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TMI Blog2015 (4) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... n upholding addition of Rs. 1,25,940/- to the Book Profits computed under section 115JB of the Act. It is submitted that disallowance made under Sub section (2) and (3) of Section 14A cannot be added to the book profits. The conclusions arrived at by the Commissioner of Income-tax and by the Assessing Officer is erroneous and contrary to the law. 3. The appellant reserves the right to add to, alter or amend the grounds of appeal". 2. Ground no.1 pertains to disallowance of Rs. 1,58,940/- u/s 14A read with Rule 8D. 3. The facts are that the assessee was established in 1931. Between 1964 and 1969, the assessee made investments in certain shares of around 66,000/-. Again in 1991-92, it made further investment of Rs. 29.49 lacs in the shares of Infra Financial Corp. Ltd. This aggregate investment in shares is shown consistently in its Balance Sheet. In the year under consideration, the assessee earned dividend income of Rs. 14,760/-, which was straight away deposited in its Bank account. 4. The AO, while conducting the assessment proceedings sought the assessee's view as to why the provisions of section 14A should not be invoked and also taking into consideration the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicating nothing adverse qua the sufficiency of the surplus capital, i.e., with reference to the investment, which in fact flow from an earlier year. Under these conditions of abundance of capital, i.e., even considering the deployment toward business assets, the presumption in law, as explained in the case of Reliance Utilities and Power Ltd [2009] 313 ITR 340 (Bom), would only be of the investment as having been financed out of own funds, toward which we find valid basis on facts. We are, under the circumstances, in no manner of any doubt, which way clarify to be a finding of fact, that the investment in shares, etc., is funded by the assessee out of own capital. Consequently, no disallowance of interest cost u/s. 14A r/w rule 8D shall arise in the facts and circumstances of the case. Coming to the disallowance in respect of indirect, administrative expenditure, worked out at Rs. 15,075/- by following the prescription of rule 8D(2)(iii), i.e., at 0.5% of the average investment for the year, the assessee did not raise any argument before us nor do we find any such before the authorities below, i.e., towards non-application of the said estimate or at a lower sum. Under the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al additions be deleted. 3. The appellant reserves the right to add to, alter or amend the grounds of appeal". 16. In the impugned appeal, the assessee has raised following additional grounds, which read as under: "1. In the alternate and without prejudice to the grounds raised, if it is held that job work receipts would not be entitled to deduction under Section 80HHC of the Act, the exclusion has to be the net of receipt from job work. 2. The learned Assessing Officer erred in disallowing a sum of Rs. 28,450/- under section 14A. It is further submitted the interest have been made out of interest free fund. Further interest paid by the appellant is specific borrowing and cannot be apportion to the investment. The conclusion arrived by the learned Assessing Officer is erroneous and contrary to the facts and bad in law. 3. The appellant reserves the right to add to, alter or amend the grounds of appeal". 17. The facts are that the assessee filed its return on 26.10.2004, and an order u/s 143(3) was passed on 27.11.2006. On 25.03.2011, the AO issued a notice u/s 148, seeking to reopen the assessment framed earlier. Against this notice the assessee filed its return on 11.04.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Pgs. 20-23) as well as the assessee's reply thereto (PB. pg 24-32); and (b) that there was true and full disclosure of all material facts necessary for the assessment and, in any case, in respect of the adjustment proposed per the reasons recorded. We may at this stage clarify that the assessee vide its computation of deduction u/s.80HHC highlighted the fact of the inclusion of processing charges in its' turnover for the year (PB. pgs 28, 30, being Annexure 18 and 8 to its' letters dated 18.8.2006 & 6.9.2006 respectively), the figure of which for the year (at Rs. 1860.57 lakhs) stood brought out clearly in its' annual accounts (PB. pgs. 45-55, per Schedule 9/PB pg. 53). Further, the deduction u/s. 80HHC had been claimed and allowed in assessment by: (i) including the processing charges in the quantum of the total turnover; and (ii) without excluding 90% thereof in computing the 'profits of the business' under Explanation (baa) to sec. 80HHC. The said non-exclusion, i.e., at 90% of the job work charges, under Explanation (baa), being contrary to the judgment of the apex court in ITO vs. Ravindranathan Nair (2007) 295 ITR 228 (SC), forms the sole basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough cautioned that the AO shall in each case have to ascertain the nature of the income liable for exclusion under Explanation (baa) to s. 80-HHC depending upon its genesis and the assessee's business activities. The said view by the AO, however, amounts to little in view of the subsequent (i.e., dated 13.11.2007) decision by the apex court in the case of Ravindranathan Nair (supra), holding of both, the inclusion of the processing charges as part as part of total turnover of the assessee, as well its exclusion (at 90% thereof) in arriving at the 'profits of the business' under Explanation (baa) to section 80HHC. It is trite law that the decision of the apex court settles the law as it always was, i.e., since the cooption of the relevant provision (or part thereof) on the statute book. Timing of the decision, either preceding or subsequent to the assessment or an order, is thus rendered of no consequence. The law consequentially admits of no debate, and no view contrary thereto can hold. The Revenue would even be perfectly justified in law to move a rectification under section 154. Why, the Mumbai Benches of this Tribunal are in the regular course admitting and allow ..... 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