9911796707
TMI Blog2014 (12) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2006-07, the assessee filed return of income on 29.11.2006 showing income of Rs. 1,58,69,445/-. The return was selected for scrutiny and assessed under section 143(3) of the Income Tax Act vide order dated 26.11.2008 and assessed accordingly. The assessment was reopened after recording reasons for re-opening of the assessment on 09.03.2011 and assessment was completed under section 143(3) read with Section 147 of the Income Tax Act on dated 30.11.2011 rejecting the claim of assessee for deduction under section 80IB of the Act in respect of subsidies credited to the expenses without showing separately as revenue receipts. The assessee raised the objections before Assessing Officer which were disposed of by the Assessing Officer vide letter dated 14.11.2011. The Assessing Officer had observed that the assessee had claimed deduction under section 80IB on account of freight, insurance and interest on working capital subsidies which was not permissible in view of the judgements of Hon'ble Supreme Court in the case of CIT vs Sterling Foods 237 ITR 579 (S.C) and of Hon'ble Punjab & Haryana High Court in the case of M/s Nahar Exports Ltd. Vs CIT 204 CTR 464. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Tribunal. 7. The ld. counsel for the assessee reiterated the submissions made before authorities below and referred to the original assessment framed in which the Assessing Officer, after elaborate discussion allowed the claim of assessee for deduction under section 80IB in respect of Unit-I and Unit-II at Samba in assessment year 2006-07 and also made part disallowance. He has also submitted that the same decisions which are now referred to in the reasons recorded for re-opening of the assessment have already been considered by the Assessing Officer in original assessment orders. He has referred to the replies filed by assessee at original assessment stage in assessment year 2006-07 and stated that complete facts were disclosed to the Assessing Officer at assessment stage, therefore, it is a clear case of change of opinion for re-opening of the assessment which is not permissible in law. He has referred to reply of the Assessing Officer dated 14.11.2011 in which Assessing Officer admitted it to be a case of change of opinion. He has relied upon same decisions which were relied upon before the Assessing Officer and 274 ITR 186 (D) 318 ITR 295 (D) , 320 ITR 56 (S.C) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall have to disclose only the primary facts. 10. Hon'ble Delhi High Court in the case of CIT Vs Orient Craft Ltd. 354 ITR 536 held as under Held, dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income "on going through the return of income "filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Officer did confirm the apprehension about the harm that a less strict interpretation of the words "reason to believe" vis-a-vis an intimation issued under section 143(1) could cause to the tax regime. There was nothing in the reasons recorded to show that any tangible material had come into the possession of the Assessing Officer subsequent to the issue of the intimation. The notice reflected an arbitrary exercise of the power conferred under section 147. 11. Hon'ble Delhi High Court in the case of CIT V Atul Kumar Swami 362 ITR 693 held as under : A valid reopening of assessment has to be based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts necessary for assessment. There is a difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts fully and truly. It is only in the latter case that the Assessing Officer would be entitled to proceed under Section -147. Held, allowing the petition, that the Assessing Officer had not recorded the failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment year 1997-98. What was recorded was that the petitioner had wrongly claimed certain deductions which he was not entitled to. The reassessment proceedings initiated in the year 2004 were not valid. 14. Considering the above legal propositions decided in the above cases, it is clear that AO is not justified in reopening the assessment on mere change of opinion. 15. In this case, the original assessment order in assessment year 2006-07 was passed under section 143(3) of the Act vide order dated 26.11.2008 (PB-19) the Assessing Officer considered the claim of assessee under section 80IB in respect of Unit No. I and Unit No. II at Samba (J&K) and considered the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidies to the expenses account, without showing them separately as revenue receipts, the assessee has, in effect, included these subsidies in profits derived from business for the said assessment year and has claimed deduction u/s 80IA/IB on these receipts. The details of these subsidies are as follows : Unit-I, Samba DG sets Rs.355323/- credited to DG set account Freight inward 1657502/- credited to freight inward account Insurance 461800/- credited to insurance account Interest of WC 1215795/- credited to interest of WC account ISO 9001-2000 certification 24996/- credited to ISO 9001-2000 account Total 37 1541 6/- Unit II, Samba DG sets 2500000/- credited to DG set account Freight inward 4401087/- credited to freight inward account Insurance 1453800/- credited to insurance account Interest of WC 1290372/- credited to WC account Total 9645259/- The assessee has, treated the above receipts