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TMI Blog2018 (4) TMI 1511X X X X Extracts X X X X X X X X Extracts X X X X ..... computation mechanism provided in Rule 8D(2) of the Rules. Thus we hold that no disallowance is to be made u/s 14A over and above ₹ 30,57,783/- which has already been disallowed by the assessee. - Decided in favour of assessee Denial of deduction u/s 80IE - assessee is engaged in the business of growing and manufacturing of tea, manufacturing chemical and fertilizers, trading of tea, warehousing and development of real estate - substantial expansion - Held that:- As find that the expression ‘substantial expansion’ is also defined in 80IE(7)(iii) wherein, it should result in increase in investment of plant and machinery by at least 25% of the book value of plant and machinery. This factual aspect as to whether the assessee had inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed the same as exempt income in the return of income and disallowed the sum of ₹ 30,57,783/- under Rule 8D(2)(iii) being 0.5% of average value of investment and also considering certain direct expenses incurred for the purpose of earning exempt income. The ld. AO recomputed the disallowance under Rule 8D and arrived at the figure as below under Rule 8D(2)(ii) Rs. 1,00,55,126/- Rule 8D(2)(iii) ₹ 22,75,746/- Total ₹ 1,23,30,872/- Less: Disallowed by the assessee ₹ 30,57,783/- Balance disallowed by AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation mechanism provided in Rule 8D(2) of the Rules. This has to be done with cogent reasons by the ld AO. This is the requirement of Hon ble Jurisdictional High Court in the case of CIT vs Ashish Jhunjhunwala . (mention the citation here which I gave you in IMC Ltd case) . Hence, we hold that no disallowance is to be made u/s 14A of the Act over and above ₹ 30,57,783/- which has already been disallowed by the assessee. Accordingly ground no. 1 raised by the assessee is allowed. 4. The next issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the action of the ld. AO in denial of deduction u/s 80IE of the Act, in the facts and circumstances of the case. 4.1. The brief facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AO did not discuss anything about the claim of deduction u/s 80IE of the Act in the assessment order but merely proceeded to disallow the deduction u/s 80IE while completing the assessment. The Ld. CIT(A) on going through the accounts of the assessee as well as audit report submitted in form 10CCB in respect of eligible units, observed that the assessee had carried out substantial expansion and had not completed the same within the same year in which such substantial expansion were undertaken. In other words, in the opinion of Ld. CIT(A), the substantial expansion once undertaken should be completed within the same financial year in order to claim deduction u/s 80IE of the Act. The Ld. CIT(A) also made a passing reference that the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in his assessment order. We find that the deduction u/s 80IE of the Act is eligible to assessee who begins to manufacture in any of the North Eastern States during the period 01.04.2007 to 31.03.2017 either by setting up a new unit or by undertaking substantial expansion to manufacture or produce any eligible article or thing. The provision of Section 80IE(1) stipulates that the assessee would be entitled to 100% of the profits and gains derived from such business as deduction for 10 assessment years commencing with the Initial Assessment Year. The expression Initial Assessment year is defined in section 80IE(7) as under: ( 7) For the purposes of this section,- ( i ) initial assessment year means the assessment year releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 25% of the book value of plant and machinery (before depreciation in any year); as on the first day of the previous year in which substantial expansion is undertaken, was not verified by the authorities below. Hence, in the interest of justice and fair play, we deem it fit and appropriate, to remand this issue to the file of the ld. AO, for this limited purpose of verification of quantum of investment in plant and machinery so as to satisfy the definition of substantial expansion within the meaning of 80IE(7)(iii) of the Act. If the assessee is found to be so satisfied, then deduction u/s 80IE of the Act should be allowed to the assessee. Accordingly, ground no. 2 raised by the assessee is allowed for statistical purposes. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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