TMI Blog2017 (3) TMI 1937X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appeal stands allowed. Disallowance u/s 14A read with Rule 8D - mandation of recording satisfaction - HELD THAT:- As perusal of the assessment order clearly shows that the Assessing Officer has not recorded the satisfaction u/s 14A(2) regarding the incurrence of expenditure. In the circumstances respectfully following the decision of the coordinate bench of this Tribunal in the case of the Sesa Goa Ltd. [ 2013 (9) TMI 233 - ITAT PANAJI ] Further as it is noticed that the assessee has substantial own funds far in excess of the investments which has generated the exempt income. Consequently, in view of the decision of HDFC Bank Limited [ 2014 (8) TMI 119 - BOMBAY HIGH COURT ] as also the decision in the case of SBI DHFL [ 2015 (11) TMI 399 - BOMBAY HIGH COURT ] we are of the view that no disallowance of interest under Section 14A is called for in the hands of the assessee. Consequently the disallowance as made by the Assessing Officer by invoking of the provisions of section 14A read with rule 8D stands deleted. In the result Ground No. 2 of the cross objection stands allowed. Disallowance of the dimunition in the value of the fertilizers bonds u/s 37 - It was a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, if the interest-free funds were sufficient to meet the investments , the Assessing Officer is directed to delete the disallowance of interest. In the result Ground of the Cross objection stands allowed. Expenditure incurred towards feasibility study report u/s 37(1) - AO had held that the expenditure was a capital expenditure - HELD THAT:- Admittedly when the assessee filed its returns the assessee did have the bonafide belief that it was going to proceed with the business expansion and diversification. However it has been admitted by the assessee that due to the market condition it was not feasible to proceed with business expansion and diversification and consequently the project has been dropped. As it is noticed that the assessee has dropped its intention of proceeding with the project of expansion and diversification the expenditure incurred on the feasibility study in respect of the Greenfield Urea Fertilizer Project cannot be treated as the revenue expenditure. Consequently the finding of the Assessing Officer and the learned CIT(A) in holding the said expenditure as the capital expenditure stands confirmed. Decided against assessee. Disallowing the set off of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 37(1) - HELD THAT:- Admittedly the assessee has not been able to place before us the details of the persons to whom the gifts have been given. In fact even the Assessing Officer has disallowed the same only on the ground that the assessee has failed to submit the details as to whom the gifts were given. This being so the finding of the learned CIT(A) and that the Assessing Officer in respect of the disallowances stands confirmed. - Shri P.K. Bansal, Hon'ble Accountant Member Shri George Mathan, Hon ble Judicial Member For the Assessee : Shri Mukund Bakshi-CA. For the Department : Shri Raviraj Y.V. Ld. DR. ORDER PER GEORGE MATHAN, JUDICIAL MEMBER 1. ITA. No. 328/PNJ/2014 is an appeal filed by the Assessee against the Order of the CIT(A) Panaji in appeal No. 272/MRG/11 12 dated. 21.04.2014 for the assessment year 2006-07. ITA. No. 329/PNJ/14 is an appeal filed by the assessee against the Order of the CIT(A) Panaji in appeal No. ITA. NO. 95/MRG/13-14 dated 21.04.2014 for the Assessment Year 2010 11. C.O No. 37/PNJ/14 is the cross objection filed by the assessee in the revenue appeal filed in ITA No. 229/PNJ/14 in the order of the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itlement of ₹.1.95 crores. It was submission that the Assessing Officer had held that this amount of ₹. 1.95 Crores was not allowable. It was submission that under identical circumstances the coordinate bench of this Tribunal, Ahmadabad bench has held that the calculation as done by the assessee was correct. He drew out attention to the order of the coordinate bench of this tribunal in the case of the JK Paper Limited in ITA No. 2155/AHD/2013 CO 36/AHD/14 dated 18/10/16 wherein in Para 23 it has been held as follows:- It can be seen that provision for current tax is shown at ₹. 7,41,01,907/- and MAT credit entitlement has been separately shown at ₹. 6,13,84,689/- it can be further seen that the provision for current tax is shown at gross amount. The net amount comes to ₹. 1,27,17,218/-, if the MAT credit entitlement is reduced from provision for current tax. If the assessee had shown the net amount of ₹. 1,27,17,218/- and added back the same for the computation of the book profit, the revenue would have accepted this computation. But for the accounting principles and set guidelines both the amounts were shown separately. Considering these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance made by the Assessing Officer by invoking the provision of Section 14A of the Act. It was submission by the learned Authorized Representative of the assessee that for the purpose of the making disallowance under Section 14A read with Rule 8D, satisfaction is liable to be recorded regarding the incurrence of the expenditure as has been held by the coordinate bench of this Tribunal in the case of Sesa Goa Ltd reported in 38 Taxman.com 34 (Panaji) as also Mumbai benches in the case of Shapoorji Pallonji and company limited reported in 79 taxman.com 39 Mumbai. 