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TMI Blog2016 (10) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 2007 issued pursuant to Electricity Act, 2003, Assessee is under an obligation to prepare its accounts as per the said regulations and not under Part II and III of Schedule VI of the Companies for computing Book Profit. As a matter of fact, a coordinate Bench of this Tribunal in the assessee’s own case for the AY 2007-08 [2016 (8) TMI 855 - ITAT KOLKATA] considered this issue in extenso and hold that the provisions of Section 115JB have no application to the assessee company. In the said case, this Tribunal, after going through the basic intention behind the introduction of Sec. 115JB of the Act, Department Circular No. 762 dated 18.02.1998, Memorandum explaining the provisions in the Finance Bill, 1996, under the caption “Rationalisation and Simplification”, hyden rules, decisions of various High Courts and Tribunal viz. Kerala State Electricity Board Vs. DCIT reported in (2010 (11) TMI 127 - Kerala High Court) and Maharashtra State Electricity Board Vs. JCIT reported in (2001 (8) TMI 310 - ITAT MUMBAI ) decided that the provisions of section 115JB of the Act are not applicable to the assessee company. - Decided in favour of assessee - I.T.A. No.1656/Kol/2013, I.T.A No. 891/Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under section 234-B on the additions due to retrospective amendment. 4. Aggrieved by the impugned order, the assessee approached before the Tribunal on the following grounds:- 1.0 That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT (Appeals)] was not justified and grossly erred in confirming the disallowance u/ s 14A of the Act r.w. Rule 8D of Income Tax Rules, 1962 at Rs. ₹ 9,70,627/- in spite of the fact that no such expenditure was incurred for earning the exempt income. 1.1 That on the facts and in the circumstances of the case, and without prejudice to Ground 1.0 taken here-in-above, Ld. CIT (Appeals) was not justified and grossly erred in considering entire interest debited to Profit Loss account while computing disallowance u/s 14A r.w. Rule 8D, without considering the fact that the borrowings were made for specific purposes. 2.0 That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the disallowance of an amount of ₹ 20,000/ - on account of donation paid in computing total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. For the AY 2009-10, the assessee company filed its return of income on 29.9.2009 declaring income of ₹ 23,98,647/- under section 115 JB of the Act. Subsequently they revised the same twice on 19.10.2010 and 31.03.2011 showing the NIL income under normal provisions of computation after adjusting the unabsorbed depreciation. Returns dated 29.9.2009 and 19.10.2010 were filed under section 115 JB of the Act whereas in the return dated 31.3.2011 it is alleged that the provisions under section 115JB have no application to the assessee being a Power Generating Company. The AO by way of order dated 01.10.2011 assessed the income of the assessee at ₹ 11,71,31,845/- under section 115 JB of the Act. 6. Aggrieved, assessee preferred appeal before the CIT(A), who by way of impugned order dated 28.03.2013 sustained to some extent the order of AO, inter alia, disallowing u/s. 14A of the Act read with rule 8D of the I. T. Rules the claim for ₹ 15,18,912/- deduction towards expenditure, calculation of the tax liability of the assessee under section 115JB of the Act, adding ₹ 39,19,000/- claim of the assessee of leave encashment, ₹ 15,18,912/- disallowing expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable in its case. 4.0 That on the facts and in the circumstances of the case, and without prejudice to Ground 3.0 above, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of expenditure incurred in relation to earning exempt income in computing Book Profits u/s 115JB without appreciating the fact that no such expenditure was debited in the Profit Loss A/c in the relevant assessment year. 5.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified rather grossly erred in confirming imposition of interest of u/s 234B. 8. At the time of hearing Ld. Counsel for the assessee did not press ground nos. 2 and 3 of AY 2008-09. Hence, the same are dismissed being not pressed. 9. The issue involved in both the appeals of assessee is that the Ld. CIT(A) was not justified in confirming the disallowance on account of expenditure u/s. 14A of the Act r.w. rule 8D of the I. T. Rules, 1962 (hereinafter referred to as the Rules ) for earning dividend and interest income, leave encashment claimed on provision basis and interest u/s. 234B of the Act for computing book profit u/s. 115JB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng reduction in investments in the balance sheet, while computing book profit u/s 115JB of the Act in respect of AY 2008-09? 