TMI Blog2023 (2) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... n raised by the assessee for deleting addition under Rule 8D(2)(iii) are rejected. Assessee has raised an alternate plea that only dividend yielding investments should be considered for the purpose of disallowance - Assessee has also filed a chart identifying the companies wherein the assessee has earned dividend. It is no more res-integra that only dividend yielding investments should be considered for the purpose of computation of disallowance under Rule 8D(2)(iii). We accept the alternate contention of the assessee. The AO is directed to consider only dividend yielding investments for computing disallowance under Rule 8D (2)(iii). Consequently, ground No. 2 of the appeal is partly allowed in terms aforesaid. Disallowance of interest paid on Perpetual Non-Convertible Debentures (PNCD)u/s 36(1)(iii) - AO rejected the assessee s claim on the ground that the said expenditure claimed is not in the nature of interest - HELD THAT:- It is not disputed by the Department that the PNCD on which the assessee has paid interest are the same that were subject matter of dispute in AY 2011-12 and 2012-13 in proceedings u/s 263 of the Act. Thus, in the light of the decision of Co-ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ths from the date of receipt of this order. Thus, ground of appeal is allowed for statistical purpose. Disallowance of provision for leave encashment - AR submits that the assessee has made clam of deduction for leave encashment on the basis of actual payments only - HELD THAT:- In the facts of the case and the decision of Co-ordinate Bench in assessee s own case, we hold that the amounts actually paid towards leave encashment is allowable as deduction. The assessee has placed on record Tax Audit Report for AY 2017-18. The same was available before the AO, as is evident from Assessment Order - AO has erred in holding that the assessee has claimed entire provision i.e. in excess of amount actually paid. After examining the Audit Report - The aforesaid sums were paid before the due date of filing return of income u/s 139(1) of the Act. Hence, ground is allowed pro-tanto. - Shri Vikas Awasthy, Judicial Member And Shri M Balaganesh, Accountant Member For the Appellant : Shri Nishant Thakkar Ms. Jasmin Amasadvala. For the Respondent : Shri Biswanath Das CIT DR. ORDER PER VIKAS AWASTHY, JM: These two appeals by the assessee that is for assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D(2)(i) Rs. 96,00,000/- 2. Rule 8D(2)(ii) Rs. 28.94 crores 3. Rule 8D (2)(iii) Rs. 16.27 crores 4.2 The learned AR pointed that disallowance under Rule 8D(2)(ii) made by AO was deleted by the Dispute Resolution Panel (DRP) after being satisfied that assessee s own interest free funds were sufficient to cover the investments made. However, the DRP upheld the findings of AO insofar as the disallowance under Rule 8D(2)(i) and Rule 8D(2)(iii). The learned AR contended that the AO before applying the provisions of Rule 8D ought to have recorded dis-satisfaction with respect of assessee s computation of disallowance u/s 14A of the Act. No satisfaction has been recorded by AO as mandated u/s 14A(2) of the Act. 4.3 Without prejudice to the primary contention, the learned AR made an alternate prayer that for making disallowance under Rule 8D(2)(iii), only dividend yielding investments should be considered. 4.4 In respect of ground No. 4 relating to disallowance of interest paid on Perpetual Non-Convertible Debentures, the learned AR submits that interest on debentures was disallowed in proceedings u/s 263 of the Act in assessment years 2011-12 and 2012-13. The assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the learned AR submits, that admittedly the assessee had not claimed deduction of interest on PNCD in computation of Book Profits u/s 115JB of the Act. The claim was made for the first time in assessment proceedings before the AO. The AO rejected the claim of assessee, by placing reliance on the decision of Hon ble Supreme Court of India in the case of Goetze India Limited 284 ITR 323. The learned AR fairly concedes that the AO cannot consider any claim not made in the return of income/revised return of income, however, there is no impediment for the Appellate Authorities to admit fresh claim of assessee. In support of his submissions, the learned AR placed reliance on the following decisions. 1) Banc Tec TPS India Pvt. Ltd. in ITA No. 2074/MUM/2017 2) Pruthvi Brokers and Shareholders India Pvt. Ltd. 349 ITR 336 (Bombay) The learned AR submits that the claim of assessee may be admitted and restored to AO for examination. 