TMI Blog2022 (8) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not recorded any objective satisfaction as to why the voluntary disallowance made by the assessee is incorrect before proceeding to apply computation mechanism in Rule 8D(2)(iii) of the Rules in the instant case. This issue is no longer res-integra in view of the decision of this Tribunal in assessee s own case [ 2022 (6) TMI 1119 - ITAT MUMBAI] wherein this Tribunal had elaborately discussed the very same issue of disallowance u/s.14A of the Act made under identical circumstances and deleted the disallowance made by the lower authorities. We further find that this issue is also settled in the case of Maxopp Investments [ 2018 (3) TMI 805 - SUPREME COURT] and Godrej Boyce Manufacturing Co. Ltd [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] It is also pertinent to note that this decision of the Hon ble Bombay High Court has been further affirmed by the Hon ble Supreme Court [ 2017 (9) TMI 1689 - SUPREME COURT] Thus we direct the ld. AO to restrict the disallowance u/s.14A as suo moto under normal provisions of the Act. Disallowance of expenses u/s.14A while computing book profits u/s.115JB - We find that the Special Bench of Delhi Tribunal in the case of Vireet Investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had not claimed this TDS credit of Rs.5,05,620/- in the A.Y.2015-16 based on form 26AS. This direction is given in order to protect the interest of the Revenue by not giving double credit of TDS to the assessee. Taxes deducted by four payers but the TDS was not remitted by the payers to the account of the Central Government - As merely because the deductor had not remitted the TDS to the account of the Central Government having deducted the taxes from the amounts due to the assessee, assessee cannot be deprived or denied of its legitimate credit. This is a clear case of default committed by the deductor against whom the department is entitled to take suitable action as per law. The assessee cannot be denied TDS credit for no fault of it. Revised claim made by the assessee during the course of assessment proceedings and the same was not claimed by way of a valid return of income cannot be entertained - Action of the AO in not computing short term or long term capital gain / loss submitted by the assessee during the assessment proceedings - We find that the decision of the Goetze India Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] clearly enables the appellate authorities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unascertained liability - disallowance made while computing book profits u/s.115JB of the Act - HELD THAT:- The consistent practice followed by the assessee is that the provisions as and when made as on 31st March of each year are being reversed on first April of the subsequent year by offering it to tax and the actual expenses based on the final invoice submitted by the vendor are booked as expenditure of that year. It is not in dispute that the reversal of provision for expenses made by the assessee in subsequent year has been accepted by the Revenue when income is being offered thereon. Similar practice has been followed by the assessee while making reversal of provision of earlier year expenses during the year under consideration by offering it to income, which fact is also accepted by the Revenue. In these circumstances, we have no hesitation to hold that provision for expenses which have been made based on an agreed contract or based on proforma invoice for which services had already been rendered to the assessee by the vendors, becomes a provision made on a realistic and rationale basis and cannot fall within the ambit of unascertained liability As relying on M/S. EDELCA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made suomoto disallowance of expenses u/s.14A of the Act in the sum of Rs.5,55,969/-. The basis of making the said disallowance of Rs.5,55,969/- is enclosed in page 55 of the paper book filed by the assessee as under:- Particulars Total cost Proportionate expenses of dividend income segment Employee costs 311,182,037 500,000 Auditors' remuneration 3,207,173 5,153 Communication 5,275,266 8,476 Electricity charges 1,813,876 2,914 Office expenses 665,365 1,069 Rent 23,871,347 38,356 346,015,064 555,969 2.3. The ld. AO however, disregarded the aforesaid suomoto disallowance of expenses and proceeded to make disallowance u/s.14A of the Act r.w.Rule 8D(2)(iii) of the Rules in the sum of Rs.13,91,31,681/- after reducing the suomoto disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 8 and deleted the disallowance made by the lower authorities. We further find that this issue is also settled by the Hon ble Supreme Court in the case of Maxopp Investments reported in 402 ITR 640 and by the decision of the Hon ble Jurisdictional High Court in the case of Godrej Boyce Manufacturing Co. Ltd., vs. Dy. Commissioner of Income Tax Range 10(2), Mumbai reported in 328 ITR 81. It is also pertinent to note that this decision of the Hon ble Bombay High Court has been further affirmed by the Hon ble Supreme Court. 2.5. