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TMI Blog2023 (1) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... raised following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing interest amounting to Rs 41,38,397/- by treating the same as attributable towards Capital Workin-Progress (CWIP). 2. Without prejudice to the above ground of appeal, the Commissioner of Income-tax (Appeals) erred in rejecting the claim of the appellant that since the closing CWIP includes CWIP acquired during the year, the rate of disallowance of interest should be average rate of interest (i.e. 6%, half of the rate applied by the Assessing Officer). 3. Without prejudice to the above grounds of appeal, the Commissioner of Income-tax (Appeals) erred in rejecting the contention of the appellant that in case the aforesaid interest is held to be capital in nature then the same ought to be considered as part of the cost of asset and depreciation ought to be allowed thereon in the year in which the CWIP is capitalized. 4. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the disallowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profits as per the provisions of section 115JB of the Act. 12. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in adding back an amount of Rs.2,00,000/- on account of provision for wealth tax while the computing book profits under section 115JB of the Act. 13. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing excise duty debited to the profit and loss account amounting to Rs.29,32,000/-. 14. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing a sum of Rs.30,60,000/- out of interest paid attributable to loan to a subsidiary. The Appellant hereby reserves the right to add to, alter or amplify the above grounds of appeal." 04. In ITA No.5431/Mum/2017, the learned Assessing Officer has raised following grounds of appeal:- "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (the Act) was offered by assessee at Rs.3,90,10,127/-, which was revised at Rs.14,87,59,916/-. 06. Aggrieved by the order of the learned Assessing Officer, assessee preferred the appeal before the learned CIT (A), who, vide order dated 3rdMay 2017, partly allowed the appeal of the assessee. Therefore, assessee is aggrieved against the disallowance confirmed and learned Assessing Officer is aggrieved with respect to the disallowance deleted. Accordingly, both the parties are in appeal before us. 07. We fist note that assessee has raised an additional ground of appeal vide letter dated 5th November, 2019, raising following grounds of appeal:- i. "on the facts and in the circumstances and in law, the assesseeprays that the learned Assessing Officer be directed to allow deduction of prior period expenses in the year in which the said expenses are debited to the profit and loss account." 08. Assessee says that it is merely a legal ground require to be admitted. Assessee relied on the decision of Hon'ble Supreme Court in case of National Thermal Power Company vs. CIT 229 ITR 383, Jute Corporation of India Ltd. vs. CIT 187 ITR 688 and Full Bench decision of Hon'ble Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying the rate of interest 12%.He computed the interest amounting to Rs.41,38,397/- and disallowed the sum under Section 37(1) of the Act. The issue travelled before the learned CIT (A). The learned CIT (A) following the decision of first appellate authority in appellant's group concerns M/s Excel Crop Care Ltd for A.Y. 2009-10 confirmed the disallowance. He also rejected the argument of the assessee that no such disallowances were made in the earlier years and the disallowance even if to be made, should not be at the rate of 12% but at the rate of 6%. Therefore, the assessee is in appeal before us. 015. The learned Authorized Representative submitted that as per accounting policy of the assessee with respect to the cost of acquisition of fixed assets the borrowing cost related to the period till such assets are put to use is already capitalized. He submitted that the capital expenditure was not funded out of borrowed funds but incurred out of internal accruals. To demonstrate that, he referred to the annual accounts of the company and also submitted that all other are working capital loans and are not used for the purposes of acquisition of assets. He further referred to the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Reliance Utilities and Power Limited 313 ITR 340 as well as the decision of the Hon'ble Supreme Court in case of CIT vs. Reliance Industries Ltd. 410 ITR 466. Accordingly, ground no.1 of the appeal is allowed. 018. In view of our decision in ground no.1, ground no.2 and 3 of the appeal becomes infructuous and hence, dismissed. 