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TMI Blog2016 (4) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... and Amount written off ₹ 1,76,70,049/- totaling to ₹ 8,25,42,577/- were charged and were not having indirect nexus with dividend income. We therefore find merit in the submissions of the ld counsel that disallowance as made by the AO and upheld by CIT(A) is excessive and unreasonable on the ground that there hardly any expenses incurred for the propose of investments. We are in agreement with the CIT(A) that rule 8D is applicable from AY 2008-09 but not blindly when the assessee had hardly incurred any expenses in relation to the dividend earned and the substantial investments were made temporarily in order to park the idle funds ideally. We therefore allow relief to the assessee to the extent of ₹ 8,00,000/- out of ₹ 14,61,622/-. Thus the assessee gets relief of ₹ 13,50,586 in all out of Rs, 20,12,208/- thereby sustaining the addition of ₹ 6,61,622/-. - Decided partly in favour of assessee. Addition in respect of late payment of PF - Held that:- We find from the records and arguments of the counsels that the assessee had paid the PF beyond the grace period after the due date under the relevant Act but well before the due date for filing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slump sale and the assessee could not be allowed double benefit. Even the CIT(A) upheld the additions on the same analogy. We find that the both AO and CIT(A) had completely ignored the fact that under "Adjustment to Purchase Price" the purchaser reassigned some debts amounting to ₹ 2,44,221,60/- to the assessee and assessee reduced the same from the purchase price which is clearly mentioned in para 7.1 of the assessment order. In our view the finding of AO and the CIT(A) that the debts were transferred as part of net current assets in the slump sale and the assessee would get double benefit if allowed deduction in respect of write off of the book debts were wrong and against the facts of the case. The assessee had rightly written off the debts and the same were admissible under section 36(1)(vi) of the Act - Decided in favour of assessee. - ITA No. 7435/Mum/2011, ITA No. 7849/Mum/2011, ITA No. 6518/Mum/2012 - - - Dated:- 29-2-2016 - Amit Shukla, JM And Rajesh Kumar, AM For the Appellant : Ms. Aarti Vissanji For the Respondent : Shri Yogesh Kamal ORDER Per Rajesh Kumar, AM These cross-appeals are filed by the respective parties and the appeal bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal is against confirmation of addition of ₹ 20,12,208/- by CIT(A) as made by the AO u/s 14A of the Act out of which ₹ 5,50,586/- was for the interest charges and remaining ₹ 14,61,622/- was on account of indirect expenses @ 0.5% of the average investments by rejecting the contention of the assessee that the said investments which yielded exempt dividend of ₹ 4,34,99,267/- were made out of own funds and not out of borrowed funds and also that no expenses were incurred in relation to the said investments as the investments were made and managed by portfolio management companies who charged 2% from the mutual funds in which the investments were made. The AO further observed that in the case of Godrej and Boyce Mgf Co Ltd the provisions of rule 8D where held to be applicable from the assessment year 2008-09. 4.1. The ld CIT(A) upheld the additions of ₹ 20,12,208/- made u/s14A on the ground that the application of section 14A rule 8D stands settled by the decisions in the case of Godrej and Boyce Mfg Co Ltd and the AO had rightly invoked the provisions of section 14A rule 8D of the Act. 4.2. Ld AR submitted before us that rule 8D was wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 13,10,21,919/- on the corresponding date in the preceding previous year as against the own funds available in the form of share capital and reserves and surplus of ₹ 58,23,39,972 as on 31.3.2008 vis- -vis ₹ 40,30,74,356/- as on 31.3.2007. In our opinion the assessee had sufficient funds available with it to finance its investments and therefore it can be presumed that it had invested its own funds and not borrowed funds which we have seen that were taken for specific purposes and used accordingly. Thus the additions of ₹ 5,50,586/- made rule 8D(2)(ii) as confirmed by CIT(A) is ordered to be deleted by following the ratio laid down in the case of CIT V/s Reliance Utilities and Power Ltd (2009) 313 ITR 340 (Bom), and CIT V/s HDFC BANK LTD. [2014] 366 ITR 505 (Bom). In respect of ₹ 14,61,622/-, the disallowance under rule 8D(2)(iii) we find that the investments were made in the mutual funds by the portfolio management companies. Further in the schedule M pertaining to Administrative and Selling Expenses the total of ₹ 14,91,12,604/- were charged whereas personnel cost in schedule no L ₹ 12,47,94,407/-were debited. In the schedule no M we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution were subject to the provisions of section 43B and the assessee was entitled to the deduction in respect thereof. We therefore respectfully following the ratio laid down in the said decision, delete the addition of ₹ 3,64,975/- and AO is directed accordingly. 5.2. The ground no 2 is allowed in favour of the assessee. 