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2019 (6) TMI 1374 - AT - Income TaxTP Adjustment - non speaking order - silent in considering submissions of the assessee - HELD THAT - The ld.CIT(A) reproduced grounds of appeal on page no.1 and 2, and thereafter reproduced submissions of the assessee upto page no.44. In other words, he has reproduced 40 pages of written submission given by the assessee, and thereafter concluded the finding in five-six lines. This order has been followed blindly in other years without any application of mind. Thus, it is a just non-speaking order at the end of the ld.CIT(A). Full Bench of the Hon ble Punjab Haryana High Court in the case of Roadmaster Industries of India P.Ltd. Vs. ACIT, 2006 (5) TMI 86 - PUNJAB AND HARYANA HIGH COURT has considered large number of judgments at the end of Hon ble Supreme Court as well as at the end of Hon ble High Courts in order to propound why reasons are necessary in support of conclusions of any adjudicating authority. If we visualize written submissions and finding given by the ld.CIT(A), then it is apparent that such finding does not contain any adjudication on the submissions of the assessee and not sustainable. Therefore, we set side finding of the ld.CIT(A) on this issue in all three years and restore for readjudication. Deduction u/s 80HHC - HELD THAT - Deduction u/s 80HHC is to be computed after reducing deduction allowed u/s 80IA and 80IB (b) excise duty and sales-tax are to be included in the total turnover for the purpose of calculating 80HHC as required under the formula, and (c) sale proceeds of DEPB licence is to be reduced from profit of the business to the extent of ₹ 4,89,81,959/-. For this purpose, the AO has relied upon the amendment brought in Finance Act, 2005 with retrospective effect. It was pointed out that this amendment has been held as unconstitutional by Hon ble Gujarat High Court in the case of Avani Exports 2012 (7) TMI 190 - GUJARAT HIGH COURT . The matter was set aside to the AO by the Tribunal with a direction to recompute the deduction in view of amendment by the Taxation Law. AO has passed a fresh assessment order on 30.12.2011. The ld.CIT(A) has taken cognizance of the decision of Hon ble jurisdictional high Court which was rendered on 2.7.2012. Thus, the sale proceeds of DEPB licence are not required to be excluded from the profit of the business for calculating 80HHC. CIT(A) has followed the decision of the Hon ble jurisdictional High Court, and there is no error in appreciating the facts and circumstances. Therefore, we do not find any merit in this ground of appeal. Addition u/s 14A - HELD THAT - As far as the finding of the CIT(A) that disallowance cannot be made with help of Rule 8D is concerned, we do not find any error in his order, because Rule 8D has been made applicable w.e.f. 1.4.1981 Hon ble Bombay High Court judgment in the case of Godrej Boyce vs. CIT, 2010 (8) TMI 77 - BOMBAY HIGH COURT Whether the interest expenses could be allocated for disallowance of earning of exempt income - HELD THAT - CIT(A) made an analysis and observed that the assessee has more surplus funds out of which it can be inferred that the investment was made - CIT(A) has made reference to the decision of Hon ble Bombay High Court in the case of Reliance Utilities Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT . We do not find any error in the order of the CIT(A) on this issue for placing this reliance as well as for holding that since the assessee was having more interest free funds, then the interest expenses cannot be carved out with help of formula given in Rule 8D. The ld.CIT(A) has rightly deleted the disallowance with regard to the interest expenditure is concerned. Disallowance worked by the CIT(A) is concerned, it is not on sound footing. The details of dividend income has been placed in tabular form and reproduced on page no.13 of the impugned order. According to the ld.counsel for the assessee these are old investments, and this year only activity relating to such exempt income is receipt of six cheques. There is no other activity which requires incurrence of expenditure. Estimation of expenditure at ₹ 12.51 lakhs is on the higher side. We scale down it to ₹ 1,50,000/- which can take care of all other necessary expenditure, if any, incurred by the assessee. In view of the above discussion, we do not find any merit in the ground raised by the Revenue. It is rejected.
Issues Involved:
1. Adjustment in Arm's Length Price (ALP) of international transactions. 2. Disallowance under section 80HHC. 3. Quantification of expenditure required to be disallowed for earning tax-free income under section 14A. Issue-wise Detailed Analysis: 1. Adjustment in Arm's Length Price (ALP) of International Transactions: The primary issue raised by the assessee was the confirmation of additions made by the AO based on the TPO's recommendation for adjustments in the ALP of international transactions with its AE. The additions were ?1,59,56,205/- for AY 2002-03, ?1,80,32,866/- for AY 2003-04, and ?1,65,41,873/- for AY 2004-05. The assessee contended that the orders of the CIT(A) in these years were non-speaking and did not consider the submissions made by the assessee. The Tribunal observed that the CIT(A) had merely followed the orders of the predecessor without independent consideration, making the orders non-speaking. The Tribunal cited the Full Bench of the Punjab & Haryana High Court in Roadmaster Industries of India P. Ltd. Vs. ACIT, emphasizing the necessity of providing reasons in support of conclusions. Consequently, the Tribunal set aside the findings of the CIT(A) on this issue in all three years and restored the matter to the CIT(A) for re-adjudication, ensuring that the CIT(A) considers the judgment of the Full Bench of the Punjab & Haryana High Court. 2. Disallowance under Section 80HHC: In the Revenue's appeal, the sole ground was the deletion of disallowance made under section 80HHC amounting to ?4,26,64,066/-. The AO had disallowed the deduction based on three reasons: (a) deduction under section 80HHC to be computed after reducing deductions under sections 80IA and 80IB, (b) inclusion of excise duty and sales tax in total turnover, and (c) reduction of sale proceeds of DEPB license from the profit of the business. The Tribunal noted that the CIT(A) had followed the decision of the jurisdictional High Court in Avani Exports Vs. CIT, which held the retrospective amendment brought by the Finance Act, 2005, as unconstitutional. Therefore, the Tribunal upheld the CIT(A)'s decision and rejected the Revenue's ground of appeal. 3. Quantification of Expenditure Required to be Disallowed for Earning Tax-Free Income under Section 14A: The assessee had dividend income of ?1,73,50,995/- claimed as exempt. The AO, using Rule 8D, worked out a disallowance of ?2,00,34,000/-. The CIT(A) restricted this disallowance to ?12.30 lakhs, deleting the rest. The Tribunal agreed with the CIT(A) that Rule 8D is prospective and applicable from 01.04.2008, as per the Bombay High Court judgment in Godrej & Boyce vs. CIT. The Tribunal also upheld the CIT(A)'s decision that no interest disallowance was warranted due to sufficient interest-free funds. However, the Tribunal found the CIT(A)'s estimation of administrative expenses disallowance at ?12.51 lakhs to be excessive and scaled it down to ?1,50,000/-. The Tribunal rejected the Revenue's ground of appeal and partly allowed the assessee's appeal, restricting the disallowance to ?1,50,000/-. Conclusion: The Tribunal allowed all three appeals of the assessee for statistical purposes and dismissed the two appeals of the Revenue. The order was pronounced on 25th June 2019 at Ahmedabad.
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