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TMI Blog2017 (8) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance under section 14A by applying Rule 8D(2)(iii) of the Rules. Adoption being the expenditure relatable to the earning of the impugned dividend income - Held that:- The assessee explained that the dividend receipt from Mutual Funds was merely by way of dividend reinvestment plan in terms of which dividend is reinvested automatically and no effort is required for collecting such dividend. The assessee has also explained the basis of arriving at the aforesaid expenditure, being a percentage of remuneration paid to the employees looking after the activity of the Mutual Fund investments. Considering the entirety of facts and circumstances, especially the fact that the explanation furnished by the assessee has been completely brushedaside, we find no reason to uphold the action of the Assessing Officer in applying Rule 8D(2)(iii) of the Rules in order to compute the disallowance envisaged under section 14A of the Act. Therefore, we set-aside the order of the CIT(A) on this aspect also and direct the Assessing Officer to retain the suo-motu disallowance of ₹ 70,276/- made by the assessee and delete the balance. Depreciation in respect of Badminton court - Held that:- I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold the field and, therefore, we find no reason to interfere with the decision of the CIT(A) on this aspect. Thus, on this aspect also Revenue fails. - ITA NO.8048/MUM/2011, ITA NO.1776/MUM/2013, ITA NO.8554/MUM/2011 And ITA NO.965/MUM/2013 - - - Dated:- 16-6-2017 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For The Revenue : Shri Rajat Mittal For The Respondent : S/Shri Nitesh Joshi/Nishit Khatri ORDER PER G.S.PANNU,A.M: The captioned are bunch of four appeals pertaining to the same assessee for assessment years 2008-09 and 2009-10. 2. First we shall take up the cross appeals filed by the assessee as well as Revenue pertaining to the assessment year 2008-09, which are directed against an order passed by CIT(A)-41, Mumbai dated 06/09/2011, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 23/12/2010. 3. In these appeals, the respective Grounds of appeal read as under:- Assessee s Grounds of Appeal(A.Y. 2008-09):- 1. (a) The learned Commissioner of Income tax (Appeals) erred in upholding the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify the assessment in accordance with the provisions of the Act. 5. Each of the above grounds of appeal are independent and without prejudice to each other. 4. The assessee before us is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of manufacturing and sale of cement and clinker. For the assessment year under consideration, it filed a return of income declaring a total of income of ₹ 305,82,87,116/-, which was subject to a scrutiny assessment, in terms of which the total income has been assessed at ₹ 3,17,03,27,430/-, after making certain additions/ disallowances. The various additions made to the returned income were carried in appeal before CIT(A), who has allowed partial relief. The assessee as well as the Revenue are in appeal before us on the aforestated Grounds of appeal. 5. First, we shall take up the appeal of the assessee, wherein Ground of appeal No.1 relates to a disallowance computed by the Assessing Officer under section 14A of the Act at ₹ 1,75,28,793/-, as against a suo-motu disallowance of ₹ 70,276/- made by the assessee. In this context, the relevant facts ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other interest is concerned, the same relates to business related liabilities, for instance interest on security deposits received, etc. It was, therefore, contended that there was no justification for disallowing any interest expenditure. Apart therefrom, the Ld. Representative for the assessee pointed out that during the year under consideration the value of investments have increased to ₹ 258.76 crores from ₹ 141.87 crores at the end of the preceding year and that the Shareholder Funds comprising of paid-up share capital and Reserves surplus amounting to ₹ 617.77 crores was enough to cover the investments. It was pointed out that the fresh investments during the year were to the tune of ₹ 117.00 crores and that the cash profit before depreciation but after tax for the year under consideration was ₹ 273.56 crore. According to the Ld. Representative for the assessee, the aforesaid facts show that no interest expenditure was attributable to the making of the investments, which have yielded exempt income. 5.2 With regard to the disallowance of Rs. ₹ 75,71,000/- made out of administrative expenditure, the Ld. Representative for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of section 14A of the Act, as held by Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd., 366 ITR 505(Bom) and in the case of HDFC Bank Ltd. vs. DCIT,383 ITR 529 (Bom). Therefore, in the above background, we have no hesitation to delete the disallowance of interest made by the Assessing Officer under section 14A of the Act. 5.5 In so far as disallowance of ₹ 75,71,000/- out of administrative expenses is concerned, the plea of the assessee is based on the requirements of section 14A(2) of the Act. The plea is that the method prescribed in Rule 8D of the Rules cannot be straightway invoked to compute the disallowance under section 14A of the Act unless the Assessing Officer has recorded his satisfaction with regard to correctness or otherwise of the assessee s claim in this regard. On this aspect, the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd.