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TMI Blog2017 (4) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... owance under rule 8D(2)(iii) of the Rules. We, therefore, direct the AO to rework the disallowance under rule 8D(2)(iii) after excluding strategic investments and accordingly the ground raised by the assessee is allowed. Additional depreciation allowed Interest was payable under section 234B - Held that:- It was nobody's case that the assessee had committed a default in payment of advance tax when it actually paid it, the assessee could not be held liable to pay interest under section 234B. Insofar as the observations in the order of the Tribunal, that the assessee should have anticipated the events that took place in March, 1992, were concerned, they had no substance. It was rightly submitted that it was not possible for the assessee to anticipate the events that were to take place in the next financial year and pay advance tax on the basis of those anticipated events. It was to be held that in the facts and circumstances of the case it is not justified in law in holding that the interest was payable under section 234B - ITA NO.151/Mum/2015 - - - Dated:- 10-1-2017 - SHRI C.N. PRASAD, JM AND SHRI RAJESH KUMAR, AM For The Assessee : Shri F V Irani For The Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it is , i.e. Godrej. Under these circumstances, one cannot contend at all that there was any type of acquisition of new intangible asset. The Godrej brand was with this group and remained as it is._ There was no change in the ownership of the brand. In the given facts, at the best, it could be argued that there was some improvements in the looks and appearance of the brand. Under these circumstances, it cannot be contend that there was creation of a 'new capital asset. It was settled way back by Hon'ble Supreme Court in the case of Empire Jute Co Ltd vs CIT 124 ITR 1 that for the purpose of treating an expenditure as capital expenditure, twin conditions are must, viz. (i) there should be benefit of enduring nature; (ii) the expenditure must give rise to creation of new capital asset. The observations of Hon ble Supreme Court were reiterated in subsequent judgment in the case of Alembic Chemical Works ltd vs CIT 177 ITR 377 (SC) and thereafter many judgements came from various courts from all over the country wherein similar views were taken. In the facts of the case before us, admittedly, there is no creation of new assets. Thus, the impugned expenditure cannot be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings, AO noted that the assessee has earned exempt income of ₹ 4280.11 lacs and also made suo motto disallowance under section 14A of expenses attributable to earning of the exempt income to the extent of ₹ 36,98,000/-. The AO also observed that no disallowance has been made by the assessee on account of interest expenses and therefore the provisions of Rule 8D(2)(ii) of the Rules were attracted. Accordingly the AO after giving the show cause notice to the assessee and considering the contentions raised that no expenses were incurred directly for earning of the exempt income/dividend in defense by holding that no separate records have been maintained for the investments in shares and securities yielding exempt income and other business transactions. Therefore, the AO came to the conclusion that the assessee failed to prove direct nexus of investments in shares out of own surplus funds and re-worked the disallowance by taking interest expenditure u/s 14A r.w.rule 8D(2)(ii) of the Rules at ₹ 2823.31 lakhs and ₹ 523.16 lakhs under rule 8D (2)(iii) of the Rules and after allowing the deduction suo mottu disallowance of ₹ 36.98 lakhs made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,20,47,000/- 10. The ld.CIT(A) sustained the disallowance to the extent of ₹ 826.99 lacs by allowing the relief to the assessee to the extent of ₹ 2520.47 lacs. 11. As regard the disallowance under rule 8D(2)(ii), the ld. AR submitted that the investments made by the assessee in the subsidiary companies were for strategic purposes and therefore the provisions of section 14A read with rule 8D(2)(ii) were not applicable. In defense of his arguments, the ld. AR drew our attention to the decision of co-ordinate bench of the Tribunal in assessee s own case in ITA No.424/M/2012 (AY-2008-09) dated 7.10.2015, ITA NO.1900/Mum/2011(AY-2006-07) and others, dated 28.8.2014 and ITA Nos.3428/Mum/2013 and 3737/Mum/2013) (AY-2009-10), wherein the ld. counsel pointed out that the identical issue has been decided in favour of the assessee under identical facts and circumstances and therefore the disallowance as sustained by the ld.CIT(A) under rule 8D(2) should be deleted. 12. As regards the disallowance made under rule 8D(2)(iii), the ld. AR submitted that the AO has not recorded any satisfaction before invoking the provisions of rule 8D and therefore disallowance was ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, the claim of strategic investments made by the assessee need verification. We, therefore, restore the entire issue to the file of the AO. The AO is directed to verify the claim of the assessee that the investments are made for strategic purposes and decide this issue afresh in the light of the findings given by the Tribunal in assessee s own case in earlier assessment years and also keeping in mind that if investments are found to be of strategic in nature then to decide the issue as per the decision of the Tribunal given in the case of J.M. Financial Ltd. in ITA No. 4521/M/2010 read with M/s. Garware Wall Ropes Ltd. in ITA No. 5408/M/2012. The assessee may furnish any other related decision in support of its claim. With the above directions, ground No. 1 to 5 are treated as allowed for statistical purpose. 15. In view of the above, we direct the AO to delete the disallowance on account of interest under rule 8D(2)(ii) in toto and so far as the disallowance under rule 8D(2)(iii) is concerned, the investments made in the sister concerns are of strategic nature are also required to be excluded while calculating the disallowance under rule 8D(2)(iii) of the Rules. We, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27), ITA No.424/Mum/2012 (AY-2008-09) order dated 7.10.2015 (para 15) and also in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10) (para 15) in favour of the assessee. 23. On perusal of the above Tribunal orders, we find that the issue of cenvat credit is allowed in favour of the assessee. Accordingly, respectfully following the decision of the Tribunal in assessee s own case we allow the ground taken by the assessee. 