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TMI Blog2021 (1) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee. 2. Brief facts of the case are that the assessee is a public limited company engaged, inter alia, in the business of real estate. Assessee was granted permission on 12.04.2006 by Directorate of Industries & Commerce, Punjab for development of Integrated Industrial Park on 40 acres of land at Focal Point, Phase VIII, Ludhiana ("Project"). For the assessment year 2008-09, the assessee filed the original return of income on 29.09.2008 declaring income of Rs. 9,51,70,507 under normal provisions of the Act. Subsequently, during the course of assessment proceedings, the assessee revised its financial statements and e-filed revised return of income for the year under consideration on after excluding net profit of Rs. 16.87 crore, both while computing income under normal provisions and also under section 115JB of the Act. According to the assessee, despite the fact that the permission was hedged with various conditions, including in particular, prohibition on pre-launch of the Project, the assessee, on pre-launch basis, entered into agreement for sale of part of the Project, resulting in recognition of notional amount of Rs. 85.24 crores as revenue, which was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the learned Assessing Officer and, therefore, for the purpose of computing book profits under section 115JB of the Act, Ld. CIT(A) directed the assessing officer to consider the revised accounts; and that inclusion of revenue Rs. 85.24 and profit thereon of Rs. 16.87 crore would, in any case, result in taxation of a hypothetical amount, which is against the settled law that only 'real income' can be brought to tax. While holding so, the Ld. CIT(A) noted the fact that no amount was received against the agreements to sell entered between the assessee and various parties stated supra, which were in fact subsequently cancelled. The CIT(A) also made note of the fact that the Government had later accorded approval to sell the developed area only in May, 2010.Aggrieved such findings of the CIT(A), the Revenue is before us in this appeal. 5. Insofar as the grounds No. 1 and 2 of Revenue's appeal, relating to the action of the learned Assessing Officer in not excluding sales of Rs. 85.24 crores and corresponding profit thereon of Rs. 16.87 crores in computing the total income as per normal provisions as well as under section 115 JB of the Act, Ld. DR, placing reliance on the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered for tax in the return for the subsequent years, and that subsequently, not only the Project was launched, but revenues therefrom are offered for tax both while computing income under the normal provisions and also for the purpose of MAT under section 115JB of the Act. 8. In view of the fact that the issue involved for this assessment year is directly and substantially involved for the assessment year 2007-08 and there is no change is in facts or in law, we find it difficult to take a different view that was taken for the assessment year 2007-08. Ld. CIT(A) dealt with this issue in extenso to reach a conclusion that the starting point for computing of the profits is the audited financial statement as prepared under the Companies Act, which is subject to further additions/deductions in terms of various upward and downward adjustments provided in various clauses of explanation given below subsection (2) of section 115 JB of the Act, and such a finding is well fortified by the findings of the Tribunal in assessee's own case for the assessment year 2007-08.Findings of the Ld. CIT(A), therefore, cannot be found fault with and are to be confirmed. With this view of the matter we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was not a concern in which any of the shareholders of RSML had substantial interest, and while placing reliance on the decision of the Special Bench of the Tribunal in the case of Bhaumik Colour Pvt. Ltd. [2009] 27 SOT 270 (Mum) (SB) he argued that deemed dividend under Section 2(22)(e) is taxable in the hands of the common shareholder. He submitted that the said decision of the Special Bench has been affirmed by the Hon'ble High Court of Bombay in the case of CIT v. Universal Medicare: 324 ITR 263 (Bom). He also placed reliance on the additions reported inCIT vs. Ankitech (P) Ltd: 340 ITR 14 (Del), which was further upheld by the apex Court in the case of CIT vs. Madhur Housing and Development Company 401 ITR 152 (SC), and IT vs. MotherIndia Refrigeration Industries (P) Ltd. 155 ITR 711. He also placed reliance on the decision of the Hon'ble Apex Court in the case of ITO vs. MotherIndia Refrigeration Industries (P) Ltd.: 155 ITR 711 also. 12. For proper appreciation of the contentions of the parties on this aspect, we deem it necessary to look into the provisions of section 2(22)(e) of the Act which reads as under: . "2. Definitions. In this Act, unless the context