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2021 (4) TMI 530 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - CIT-A directed disallowance u/r. 8D(2)(iii) amounting to half percent of assessee's investment which earned exempt income - HELD THAT - No infirmity in the above direction of learned CIT(A). Assessee's claim that this limb of disallowance u/r. 8D(2)(iii) was not invoked by the AO is not at all sustainable. AO had made disallowance under section 14A. CIT(A) had deleted that and directed for a disallowance of 0.5% of the average value of investment under rule 8D(2)(iii) after necessary verification by the Assessing Officer. We find that the disallowance sustained by learned CIT(A) in effect is much less than that by the Assessing Officer. Even if investment have been made out of available interest free fund the same by no stretch of imagination goes on to the prove that no disallowance under rule 8D(2)(iii) is required. We are not at all convinced by the assessee's contention that due to technicality there is infirmity in the direction of learned CIT(A) as the Assessing Officer initially has not proposed any such disallowance . Hence, we uphold the order of learned CIT(A). Hence, this appeal by the assessee for A.Y. 2001-02 stands dismissed. Rectification of mistake u/s 154 - re-computing the deduction allowable u/s. 33AC - whether the impugned amount represents profit earned on account of freight paid to the subsidiary company is to be considered as shipping business income for the purpose of computation of deduction u/s. 33AC or not? - in the assessment order under section 143(3) of the Act, the AO has denied this claim by holding that 19.62% comprises the freight attributed by the assessee company to the Singapore based associate companies and that income earned through hiring of vessels belonging to others cannot be said to be the income derived from operation of ships - HELD THAT - The ownership by the assessee is not criteria for deduction under section 33AC. The issue raised is squarely covered by the above said case law referred by the assessee's counsel. No contrary decision has been produced. While adjudicating this issue learned CIT(A) originally has mentioned that the case laws relied upon by the Assessing Officer are very much applicable. We find that as a matter of fact, the Assessing Officer has not mentioned any case laws on this issue. In this view of the matter in our considered opinion assessee's plea succeeds that denial of deduction on the ground that these freights were paid to the subsidiary company ships is not sustainable. Accordingly this issue is decided in favour of the assessee. Different item to be considered as business income for the purpose of computation of deduction - As relying on DOLPHIN OFFSHORE 2009 (3) TMI 653 - ITAT MUMBAI , MERCATOR LINES LTD. 2007 (6) TMI 303 - ITAT MUMBAI ,GAL OFFSHORE SERVICES LTD. (NOW THE GREAT EASTERN SHIPPING CO. LTD.) 2008 (11) TMI 93 - BOMBAY HIGH COURT these items rejected by the Assessing Officer have been considered and accepted as business income for the purpose of determining deduction allowable under section 33AC of the Act in the above case laws. Respectfully following the precedents, we set aside the order of learned CIT(A) and decide this issue in favour of the assessee. Allowability of interest under section 244A of the Act on the excess amount of tax paid by the assessee - HELD THAT - As CIT(A) directed that the Assessing Officer should grant interest under section 244A of the Act as provided under the Act. In the absence of any further detail furnished by the assessee, we find that there is no infirmity in the direction to grant interest under section 244A of the Act as per provisions of the Act. We find that learned CIT(A) has already directed the Assessing Officer to follow the prescription of the Act. Hence, no separate adjudication is required. Hence, we uphold the order of learned CIT(A). This ground raised by the assessee stands dismissed. Short-term capital gain on account of sale of VESSEL assessed to tax @ 37.5% is taxable at the rate of 20% as provided in Section 112 of the Act as Long-term Capital Gain and Long-term Capital Loss incurred by the Appellant should be deducted from the same - HELD THAT - We note that there are contradictory decisions on the above subject. However, now we note that the assessee has raised alternate contention that the assessee should have allowed set off of brought forward unabsorbed long term capital loss of ₹ 11,86,28,448/- against the short term capital gains of ₹ 6,97,21,921/-. We find that this alternative contention is covered in favour of the assessee by the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s. Manali Investment 2013 (12) TMI 333 - BOMBAY HIGH COURT Accordingly, the alternate ground No. 5 is decided in favour of the assessee. While deciding the alternate ground we have noted that though this issue is being raised for the first time but it is a legal issue. Moreover, even in the case of Goetz India Ltd. Vs. CIT 2006 (3) TMI 75 - SUPREME COURT has accepted the jurisdiction of the ITAT in considering a ground not raised earlier even without filing revised return. Accordingly, the alternate ground as above stands allowed. Computing the Book Profit u/s. 115JB - considered deduction u/s. 33AC amounting to ₹ 40,19,96,248 instead of the amount credited to reserve u/s. 33AC and debited to Profit and Loss Account amounting to ₹ 46,00,00,000 - HELD THAT - We note that the assessee is raising a legal issue. We note that it is settled law that book profit shown by the assessee has to be as per the profit shown in the profit and loss account subject to only those adjustments as provided in the Act. As mandated in the case of Apollo Tyres Ltd. Vs. CIT 2002 (5) TMI 5 - SUPREME COURT no tinkering with the book profit as per profit and loss account is permitted otherwise than mandated by the provisions of the Act as contained in section 115JB of the Act. This is more so in rectification order passed. Hence, with the above observation this issue is remitted to the file of the Assessing Officer to consider the issue afresh and follow the mandate of law as above.