as profits derived from the business of the assessee and claimed deduction u/s 801A/1B. But these receipts can at best be treated as profits "attributable to" the business of the assessee because there is no direct nexus between these recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. No tangible material was found against assessee and no fresh material came on record for re-opening of the assessment. The decisions which are referred to in the reasons for re-opening of the assessment i.e. decision of the Hon'ble Supreme Court in the cases of Sterling Foods and Liberty India Ltd. (supra) were already considered by Assessing Officer while passing the original assessment order. Therefore, it is clearly a case of change of opinion on the part of the Assessing Officer and therefore, on mere change of opinion, re-opening of the assessment could not be held to be valid and justified. 18. Considering the above propositions of law decided in various judgements quoted above, it is clear that Assessing Officer is not justified in re-opening the assessment on mere change of opinion. The ld. counsel for the assessee, on the basis of the replies filed before Assessing Officer at the original assessment proceedings has been able to prove that assessee disclosed all primary fact before Assessing Officer at the time of making original assessment order dated 26.11.2008. The Assessing Officer, after examining the replies and details on record, accepted the substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to believe, whether such reasons originate out of the record already scrutinized or otherwise, he shall be within his competence to initiate the re-assessment proceedings." Since in the assessment year under appeal, the Assessing Officer has processed the return under section 143(1) and has not formed any opinion on the material available on record, the above decision of the jurisdictional High Court squarely apply against the assessee and is binding on the subordinate Courts and the Tribunal. Therefore, it may not be a case of quashing of re-assessment proceedings in the year under consideration i.e. assessment year 2007-08, this ground is therefore against the assessee and is dismissed. Issue No. 2 (Deduction under section 80IB - Subsidies) 22. This issue of deduction under section 80IB on various subsidies arises in all the assessment years under appeals in the appeals filed by the assessee. Both the parties mainly argued in assessment year 2006-07 on this issue and stated that the order in that case may be followed in other years, therefore, for the purpose of disposal of all the assessee's appeals on this issue, the facts and findings are taken from assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these Units being engaged in the manufacturing activity were eligible for claim of deduction under Section 80-IB of the Act. The Appellant had filed the return of income wherein the deduction U/s 80-IB was claimed in respect of the profits of both the two Units at Samba and such deduction was claimed based on the Report of the Chartered Accountant of the Appellant. It is submitted that the above Units are eligible for certain subsidies as per the Scheme of Government and in accordance with such scheme the appellant had booked various subsidies namely Freight Subsidy, Insurance Subsidy and Interest Subsidy in Unit-I, Samba & 'Unit-II, Samba. The Assessing Officer disallowed the deduction U/s 80-IB amounting to Rs, 33,60,093/- for Unit-I and Rs. 71,45,259/- for Unit-II by holding that the subsidy receipts are not eligible for deduction u/s 80-IB of the Act. At the outset it is submitted that all these receipts in the nature of subsidies and benefits are capita} receipts not chargeable to tax and there is no question of any disallowance of deduction U/s 80-IB on receipts. The various subsidies are received only in pursuance to Industrial Policy and other Concessions announce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 335 wherein it has been held that the incentives in the nature of excise duty refund, interest subsidy, insurance subsidy etc, given, to units who have set up their production facility at the designated area in J&K are all capital receipts not chargeable to tax and accordingly we wish to submit that all these incentives received by the assessee may not be treated as taxable income of the assessee and therefore the disallowance of deduction under section 80IB does not arise at all The above Judgment has since been followed by the Hon'ble Amritsar Bench of the ITAT in the case of the same party for the AY 2006-07 vide their order 21.06.2011 In ITA No. 163/ASR/2010, Thus relying upon the above Judgment it is submitted that there cannot be question of disallowance of deduction U/s 80-1B of the Act. The total Income of the appellant is to be computed by excluding the above capital receipts and thereafter deduction U/s 80IB is to be allowed to the Appellant, Since, these receipts are not forming part of the total income, there Is no question of making any kind of disallowance. Without to our submissions, even if we consider the various subsidies received by the assessee as rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidy directly linked, The same view has bean taken for the Assessment year 2001-02 in assessee's own case in ITA Mo, 1129/Chandi/2005 order Dated 4.5.2006." b. Shri Sunil Gupta vs. ITO no. ITA no 977/CHD/2007 (ITAT Chd Bench) "Having