6. Are the authorities below justified in adding ₹ 9,66,000/- amount provided for payment on retirement of workers in computing Book Profit under Section 115JB of the Act in respect of AY 2008-09? 7. Are the authorities below justified in disallowing the claim of ₹ 15,18,912/- under section 14A r/w 8D in computing book profits under section 115JB 8. Are the authorities below justified in imposing interest under section 234B on additions AY 2008-09 and 2009-10? Issue No 1 11. This issue relates to ground nos. 1.0 to 1.3 in ITA No. 891/Kol/2013 and ground nos. 1.0 and 1.1 in ITA No.1656/Kol/2013. 12. Argument of the learned AR on merits is three fold on this issue. Firstly, he submitted that the borrowings were made for a specific purpose of earning taxable income, as such, it cannot be said that the amount borrowed could have been invested to earn exempt income for applying Rule 8D of the Rules. To substantiate his submission, learned AR placed before us the documents relating to the term loan of State Bank of India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at % of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT (A) 16. We have carefully gone through the submissions of both the side, perused the material available in the paper book submitted by the assessee and the orders of the lower authorities. We find that the copy of the Term loan sanction letters dated 10.5.2006 and 7.12.2006 issued by the State Bank of India clearly mention in the terms and conditions that the purpose of the loan was to construct three floors and a conference hall at the Company s Registered Office and 33/1 1KV sub-station respectively. So also other loan sanction letter dt 2-12-2009 issued by State Bank of Patiala, letter dated 30-9-2008 issued by IDBI, letter dated 2.3.2005 issued by oriental Bank, letter dated 27.9.2007 issued by Yes Bank clearly sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 10,39,339/- in respect of the AY 2009-10 by applying section 14A r/w 8D, and any addition on such score has to be deleted. 20. In view of our finding in the preceding paragraph, we do not think it necessary to consider the alternative submission of the learned AR that for the purpose of disallowance, the CIT should have considered only the investment generating exempt income, instead of total investments. Hence, ground nos. 1.0 to 1.2 in ITA No. 891/Kol/2013 and ground nos. 1.0 and 1.1 in ITA No.1656/Kol/2013 are allowed in favour of assessee. Issue No 2 and 3. 21. Issue no. 2 relates to the additional ground in ITA No.1656/K/2013. Issue no. 3 relates to ground no. 3 in ITA No.891/K/2013 and ground no. 4 in ITA No.1656/K/2013. 22. It is the submission of the learned AR that the assessee submitted before the learned CIT(A) that the provisions of Sec 115 JB of the Act have no application to the Assessee Company since being a Power Generating Company they are governed by the provisions of West Bengal Electricity Regulatory Commission (Terms and Conditions of Traffic) Regulations, 2007 issued pursuant to Electricity Act, 2003, and they are not maintaining their accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication , hyden rules, decisions of various High Courts and Tribunal viz. Kerala State Electricity Board Vs. DCIT reported in (2010) 329 ITR 91 (Ker), Maharashtra State Electricity Board Vs. JCIT reported in (2002) 82 ITD 422 (Mum trib.), State Bank of Hyderabad Vs. DCIT reported in (2013) 33 taxmann.com 312 (Hyd. Trib.) vide order dated 7.9.2012, ICICI Lombard General Insurance Co. Ltd. Vs. ACIT reported in 2012-TOIL-690 (ITAT, Mum), Bank of India Vs. Addl. CIT reported in (2014) 5 TMI 929 and M/s. Reliance Energy ltd. Vs. ACIT reported in ITA No. 218/Mum/05 dated 24.01.2008 decided that the provisions of section 115JB of the Act are not applicable to the assessee company. We do not see any reason to entertain a different view. While respectfully following the above decision of the coordinate Bench of this Tribunal, we hold these two issues in favour of the assessee. Hence, the additional ground in ITA No.1656/K/2013 and ground no. 3 in ITA No.891/K/2013 and ground no. 4 in ITA No.1656/K/2013 are allowed in favour of assessee. Issue No 4: 25. This issue relates to ground no.2 in ITA No.891/K/2013. 26. The assessee claimed deduction towards provision for leave encashment i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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