TMI Blog2021 (7) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the IT Rules and compare with the allocation of expenses to exempted income earned and allow the claim which is beneficial to the assessee. The assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. We allow the grounds of appeal of the assessee for statistical purposes. Disallowance computed applying Sec 14A and Rule 8D(2) of the I T Rules, the assessee is eligible to make adjustment of disallowance amount while claiming deduction U/sec80IA of the Act in computing the revised profits. Unabsorbed depreciation and accumulated losses of the earlier years prior to initial year of claim u/sec 80IA of the Act have to be adjusted while computing profit of eligible business - HELD THAT:- We Find the Honble High Court Of Madras in the case of M/s Velayudhaswamy Spinning Mills (P) Ltd. [ 2010 (3) TMI 860 - MADRAS HIGH COURT] has observed The Loss in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business, as no such mandate is provided in section 80-IA(5)of the Act. Subsequently the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decision discussed above, direct the assessing officer to allow the deduction of cess and allow the ground of appeal of the assessee. - ITA No. 4223/Mum/2012 And ITA No. 4955/Mum/2013 - - - Dated:- 24-6-2021 - Shri M. Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Shri Percy J Pardiwalla, AR For the Respondent : Shri Shishir Dhamija, CIT DR ORDER PER PAVAN KUMAR GADALE JM : These are the appeals filed by the assessee against the separate orders of Commissioner of Income Tax (Appeals)- 24 passed u/s143 (3) and 250 of the Income Tax Act for the A.Y.2008-09 2009-10.The issues in these appeals are similar and identical. Hence are clubbed, heard and consolidated order is passed. We shall take up ITA No. 4223/Mum/2012 for the Assessment Year (A.Y.) 2008-09 as a lead case and facts narrated. The assessee has raised following grounds of appeal as under: (a) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing an amount of ₹ 2,81,70,670 under section 14A of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of Voluntary Emission Reduction credits received: 1) On the facts and in the circumstances of the case and in law, the appellant prays that the sum of ₹ 7,70,32,928 received in connection with the Voluntary Emission Reduction (VER) credits, which is in the nature of a capital receipt, ought to be reduced from the total income Cost of acquisition for the purpose of computing Capital gains in respect of debentures of Bajaj Auto Finance Limited sold by the appellant during the year: 2) On the facts and in the circumstances of the case and in law, the appellant prays that while computing the Capital gains in respect of sale of debentures of Bajaj Auto Finance Limited, the cost of acquisition ought to be considered at ₹ 500 per debenture instead of ₹ 452 per debenture, i.e. without reducing the value attributed to the component relating to the detachable warrants received along with the debentures. 3.) Deduction in respect of education cess: On the facts and in the circumstances of the case and in law, the appellant prays that the Assessing Officer be directed to allow deduction in respect of education cess on income tax paid during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or computation of book profits under section 115JB of the Act. In respect of claim of deduction under80IA of the Act, the A.O. observed that the generation of wind power commenced in F.Y 1999-2000 and the assessee has claimed deduction u/sec 80IA of the Act from F.Y.2004-05 hence unabsorbed depreciation and accumulated losses of earlier years should be adjusted first, even if the assessee starts claiming deduction in subsequent years. The assessee has filed the explanations by letter dated 3-12-2010 referred at para5.1 of the order. The A.O. was not satisfied with the explanations and is of the opinion that even if the assessee has claimed the deduction u/sec 80IA of the Act in the sixth year, the unabsorbed depreciation and accumulated losses of earlier years are to be adjusted while computing profits eligible for deduction u/sec80IA of the Act. Finally the A.O. has recalculated the deduction Rs Nil and determined the assessable income of ₹ 90,52,16,685/- and passed the order u/s 143 (3) of the Act dated 31.12.2010. Aggrieved by the A.O. order, the assessee has filed the appeal with the CIT (A). 4. In the appellate proceedings, on the issue of disallowance U/sec14A r.w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Assessing Officer and partly allowed the appeal of the assessee. Aggrieved by the order of the CIT (A), the assessee has filed the appeal before the Honble Tribunal. 