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TMI Blog2016 (10) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... to provision of section 14A read with rule 8D. Therefore, we are of the view that the addition made by the AO under rule 8D (2)(ii) ₹ 44,85,098/- should be deleted. So far the addition by the ld. AO under rule 8D(2)(iii) at ₹ 12,30,089/- is concerned, it is towards general and administrative expenses which normally a company incurs while making investment decision. In the investment decisions, the Board of Directors of the companies are involved and the finance department is also involved therefore, there should be some expenditure. Therefore, there are certainly some expenses which the company might have incurred to earn the exempt income. Therefore, the disallowance made by the ld. AO under rule 8D (2) (i) ₹ 100,000/- and Under Rule 8D(2)(iii) at ₹ 12,30,089/- is confirmed by us and the addition made under rule 8D(2)(ii) amounting to ₹ 44,85,098/- is deleted. - ITA Nos. 170 to 172/Kol/2014, C.O. Nos.20 & 21/Kol/2014 - - - Dated:- 19-8-2016 - Shri N.V.Vasudevan, J.M. and Dr.A.L.Saini, A.M. For The Department : None For The Assesseeby : Shri P. J. Bhide, FCA ORDER Per Dr. A.L.Saini, A.M .: The captioned three appeals filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment, which is pending before the Hon ble Supreme Court against the above decision on this issue. Therefore, in order to maintain judicial consistency, the claim of the assessee is disallowed and expenses on green leaf cess is added back. Therefore, holding the same, the AO has disallowed the green leaf cess for assessment years 2007-08, 2008-09 and 2009-10. 2.1. Aggrieved from the order of the ld. AO, the assessee filed appeals before the Commissioner of Income Tax(A) IV, Kolkata. The Commissioner of Income- Tax (Appeals) vide page 3 page 4 of his order wherein he held that assessee s appeal against the disallowance of claim for cess paid to the State Government on the quantity of green leaf plucked and consumed in manufacture of tea, income from which is determined in terms of rule 8 of the Income-tax Rule, 1962. This ground has already been decided in favour of the appellant. Following the decisions of the Hon ble Calcutta High Court in the case of CIT-vs- AFT Industries Ltd., reported in 270 ITR 167 and also the decision of the ITAT in the case of assessee s own case vide its order dated 31.04.2010 in Appeal Nos.532 533, the appellant should have been allowed cess on gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact that the Special leave Petition is pending before the Hon ble Supreme Court against the decision of the Hon ble Calcutta High Court in respect of AFT Industries Ltd. vs- CIT ( supra ) will not have any effect since the Hon ble Apex Court has neither set aside the orders of the Hon ble Calcutta High Court nor granted any stay. Therefore, in the present case under consideration , the claim has not been allowed by the AO on the reason that the department has filed a SLP against the decision of the Hon ble Calcutta High Court and the same is pending in the Hon ble Supreme Court. Such pendency of the SLP would not be the ground for disallowance of the assessee s claim. 2.4. Having heard the rival submissions, we noticed that there is merit in the submission of the ld. AR for the assessee, as the propositions canvassed by him are supported by the decision of the Hon ble Calcutta High Court in the case of CITvs- AFT Industries Ltd. ( supra ) and the facts cited by him. As the AO did not allow this claim merely because the department has filed a SLP against the decision of the Hon ble Calcutta High Court in the case of CIT-vs- AFT Industreis Ltd. ( supra ) and the same is pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation and manufacture of Tea and therefore, such Subsidy should have also been considered by the Assessing Officer for the Appellant's income of Tea business. The Appellant submits that the Assessinq Officer should not have assessed the amount of the said Subsidy as Appellant's income from other sources. 6.2 I find that the claim is logical and the same is, therefore, accepted. The Assessing Officer is directed to assess the Subsidy income as income from cultivation and manufacture of Tea and not from income of other sources and should not be taxed @ 100% . 3.2. We noticed from the Assessment Order that this issue has not been raised by the assessee during the assessment proceedings under section 143(3) of the Act. The said fresh issue has been raised by the assessee first time before the Ld.CIT (A).The Assessee submitted before the Ld.CIT(A) that there is no dispute that the amount of Subsidy received, is taxable as income of the Assessee u/s 41(1) of the Act. Assessee also submitted that deduction in respect of such interest has been allowed only in computing Assessee's income from cultivation and manufacture of Tea. Therefore, having accepted the assessee`s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 8. Decision in the case of Goetze (India) Ltd. (supra) was distinguished in Jai Parabolic Springs Ltd. (supra) in the following words:- In Goetze (India) Ltd. Vs. CIT [2006] 284 ITR 323 (SC) wherein deduction claimed by way of a letter before the Assessing Officer, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of the assessing authority to entertain claim for deduction otherwise than by a revised return, and did not impinge on the power of the Tribunal. 