TMI Blog2023 (7) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... are certain restrictions for using the said profits that itself is not enough to hold that the same is not the income of the assessee. That special reserve belongs to the assessee only and is reserved for utilization in certain eventualities for the safety and benefit of assessee and its customers as per the RBI guidelines. This fund is in the type of savings that belongs to the assessee itself. Therefore, it cannot be said that transfer of certain profits to reserve fund will not fall in the definition of income of the assessee. As relying on Srei Infrastructure Finance Limited . [ 2015 (2) TMI 545 - DELHI HIGH COURT] we dismiss this ground raised by the assessee. MAT computation - The above special reserve should not be taken for computation of income in the book profit under section 115JB as decided in Srei Infrastructure Finance Limited. [ 2015 (2) TMI 545 - DELHI HIGH COURT] Decided against assessee. Short-term capital gain on the receipt from transfer of voting rights - CIT-A deleted the addition - HELD THAT:- AO taxed the said amount as short term capital gains. CIT(Appeals) deleted the addition made by the ld. Assessing Officer holding that since the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. Disallowance u/s 36(1)(iii) - AO computed the notional interest at the rate of 10% on the average investments in SPVs and held that the same cannot be allowed under section 36(1)(iii), on the contention that these investments were not for generating any income nor was there any certainty that they would generate any income in near future and thus were not for the purpose of business - CIT-A deleted disallowance observing that the assessee was having sufficient own funds to make investment and further that investments in SPV (Special Purpose Vehicle) have been made during the course of business - HELD THAT:- . Considering the nature of business of the assessee and the purpose of forming the SPV to secure infrastructure, contracts etc., we do not find any infirmity in the order of ld. CIT(Appeals) in holding that the said expenditure/investment was made for the business purposes. This ground of Revenue s appeal is, therefore, dismissed. Deduction u/s 36(1)(viii) - HELD THAT:- CIT(Appeals) correctly relied upon the decision of National Thermal Power Co. Limited. [ 1996 (12) TMI 7 - SUPREME COURT] and Pruthvi Brokers Shareholders [ 2012 (7) TMI 158 - BOMBAY HIGH C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified grossly erred in confirming the disallowance of claim of Education Cess amounting to Rs. 86,70,456/- as allowable expenditure in computing total income. (3) That on the fact and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of claim for exclusion of amount transferred to Special Reserve u/s 45IC of the RBI Act, 1934 amounting to Rs. 19,00,00,000/- in computing total income under normal provisions of the Act. (4) That on the fact and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of amount transferred to Special Reserve u/s 45IC of the RBI Act, 1934 amounting to Rs. 19,00,00,000/- in computing Book Profits u/s 115JB of the Act . 2. Ground No. 1 relates to disallowance of provision for leave encashment amounting to Rs. 37,73,360/-. 3. At the outset, the ld. Counsel for the assessee has fairly stated that the issue raised vide ground no. 1 is squarely covered against the assessee by the judgment of Hon ble Supreme Court dated 24.04.2020 in the case of Union of India Ors. -vs.- Exide Industries Limited Anr. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JB . 8. Ld. D.R. relied on the order of ld. CIT(Appeals) as well as the judgment dated 13.02.2015 of the Hon ble Delhi High Court in I.T. Appeal Nos. 371 372 of 2012 in the case of Srei Infrastructure Finance Limited vs.- Addl. CIT (2015) 54 taxmann.com 254 (Delhi). 9. We have considered the rival contentions and gone through the record carefully. In our view, merely because the assessee is required to transfer the profits to special reserve or there are certain restrictions for using the said profits that itself is not enough to hold that the same is not the income of the assessee. That special reserve belongs to the assessee only and is reserved for utilization in certain eventualities for the safety and benefit of assessee and its customers as per the RBI guidelines. This fund is in the type of savings that belongs to the assessee itself. Therefore, it cannot be said that transfer of certain profits to reserve fund will not fall in the definition of income of the assessee. Moreover, this issue is squarely covered by the decision of the Hon ble Delhi High Court in assessee s own case i.e. Srei Infrastructure Finance Limited vs.- Additional Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the ld. CIT(A) erred in deleting the disallowance amounting to Rs. 14,467,83,685/- u/s 14A of the Act in the computation of income under both normal provisions and the book profit of the Income Tax Act, 1961. (5) That on the facts and the circumstances of the case, the ld. CIT(A) erred in deleting the disallowance amounting to Rs. 48,83,800/- u/s 36(1)(iii) in the computation of income under normal provisions of the Act. (6) That on the facts and the circumstances of the case, the ld. CIT(A) erred in deleting the disallowance of modified claim of deduction u/s 36(1)(vii) of the Act amounting to Rs. 7,61,48,526/-. (7) That on the facts and the circumstances of the case, the ld. CIT(A) erred in deleting the addition of contingent provision against standard assets amounting to Rs. 1,61,00,000/- in the computation of book profit u/s 115JB of the Act. 13. Vide Ground No. 1, the Revenue has contested the action of the ld. CIT(Appeals) in deleting the addition made by the ld. Assessing Officer on account of short-term capital gain on the receipt from transfer of voting rights amounting to Rs. 20,00,00,000/-. 