Issues Involved:
1. Disallowance of administrative expenses under Rule 8D(2)(iii) for A.Y. 2001-02. 2. Deduction under Section 33AC for various incomes for A.Y. 2004-05. 3. Set-off of brought forward unabsorbed long-term capital loss against capital gains under Section 50 for A.Y. 2004-05. 4. Allowability of interest under Section 244A for A.Y. 2004-05. 5. Rectification under Section 154 regarding MAT credit for A.Y. 2004-05. 6. Additional ground regarding deduction under Section 33AC while computing Book Profits under Section 115JB for A.Y. 2004-05. Issue-wise Detailed Analysis: 1. Disallowance of Administrative Expenses under Rule 8D(2)(iii) for A.Y. 2001-02: The assessee appealed against the CIT(A)'s direction to disallow administrative expenses under Rule 8D(2)(iii) amounting to 0.5% of the average value of investments. The assessee argued that no such disallowance was made in the original assessment and that investments were made from own funds, thus no expenditure was incurred for earning exempt income. The CIT(A) found the assessee's claim of sufficient interest-free funds valid and deleted the interest expenditure disallowance but upheld the disallowance under Rule 8D(2)(iii). The tribunal found no infirmity in the CIT(A)'s direction and dismissed the appeal for A.Y. 2001-02. 2. Deduction under Section 33AC for Various Incomes for A.Y. 2004-05: The assessee challenged the exclusion of ?9,81,23,493 representing profit from freight paid to a subsidiary and other incomes for deduction under Section 33AC. The CIT(A) did not adjudicate the merits, considering it covered by earlier orders. The tribunal found that ownership of ships is not a criterion for deduction under Section 33AC, citing decisions in Orion Agencies Ltd. and Sirius Shipping Co. Ltd. The tribunal held that the assessee's plea succeeds and allowed the deduction for the said amounts. 3. Set-off of Brought Forward Unabsorbed Long-term Capital Loss against Capital Gains under Section 50 for A.Y. 2004-05: The assessee claimed set-off of brought forward unabsorbed long-term capital loss against short-term capital gains on the sale of a vessel. The CIT(A) found no error in the AO's order. The tribunal noted contradictory decisions but relied on the jurisdictional High Court's decision in CIT vs. M/s. Manali Investment, allowing the set-off. The tribunal allowed the alternate ground and rejected the related ground as it was without prejudice. 4. Allowability of Interest under Section 244A for A.Y. 2004-05: The assessee challenged the allowability of interest under Section 244A on excess tax paid. The CIT(A) directed the AO to grant interest as per the Act. The tribunal found no infirmity in this direction and upheld the CIT(A)'s order, dismissing the ground. 5. Rectification under Section 154 regarding MAT Credit for A.Y. 2004-05: The assessee contended that the AO's rectification under Section 154 regarding MAT credit was incorrect. The CIT(A) elaborated on the scheme of the Act and upheld the AO's action. The tribunal found the CIT(A)'s order reasonable and dismissed the ground. 6. Additional Ground regarding Deduction under Section 33AC while Computing Book Profits under Section 115JB for A.Y. 2004-05: The assessee raised an additional ground regarding the deduction under Section 33AC while computing book profits under Section 115JB. The tribunal noted that book profit should be as per the profit and loss account, subject to adjustments mandated by the Act. The tribunal remitted the issue to the AO to consider afresh following the mandate of law. Conclusion: The tribunal dismissed the appeal for A.Y. 2001-02 and partly allowed the appeal for A.Y. 2004-05, providing relief on specific grounds while upholding the CIT(A)'s decisions on others.
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