9. In CIT Vs. Natraj Stationery Products (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also held that the assessee has incurred interest expenses proportionately to earn the exempt income and the same should be disallowed. The working of the disallowance as per Rule 8D(2)(ii) and Rule 8D(2)(iii) is reproduced below: 1) Gross Interest (A) ₹ 2,38,99,779 2) Average value of Investments of [34405685 + 457629892] (B) ₹ 24,60,17,789 3) Average value of Assets of [988792720 + 322164371] (C) ₹ 1,81,09,57,091 A x B = 23899779 x 246017789 = Rs.44,85,098 C 1810957091 0.5% of Average Investments = i.e. B as above Rs.12,30,089 Amount disallowable U/s 14A= Rs.58,15,187 4.2. The ld. CIT(A) has deleted the addition made by the AO, observing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment and for earning purely agriculture income. The AO failed to establish linkage and nexus between the exempt income and the expenditure incurred by the assessee. Such a finding is essential if the AO intends to invoke section 14A read with rule 8D. The ld. AR also stated that the AO has not recorded any satisfaction with regard to provision to section 14A read with rule 8D. Therefore, in view of the decision of the Hon ble Jurisdictional Tribunal in case of BalarampurChini Mills Ltd. (Supra), the provision of section 14A cannot be invoked. The ld. AR also explained that the assessee company had sufficient own funds in its share capital and reserve to finance its investments. In fact, from the balance-sheet it is clear that most of the investment has come to the company as a result of merger scheme and own funds. 4.5. We have gone through the facts and circumstances of the case and perused the material available on record. We noticed merit in the submissions of the ld. AR for the assessee, as the propositions canvassed by him are supported by the decision of the Jurisdictional Tribunal in case of Balarampur Chini Mills Ltd (supra), and the facts narrated by him. As the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant s claim U/s 80-IC of the Act. The Assessing Officer rejected the Appellant s claim following the Orders of the assessment years 2004-05, 2005-06 2006-07. Such disallowances have been confirmed. I, therefore, hold that the Assessing Officer was justified in rejecting the Appellant s claim for deduction U/s 80IC of the Act. 5.2. The ld. AR for the assessee has submitted that the assessee under consideration is entitled to claim the deduction under section 80IC of the Act, however, the assessee has not raised this issue before the Assessing Officer. He also submitted that purpose of the assessment proceedings is to assess correct income of the assessee as per the Income Tax Act, and therefore the assessee may raise new issue before the appellate authorities.The ld. AR for the assessee also relied on the case laws in the case of CIT-vs- Sam Global Securities Ltd. by the Hon ble High Court at Delhi in Income Tax Appeal 214/2013. 5.3. We noticed that there is merit in the submission of the ld. AR for the assessee as he explained that it is open for the assessee to raise a new issue before the appellate authorities which was not raised by him before the ld. AO. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion otherwise than by a revised return, and did not impinge on the power of the Tribunal. 9. In CIT Vs. Natraj Stationery Products (P) Ltd., (2009) 312 ITR 222 reliance placed on Goetze (India) Ltd. (supra) by the Revenue was rejected, as the assessee had not made any new claim but had asked for recomputation of deduction under Section 80-1B. The said decision may not be squarely applicable but the Courts have taken a pragmatic view and not the technical view as what is required to be determined is the taxable income of the assessee in accordance with the law. In this sense, assessment proceedings are not adversarial in nature. 5.4 Therefore, we find it appropriate to set aside this issue to the file of the AO to re-consider the same, after due examination as per the discussion (supra). In the result, the Cross Objections filed by the assessee are allowed for statistical purposes. 5.5. In the result, the appeals of the Revenue in ITA Nos.170/Kol/2014 172/Kol/2014 are dismissed and appeal in ITA No.171/Kol/2014 is partly allowed whereas the Cross Objections filed by the assessee are allowed for statistical purposes. Order Pronounced in the Open Court on 19-08-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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