12. The learned Authorized Representative of the assessee drew our attention to the assessment order, Para 2 to submit that no such satisfaction has been recorded. It was further submission that the assessee also had substantial noninterest bearing funds to an extent of ₹.844.45 crores whereas the total investment in the shares was only ₹.337.68 crores and even the calculation of the disallowance as made by the Assessing Officer itself was erroneous in so far as the Assessing Officer has taken the total of the investment as having generated exempt income and not the value of the investments which has ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. This View of ours is also supported by the decision of the Hon ble Mumbai High Court in the case of Godrej Boyce Mfg. Co. Ltd. reported in 328 ITR 81. 15. Further as it is noticed that the assessee has substantial own funds far in excess of the investments which has generated the exempt income. Consequently, in view of the decision of the Hon ble Mumbai High Court in the case of HDFC Bank Limited referred (supra) as also the decision in the case of SBI DHFL referred to (supra), we are of the view that no disallowance of interest under Section 14A is called for in the hands of the assessee. Consequently the disallowance as made by the Assessing Officer by invoking of the provisions of section 14A read with rule 8D stands deleted. In the result Ground No. 2 of the cross objection stands allowed. 16. It was submission that Ground No. 3 was against the action of the learned CIT(A) in confirming the disallowance of the dimunition in the value of the fertilizers bonds under Section 37 of the Act. It was submission that the fertilizer bonds were given by the government in lieu of the subsidy that were receivable by the assessee company. It was a submission that the fertilizer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4 stands partly allowed. 20. It was the submission by the learned Authorized Representative of the assessee that in respect of the Ground No. 5, it was against the action of the learned CIT(A) in not granting the assessee the benefit of the TDS credit to an expenditure of ₹. 18,50,403/-. It was submission by both sides that there was no objection if this issue was restored to the file of the Assessing Officer for re-adjudication after granting the assessee an opportunity to produce and prove claim of TDS with evidences. 21. We have considered the submissions. As it is noticed that the assessee has claimed that there is a short credit of TDS, the issue is restored to the file of the Assessing Officer for re-adjudication after granting assessee adequate opportunity to produce all such evidences in respect of the claim of the short credit of TDS. In the result the ground No. 5 of the Cross Objection partly allowed for statistical purpose. 22. In the result the Cross objection filled by the assessee stands partly allowed for statistical purpose. 23. C.O. No. 38/PNJ/2014:- It is submitted by the learned Authorized Representative of the assessee that in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 36(1)(iii) of the Act. It was submission that the assessee had given interest free loans to the extent of ₹ 52.20 crores to its subsidiary companies during the year. It was submission that the assessee had own funds in excess of the interest free advances and consequently no disallowances was called for. It was submission that the assessee had own funds to an extent of ₹ 927.40 crores as against the advance of ₹. 52.70 crores granted to the sister concern. On specific query as to how much was the investments in the shares during the assessment year, it was submitted that the same was ₹.722 crores. It was submitted that even if the investments were considered the gross noninterest bearing own funds was to extent of ₹.927 crores; and the advance to the sister concern was ₹.52.70 crores and the investments ₹.722 crores, thus the assessee had adequate noninterest bearing funds to give interest free loans to subsidiary companies. It was submission in view of the decision of the Hon ble jurisdictional High Court of Bombay in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340, no disallowance is liable to be invoked under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable with the assessee, following our decision in respect of the ground No. 2 of C.O. No. 37/PNJ/2014 the addition confirmed by the learned CIT(A) stands deleted. In the circumstances Ground No. 1 of the assessee appeal stands allowed. 35. In respect of Ground No. 2 it was submitted that the issue was against the disallowance of the dimunition of the value of the fertilizer bonds under Section 37(1)(iii) of the Act. It was fairly agreed that the arguments were identical to the arguments in respect of Ground No. 3 of the C.O. No. 37/JPNJ/2014 for the Assessment Year 2008 09. 36. We have considered the submissions. As we have already held that the Assessing Officer is to allow the real loss as and when the fertilizer bonds are sold / redeemed in respect of the fertilizer bonds in the ground No. 3 of the assessee s cross objection in C.O. NO. 37/PNJ/2014 for the Assessment Year 2008 09 on identical finding for this year also the Assessing Officer is directed to allow the real loss as and when the fertilizer bonds are sold / redeemed. In the circumstances ground No. 2 is partly allowed. 