considered the rival submissions and the precedent relied upon by the assessee, we direct the Assessing Officer to recompute the deduction under section 8Q-IA/IB by excluding the sum of freight subsidy calculated after setting off .the expenses which are directly linked to it," The Hon'ble Bench has placed reliance on the Judgment of Shri Dinesh Kumar (supra) at the time of giving the said decision, Judgement of the Hon'ble ITAT, Chandigarh Bench in ITA no. 293/Chd/2010 in the case of same person above i.e Shri Sunil Gupta wherein it has been clearly held as under; The assessee during the year under consideration had received subsidy of Rs, 12,33,836/- as against expenditure on freight paid Rs. 23,02,756/-. After setting off of the freight subsidy received against the expenditure incurred on the same, the resultant is a loss and accordingly no adjustment is required to be made in the profits of business eligible for deduction under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, Firstly on account of capital receipt as per the judgment of the Hon'ble J&K High Court and secondly if the same is treated as revenue receipt even in that case there cannot be any disallowance of deduction under section 80IB of the Act as the assessee has not claimed any deduction on account of the subsidies as there is no net income from the various subsidies received by the assessee." 25. The ld. CIT(Appeals), however did not accept contention of the assessee and dismissed this ground of appeal of the assessee. His findings in para 10 to 11 of the appellate order are reproduced as under : "10. I have considered the basis of addition made by the Assessing Officer and the arguments of the AR on the issue, The first issue to be decided here is that whether the amounts received by the appellant in the form of freight, insurance and interest subsidy are in the nature of capital or revenue receipt. The Hon'ble J & K High Court in the case of Sh. Balaji Alloys 333 ITR 335 has very categorically held the impugned subsidies to be capital in nature and not chargeable to tax. The Assessing Officer however has obviated the necessity to rebut the assessee's claim in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be exported of the burden of customs duties and excise duties. As customs duties and excise duties are admittedly an integral part of the cost of production any receipts by way of reimbursement of such duties are inextricably linked with the' cost of production which has to be reflected in the profit and loss account of the assessee, Therefore, duty drawback was "derived from'1' the industrial undertaking and eligible for deduction u/s 80J of the Act." "Hon'ble Madras High Court, however, in the of CIT Vs. Jameel Leathers and uppers (2000) 216 ITR 97 (Mad) have expressed the view in favour of the revenue. Subsequently the same High Court has reiterated the view in the case of CIT Vs. Viswanathan & Co, (2003) 261 ITR 737 (Mad.)" It is evident that there are conflicting views available in respect of the issue involved in this case, Since the decision of Chandigarh of the-Tribunal is in favour of the which is also supported by Hon'ble Gujrat High Court, I respectfully follow the same preference to the decision of Hon'ble Madras High Court and Hon'ble Delhi Bench of the Tribunal (Supra) and "hold that amount of Rs. 1,18,402/- has got to be set off again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y clear that the subsidies in are revenue in nature and can not' be said to be 'derived from the eligible business. The decision of the Hon'ble ITAT relied upon by the Assessing Officer also concurs with the view expressed by Hon'ble Jurisdictional High Court on the issue, However the direction by the Hon'ble ITAT in the said case to the Assessing Officer to allow setting off of expenses on freight against the subsidy received seems to be contrary to the main judgement in the case, It is clear that the Hon'ble Jurisdictional High Court has held the freight subsidy to be revenue in nature as well as not eligible for deduction under section 80IA/80IB and therefore respectfully following the same, the action of the Assessing Officer in disallowing the deduction is confirmed." 26. The ld. counsel for the assessee reiterated submissions made before ld. CIT(Appeals) and also filed brief synopsis and copies of various judgements in support of his contention and submitted that unit-I and II of the assessee for which subsidies have been received, are situated in Samba (State of J & K) and filed copies of the industrial policies of State of J & K as per Central polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... designated rail head iii) 100% insurance premium on capital investment For the purposes of determining whether subsidy is a capital or revenue in nature, one has to go to the scheme of subsidy and purpose for which subsidies have been given. 30. It is not in dispute that the assessee obtained subsidies in question in respect of unit No. I and II Samba which falls in territory of State of J&K and the dispute of disallowance of deduction under section 80IB pertains to Samba unit only which is in the State of J&K. The scheme has not been disputed by the revenue department and the said scheme provides incentives to new industrial units and specially expansion of existing units generate employment through acceleration of industrial development in public interest. 