9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (5) TMI 389 - AT - Income TaxDeduction u/s 80IB of Jorhat Unit - allocation of expenses, from Head Office to Jorhat Unit - Held that - We do not find any merit in the contentions of assessee because even if the assessee has made some allocation in the present year, it has to be seen that such allocation is in line with the allocation made in earlier years as per the direction of the Tribunal. Regarding this contention that plea was not taken before the Tribunal in assessment year 2004-05 to the effect that there was absence of business arrangement between the assessee and any other person, we find that there is no merit in this contention also because it is noted by the Tribunal in the order for assessment year 2004-05 that power for adjustment is available to the Assessing Officer by virtue of sub section (8) and (10) of section 80IA. - Decided against assessee. Disallowance out of foreign travel expenses - Expenses incurred on the spouse of the Chairman and Managing Director of the company - Held that - in the absence of any evidence regarding invitation to the spouse of the Directors of the company or their participation in any social engagements in the foreign country visited by them along with the Directors of the assessee company, we do not find any reason to interfere in the order of CIT(A) on this issue. Decided against the assessee. Enhancement of book profit U/s 115JB - Held that - The authorities below have applied Explanation (1), clause (f) an sub-clause (ii) appearing below clause (i) of Explanation (1). It is submitted that on the facts of the present case where the investment in shares either directly or through PMS has yielded huge income in the form of short term capital gain which is taxable, it cannot be said that there was any expenditure that could be identified and said to be related to the exempted income. The expenditure was essentially been incurred for the purposes of earning income which is taxable and in case, by virtue of the share holding being hold beyond a specified period any incidental income has been earned, it cannot be said that the expenditure was relatable to any exempt income. Therefore, no part of the expenses could have been considered to be disallowable, so as to call for adjustment in book profit computed under section 115JB.Wholly without prejudice to the said submissions, it is stated that estimate of ₹ 10,00,000/- in relation to the income earned through direct investment (other than PMS) is much too high and excessive. The dividend income, apart from incidental to the investment in shares, the decision making process cannot be said to be entailing such a huge expenditure. In this view of the matter the assessee s submission is that first of all no disallowance should have been made (which may affect the computation of book profit under section 115JB) and in any case and without prejudice to the said submission the estimate of expenditure at ₹ 10,00,000/- is much too high and excessive. Disallowance of dividend - Held that - As it is noted by CIT(A) that out of total dividend income of ₹ 11.2 crores earned by the assessee, the earning of dividend income through PMS is ₹ 169.35 lac and therefore, earning of dividend income from self-investment is more than ₹ 10 crore - Held that - CIT(A) has reproduced clause (f) to the Explanation 1 of section 115JB and as per this clause (f), any expenditure relatable to any income to which section 10 is applicable, is to be added back. The CIT(A) has directed the A.O. to compute the amount of expenditure incurred for earning dividend income in proportion to dividend income to total income i.e. capital gain dividend, as noted by CIT(A) in Para 6.1 reproduced above. Considering the provisions of clause (f) of sub section (1) of section 115JB, we do not find any infirmity in the order of CIT(A) on this issue. Disallowance was made by the Assessing Officer for expenses incurred in relation to total dividend income whereas as per the decision of CIT(A), he has bifurcated such disallowance in two parts because the dividend income earned by the assessee of ₹ 1182.21 lac is in two categories i.e. partly from PMS investment to the extent of ₹ 169.39 lac and the balance in excess of ₹ 10 crore is on account of direct investment. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this issue because when dividend income from PMS is only ₹ 169.35 lac, the entire dividend income of ₹ 1182.21 lac cannot be considered for making disallowance out of expenses incurred on PMS and therefore, part relief allowed by CIT(A) is justified. At the same time, CIT(A) has covered up this aspect of earning dividend income of more than ₹ 10 crores out of direct investment by directing the Assessing Officer to disallow ₹ 10 crore on lump sum basis. Hence, on this issue, we confirm the order of CIT(A) Disallowance u/s 14A r.w.r. 8D - Held that - None of the judgments cited by assessee is applicable because in all these judgments, the assessment year is prior to assessment year 2008-09 when Rule 8D was not applicable whereas in the present case, Rule 8D is applicable and therefore, in the facts of the present case, we find no infirmity in the order of authorities below and decline to interfere in the order of CIT(A). - Decided against assessee.
Issues Involved:
1. Reduction in the claim of the assessee u/s 80IB for Jorhat Unit. 2. Disallowance out of foreign travel expenses. 3. Enhancement of book profit u/s 115JB. 4. Disallowance u/s 14A read with Rule 8D (for assessment year 2008-09). Detailed Analysis: 1. Reduction in the Claim of the Assessee u/s 80IB for Jorhat Unit: The assessee's claim for deduction under section 80IB for the Jorhat Unit was reduced by allocating additional expenses from the Head Office. The Tribunal noted that the assessee had already allocated certain expenses to the Jorhat Unit and maintained separate books of accounts. The CIT(A) followed the Tribunal's earlier decision, which allowed for the allocation of expenses from the Head Office to the Jorhat Unit to arrive at the correct profit derived from the unit. The Tribunal upheld this approach, stating that the allocation method used in previous years should be consistently applied. The Tribunal rejected the assessee's argument that no further allocation was needed beyond what was already done by the assessee. 2. Disallowance out of Foreign Travel Expenses: The disallowance pertained to expenses incurred on the spouse of the directors during foreign trips. The Tribunal upheld the disallowance, noting that the assessee failed to demonstrate how the spouse's travel was for business purposes. The Tribunal distinguished the case from others where such expenses were allowed due to specific social engagements or invitations, which were not present in this case. The Tribunal emphasized that business expediency must be established for such expenses to be allowable. 3. Enhancement of Book Profit u/s 115JB: The Assessing Officer added an amount of Rs. 48,71,190/- as expenditure related to exempt dividend income while computing book profit under section 115JB. The CIT(A) modified this by considering only the dividend income earned through Portfolio Management Services (PMS) and self-managed investments separately. The Tribunal upheld the CIT(A)'s decision, noting that the allocation of expenses should be proportionate to the income derived from PMS and self-managed investments. The Tribunal found the CIT(A)'s estimation of Rs. 10,00,000/- for expenses related to self-managed investments to be reasonable and consistent with the law. 4. Disallowance u/s 14A read with Rule 8D (Assessment Year 2008-09): For the assessment year 2008-09, the assessee had disallowed Rs. 37,44,169/- under section 14A, which the Assessing Officer increased to Rs. 68,23,681/- using Rule 8D. The Tribunal upheld the disallowance, noting that Rule 8D was applicable from this assessment year. The Tribunal observed that the Assessing Officer correctly applied Rule 8D after finding the assessee's method of allocation unsatisfactory. The Tribunal dismissed the assessee's reliance on earlier judgments where Rule 8D was not applicable, affirming that the rule must be applied as per the law for the relevant assessment year. Conclusion: The Tribunal dismissed the appeals of both the assessee and the Revenue, upholding the CIT(A)'s decisions on all issues. The Tribunal emphasized consistency in the application of allocation methods and the necessity of substantiating business expediency for expense claims. The application of Rule 8D for disallowance u/s 14A was affirmed for the assessment year 2008-09, aligning with the legal requirements for that period.
|