24. Ground No.12 taken by the assessee is against upholding the order of AO on the issue of opening written down value and not allowing depreciation by CIT(A) on the basis of ITAT order. 25. The ld. AR fairly agreed before us that the issue raised by the assessee in this appeal stands covered against the assessee by the decision of Co-ordinate Bench of the Tribunal in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10). Therefore, the ld.AR prayed that the ground raised by the assessee be allowed. 26. We, on perusal of the decision relied upon by the assessee in its own case in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10). (supra), the Tribunal vide para 16 of the order has been decided the issue agains the assessee . Therefore, respectfully foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. ITA No.164/Mum/2015 29. Ground no.1 and 2 taken by the revenue read as under : 1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting the disallowance to ₹ 8,26,99,000/ - as against disallowance of ₹ 33,10,48,000/- made by the Assessing Officer. 1.1. On the facts and in. the circumstances of the case, the Ld. CIT(A) erred in not appreciating that the expenses on each investments are not separately identifiable and hence could not be directly attributed to the exempt income. 2. On the facts and in the circumstances of the case, the Ld. CJT(A) erred in holding that only ₹ 8,26,99,000/- being disallowance u/s. 14A, be added to the book profit and not the entire disallowance of ₹ 33,10,48,000/- 30. Ground No.1 and 2 taken by the revenue is in respect of restricting the disallowance to ₹ 8,26,00,000/- by CIT(A) as against disallowance of ₹ 33,10,48,000/- made by the AO under rule 8D(2) of the Rules. 31. We have already decided the issue in favour of the assessee vide para 11 to 15 hereinabove and therefore these grounds raised by the revenue become infructuous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 145A, the valuation of purchases and sales of goods and inventory for the purpose of determining the income chargeable under the head profits and gains of business or profession shall be: .... (b) .. further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) paid or incurred by the assessee to bring the goods to the place of its location and conditions as on the date of valuation: The provisions of section 145A are mandatory and supersedes the accounting standards. In the case under consideration, the AO considered the element of excise duty and other taxes while valuing the inventory only whereas element of such duty. or taxes were also required to be considered for valuing the purchases, sales and inventory. Various courts have also held that when such adjustment is required to be made, such adjustment will also have to be made in the opening stock. In the facts and circumstances, the AO is directed to recast the accounts of the appellant by considering the element of excise duty and other taxes in the opening stock, purchases, sales and inventory. The increase, if any, on account of these adjustments, should be added in the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the hearing of this appeal, Shri Ajit Kumar Srivastava, learned CIT-DR, advanced his arguments which are identical to the ground raised by submitting that the learned Commissioner of Income Tax (Appeals) while granting direction to the Assessing Officer ignored the provisions of the Act. The addition so made by the Assessing Officer was defended. On the other hand, Ms. Sonalee Godbole, learned Counsel for the assessee defended the conclusion arrived at in the impugned order by submitting that the case is covered in favour of the assessee by the decision of the learned Commissioner of Income Tax (Appeals) itself for the assessment year 2009-10, which has been reproduced at Page-2 onwards of the impugned order. 3. We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we note that the assessee declared total income as nil as per the normal provisions of the Act and total income at ₹ 21,86, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in MITC Rolling Mills Pvt. Ltd. v/s ACIT, (ITA no.2789/Mum./2013), order dated 13th May 2013. Thus, the assessee is entitled to depreciation in the subsequent year, if the entire depreciation is not allowed in the first year of installation. The ratio laid down in ITO v/s M/s. Aswani Industries (ITA no.140/Ahd./2013) order dated 31st May 2013, further supports the claim of the assessee. The ratio laid down in Apollo Tyres Ltd. v/s ACIT, (2014) 45 taxman.com 337 (Cochin)(Trib.) further supports the case of the assessee. If the ratio laid down in the aforesaid cases is kept juxtaposition with the facts before us, we are of the view that the assessee is entitled for 50% of the additional depreciation and there is no restriction to claim the additional depreciation, if otherwise available, to the assessee. We find no infirmity in the conclusion drawn by the learned Commissioner of Income Tax (Appeals). It is affirmed. In ITA No.3428/Mum/2013, the issue has been decided vide para 26 which is reproduced below: 26. Ground No.2: This ground is with regard to allowing additional depreciation in the first year of installation of plant and machinery. It was fairly stated that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 333 ITR 464 (Bom) (HC); B) Emami Ltd V/s CIT reported in 337 ITR 470 (Cal) (HC); C) Grindwell Norton V/s ACIT ITA No.9178/Mum/2004 (Mum-Trib); D) Priyanka Overseas Ltd V/s DCIT reported in 79 ITD 353 (Del-Trib); E) Haryana Warehousing Corporation V/s DCIT reported in 75 ITD 155 (Del-Trib). The ld.AR pointed out that the similar issue has been decided by the first appellate authority for the assessment year 2008-09 which was not appealed before the Higher Forum by the revenue. In view of this the ld.AR prayed that the decision of the ld.CIT(A) be affirmed on this issue by dismissing the ground raised by the revenue. 42. We have carefully considered the rival submissions and perused the material placed before us in respect of the issue in hand. We find that the assessee has deposited the advance tax in four installments as per columns before the due date as per the provision of the Act. It is also clear from the fact before us that during the year the assessee paid taxes as per the law prevailing provisions in the Act in the relevant year and filed return of income accordingly. We find that the Financial Act 2001 brought out retrospective change to the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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