6. The Third ground is against the confirmation of additions of ₹ 56,94,748/- CIT(A) on account of balance written off during the year following selling of general cargo division. The facts in brief are that the assessee had taken two warehouses on lease and license basis from M/S Paras Commercial Centre Pvt Ltd beside taking three warehouses from M/S Synergy Logistics Pvt. Ltd and two from M/S Bhave Warehousing and Storage Pvt. Ltd . Upon sale of the general cargo division by the assessee the warehouses taken from former company M/S Paras Commercial Centre Pvt. Ltd were no more required in the business and therefore the lease and license agreement was prematurely terminated on 31.10.2007 and the licensor deducted ₹ 45,16,000/- as compensation of premature termination of license agreement whereas the warehouses taken from M/S M/S Synergy Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m M/S Bhave Warehousing and Storage Pvt. Ltd were transferred as part of the slump sale and all the deposits and rent for the unexpired lease were also transferred as part of net worth assets transferred. The ld AR vehemently submitted that the AO and CIT(A) without even going though the letter filed replying the various queries raised during the scrutiny proceedings came to the wrong conclusion that three warehouses were transferred whereas as a matter of fact five warehouses were transferred to the purchaser and two warehouses were surrendered to the licensor by terminating the lease and license deed. It was submitted that the assessee was entitled to deduction of ₹ 45,16,000/- deducted by M/S Paras Commercial Centre Pvt. Ltd as compensation for pre-mature termination of lease on 31.10.2007 on the ground of commercial expediency and prayed that the AO be directed accordingly. The ld AR relied upon the decision CIT Vs Microsoft Corporation of India (P) Ltd (Del) 220 CTR 410. 6.4 The ld DR on the other hand relied on the orders of authorities below. 6.5. We have considered the rival submissions and perused the materials on records and find that the assessee had terminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and net debt transferred to the purchaser. The said difference was mainly arose because of irrecoverable debtors of ₹ 1,76,70,49/- which after re-assignment were ultimately written off by the assessee during the year. 7.1. The AO upon finding that the assessee had written off debts amounting to ₹ 1,76,70,049/-, added the said amount to the income of the assessee by rejecting the said reply dated 30.12.2010 para (g) of the assessee for the reasons that once the entire division was sold as slump sale and the due consideration was paid by the purchaser on the date of sale including for debtors then the benefit of write off could not be allowed to the assessee as the assessee had already claimed the said debtors from sales consideration and the benefit of such debts was taken while computing the long term capital gain. 7.2. The ld CIT(A) also confirmed the addition by holding that the debtors were transferred to purchaser in slump sale and thus the AO had rightly disallowed the writing off the debts as the provisions of section 36(1)(vii) r.w.s. 36(2) were not applicable. 7.3. The ld AR submitted vehemently that the AO as well as the CIT(A) had not appreciated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 72,30,254/-.The agreement transferring the general cargo division provided for determination of the purchase price as per clause 3 of the agreement (placed at page 61 of the paper book) was subject to any adjustments which was provided in the adjustment clause in the definition clause which is placed at page 55 of the paper book. From the records before us we find that the purchaser M/S Excel re-assigned some debts which were part of the net current assets in the slump sale and reduced the purchase price accordingly by ₹ 2,44,22,159.91. The assessee wrote off ₹ 1,76,70,049/- out of this amount claiming the same to be admissible under section 36(1)(vi) of the Act however the same was added to the income of the assessee on the ground that the debts were transferred to the purchaser as part of the net current assets under slump sale and the assessee could not be allowed double benefit. Even the CIT(A) upheld the additions on the same analogy. We find that the both AO and CIT(A) had completely ignored the fact that under Adjustment to Purchase Price the purchaser reassigned some debts amounting to ₹ 2,44,221,60/- to the assessee and assessee reduced the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l by the revenue, as the said circular has retrospective effect and is applicable to the existing appeals of revenue. Accordingly, we dismiss the same. 11.3 Considering the above, the appeal filed by the Revenue, is therefore dismissed. 11.4 In the result, the appeal of the Revenue is dismissed. 12. Now, we will take up the appeal bearing ITA. No:- 6518/Mum/2012 filed by the assessee. 12.1 The grounds taken by the assessee are as under : 1 The learned CIT(A) erred in confirming the disallowance u/s. 14A amounting to ₹ 24,63,205/- worked out as per Rule 8D. Your appellants submit that the disallowance is unwarranted and the same ought to be deleted. Without prejudice to the above, your appellants submit that the disallowance is excessive and ought to be reduced substantially. 2. Your appellants further reserve the rights to add, amend or alter the aforesaid grounds of appeal as they may think fir by themselves or by their representatives. 13. The only issue raised in the appeal is against the confirmation of disallowance u/s. 14A under rule 8D amounting to ₹ 24,63,205/- . The fact in brief are that the assessee company filed its return of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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