019. Ground no.4 of the appeal is with respect to the disallowance under Section 14A read with Rule 8D of the Rules. The fact shows that assessee has earned exempt income of Rs.1,33,73,241/- and has also offered SUO Moto disallowance u/s 14 A of the act of Rs.56,132/-. The learned Assessing Officer found that disallowance offered by the assessee is on ad hoc basis and without any mathematical working. The learned Assessing Officer questioned the assessee to show cause how the disallowance has been worked out and to give proof about the expenses incurred or not incurred for earning exempt income. Assessee submitted that no expenses have been incurred for earning exempt income. The learned Assessing Officer after considering the explanation of the assessee stated that he is not satisfied with the same, invoked the provisions of Rule 8D of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, we find that when non-interest bearing funds are much higher than the amount invested which yielded exempt income, there is no question of making any disallowance under Rule 8D2 (1) and 8D (2)(iii) of the Act. Such claim of the assessee before us is only with respect to the interest disallowance under Rule 8D of the Rules, Assessee succeeds on this issue. . With respect to the ground no.8, being disallowance under Section 14A imputed under the computation of book profit, we find that issue is squarely covered in favour of the assessee by the decision of Hon'ble Karnataka High Court in 125 taxmann.com 72 in case of Sobha Developers vs. Dy. Commissioner of Income Tax. Even otherwise, we find that assessee has already complied with Provision of Section115JB of the Act, explanation 1 clause (f) of the Act in form no 29B. There is no finding of the learned Assessing Officer that provision of Explanation 1(f) of Section 115JB of the Act is not properly applied by the assessee. Unless that fact is recorded along with the fact that disallowance under Section 14A of the Act is identical to the disallowance under that clause, the order of the learned lower authorities cannot be susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er inadvertently added further Rs.8,71,36,354/-. 030. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and learned CIT (A). 031. We have carefully considered the rival contentions and perused the orders of the lower authorities. During the year assessee has credited to the profit and loss account of sum of Rs.10,15,81,117/- being write back of provision of bad and doubtful debts. Assessee created the above provision from A.Y. 2003-04 to 2009-10. At the time when the provision was created, the assessee has disallowed the same in all the assessment year which is substantiated by filing the computation of total income for all these years. The learned Assessing Officer in the remand report also agreed with the above finding of the fact. The above provision for doubtful debts has been written back during this year. Naturally, this amount has not been claimed as deduction in the year in which the provision has been made. Therefore, naturally, same would be not taxable in the present assessment year when such provisions were written back. Accordingly, we find that learned lower authorities are not correct in making the addition of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee is that the amount of income tax paid or payable required to be added to the book profit is always under a MAT credit. 037. We find that identical view has been taken by the coordinate Bench in case of ACIT vs. JK paper Ltd in ITA No.2156/Ahd/2013 for A.Y. 2008-09,para no.23 of the order covers the issue in favour of the assessee. We also find that whenever a provision of current tax is required to be made in the profit and loss account it has to be net of MAT credit available to the assessee. Accordingly, the separate adjustment of MAT credit cannot be made and added to the book profit. Accordingly, the adjustment made by the learned Assessing Officer and confirmed by the learned CIT (A) is not correct. Ground no.11 of the appeal is allowed. 038. As per ground no.12, Rs.2 lacs added by the learned Assessing Officer being provision for wealth tax to the book profit u/s 115JB of the Act. Claim of the assessee is that only provision for income tax is required to be added. The provision of income tax and provision of wealth tax are two separate items. Therefore, the addition cannot be made. The learned Assessing Officer made the addition which was confirmed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich shows that excise duty on sales amounting to Rs.1,322 lac has been reduced from sales in profit and loss account and excise duty on increased and decreased in stock amounting to Rs.29.32 lacs has been considered as in the profit and loss account. At page no.113, the assessee has also shown that difference of excise duty was arising out of duty included in opening stock as well as closing stock. At page no.114 and 115 of the Paper Book the assessee has also demonstrated that whatever is not paid before due date of filing of return of income, it is offered for disallowance. We find that addition is not correctly made for the reason that it is not double deduction as stated by the learned Assessing Officer. Accordingly, ground no.13 of the appeal is allowed. 044. Ground number 14 of the appeal is with respect to disallowance of interest expenditure of Rs. 3,060,000/- on account of interest attributable to the loans to subsidiary companies. Facts relating to the disallowance shows that the learned assessing officer questioned the assessee to submit details of the name address et cetera parties to whom loans and advances were made along with the rate of interest charged. Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to delete the disallowance of Rs. 3,060,000. 048. Thus, appeal of the assessee is partly allowed. 