TMI Blog2023 (4) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... a capital loss and if it is a capital loss whether the loss can be allowed as a business expenditure? - HELD THAT:- The loss in the present case is on account of depreciation in the value of investments. It is not the case of assessee that the loss is a business loss. In such a situation, when the loss is not a business loss, we do not find any infirmity in the order of CIT(A) and thus this ground of assessee is dismissed. Deduction u/s 10AA - AO after making the adjustment on account of allocation of office expenses and interest and other adjustment recomputed the exemption u/s 10AA - HELD THAT:- We find that identical issue arose in assessee s own case in A.Y. 2014-15 [ 2020 (9) TMI 403 - ITAT DELHI] and Co-ordinate Bench of Tribunal on this issue restored the issue back to the file of AO - We therefore following the order of Co-ordinate Bench for A.Y. 2014-15 and with similar directions restore the issue back to the file of AO and direct him to re-compute the exemption under 10AA of the Act in accordance with law. Assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of the claim and AO shall also be free to call for such info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred in future trading is speculation loss. 1.2 That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the AO in holding that the loss of Rs.3,08,97,129/- in dealings of shares based on actual delivery was speculation loss. 1.3 That on the facts and in the circumstances of the case, the learned CIT(A) erred in holding that sum of Rs.28,14,118/- was disallowable u/s 14A of the Income Tax Act.1961 (Act for short). 1.4 That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the AO in disallowing a loss of Rs.14,99,999/-on account of revaluation of 1,50,000/- shares of M/s. Radiant Chemtech (P) Ltd. 1.5 That on the facts and in the circumstances of the case, the learned CIT (A) erred in confirming the action of the AO in whittling down the claim of the appellant that it was entitled to a deduction of Rs.100,12,142/ u/s 10A of the Act to Rs.52,05,176/- 6. That the appellant craves liberty to add, alter, vary or amend any ground of appeal. 6. Before us, at the outset, Learned AR submitted that assessee does not wish to press ground Nos.1.1 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of Share Capital and Reserve and Surplus are at Rs.156.40 cr. (rounded off) which are much more than the investments made and in such situation the presumption would arise that the investments made are out of the interest free funds and therefore no disallowance under Rule 8D(2)(ii) is called for. 12. With respect to the disallowance under Rule 8D(2)(iii) towards administrative expenses is concerned, he submitted while calculating the average investments only those investments which have actually yielded dividend income during the relevant year should be considered and not the entire investments and to support the aforesaid contention he placed reliance on the decision of Delhi High Court in the case of ACB India Ltd. vs. ACIT reported in 374 ITR 108. He thereafter pointed to page 13 of the paper book wherein the details of dividend income earned by the assessee is tabulated and from the aforesaid table he pointed to the fact that all the investments have not yielded dividend income. He thereafter submitted that identical issue arose in assessee s own case in A.Y. 2014-15 before the Tribunal and Tribunal had set aside the issue to the file of AO to work out the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e availability of the funds with the assessee in the shape of share capital and Reserves Surplus. So also, the Ld. CIT(A). In the circumstances, we are of the considered opinion that the contention of the assessee merits consideration by the learned Assessing Officer. 13. Ld. CIT(A) had granted relief to the assessee by limiting the disallowance to the exempt income in the light of the decision of the Hon ble jurisdictional High Court in the case of Joint Investments P. Ltd. vs. CIT (2015) 372 ITR 694. However, further grievance of the assessee is that for the purpose of disallowance u/s 14A of the Act read with rule 8D(2)(iii) of the Rules, such an amount should have been computed only qua the investment which yielded exempt income during the relevant previous year. Reliance is placed on the decision of the Hon ble jurisdictional High Court in the case of ACB India Ltd. vs ACIT, 374 ITR 108 (Del) and the decision of the Kolkata Bench of the Tribunal in REI Agro Ltd. vs DCIT, 144 ITD 141n (Kol-Trib). 14. Coming to this submission of the learned AR,in view of the decision in the case of ACB India Ltd. vs ACIT, 374 ITR 108 (Del) and REI Agro Ltd. vs DCIT, 144 ITD 141n (Kol-Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Assessee shall also be free to file such documents, explanations, submissions as it deems fit in respect of the claim. Needless to state that AO shall grant adequate opportunity of hearing to the assessee. Assessee is also directed to promptly furnish the required details called for by the authorities. Thus this ground of assessee is allowed for statistical purposes. 16. Ground No.1.4 is with respect to the disallowance of loss of Rs.14,99,999/-. 