestrian guard rails etc. which are fixed on the toll road and got damaged in the accidents taken place and being not remained for use as such become scrap. The ld. Counsel submitted that had there been no business of operating and maintaining of the toll highway, there would be no question of generation of any such scrap, thus the income from sale of scrap is normal business income and therefore is eligible for deduction u/s 80IB. 14.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the ld. CIT (A) while deciding the issue has given the following finding of fact :- 9.3. I have carefully considered the findings of the AO as also the submission of the appellant. It may be noted that the income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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