049. Now we come to the appeal of theld. AO . The Ground No. 1 & 2 are related to the disallowance of prior period expenditure. The ld. AO noticed that assessee has claimed an amount of Rs. 1,41,51,738/- as gross prior period expenses despite assessee following mercantile system of accounting. The AO questioned the assessee that why the above amount should not be disallowed. The claim of the assessee is that the above expenditure tough related to prior years have been debited, but this expenditure is accounted in this year due to non-receipt of invoices from the suppliers. Assessee also stated that if the same is not allowed in this year it should be allowed in the year to which at pertains to. The ld. AO held that assessee following mercantile system of accounting cannot book the expenses in the like manner therefore he held that only those expenses which approved for the current year is allowable. Accordingly, he disallowed Rs.1,41,51,738/-. 050. On appeal before the ld. CIT(A) The assessee raised the above ground. Before the ld. CIT(A) it was further stated that in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allow it in the year to which the expenses pertain to. Therefore, we need to decide the issue whether the direction of ld.CIT(A) is correct or not. According to, assessee it is correct and according to the AO it is incorrect. 056. Identical issue arose in the case of the assessee ITA No. 5630/MUM/1991 for A.Y. 1987-88 and ITA No. 3540/MUM/1994 in A.Y. 1990-91 dated 12.09.2000. The Para No. 5 deals with this issue where an expenditure of Rs.3,13,381/- was an expenditure relating to earlier years, disallowed by the ld.AO on the ground that assessee follows the mercantile system of accounting, CIT(A) confirmed the same in Para No. 7. The facts clearly shows that assessee made claimed of expenditure for A.Y. 1986-87 but same was disallowed on the ground that no entries were made in the books of account for that year. Assessee also made the claimed in A.Y. 1987-88. The ITAT held that if assessee gives up the claim in A.Y. 1987-88 then its request for considering the said expenditure for deduction in the year under appeal (1987-88) could be considered. ITAT held that the purpose of assessment was to make a fair determination of tax liability of assessee. In Para No. 8. It held that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2011 - 12. Both the parties confirmed that the identical grounds are raised in their respective appeal. Their arguments are also similar. Both of them confirmed that there is no change in the facts and circumstances of the case compared to the assessment year 2010 - 11 of the impugned assessment year i.e., 2011 - 12. 061. For the impugned assessment year the assessee filed its return of income on 30/9/2011, returning total income of Rs. 201,156,899/- as per the normal computation of income and u/s 115JB of Rs 180,362,036/-. The income was assessed u/s 143 (3) of the income tax act, 1961 by order dated 28th of March 2014 wherein the total income of the assessee is determined at Rs 26,95,44,811/- as per the normal computation of income, whereas the book profit u/s 115 JB was also increased by disallowance u/s 14 A, and provision of wealth tax as well as excess provision of taxation of earlier years. Consequently, the book profit was determined at Rs. 189,664,488/-. 062. The matter went to the learned CIT - A, who passed an order on 3/5/2017 on similar lines of the appellate order passed by him for assessment year 2000 - 11. Therefore, both the parties are in appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the act. The identical issue arose in the case of the assessee as per ground number 9 of the appeal for assessment year 2010 - 11 wherein we following the decision of the Honourable High Court's and special bench has deleted the above addition. For the similar reasons we also allow ground number 9 of the appeal of the assessee. 068. Ground number 10 of the appeal is with respect to the addition in respect of the provision for wealth tax while computing the book profit u/s 115 JB of the income tax act of Rs 3 lakhs. The identical issue arose in the case of the assessee for assessment year 2010 - 11 in ground number 10 where the wealth tax provisions made by the assessee have been added to the book profit of the assessee holding that it is part of the tax provisions. While deciding that ground We have directed the learned assessing officer to delete the addition of wealth tax provision to the book profit u/s 115 JB of the income tax act. For similar reasons, we also allow ground number 10 of the appeal of the assessee and direct the learned assessing officer to delete the addition of Rs 3 lakhs of wealth tax provision to the book profit u/s 115 JB of the act. Ground number 10 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the coordinate bench in assessee's own case for assessment year 87 - 88 and 1990 - 91. The identical issue was decided by us in the appeal of the assessee for assessment year 2010 - 11 where we have rejected the above argument and dismissed the additional ground. For the similar reasons we dismiss this ground of appeal. 073. Accordingly appeal of the assessee in ITA No 5473/Mum/2017 for AY 2011-12 is partly allowed. 074. Now we come to the appeal of the learned assessing officer in ITA number 5432/M/2017 for assessment year 2011 - 12. 