14. Brief facts of the case are that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said right to purchase the sale shares by the assessee to ECI as sale of shares itself. However, the ld. CIT(Appeals) deleted the addition made by the ld. Assessing Officer observing that there was a lock in period during which the shares in question could not be transferred. The amount was received by the assessee as an advance on account of transfer of right to purchase pursuant to agreement to sale of shares at a future date. The ld. Counsel for the assessee has submitted that the said shares were actually sold in the assessment year 2021-22 and the amount received of Rs.20 crores was duly offered for taxation in the said year. Even during the course of assessment year 2021-22, a query was raised on account of the said sum and reply was furnished by the assessee, which has been duly accepted and no adjustment was made. 20. Since the assessee had only entered into an agreement for selling its right to purchase the sale shares of M/s. Potin Pangin Highway, a joint venture of assessee and ECI and the actual transaction had taken place in the assessment year 2021-22 and no transfer of shares took place in the assessment year under consideration and further the amount has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of the Hon ble Supreme Court in the case of CIT vs.- B.C. Srinivasa Setty (1981) 128 ITR 294(SC). 25. The ld. D.R. could not point out any distinguishable facts on law to interfere in the order of ld. CIT(Appeals) and the same is accordingly upheld. This ground of Revenue is hereby dismissed. 26. Vide Ground No. 4, the revenue has agitated the action of the ld. CIT(Appeals) in deleting the disallowance of Rs. 14,47,83,685/- made by the ld. Assessing Officer under section 14A of the Income Tax Act in computation of income under normal provisions of profit under section 115JB of the Income Tax Act. 27. The ld.. CIT(Appeals) noted that the assessee during the year earned dividend income of Rs. 2,78,53,622/-. The assessee had made suo motu disallowance of Rs. 5,44,466/- being the direct expenses incurred. The ld. CIT(Appeals) further relied upon the decision of Hon ble Special Bench of ITAT, Delhi in the case of Vireet Investment P. Limited (ITA No. 502 of 2012) and held that the disallowance under section 14A is to be computed on only shares generating exempt income during the year. The ld. CIT(Appeals) also invited the calculation from the appellant and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SPV. That the assessee had entered into an agreement with the other parties only pursuant to the nature of its business and acted only as financial member of the SPV and that the shares in the SPV were held only pursuant to the agreement and to promote the business of the financing and not with the intention to make the investment. The SPV was formed for the purpose of business of the assessee and that it was not for the purpose of investment. Considering the nature of business of the assessee and the purpose of forming the SPV to secure infrastructure, contracts etc., we do not find any infirmity in the order of ld. CIT(Appeals) in holding that the said expenditure/investment was made for the business purposes. This ground of Revenue s appeal is, therefore, dismissed. 32. Vide Ground No. 6, the Revenue has agitated the action of the ld. CIT(Appeals) in allowing and considering the modified claim of deduction under section 36(1)(viii) of the Income Tax Act. 33. Brief facts relating to this issue are that the assessee had claimed deduction under section 36(1)(viii) of Rs. 1,69,484/- in the return of income. During the course of assessment proceedings, the assessee filed a mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38. The ld. CIT(Appeals) considering the above submission of the assessee deleted the addition so made by the assessee observing as under:- The written submissions and case laws/judicial precedents cited by the ld. ARs have been duly perused and carefully considered. The appellant has prepared its financial statements in conformity, inter alia with the guidelines issued by the Reserve Bank of India as applicable to an Infrastructure Finance Company Non Banking Finance Company. Accordingly, the appellant has created Contingent Provision against Standard Assets as per Notification No. DNBS(PD) CC. No. 207/03.02.002/2010-11 dated January 17, 2011 issued by the RBI wherein every NBFC has to create a provision at 0.25% by the RBI. Thus clause (c) of Explanation 1 to sec. 115JB which provides for addition of amount set aside to provision made for meeting liabilities other than ascertained liabilities is not applicable. Reliance is placed on the decision of Hon ble Apex Court in Metal Box Co. of India Ltd. vs.- Their Workmen (19690) 73 ITR 53 (SC) wherein it was held that a liability accrued during the year through discharged at a future date would be a proper deduction while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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