o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est. We, therefore, find that the relationship as contemplated in section 2(22)(e) of the Act, to apply the mischief of the said section is not at all satisfied in the facts of the present case. Further, there is no denial of the submission made on behalf of the assessee that no other shareholder in the assessee simultaneously held more than 20% of the voting power in the assessee and more than 10% of the voting power in RSML. 14. Hon'ble Supreme Court in the case of CIT vs. MotherIndia RefrigerationIndustries (P) Ltd.: 155 ITR 711, held in respect ofthe scope of legal fiction as under: "Having regard to the aforesaid rival contentions, it will be clear that the real issue that arises for our consideration in this case is whether, on a proper construction of the relevant provisions of the concerned enactment, unabsorbed carried forward losses should have preference over current depreciation in the matter of set off or is the position vice versa while computing the total income of an assessee in the concerned assessment year ?And the answer to this question depends on what is thetrue scope and purpose of the legal fiction created under proviso (b) to s. 10(2)(vi)of the 1922 Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income under the Act or, in other words, exempt income; whereas the Ld. DR, as against the contentions of the assessee, placed reliance on the assessment order. 19. There is no dispute that during the relevant previous year, the assessee did not earn any exemptdividend income from investments held in subsidiaries. When no exempt income is actually earned by an assessee from investments held during the year, no portion of expenses incurred during the year can be disallowed under section 14A of the Act. 20. Hon'ble Jurisdictional High Court in PCIT vs. IL & FS Energy Development Company Ltd. (2017) 99 CCH 0190 DelHC, (2017) 297 CTR 0452 (Del) decided on 16th August, 2017, after considering a catena of decisions, held the issue in favour of the assessee and observed that,- 9. Mr. Zoheb Hossain, learned Senior Standing Counsel for the Revenue, submitted that, in Cheminvest Ltd. (supra), this Court had no occasion to consider the CBDT Circular No. 5/2014 dated 11th February 2014 which clarified that Section 14A would apply even when exempt income was not earned in a particular AY. According to him, the other decisions of this Court in CIT-IV v. Taikisha Engineering India Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would result in the imposition of an artificial method of computation on notional and assumed income. We believe thus would be carrying the artifice too far." 21. The decisions in CIT v. M/s Lakhani Marketing Inc. 2014 SCC Online P&H 20357, CIT v. Winsome Textile Industries Limited [2009] 319 ITR 204 (P&H), CIT v. Shivam Motors (P) Ltd. (2014) 272 CTR (All) 277 have all taken a similar view. The decision in Taikisha Engineering India Pvt. Ltd. (supra) does not specifically deal with this issue. 22. It was suggested by Mr. Hossain that, in the context of Section 57(iii), the Supreme Court in Commissioner Of Income Tax, West v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) explained that deduction is allowable even where income was not actually earned in the AY in question. This aspect of the matter was dealt with by this Court in M/s Cheminvest Ltd. (supra) where it reversed the decision of the Special Bench of the ITAT by observing as under: "20. Since the Special Bench has relied upon the decision of the Supreme Court in Rajendra Prasad Moody (supra), it is considered necessary to discuss the true purport of the said decision. It is noticed to begin with that the issue bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before do not merit acceptance. Further, the mere fact that in the audit report for the AY in question, the auditors may have suggested that there should be a disallowance cannot be determinative of the legal position. That would not preclude the Assessee from taking a stand that no disallowance under Section 14 A of the Act was called for in the AY in question because no exempt income was earned. 21. In view of the above position of law, we are of the considered opinion that where there is no dispute of fact that no dividend has been earned by the assessee during the year, no disallowance is called for under section 14 A of the Act. Ground No. 4 of the appeal of the Revenue is accordingly dismissed and ground No. 2 of assessee's appeal is allowed. 22. Ground No. 1 of Assessee's Cross Objections relates to the disallowance of foreign travel expenses.Learned Assessing Officer disallowed travelling expenditure to the extent of Rs. 60,00,107/-, on the ground that the same was in respect of foreign travel, which were incurred for non-business purposes. According to the assessee during the relevant previous year ending 31.03.2008, the assessee incurred total travelling expenditure amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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