4.8 In support of ground No. 11 i.e. Short Grant of TDS/TCS credit, the learned AR submits that the assessee had filed an application u/s 154 of the Act before the AO on 02/07/2021. The said application of the assessee is still pending for adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to indirect administrative expenditure under Rule 8D(2)(iii). The AO has examined the same, gave reasons for his rejecting the same and thereafter, has proceeded to compute disallowance under Rule 8D(2). After examining the same, we are satisfied that the AO has recorded reasons for disagreeing with the assessee s calculation of disallowance u/s 14A of the Act. Thus, the primary objection raised by the assessee for deleting addition under Rule 8D(2)(iii) are rejected. 6.2 The assessee has raised an alternate plea that only dividend yielding investments should be considered for the purpose of disallowance. The assessee has also filed a chart identifying the companies wherein the assessee has earned dividend. It is no more res-integra that only dividend yielding investments should be considered for the purpose of computation of disallowance under Rule 8D(2)(iii). We accept the alternate contention of the assessee. The AO is directed to consider only dividend yielding investments for computing disallowance under Rule 8D (2)(iii). Consequently, ground No. 2 of the appeal is partly allowed in terms aforesaid. 6.3 The ground No. 3 of appeal is against disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h interest. The evidences in this regard are enclosed in pages 254 and 255 of the paper book filed before us and the fact of repayment of these borrowings with interest had also been duly notified by the assessee to BSE Ltd. and NSE Ltd as per the requirement of SEBI regulations. For the sake of convenience, the intimation given to BSE and NSE are reproduced hereunder: 4.8. This categorically goes to prove that it is not a case of equity and the issue of perpetual bonds is only borrowing made by the assessee. Since the said borrowing has been used for business purposes of the assessee, the interest paid thereon would be squarely allowable as deduction u/s 36(1)(iii) of the Act. Hence, even on merits, the action of the ld. PCIT would have no legs to stand. It is not disputed by the Department that the PNCD on which the assessee has paid interest are the same that were subject matter of dispute in AY 2011-12 and 2012-13 in proceedings u/s 263 of the Act. Thus, in the light of the decision of Co-ordinate Bench on same issue in assessee s own case in preceding assessment year, we hold that the interest expenditure in respect of Perpetual Non-Convertible Debentures is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contribution to compensator afforestation as per the directions of the Supreme Court. It is not permissible for the assessee to make phase-wise payment. In that view, the order of the Appellate Tribunal is sound and proper. Appeal is dismissed. Considering the above we hold that the CIT-2 was not justified in invoking the provisions of section 263 of the Act with regard to any of the three issues Effective Ground of appeal is decided in favour of the assessee. In support of his claim the learned AR of the assessee has inter alia placed reliance on the decisions of Dr. Prafulla R. Hedge in ITA No. 15 of 2012 (Bombay); Ramgad Minerals and Mining Pvt. Ltd. in ITA No. 5021/2009 (Kar) and Essel Mining And Industries Ltd. in ITA No. 352/KOL/2011. No contrary material was placed before us by the Department. Thus, following the decision of Co-ordinate Bench in assessee s own case in AY 2006-07, we hold that contribution towards Compensatory Afforestation Fund by the assessee during the impugned AY is allowable. We hold and direct, accordingly. Thus ground No. 5 of the appeal is allowed. 6.7 The learned AR of the assessee stated at Bar that he is not pressing grounds No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of receipt of this order. Thus, ground No. 11 of appeal is allowed for statistical purpose. 6.11 The ground No. 12 of appeal, is not pressed by the learned AR of the assessee. Ergo, the same is dismissed as not pressed. 7. In the result, appeal of the assessee is partly allowed. ITA No. 2374/MUM/2022 (AY 2017-18) 8. Both sides are unanimous in stating that grounds raised in appeal and the facts for AY 2017-18 are identical to AY 2016-17, except that of a new issue of disallowance of provision for leave encashment. The learned AR submits that the submissions made in respect of the grounds of appeal for AY 2016-17 would equally apply to the grounds raised in the appeal for AY 2017-18. In respect of ground No. 4 of appeal relating to disallowance of provision for leave encashment, the learned AR submits that the assessee has made clam of deduction for leave encashment on the basis of actual payments only. The AO and the DRP have erred in misconstruing the facts on the issue. The learned AR prayed for allowing assessee s claim of leave encashment on actual payment before the due date as prescribed under the relevant Act. The learned AR submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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