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TMI Blog2016 (4) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have allowed depreciation on the WDV of the assets. We, therefore, set aside the orders of the lower authorities and remand back to the file of the Assessing Officer to re-adjudicate the issue, afresh after verification as per law. - Decided in favour of assessee for statistical purpose. Disallowance under section 14A read with rule 8D - Held that:- Question of satisfaction is provided in section 14A and rule 8D(1), that relates to the accounts of the assessee. Thus, it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income which is to be considered. A question may arise as to why the term "average of the value of investment" is then used. The term average of the value of investment would be to take care of cases where there is the issue of dividend striping. In any case, as we have already held that the assessee has not incurred any expenditure by way of interest during the previous year, which is not directly attributable to any particular income. As the Assessing Officer has not considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and from sec. 75 of the Customs Act, 1962, and are therefore, not profits derived from eligible business under sec. 80-IB, disallowed the claim of the assessee. 7. Before us, Authorized Representative of the assessee relied on the decision of Hon ble Supreme Court in the case of CIT Vs. Meghalaya Steels Ltd. in Civil Appeal No. 7622/2014, order dated 09/03/2016 and submitted that it has been held by the Hon ble Supreme Court that subsidies (such as transport subsidy, interest subsidy and power subsidy) paid to the assessee with the object of reducing cost of production constitutes profits derived from the business of the industrial undertaking and is eligible for deduction under sec. 80-IB. Liberty India ((supra) is distinguishable on facts. Therefore, he submitted that order of the Commissioner of Income Tax (Appeals) should be reversed and the appeal of the assessee should be allowed. 8. The Departmental Representative supported the orders of the lower authorities. 9. We find that a similar issue had come up before this Tribunal in the case of ACIT Vs. M/s. Coral Clinical Systems in ITA Nos. 322 to 324/PNJ/2015 for the Assessment Years 2009-10 to 2011-12, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are that the assessee claimed deduction of ₹ 6,86,413/- as value of assets written off. The Assessing Officer disallowed the same as writing off assets or scrapping of a fixed asset is a capital loss and is not allowable deduction under sec. 37. According to the Assessing Officer, sec. 43(6) speaks of written down value and sub-section (c)(i)(B) speaks about the adjustments to be made to the WDV of the asset by reduction of moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during the previous year together with the amount of the scrap value, if any, so however that the amount of such reduction does not exceed the WDV as so increased. Under the block of assets method, moneys payable are reduced from the WDV of the block to arrive at the amount eligible for depreciation. A capital gain or loss would arise only where sale value of moneys payable exceed the WDV or on extinguishment of the block respectively which would then be dealt with under relevant capital gains provisions. The assessee has reduced the value of assets to NIL by writing off the same from books and it has neither sold the asset nor disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer making disallowance of ₹ 3,87,977/- under sec. 14A of the Act and not accepting the explanation of the assessee that it has not incurred any expenditure for earning exempt income. 20 On the other hand, Departmental Representative supported the orders of the lower authorities. 21 After considering the rival submissions and perusing the material available on record, we find that the Assessing Officer while working out the value of average investments, has taken the cost of investment on the first day of the previous year and the cost of investment on the last day of the previous year and has worked out the disallowance at half per cent of the average cost of investments. 22 We find that the Panaji Bench of this Tribunal in the case of DCIT Vs. M/s. Sesa Goa Ltd. in ITA Nos. 92 100/PNJ/2015 in the Assessment Year 2010-11, order dated 10/09/2015 has held as under:- 7. We have considered the rival submissions. As it is noticed that the calculation made by the AO shows that the AO has considered all the investments which is not permissible whereas the Assessee has not provided a proper computation of the disallowance u/s 14A and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that if there is any interest expenditure, which is directly relatable to any particular income or receipt, such interest expenditure is not to be considered under rule 8D(2)(ii). In the assessee's case here the interest has been paid by the assessee on the loans taken from the banks for its business purpose. There is no allegation from the banks nor the AO that the loan funds have been diverted for making the investment in shares or for non-business purposes. Further rule 8D(2)(ii) clearly is worded in the negative with the words not directly attributable . Thus for bringing any interest expenditure, claimed by the assessee, under the ambit of rule 8D(2)(ii) it will have to be shown by the AO that the said interest is not directly attributable to any particular income or receipt. Why we say here that it is to be shown by the AO is on account of the words in Rule 8D(1) being (1) Where the Assessing Officer, is not satisfied with- (a) to (b)** ** ** in relation to income ., he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). In the assessee's case, admittedly, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal filed by the Revenue stands dismissed. Consequently, ground no. 2 of the Revenue s appeal and ground nos. 1.1 to 1.3 of the Assessee s appeal stand partly allowed for statistical purposes. 23 As the Assessing Officer has not considered the above order of the Tribunal, therefore, we set aside the orders of the lower authorities and remand back to the file of the Assessing Officer for adjudicating the issue, afresh in the light of the observations made hereinabove after allowing reasonable opportunity of being heard to the assessee, thus these grounds of appeal of the assessee are also allowed for statistical purpose. 24 In ground No.8 of the appeal, the grievance of the assessee is that the Commissioner of Income Tax (Appeals) erred in deleting the interest charged under sec. 234B, 234C 234D of the Act. 25 At the time of hearing, Authorized Representative of the assessee made no submissions on this ground of appeal. Hence, we hold that the charging of interest is consequential and accordingly this ground of appeal of the assessee is dismissed. 26 In the result, appeal of the assessee is partly allowed for statistical purpose. Order Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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