5. At the time of hearing. The Ld. AR of the assessee submitted that the CIT (A) has erred in confirming the action of the Assessing Officer and explained that the assessee has received dividend income from the its sister concern and sou motto made disallowance of ₹ 5 Lakhs. The Ld. AR demonstrated the value of investments as on 31-03-2018 being 17.02% of the total assets. Similarly dividend income and other income from shares and mutual funds being sale of investments worked out to ₹ 11.75 crores credited to profit and loss account which constitute only 11.05% of total income. Whereas, the disallowance made by the Assessing Officer is ₹ 2.76 crores which works out more than 23% of income from investments credited to profit and loss account. The Assessing Officer failed to explain the reasons and basis of disallowance except applying the formula under Rule 8D (2) of IT Rules. The Assessing Officer should have considered the total expenses incurred by the assessee and shall specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er market rate of share price of M/s Bajaj Auto Finance ltd , the assessee has not exercised the warrants and were lapsed. In the F.Y.2009-10, the assesse has written off the proportionate cost attributable to the warrants. But the assessee has claimed cost of each debenture at ₹ 452/- as against the cost of ₹ 500/-and prayed to allow the differential cost. 5(vii). In the last additional ground, the Ld.AR submitted that the education cess paid on the income tax has to be allowed as deduction and relied on the judicial decisions. 6. Contra, the Ld.DR supported the order of the CIT (A). The Ld.DR submitted that the assessee has sou moto disallowed ₹ 5 lacs without considering the exempt income earned, and the expenses incurred for earning the dividend income and the substantial investments. The Assessing Officer has rightly applied the provisions of section 14A r.w.r. 8D(2) of IT Rules and computed the disallowance. In respect of claim of deduction u/sec 80IA of the Act, the Ld. DR supported the submissions relying on the judicial decisions referred in the CIT(A) order that unabsorbed depreciation and accumulated losses are required to be adjusted first, in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no satisfaction of the A.O. on the objective facts. The direct expenses of wind farm division were excluded in working out of disallowances. Due to demerger, the expenses are incurred in the holding company accounts and not in demerged assessee company. The CIT(A) has deleted the first limb under rule 8D(2)(i) and confirmed the addition made by the A.O under Rule 8D(2)(iii) of the IT Rules and the revenue is not in appeal. Further the assessee company has earned dividend income of ₹ 4.07 crores from M/s Bajaj Auto Finance Ltd. The Ld.AR relied on the decision of the Hon ble High Court of Delhi Principal CIT Vs Nalwa Sons Investment Limited dated 26.03.2019 in respect of applicability of provisions of Sec. 14A r.w.r 8D of the IT Rules and the coordinate bench of Honorable Tribunal decisions. Finally the Ld.AR submit that no expenses are incurred for earning dividend income and the disallowance is not warranted. The Ld. AR without prejudice, submitted that the A.O. has to recalculate the average value of investments for computing the disallowance u/s 14A Rule 8D(2)(iii) of the Act based only on exempted dividend yielding investments. We found the submissions of the Ld. AR are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f claim u/sec80IA of the Act have to be adjusted while computing profit of eligible business . We Find the Honble High Court Of Madras in the case of M/s Velayudhaswamy Spinning Mills (P) Ltd. Vs Acit ( 340 ITR 477) has observed The Loss in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business, as no such mandate is provided in section 80-IA(5)of the Act. Subsequently the Revenue has challenged the decision before the Hon ble Supreme Court and the SLP was dismissed ( 2016) 244 Taxman 58 (SC) . Accordingly, We follow the ratio of the above judicial decisions and set aside the order of the CIT(A) on this issue and allow the ground of appeal in favour of the assessee. 9. The Assessing Officer has issued the Income tax refund order along with interest U/sec 244A of the Act. Whereas, the intimation U/sec143(1) of the Act was passed on17/07/2009 and refund order was made on 7-09-2009. The contention of the Ld.AR is that the interest was calculated only up to date of processing of intimation U/sec143(1) of the Act and not as on actual date of refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has acquired the debentures of the M/s Bajaj Auto Finance Ltd along with detachable warrant as part of rights issue of Non Convertible Debentures. But due to lower market rate of share price of M/s Bajaj Auto Finance ltd , the assessee has not exercised the warrants and were lapsed. In the F.Y.2009-10 the assesse has written off the proportionate cost attributable to the warrants and relied on judicial decisions. Therefore considering these factual aspects that in the subsequent A.Y.2010-11, the assessee has written off in the financial statements, we are of opinion that this matter requires verification and examination of transactions as discussed above to be decided based on the final outcome of A.Y. 2010-11. Accordingly, we restore this disputed issue for verification and examination by the assessing officer and after satisfaction of facts, the assessing officer is directed to allow the claim of the assessee. The assesse should be provided adequate opportunity of hearing and shall co-operate in submitting the information and we allow this ground of appeal for statistical purpose. 12. The last additional ground of appeal raised by the assesse to grant deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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