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2019 (6) TMI 1431 - AT - Income TaxDisallowance under section 36(1)(iii) - Disallowance of proportionate interest in respect of interest free advances given by assessee to its subsidiary - HELD THAT - We have noted that the assessee s own fund consisting of share capital and reserve and surplus was ₹ 175.11 Crore. The assessee has given loans and advance to is subsidiaries i.e. Dee Greaves of ₹ 2,13,55,159/- only. The Hon ble Bombay High Court in Reliance Utility Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT held that if the assessee have funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interestfree fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. Therefore, we are of the view that the assessee has sufficient interest free fund available with the assessee and therefore, no interest disallowance under section 36(1)(iii) was justified. Hence, the ground A (1 2) of appeal raised by assessee is allowed. Disallowance under section 14A r.w. Rule 8D - HELD THAT - As noted that during the period under consideration, the assessee has shown the exempt income of ₹ 61,43,033/-. The Assessing Officer invoked the provisions of Rule 8D and disallowed ₹ 1,19,20,701/-. We have further noted that similar disallowance was made by revenue in Assessment Year 2005-06 and on appeal before the Tribunal; the disallowance was restricted to 2% of the dividend income. Considering the facts of the year under consideration and respectfully following the decision of co-ordinate bench in assessee s own case for Assessment Year 2005-06, the disallowance for the Assessment Year in the present appeal is restricted to 2% of the dividend income. The Assessing Officer is directed accordingly. Adjustment of book profit u/s 115JB of disallowance of Rule 14A - HELD THAT - this ground of appeal is covered in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. . 2017 (6) TMI 1124 - ITAT DELHI wherein held that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Therefore, respectfully following the decision of Special Bench, we direct the Assessing Officer to follow the decision of Vireet Investment Ltd. (supra) and pass the order for adjustment under section 115Jb of the Act accordingly. Addition of club expenses - HELD THAT - After the decision of Hon ble Bombay High Court in Otis Elevator Co. Ltd. 1991 (4) TMI 53 - BOMBAY HIGH COURT this issue is no more res-integra wherein the Hon ble High Court while considering the question of law about the allowance of club fees incurred/paid to employees, allowed the question in favour of assessee. Therefore, respectfully following the decision of Hon ble Bombay High Court in Otis Elevator Co. Ltd. (supra) and decision of Tribunal in assessee s own case for A.Y. 1982-83 and 1990-91, this ground of appeal is also allowed in favour of assessee. Unutilized Cenvat credit - HELD THAT - Assessing Officer made addition by following the order of earlier Assessment Years and made addition of ₹ 2.91 Crore. DRP also followed their order for earlier years. We have noted that the co-ordinate bench of Tribunal in assessee s appeal for A.Y. 2005-06 in its order 2019 (8) TMI 287 - ITAT MUMBAI set-aside the order to the file of Assessing Officer for examination of figures furnished by assessee for reconciliation of statements. Therefore, considering the order of Tribunal for A.Y. 2005-06, the ground of appeal is also restored to the file of Assessing Officer to examine the issue afresh and pass the order by following the order of Tribunal dated 15.03.2019. In the result, this ground of appeal is allowed for statistical purpose. Disallowance under section 40(a)(ia) - HELD THAT - Similar disallowance was made by Assessing Officer in A.Y. 2005-06, from the order of Tribunal for A.Y. 2005-06 we have noted that no such addition was challenged by assessee. Considering the fact that making addition of the same amount in the year under consideration is double disallowance of the same amount. Therefore, considering the fact and circumstances of the case, we are in agreement with the submission of ld. AR of the assessee that there cannot be a double disallowance of the same amount. Therefore, we direct the Assessing Officer to verify the fact and delete the addition. Disallowance under section 14A - HELD THAT - We have noted that this ground of appeal is identical to the ground no. B of appeal for A.Y. 2006-07, which we have allowed. There is no much variation on facts for the year under consideration. Therefore, following the principle of consistency, this ground of appeal is allowed with similar direction. The Assessing Officer is directed to restrict the disallowance under section 14A to the extent of 2% of exempt income earned by assessee during the relevant period under consideration. In the result, this ground of appeal is partly allowed. MAT credit under section 115JAA - HELD THAT - Section 143(1) provides that where a return is made under section 139 and any tax or interest is found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to provisions of sub-section (2), an intimation will be sent to the assessee specifying the amount so payable and such intimation shall be deemed to be a notice of demand under section 156 and all the provisions of the Act shall apply thereto. This section itself makes it clear that whilst the AO determines the tax payable, he has to give credit for all taxes paid either by way of deduction at source, advance tax, self assessment tax or tax paid otherwise which would include or which cannot exclude tax credit u/s 115JAA(1). However, the question is of priority of adjustment for the MAT credit. In this connection, it is important to bear in mind that the credit allowed is the excess of the normal tax liability over MAT liability in the subsequent years. Considering the decision of Hon ble Apex Court in CIT vs. Tulsyan NEC Ltd 2010 (12) TMI 23 - SUPREME COURT the AO is directed to re-compute the working of section 115JAA afresh by following the aforesaid decision. In the result this ground of appeal is allowed.