17. During the course of assessment proceedings and on perusing the Balance Sheet and Profit and Loss account, AO noticed that assessee had declared the value of 1.50 lacs shares of M/s. Radiant Chemtech (P.) Ltd. at Rs.1/- whereas in the Balance Sheet for the immediate preceding year, the value were shown at Rs.15 lacs. AO noticed that assessee had debited Rs.14,99,999/- in the Profit and Loss account as investments written off . The assessee was asked to justify as to how the amount of write off of investments was allowable expenditure. Assessee made the submissions which was not found acceptable to AO. AO therefore held that since the loss has been created by writing off value of share and not by way of any actual loss on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. AO noted that assessee had brought forward the losses of the unit amounting to Rs.2,73,862/-. AO therefore in view of the provision u/s 10AA(6) of the Act, set off the loss from profit for the purpose of exemption u/s 10AA of the Act. 24. AO noted that for the purpose of claiming exemption u/s 10AA, the assessee has to maintain separate books of accounts. He noted that assessee was providing various services from its corporate office, Noida but the cost of providing such services was not transferred to allowable unit for the purpose of computing profit to the unit. He noted that various expenses incurred in the head office were also not allocated to the NSEZ Unit. He was therefore of the view that due to non allocation of these expenses, the profit of the eligible unit was artificially increased. He has listed out the expenses at para 8.4 of the order which according to him aggregated to Rs.3,10,47,175/- which should have been allocated to the unit for computing correct profit. He thereafter allocated the expenses to NSEZ Unit in the ratio of turnover of NSEZ Unit to the total turnover of the company which according to him worked out at 2.62%. On the basis of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and further submitted that before CIT(A) assessee has made the submissions which though noted by CIT(A) at pages 21 and 22 of the order but has not considered the same while deciding the issue. He further submitted that identical issue arose in assessee s own case before the Tribunal for A.Y. 2014-15 and the Co-ordinate Bench of Tribunal in ITA No.4460/Del/2017 dated 07.09.2020 has restored the issue back to the file of AO. He thereafter pointed to the relevant findings on the issue of the Tribunal at page 152 to 157 of the paper book. He submitted that since the facts of the case in the year under consideration are identical to that of A.Y. 2014-15, the matter may be remitted back to AO with similar directions. 29. Learned DR on the other hand supported the order of lower authorities. 30. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the computation of the exemption u/s 10AA of the Act. We find that assessee had admitted before the AO that claim of exemption u/s 10AA of the Act be considered at Rs. 96,12,694/- that was computed by the Auditor but however AO after making the adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 was Rs. 3,03,77,120/- and as on 31/3/2014 was 3,51,69,570/-, the average of which comes to Rs. 3,27,73,345/- and therefore, considering the interest at 12% per annum reduced the profit of the eligible unit by Rs. 39,32,81/- and therefore he totally disallowed a sum of Rs. 45,83,724/- from out of Rs. 2,95,16,153/- claimed by the assessee under section 10AA of the Act and limited it to Rs. 2,49,32,429/-. 19. In the appeal before the Ld. CIT(A), it was argued on behalf of the assessee that the duties of the Directors of a company are not confined to just towards seeing the turnover of the company, that it is common knowledge that a major part of the duties of the Directors is to administer the affairs of the company with emphasis on the compliance of the companies act and a host of other acts aggregating to 3 dozen and odd; that expenses on key-man insurance, basic salary of Director, audit fees, tax audit fees and certification, taxation matter and Directors meeting fees should not be allocated to NSEZ. It was further pleaded that the expenses relating to transit good incidence and Diwali expenses in respect of NSEZ have been separately claimed in the books of NSEZ and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors do not work for head office alone. The fact that they also oversee the work of the exempt unit, makes it obligation on the part of the exempt unit to contribute to such expenditure. So also, in respect of the other expenditure, other than the one which was separately accounted for in the books of NSEZ. However, it seems the authorities below missed to notice the contention of the assessee that the expenses relating to transit goods insurance and Diwali expenses in respect of NSEZ were separately claimed in the books of NSEZ and therefore, the question of allocation of such expenses does not arise. This fact needs to be verified. 24. It is further submitted before us in respect of the interest component that at the end of the every year, as observed by the authorities below, the profit of the exempt unit also is transferred to the head office and head office holds it on behalf of the exempt unit out of which the exempt unit draws the amounts for its operations and therefore, the exempt unit owing any amount to the head office so as to necessitate the contribution in the interest expenses incurred by the head office. As a matter of fact, the authorities below noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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