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TMI Blog2015 (7) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Revenue has not placed any material on record to demonstrate as to how the aforesaid finding of ld. CIT(A) is wrong. We further find that the Assessee had suo motu worked out the disallowance u/s. 14A at ₹ 16,30,762/- and in the aforesaid working of Assessee also no mistake has been pointed out by the Revenue - Decided in favour of assessee. Disallowance of employees contribution to ESIC - CIT(A) deleted disallowance - Held that:- In the present case, it is an undisputed fact that the employees contribution of ESIC was paid after the due date prescribed under ESI Act. We find that the issue of delayed payment of ESIC contribution has now decided in favour of the Revenue by the decision of Hon’ble Gujarat High Court in the case of GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT]. Thus in the absence of any contrary binding decision brought on record by ld. A.R, we are of the view that A.O was justified in treating the delayed deposit of Employees contribution of ESIC as income of the Assessee and accordingly uphold the order of A.O on this ground. - Decided against assessee. Addition by income from investment in Free Trade Zone - CIT(A) deleted addition - Held that:- CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,65,232 on the basis of proration of interest expenses by dividing average value of investment to average value of total assets. 1.4 The above method appears in Rule 8D of the Income Tax Rules, 1961 ('the Rules') and Rule 8D does not apply to the year under consideration as held in the Appellant's own case for AY 2006-07 by the Honorable jurisdictional Tribunal vide its order dated 19 January 2012. 1.5 The Appellant suo-motu offered ₹ 16,30,762 on the basis of apportionment of indirect expenses in the ratio of dividend income to total income. While working out this disallowance of ₹ 16, 30, 762 the appellant has already included interest expenses of ₹ 47.45 lakhs. 1.6 The Appellant submits that the approach followed by the CIT(A) being akin to Rule 8D and as mentioned above Rule 8D does not apply to the year under consideration, therefore the disallowance of ₹ 14,65,232 should deleted and the amount of disallowance should be restricted to ₹ 1 6,30,762. 1.7 The Appellant prays that the disallowance of ₹ 14,65,232 made by the AO and confirmed by the CIT(A) is erroneous, unwarranted and be deleted. 4. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment is not automatic and involves time, energy and resources in terms of finance, administration, decision making and managing the activities involving the buying and selling of investments, re-investment of dividend. He also noticed that Assessee while working the disallowance during the course of assessment proceedings had bifurcated the indirect and common expenses into related and non related expenses which according to him was without any rationale and the apportionment of the expenses on the basis of ratio of exempt income to the total turnover was arbitrary. He was of the view that the better way for apportioning the related expenses would have been in the proportion of exempt income and the taxable income. He was of the view that the method prescribed in Rule 8D of the I.T. Rules would be logical method for working out the disallowance. He accordingly worked out the disallowance u/s. 14A at ₹ 84,35,716/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who after considering the submissions of the Assessee granted partial relief to the Assessee by holding as under:- 3.3 I have considered the facts of the case, assessment order and ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of expenses relating to exempt income has to be made. Appellant quantified the disallowance during assessment proceeding on the basis of salary of the person working for investment division and proportionate indirect expenses resulting in exempt income. The disallowance quantified by the appellant was ₹ 16,30,762. Assessing officer did not agree with this disallowance proposed by the appellant on the ground that appellant did not consider certain expenses and after considering of the same the indirect expenses comes to ₹ 1022.68 Lacs for making this disallowance. The difference between assessing officer and appellant's quantification of disallowance is on two counts- (1) assessing officer included entire depreciation of ₹ 251.26 lakhs as against appellant's ₹ 96.05 lakhs which was treated as related to exempt income by the appellant. (2) Appellant considered total income at ₹ 42808,36 lakhs as against 8732.50 lakhs considered by the assessing officer while computing proportionate disallowance. As far as considering the entire depreciation as indirect expenses for making proportionate disallowance, I do not find merit in assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of interest expenditure was called for and for this proposition Assessee placed reliance on the following decisions. (i) CIT vs. Torrent Power Ltd. -363 ITR 474 (Guj.) (ii) CIT vs. Suzlon Energy Ltd. 354 ITR 630 (Guj.) (iii) CIT vs. Gujarat Power Corporation Ltd. 352 ITR 583 (Guj.) (iv) CIT vs. Hitachi Home and Life Solutions (I). Ltd. (2014) 41 taxmann.com 540 (Guj.) (v) CIT vs. Reliance Utilities Power Ltd. 313 ITR 340 (Bom) (vi) Munjal Sales Corporation vs. CIT 298 ITR 298 (SC) 9. Ld. A.R. further submitted that ld. CIT(A) confirmed the disallowance of ₹ 14,65,232/- u/s. 14A in respect of interest which was worked out by the A.O based on Rule 8D. He submitted that since the provisions of Rule 8D were not applicable for the year under consideration it was not tenable in the eyes of law to confirm part disallowance u/s. 14A by following the mentioned prescribed under Rule 8D. He further submitted that Assessee had suo motu offered ₹ 16,30,762/- as disallowance u/s. 14A and no mistake in the disallowance that was offered by Assessee has been pointed out by the A.O and in such a situation, the disallowance u/s. 14A at a figure differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance in excess of the amount that has been worked out by the Assessee (i.e. ₹ 16,30,762/-) is called for. We thus direct the deletion by the disallowance in excess of the disallowance worked out by the Assessee of ₹ 16,30,762/-. Thus the ground of Assessee is allowed. 11. In the result, the appeal of Assessee is allowed. Now we take up Revenue s appeal in ITA No. 922/Ahd/2012 1st ground is with respect to disallowance of employees contribution to ESIC. 12. During the course of assessment proceedings and on perusing the tax audit report, A.O noticed that there were certain instances where the Employees contribution of ESIC was not deposited with the authorities before the prescribed due date and the aggregate of such delayed deposits was ₹ 36,313. A.O was of the view that employees contribution is treated as income u/s. 2(24)(x) of the Act and the same is allowed an expense if it is paid within the prescribed due date. If the payment is not made within due date then the expense is not allowable u/s. 36(1)(va) of the Act. He accordingly considered the delayed payment of ₹ 36,313/- of Employees contribution towards ESIC to be as income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in treating the delayed deposit of Employees contribution of ESIC as income of the Assessee and accordingly uphold the order of A.O on this ground. In the result, the ground of Revenue is allowed. Ground no. 2 is with respect to disallowance u/s. 14A. 17. Before us, both the parties submitted that the present ground is interconnected with ground no. 1 of Assessee s appeal and the submissions made by them while arguing the appeal would also be applicable to the present ground. In view of the aforesaid submission of both the parties, we for the reasons stated hereinabove while deciding the appeal for Assessee s appeal in ITA No. 889/Ahd/2011(supra) and for similar reasons dismiss the ground of Revenue. Ground no. 3 is with respect to deleting the addition by income from investment in Free Trade Zone. 18. On perusing the accounts of the Assessee, A.O noticed that Assessee had made investments in Emirates of Ajman in the form of free Zone entity by the name of Vega Industries (Middle East) FZE in Ajman Free Zone and had earned income through it amounting to ₹ 2124.75 lacs and which was not offered to tax. A.O also noticed that similar issue was involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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