31. The Hon'ble J&K High Court in the case of Shree Balaji alloys & others Vs CIT (supra) have discussed in detail the new Industrial policy for the State of J&K dated 14.06.2002 which is also matter in issue in the case of the present assessee and by virtue of the same policy, the subsidies have been received by the assessee because the assessee's units are also located in Samba (J&K). Therefore the facts and polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose and objective, it was, inter alia, provided in the Central excise notifications that the exemptions contained in the notifications would be available only on production of certificate from General Manager of the concerned District Industry Centre to the jurisdictional Dy. CCE or the Asstt. CCE, as the case may be, to the effect that the unit had created required additional regular employment, which would not, however, include employment provided by the industrial units to daily wagers or casual employees engaged in the units. A close reading of the Office Memorandum and the amendment introduced thereto with para No. 3 appearing in the Central Excise Notification Nos. 56 and 57 of 11th Nov., 2002, makes it amply clear that the acceleration of development of industries in the State was contemplated with the object of generation of employment in the State of Jammu & Kashmir and the generation of employment, so contemplated, was not only casual or temporary; but was on the other hand, of permanent nature. Considered thus, the paramount consideration of the Central Government in providing the incentives to the new industrial units and substantial expansion of the existing units, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessees.- CIT vs. Ponni Sugars & Chemicals Ltd. & Ors. (2008) 219 CTR (SC) 105 : (2008) 13 DTR (SC) 1 : (2008) 306 ITR 392 (SC) , Mepco Industries Ltd. vs. CIT (2009) 227 CTR (SC) 313 : (2009) 31 DTR (SC) 305 : 2009 (7) SCC 564 and Sahney Steel & Press Works Ltd. Etc. vs. CIT (1997) 142 CTR (SC) 261 : (1997) 228 ITR 253 (SC) relied on; Shree Balaji Alloys vs. ITO (2010) 127 TTJ (Asr) 129 : (2010) 33 DTR (Asr)(Trib) 67 set aside. 32. The ITAT Amritsar Special Bench in the case of Shri Vinod Kumar Jain Vs ITO & ors in ITA No. 65/2010 vide order dated 26.10.2012 considering the identical question, decided the issue in favour of the assessee by following judgement of the Hon'ble J&K High Court in the case of Shree Balaji alloys & Ors Vs CIT (supra) and held in para 4 to 6 as under : 4. We have considered the rival submissions carefully in the light of material on records as well as decisions cited by the parties. In this case, assessee had received excise duty refund amounting to Rs. 19,98,09,716/-and has claimed deduction u/s 80IB of the Income-tax Act, 1961 on the income corresponding to the receipt of the said refund. The AO after detailed discussion rejected the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s intention in extending the incentives. The Government's objective, as conveyed by the Hon'ble Prime Minister a Srinagar on April 19, 2003, was, for creation of one lakh employment and self-employment opportunities in Jammu and Kashmir State. 28 To achieve the purpose and objective referred to hereinabove, it was, inter alia, provided in the central excise notifications that the exemptions contained in the notifications would be available only on production of certificate from general manager of the concerned District Industries Centre to the jurisdictional Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, to the effect that the unit had created required additional regular employment, which would not, however, include employment provided by the industrial units to daily wagers or casual employees engaged in the units. 29 A close reading of the Office Memorandum and the amendment introduced thereto with paragraph No. 3 appearing in the Central Excise Notification Nos. 56 and 57 of November 11, 2002, thus, makes it amply clear that the acceleration of development of industries in the State was contemplated with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, in terms of the Office Memorandum, was achieved. 34 The other factors, which had weighed with the Tribunal in determine the incentives as production incentives may not be decisive to determining the character of the incentive subsidies, when it is found, as demonstrated in the Office Memorandum, amendment introduced thereto and the statutory notification too that the incentives were provided with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the State by accelerated industrial development." 5. On the basis of the above observations, the Hon'ble J&K High Court has held as under : "35. For all what has been said above, the finding of the Tribunal on the first issue that the excise duty refund, interest subsidy and insurance subsidy were production incentives, hence revenue receipt, cannot be sustained, being against the law laid down by the Hon'ble Supreme Court of india in Sahney Steel Case (1997) 228 ITR 253 and Ponni Sugars case (2008) 306 ITR 392 . 