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we direct the ld. AO to restrict the disallowance u/s.14A of the Act in the sum of Rs.5,55,969/- under normal provisions of the Act. 2.6. With regard to disallowance of expenses u/s.14A of the Act while computing book profits u/s.115JB of the Act, we find that the ld. AO had made same disallowance as was made by him under normal provisions of the Act, again while computing the book profit u/s.115JB of the Act. We find that the Special Bench of Delhi Tribunal in the case of Vireet Investments reported in 165 ITD 27 had categorically held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was not automatically picked by the Income Tax e-filing system by posting the said figure under Schedule C F L. The ld. AO concluded that the assessee had withdrawn the claim of long term capital loss of Rs.1,57,45,360/-. We have gone through the entire income tax return form filed at the time of filing revised return. These documents are enclosed in pages 84-91 of the paper book. From the above narration, it could be seen that failure to reflect the long term capital loss figure of Rs.1,57,45,360/- in the schedule of carry forward of losses in the income tax return is purely not attributable to the assessee as it is an automatic pick of figure from Column B-9 in the IT return which is to be done by online system. So, this is purely a technical glitch in the income tax e-filing system, for which assessee could not be faulted. In fact, this was brought to the knowledge of ld. CIT(A) in the statement of facts itself. But the ld. CIT(A) had conveniently stated that assessee had not claimed this long term capital loss in the revised return which is factually incorrect as is evident from the above narration of facts. 3.2. In view of the above observations, we direct the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration. It was argued that merely because the deductor had not remitted the TDS to the account of the Central Government having deducted the taxes from the amounts due to the assessee, assessee cannot be deprived or denied of its legitimate credit. This is a clear case of default committed by the deductor against whom the department is entitled to take suitable action as per law. The assessee cannot be denied TDS credit for no fault of it. We find that similar issue had come for adjudication before this Tribunal in assessee s own case for A.Y.2016-17 and 2017-18 vide order dated 23/06/2022 referred to supra wherein in para 22, it has been held as under:- 22..............................................The assessee has shown a tax deduction at source made by tax deductor amounting to ₹54,59,764/-, which has been paid to the credit of Central Government by the various parties. However, assessee has submitted the list of 16 such parties where the amount of income has been offered by the assessee as income however, consequent TDS of ₹5459764/- was not granted as credit to the assessee. The reason being that it did not appear in form no. 26AS of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Apart from that assessee had also pleaded that even assuming interest is required to be disallowed in terms of Rule 8D(2)(ii) of the Rules, only the net interest paid, if any should be considered i.e. interest expenditure less interest income earned by the assessee. The assessee also gave details before the ld. AO that it had earned interest income of Rs.425.68 Crores as against interest expenditure of Rs.50.40 Crores, thereby resulting in net interest paid becoming negative. Accordingly, it was pleaded that no disallowance of interest in terms of Rule 8D(2)(ii) of the Rules could be made. With regard to disallowance of indirect expenses, the assessee pleaded that it had taken each and every expenses debited in the P L account and had attributed certain ratio as relatable to the investment activity and wherever expenses that are not at all linked with the investment activity, the same has been ignored. The ld. AO however, disregarded the entire contentions and written submissions of the assessee are directly proceeded to invoke the revised computation mechanism provided in Rule 8D(2) of the Rules which came into effect only from 02/06/2016 and made disallowance under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 167/- on sale of units of mutual funds under the head short term capital gains in the return of income as against short term capital loss (STT paid) of Rs.3,54,731/- and long term capital gain (STT paid-exempt income) of Rs.20,59,114/-. The ld. AO did not take cognizance of the same and there was absolutely no discussion regarding the same in his assessment order. The ld. CIT(A) by placing reliance on the decision of the Hon ble Supreme Court in the case of Goetze India Ltd., reported in 284 ITR 323 stated that this revised claim was only made by the assessee during the course of assessment proceedings and the same was not claimed by way of a valid return of income, the same cannot be entertained. 8.3. We find that the decision of the Goetze India Ltd., referred to supra clearly enables the appellate authorities to consider the claim made by the assessee even if it is not made by way of a valid return of income but claimed during the course of assessment proceedings. What is required to be seen is whether the claim of the assessee is legitimate or not? We further find that the Hon ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd productivity thereon and hence, the same shall be eligible as deduction u/s.36 or 37 of the Act as staff welfare expenses. The assessee, on without prejudice basis, further pleaded that the borrowings made by it were utilised only for the purpose of business and that no part of the borrowings has been used for advancing loan to employee welfare trust. The assessee pleaded that it had sufficient interest free funds available with it to make advance of interest free loan to its employee welfare trust. The assessee placed reliance on the decision of the Hon ble Jurisdictional High Court in the case of Reliance Utilities Power Ltd., reported in 313 ITR 340 in support of its contentions. 