37. In respect of the Ground No. 3 it was fairly agreed that the issue was identical to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission that the Assessing Officer had held that the expenditure was a capital expenditure. It was submission that the addition may be deleted and the same may be allowed as the revenue expenditure. In reply the learned Departmental Representative submitted that the expansion and diversification as per the project report has not been executed but has been dropped and consequently the expenditure was liable to be treated as the capital expenditure only. 40. We have considered the rival submissions. Admittedly when the assessee filed its returns the assessee did have the bonafide belief that it was going to proceed with the business expansion and diversification. However it has been admitted by the assessee that due to the market condition it was not feasible to proceed with business expansion and diversification and consequently the project has been dropped. As it is noticed that the assessee has dropped its intention of proceeding with the project of expansion and diversification the expenditure incurred on the feasibility study in respect of the Greenfield Urea Fertilizer Project cannot be treated as the revenue expenditure. Consequently the finding of the Assessing Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eculation loss. The learned Counsel for the assessee relied upon the decision of ITAT Delhi Bench in the case of DCIT Vs Jindal Exports Ltd. 101 ITD 129 (Delhi) (TM) in which it was held that it had been accepted that the shares were held by the assessee as capital assets (investments), loss accruing to the assessee was liable to be assessed as short term capital loss and, therefore, there was no question of treating it as speculation loss by applying explanation to section 73. The learned Counsel for the assessee also relied upon the decision of ITAT Kochin Bench in the case of Harrisons Malayalam Ltd. Vs ACIT 32 SOT 497 in which it was held that in the facts and circumstances of the case, the loss is very much in the nature of capital loss, therefore, there is no justification in treating the same as speculation loss. The learned DR however, submitted that section 73 as per assessee talks of the loss but it covers profit of business also. However, we do not agree with the contention of the learned DR because the provisions of section 73 of the IT Act are applicable to losses in speculation business and the explanation is also relevant to the same. But, in the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. In the result ground no 5 of the assessee s appeal stands allowed. 44. In respect of the Ground No 6 it was submitted that the issue was against the non granting of the TDS credits. It was fairly agreed by both the parties that the issues can be restored to the file of the Assessing Officer as has been decided in Ground No. 5 of the C.O. NO. 37/PNJ/2014 for the assessment year 2008 09 45. We have considered the submissions. As we have already restored this issue to the file of the Assessing Officer for re-adjudication after granting the assessee adequate opportunity to produce all such evidence in respect of the claim of the short credit of TDS in C.O. No. 37/PNJ/2014 for the Assessment Year 2008 09 with similar findings, this ground is also restored to the file of Assessing Officer. In the result Ground No 6 of the assessee appeal stands partly allowed for statistical purposes. 46. In the result the Appeal of the assessee is partly allowed for statistical purposes. 47. ITA. No. 91/PAN/2016 for the A.Y 2011 12: At the time of hearing learned Authorized Representative of the assessee submitted that the issue in respect of the transfer pricing in Part-A Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the interest free advances was to an extent of ₹.107.80 crores and investments ₹.524 crores. It was submission that the assessee had adequate noninterest bearing funds to give interest free loans to the sister concerns and consequently no disallowances under Section 36(i)(iii) was called for. In reply the learned Departmental Representative vehemently supported the order of the Assessing Officer and CIT(A) 53. We have considered the rival submissions. As it is noticed that for the relevant Assessment Year the assessee had adequate noninterest bearing funds to give interest free loans to the sister concerns, respectfully following our decision in C.O. NO. 38/PNJ/2014 for the Assessment Year 2009 10 the disallowances as made by the Assessing Officer and confirmed by the learned CIT(A) stands deleted. In the result the Grounds from 18 to 21 stands allowed. 54. In respect of the Part E F grounds from 22 to 24, it was fairly agreed by both the sides that the issues was in respect of the disallowance of the loss on account of the dimunition in the value of the fertilizer bonds. It was fairly agreed by both the sides that the submissions in respect of the said grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle laid down by the Hon ble Gujarat High Court and the Hon ble Delhi High Court refereed to (supra), the addition as made by the Assessing Officer and as confirmed by the learned CIT(A) on account of the cessation of liability under Section 41(1) stands deleted. In the result Grounds 25 and 26 of the assessee appeal stands allowed. 58. In respect of Part H Ground No. 27, it was submitted by the learned Authorized Representative of the assessee that the issue was against the action of the learned CIT(A) in confirming the disallowance on expenses claimed on account of participation in social activities around factory and on account of gifts to business associates under section 37(1) of the Act. The learned Authorized Representative of the assessee submitted that the expenses were on account of the various social activities which were an obligation on the part of the assessee to maintain good relationship with the local population and on account of various gifts given to the business associates. It was submission that the same is liable to the allowed as business expenditure. In reply learned Departmental Representative of the assessee submitted that the assessee has not p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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