36. The finding of the Tribunal that the incentives were revenue receipt is, accordingly, set aside holding the incentives to the capital receipt in the hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has also filed catena of orders of ITAT, Chandigarh and Amritsar Bench in which by following the judgement of the Hon'ble J&K High Court in the case of Shree Balaji alloys & Ors Vs CIT (supra), the Tribunal had taken the same view in favour of the assessee. The copies of the said orders of different Benches of the Tribunal are placed on record in the name of M/s R.N. Knitfab Pvt. Ltd., M/s Fine Aromatics, M/s Hari Nagar Sugar Mills, M/s Singla Cables, Shri Amit Jain, Prop. M/s J.K. Polypack, M/s Shivam Metal Shaper Industries and M/s Trimurti Menthol Industries. In all the orders, it was held that different subsidies received by assessee are capital in nature and allowed deduction under section 80IB. Considering the above discussion and judgements cited above, it is clear that the various subsidies received by assessee are capital subsidies and are not liable to be taxed. 36. The ld. counsel for the assessee has also raised alternate plea that said subsidy had been credited to the respective expense account and specific cost to the assessee got reduced and for that purpose, netting is allowed which has been held to be so in favour of the assessee by ITAT Chandigarh Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in assessment year 2006-07. 39. The same issue arises in remaining appeals of the assessees, therefore for following the same reason for decision as have been given in assessment year 2006-07, the orders of authorities below in remaining assessment years under appeals are also set aside and it is directed that assessee would be entitled for deduction under section 80IB of the Act. 40. In the result, all the appeals of the assessee on the issue of deduction under section 80IB of the Act are allowed. Issue No. 3 (Issue of Section 80IB on inter unit investments - interest allocation on deemed basis) 41. This issue arises in assessment year 2008-09 and 2009-10 in assessee's appeal as well as in departmental appeal. In assessment year 2008-09, assessee raised ground No. 2 challenging the order of the ld. CIT(Appeals) in upholding the part addition as made by Assessing Officer by reducing the claim of deduction under section 80IB on account of interest @ 11% on inter-unit investment as against 12% charged by the Assessing Officer. The revenue on ground No. 1 in their appeal challenged order of ld. CIT(Appeals) in reducing the disallowance of deduction under section 80IB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and he has placed recourse on Section 80IA(8) and (10) wrongly for the purpose of making disallowance. There cannot be any disallowance under section 80IB on account of notional expenditure not incurred. The Assessing Officer has totally ignored the fact that there is no nexus between the amount borrowed by the Ludhiana unit and the amount invested by the unit with other inter-units. The assessee also made additional submissions before ld. CIT(Appeals) reiterating the same stand that all funds finalized from the bank were utilized for the fixed assets being land and building and machinery and all working capital borrowed has been utilized for the purpose of business. Therefore, addition is unjustified. 44. It was further submitted that Assessing Officer has erred in applying the rate of 12% by assuming that all investments made by the Ludhiana unit in unit No. I and II are out of borrowed funds. Moreover, if any addition has to be made, it cannot be made @ 12% as the average borrowings of the assessee company are @ 11% which can also be verified. The complete details were submitted in this regard. 45. The ld. CIT(Appeals), considering explanation of the assessee in princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e units comes to Rs. 34,05,788/-, Rs. 37,21,7917- and Rs. 25,33,591/- respectively. The addition made by the Assessing Officer is therefore confirmed to the extent mentioned above. 46. The ld. counsel for the assessee reiterated the submissions made before authorities below. He has submitted that assessee has own capital and reserves and interest free funds with Ludhiana unit and no borrowed funds had been transferred to the unit at J&K. Therefore, addition is wholly unjustified. 47. On the other hand, ld. DR relied upon order of the Assessing Officer. 48. We have considered rival submissions and material available on record. The Assessing Officer has specifically noted that interest expenditure on the investments made by the Ludhiana unit in the other units located at Samba had not been allocated to respective units. The Assessing Officer, therefore, correctly referred to provisions of Section 80IA(8) (10) of the Act because the assessee company was transferring funds borrowed on interest from the non eligible unit at Ludhiana to the eligible units and the corresponding interest was not being allocated which had led to the inflation in the profits of eligible units. The finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d departmental appeals on this issue in assessment year 2008-09 and 2009-10 are dismissed. Issue No. 4 (Disallowance under section 14A of the Income Tax Act) 53. This issue arises in assessment year 2008-09 in appeal of the assessee on which assessee raised ground No. 3 challenging the addition of Rs. 7,09,562/- by applying provisions of Section 14A read with rule 8D of the Income Tax Act. The Assessing Officer observed that assessee company had made investments in shares and mutual funds on which exempt income accrued and no disallowance in respect of expenditure incurred to earn the exempt income have been made. The assessee, however claimed before Assessing Officer that no expenditure had been incurred to earn exempt income. The Assessing Officer concluded that assessee company had not been able to establish the claim that no expenditure had been incurred and therefore, disallowance had to be worked out by applying Rule 8D of the Act. The submissions of the assessee are recorded in the appellate order in which the assessee briefly explained that as on 31.03.2008, investments amounting to Rs. 1.68 Crores in shares and mutual funds were standing in the balance sheet of Ludhiana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has not recorded any satisfaction of incurring of any expenditure by assessee, therefore, addition is wholly unjustified. 