12.2. The ld. CIT(A) observed that main objection of the ld. AO was that the money advanced to the Employees Welfare Trust by the assessee has been invested by the said trust for acquiring the shares of the assessee company itself and no welfare as such of employees has been done. It is not in dispute that assessee has submitted various details with respect of the trust deed, its objects and from whom it can accept funds for making the investments etc., The law settlor in the case of the Employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idev Enterprises reported in 192 ITR 165. Hence, we have no hesitation in directing the ld. AO to delete the disallowance of interest made u/s.36(1)(iii) of the Act in the facts and circumstances of the instant case. Accordingly, the ground No.1 raised by the assessee is allowed. 13. The ground No.2 raised by the assessee is challenging the disallowance u/s.14A of the Act. 13.1. We have heard rival submissions and perused the materials available on record. We find that assessee had shown dividend income of Rs.61,06,54,600/- which was claimed as exempt u/s.10 of the Act in the return. The assessee had made suo-moto disallowance of Rs.5,68,254/- u/s.14A of the Act as expenses incurred for earning exempt income. The basis of arriving at the said disallowance figure is mentioned in pages 83-91 of the paper book filed before us. The ld. AO ignoring the elaborate contentions of the assessee directly proceeded to make disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii) of the Rules. Both the parties stated before us that the issue is similar to issue decided hereinabove for A.Y.2014-15 vide ground No.1 above. Hence, the decision rendered in ground No.1 for A.Y.2014-15 shall apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue and income, resorts to make provision for expenses based on proforma invoice or a contract which is evident from table given in pages 119 120 of the paper book filed before us. The assessee has also given subsequent date of payment of the said expenditure in the said table. Hence, these are regular business expenses that had already accrued during the year under consideration for which provision has been made by the assessee. The consistent practice followed by the assessee is that the provisions as and when made as on 31st March of each year are being reversed on first April of the subsequent year by offering it to tax and the actual expenses based on the final invoice submitted by the vendor are booked as expenditure of that year. It is not in dispute that the reversal of provision for expenses made by the assessee in subsequent year has been accepted by the Revenue when income is being offered thereon. Similar practice has been followed by the assessee while making reversal of provision of earlier year expenses during the year under consideration by offering it to income, which fact is also accepted by the Revenue. In these circumstances, we have no hesitation to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to reduce the profitability of the year of the assessee. He argued that the ld. CIT(A) had granted relief to the assessee on the premise that the said provision has been reversed by the assessee voluntarily in the subsequent year and duly offered to tax and hence, there cannot be any double taxation. The ld. DR vehemently argued that correct income should be taxed in the correct assessment year. 5.4. At the outset, there is no dispute that assessee had made provision for certain expenses on an estimated basis during the year and claimed the same as deduction in the return of income. But we find from the perusal of the order of the ld. CIT(A) that there is a proper reasoning for the same. We find that assessee is a subsidiary of Edelweiss Financial Services Limited (EFSL) which is a company listed on Bombay Stock Exchange. Being a listed company, the EFSL needs to file its consolidated audited financial statements (i.e. including the financial results of subsidiary company ) with Bombay Stock Exchange (BSE) as directed by the Securities Exchange Board of India (SEBI). In order to meet the said criteria, the subsidiary companies (including the assessee) get statutory audits d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Bharat Earth Movers vs CIT reported in 245 ITR 428 (SC). It is also not in dispute that the assessee had duly reversed the said provision in A.Y.2014-15 and 2015-16 and had offered to tax as other income reflected in the profit and loss account of the assessee and hence taxing the very same provision for expenses in this year would result in double taxation. This practice has been consistently followed by the assessee over the years which has been accepted by the Revenue. It is also a fact that assessee being a subsidiary of Edelweiss Financial Services Ltd., which is a listed company had to get its accounts audited on or before 31st May from the end of the accounting year in order to submit the balance sheet to the stock exchange in accordance with listing norms. The audited financial statements of the assessee company has been signed on 14th May 2013, for which purpose, obviously accounts need to be freezed at least by the end of April. Hence, for the purpose of freezing of accounts, expenses and income that had accrued need to be provided atleast on estimated basis and based on past practices prevailing in the company. The assessee company does not have a luxury to wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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