Issues Involved:
1. Disallowance under section 36(1)(iii) 2. Disallowance under section 14A r.w.r. 8D 3. Adjustment of book profit under section 115JB 4. Disallowance of Pooja Expenses 5. Disallowance of Club Expenses 6. Disallowance under section 40A(9) 7. Addition of unutilized Cenvat credit 8. Disallowance under section 40(a)(ia) 9. Charging of interest under section 234C 10. MAT credit under section 115JAA 11. Charging of interest under section 234B Detailed Analysis: 1. Disallowance under section 36(1)(iii): The assessee challenged the disallowance of proportionate interest on advances given to its subsidiary. The Tribunal noted that the assessee had sufficient interest-free funds and relied on the Bombay High Court decision in Reliance Utility & Power Ltd., which presumes that investments are made from interest-free funds if available. Consequently, the disallowance under section 36(1)(iii) was not justified, and the ground was allowed. 2. Disallowance under section 14A r.w.r. 8D: The assessee contested the disallowance made by applying Rule 8D retrospectively. The Tribunal observed that Rule 8D was not applicable for the assessment year under consideration (prior to AY 2008-09). Following the Tribunal's decision in the assessee's own case for AY 2005-06, the disallowance was restricted to 2% of the dividend income. The ground was partly allowed. 3. Adjustment of book profit under section 115JB: The assessee argued against the adjustment of book profit under section 115JB by disallowing expenses under Rule 14A. The Tribunal referred to the Special Bench decision in ACIT vs. Vireet Investment (P) Ltd., which held that computation under clause (f) of Explanation 1 to section 115JB(2) should be made without resorting to section 14A read with Rule 8D. The ground was allowed for statistical purposes. 4. Disallowance of Pooja Expenses: The assessee claimed Pooja expenses as business expenses. The Tribunal noted that similar expenses were allowed in earlier years, and the revenue had withdrawn its appeal before the Bombay High Court. Thus, the ground was allowed. 5. Disallowance of Club Expenses: The assessee claimed club expenses for business meetings. The Tribunal referred to its earlier decisions and the Bombay High Court ruling in Otis Elevator Co. Ltd., which allowed such expenses. Consequently, the ground was allowed. 6. Disallowance under section 40A(9): The assessee contested the disallowance of contributions to employee welfare funds. The Tribunal noted that similar disallowances were upheld in earlier years, and following the principle of consistency, the ground was dismissed. 7. Addition of unutilized Cenvat credit: The assessee argued that the addition of unutilized Cenvat credit had no impact on profit. The Tribunal noted that the issue was restored to the Assessing Officer for examination in AY 2005-06. Following the same, the ground was restored to the Assessing Officer for fresh examination. 8. Disallowance under section 40(a)(ia): The assessee contested the disallowance of expenses already disallowed in the previous year, arguing it would result in double disallowance. The Tribunal directed the Assessing Officer to verify the facts and delete the addition if it resulted in double disallowance. 9. Charging of interest under section 234C: The Tribunal stated that charging interest under section 234C is consequential and directed the Assessing Officer to work out the interest accordingly. 10. MAT credit under section 115JAA: The assessee argued that MAT credit should be allowed before deducting TDS and advance tax. The Tribunal referred to the Supreme Court decision in CIT vs. Tulsyan NEC Ltd., which supports this view. The ground was allowed, directing the Assessing Officer to re-compute the MAT credit. 11. Charging of interest under section 234B: The Tribunal noted that charging interest under section 234B is consequential and directed the Assessing Officer to re-compute the interest in accordance with the law. Conclusion: The appeals were partly allowed, with several grounds being remanded back to the Assessing Officer for fresh examination and others being decided in favor of the assessee based on precedents and consistency in the assessee’s own case.
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