54. The ld. CIT(Appeals), however, did not accept contention of the assessee and dismissed this ground of appeal of the assessee and confirmed the addition. The ld. CIT(Appeals) further observed that the decision cited by the assessee are clearly distinguishable on facts. 55. The ld. counsel for the assessee reiterated the submissions made before ld. CIT(Appeals). He has submitted that at the time of making addition, the authorities below have considered the amounts which is made as investment in subsidiary companies namely Bharat Paper Ltd. and J.C. Manufacturing Company. It was submitted that said investments have not been done in order to earn any exempt income in the form of dividend income. These investments are long term investments and no decision is required in making the investments or its dis-investments on regular basis because these investments are strategic in nature in the subsidiary companies on long term investments and therefore, no direct or indirect expenditure is incurred. The purpose of investment is not for earning the divide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the judgement in the case of Hero Cycles (supra) and judgement of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Punjab State Industrial Development Corporation Ltd. dated 18.07.2011 and Memorandum explaining Section 14A in the light of Rule 8D of IT Rules held as under : Thus above rule was found to be valid and rational. Coming back to the case in hand, the perusal of the assessment order shows as observed earlier, no where before the Assessing Officer or the ld. CIT(A), the assessee has made a specific mention to show which particular funds were borrowed for which particular requirement and in the absence of such specific utilization Rule 8D, would be applicable. Perusal of the assessment order shows that disallowance u/s 14A has been worked out on the basis of Rule 8D which is as observed earlier applicable in case of the assessee. Therefore, we set aside the order of the ld. CIT(A) and restore that of the Assessing Officer. 57. Considering the facts of the case in the light of the detailed order of this Bench in the case of M/s Chadha Super Cars P. Ltd. (supra), we do not find any justification to interfere with the orders of the authorities below. 58. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree funds and there is no nexus between the borrowed funds and the amounts advanced to the above company. The assessee relied upon several decisions in support of contention that addition is unjustified. 60. The ld. CIT(Appeals) accepted contention of the assessee and noted that the Assessing Officer has wrongly applied ratio of the judgment of the Hon'ble Punjab & Haryana High Court in the case of Abhishek Industries (supra) as this is not a case where assessee had diverted funds to the sister concern without charging any interest, rather interest has been duly charged by the assessee which fact is not controverted by the Assessing Officer. The ld. CIT(Appeals) also found that funds have been advanced to sister concern on interest basis and thus, commercial expediency is duly established and found that decision of the Hon'ble Punjab & Haryana High Court in the case of M/s Marc Auto Industries Ltd. 57 DTR 113 is applicable in favour of the assessee and accordingly, deleted the addition. 61. The ld. DR relied upon order of the Assessing Officer, on the other hand, ld. counsel for the assessee reiterated submissions made before authorities below. 62. It is not in dispute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of Unit II, Samba which was claimed as less due to inadvertent error. The assessee's written submission is incorporated in the appellate order in which the assessee has explained that a lesser claim was made of deduction under section 80IB in respect of unit II Samba while preparing return inadvertently. The computation of income and other details clearly show the proper claim of assessee. It was submitted that at the assessment stage, assessee filed application before Assessing Officer for allowing proper claim under section 80IB of the Act. The assessee relied upon decision of Hon'ble Punjab & Haryana High Court in the case Ramco International reported in 221 CTR 491 in which it was held, "Assessee having duly furnished the documents and submitted form No. 10CCB during the assessment proceedings, claiming deduction under section 80IB which was not claimed in the return, deduction is admissible even in the absence of revised return." The assessee also relied upon latest judgement of Hon'ble Punjab & Haryana High Court in the case of CIT V Metalman Auto P. Ltd. 336 ITR 434 in which it was held, "Mere omission to claim exemption under section 10(35) in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