(supra) has upheld the proposition that section 14A(2) of the Act does not empower the Assessing Officer to apply the method prescribed in Rule 8D of the Rules irrespective of the nature of claim made by the assessee. According to the Hon'ble Bombay High Court, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and fair procedure under article 14 must be observed by the Assessing Officer when he arrives at his satisfaction under sub-section (2) section 14A. As we shall note shortly hereafter, sub-rule (1) of rule 8D has also incorporated the essential requirements of subsection (2) of section 14A before the Assessing Officer proceeds to apply the method. In the absence of the recording of the necessary satisfaction, in our view, it was wrong on the part of the Assessing Officer to determine the disallowance under section 14A by applying Rule 8D(2)(iii) of the Rules. 5.6 Apart from the aforesaid, we have perused the explanation furnished by the assessee justifying the adoption of ₹ 70,276/- as being the expenditure relatable to the earning of the impugned dividend income. Before the Assessing Officer assessee pointed out that the dividend earned of ₹ 10,27,22,519/- comprised of dividend to of ₹ 85,96,119/- ( i.e. eight dividend warrants) and ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses incurred on running of a school in the village. On being show-caused, assessee pointed out that the expenditure was incurred with the purpose of carrying on business activities of the assessee as the school was catering to educational and socio-curricular needs of the children of its employees. The Assessing Officer however, keeping in mind the stand of the earlier years, invoked section 40A(9) of the Act and disallowed such expenditure. The CIT(A) has also approved the same. 7.1 Before us, it was a common point between the parties that similar payment has been held to be an allowable deduction in the earlier year by the decision of the Tribunal dated 16/05/2016(supra) for assessment year 2005-06. Following the aforesaid precedent, and since the facts and circumstances remain the same, we direct the Assessing Officer to allow the claim of the assessee. Thus, on this aspect assessee succeeds. 8. In the fourth Ground, the grievance of the assessee is against the action of the income tax authorities in allowing depreciation on UPS @15% treating it as a part of Plant Machinery, as against assessee s claim for allowance of depreciation @60% as part of computer. 8.1 On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s above. 11. Now we may take up the Revenue s appeal for assessment year 2008- 09. The Grounds of appeal raised by the Revenue read as under:- 1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) is justified in holding that the exchange rate fluctuation loss claimed by the assessee is allowable, without considering the fact that the assesee has suffered loss on account of fluctuation of foreign exchange in respect of loans the assessee had borrowed for meeting its capital requirement. 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) is justified in holding that it is not open for the Assessing Officer to assume the allowance of depreciation for earlier years when such depreciation was not actually allowed in those years, without taking into consideration Explanation 5 below Section 32(1 )(ii) inserted by the Finance Act, 2001 which will apply retrospectively w.e.f.1.4.1988. The appellant prays that the order of Commissioner of Income-tax (Appeal) on the above grounds be set aside and that the ITO/AC/DC be restored. The appellant craves leave to amend or alter any grounds or add new gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worked the written down value of the assets assuming that the depreciation for assessment years 2000-01 and 2001-02 stood allowed, though in actuality such a claim was neither made and nor allowed by the Assessing Officer in those years. As a result, the depreciation claimed by the assessee stood reduced. The CIT(A) has since negated the action of the Assessing Officer and restored the claim of the assessee for depreciation. The decision of the CIT(A) is based on the decision of his predecessor CIT(A) in the case of the assessee for 2006-07. The decision of the CIT(A) for assessment year 2006-07 has since been affirmed by the Tribunal vide its order dated 16/05/2016(supra), wherein the decision for assessment year 2005-06 has been followed. The precedents so noted continue to hold the field and, therefore, we find no reason to interfere with the decision of the CIT(A) on this aspect. Thus, on this aspect also Revenue fails. 13. In the result, so far as the assessment year 2008-09 is concerned, the appeal of the assessee is partly allowed and that of the Revenue is dismissed. 14. Now, we may take the cross appeals for assessment year 2009-10. With respect to the Grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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