075. The ground number 1 and 2 of the appeal of the assessee is with respect to the disallowance of prior period expenses of Rs 105,25,417/- wherein the learned CIT - A, has directed the learned assessing officer to verify the claim of the assessee and allow the deduction of these prior period expenses in year in which it pertains to. Identical ground has been decided by us where wherein we have allowed the appeal of the learned assessing officer holding that such direction cannot be given by the learned CIT - A, we allow ground number 1 and 2 of the appeal of the learned AO. 076. Ground number 3 - 5 of the appeal is with respect to the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case. 083. Ground number 1 - 4 are with respect to the addition of interest cost to the capital work in progress and consequently disallowance of interest expenditure, these grounds are identical to the grounds of appeal raised by the assessee for assessment year 2010 - 11. For assessment year 2010 - 11, While deciding ground number one of the appeal of the assessee, we have directed the learned lower authorities to delete the above disallowance. For the similar reasons, we direct the lower authorities to delete the disallowance. Accordingly ground number 1 is allowed. Ground number 2 - 4 of the appeal being alternative claims of the assessee are not required to be adjudicated hence dismissed. 084. Ground number 5 - 8 of the appeal is with respect to the disallowance u/s 14 A of the act applying the provisions of rule 8D. Assessment year 2010 - 11. We have confirmed that as assessee has more than enough interest free funds available than the amount of investment made in exempt income yielding instrument, then, no disallowance on account of interest can be made. Accordingly ground number 5 and 7 of the appeal of the assessee are allowed. Ground number 6 & 8 were not pressed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground. In view of the retrospective amendment as per the Finance act 2022, therefore same is dismissed. 090. Ground number 2 is with respect to the deduction in respect of prior period expenses disallowed in assessment year 2010 - 11, if those are pertaining to this year, same should be allowed to the assessee. The assessee is relying on the decision in favour of the assessee in his own case for assessment year 1987 - 88 and 1990 - 91. While deciding the appeal of the assessee for assessment year 2010 - 11, we have dismissed this ground of appeal. Accordingly, this ground is also dismissed. 091. Accordingly, the appeal of the assessee in ITA number 5474/M/2017is partly allowed. Assessment year 2013 - 14 ITA number 914/M/2018 (by Assessee ) 092. Now we come to the appeal of the assessee for assessment year 2013 - 14 filed in ITA number 914/M/2018. Assessee filed its return of income on 30/9/2013 declaring a total income of Rs. 210,453,450 as per the normal operation of income, whereas u/s 115 JB of the act total book profit was computed at Rs. 201,106,320/-. This return was revised on 31/3/2015 at a total income of Rs. 202,194,064 and book profit remained unchanged. Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned assessing officer to delete the addition of Rs. 30,33,700 on account of excise duty debited to the profit and loss account. Ground number 3 of the appeal of the assessee is allowed. 098. Ground number 4 of the appeal of the assessee is with respect to the confirmation of the disallowance of sum of Rs. 91,80,000 out of interest paid attributable to the loan to a subsidiary. This issue is identical to the ground of appeal raised in the case of appeal for assessment year 2010 - 11 wherein we have deleted the above addition. For the similar reasons, we direct the learned AO to delete the disallowance and, accordingly allow ground number 4 of the appeal. 099. In the result, appeal filed by the assessee for assessment year 2013 - 14 is partly allowed. Assessment year 2014 - 15 ITA number 915/M/2018 0100. Now we come to the appeal of the assessee for assessment year 2014 - 15 in ITA number 915/M/2018 wherein the original return filed by the assessee on 30/11/2014 declaring a total income of Rs. 150,782,521/- Under the normal provision and Rs. 179,970,890/- u/s 115 JB of the act was assessed by an order passed u/s 143 (3) of the act dated 14/12/2016, wherein the normal income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the disallowance made by the learned assessing officer for the reason that assessee has higher non-interestbearing fonts available with it then the amount of advance given to the subsidiary company. In view of this, ground number 3 of the appeal of the assessee is allowed. 0106. In the result appeal of the assessee in ITA number 915/MU M/2018 for assessment year 2014 - 15 is allowed. Assessment year 2015 - 16 IT number 6444/M/2018 0107. Assessee has filed above appeal against the appellate order passed by the Commissioner of income tax appeals - 54, Mumbai for assessment year 2015 - 16 dated 28/8/2018. 0108. Assessee filed its return of income on 30/9/2015 declaring income of Rs. 343,770,588/- under normal provisions and Rs. 475,841,812 as book profit under section 115 JB of the act. The assessment under section 143 (3) of the act was passed on 12/12/2017 wherein the total income of the assessee was determined at Rs. 104,773,615 as per normal computation and book profit under section 115 JB was computed at Rs. 47,61,41,810/-. 0109. Assessee preferred an appeal before the learned CIT - A Who partly allowed the appeal of the assessee and therefore the assessee is in appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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