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TMI Blog2018 (6) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... nted by disregarding that the assessee followed mercantile system of accounting and as per accounting standard interest accrued should have been recognized on accrual basis Addition on account of depreciation on plant and machinery and other business assets purchased out of amount withdrawn from the credit available with NABARD - Held that:- We note the issue is squarely covered in favour of the assessee by the decision of Hon’ble jurisdictional High Court in assessee’s own case wherein d Tribunal very rightly confirmed the deletion of disallowance of the claim of the assessee to depreciation. Addition to the book profit computed u/s. 115JB of the Act on account of disallowance u/s. 14A - Held that:- It is reiterated that the disallowances made under the provisions of Sec. 14A r.w.s 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act. Therefore, the AO shall work out disallowances in terms of the clause (f) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law. Accordingly, this issue of revenue’s appeal is allowed for statistical purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment proceedings the AO found that the assessee has not made any disallowance on account of interest expenses under Rule 8D(2)(ii) of the Rules. Thus, the AO worked out the disallowance of the interest as per the provision of Rule 8D(2)(ii) of the Rules at ₹ 3,91,07,732/- and added back the same to the total income of the assessee. On appeal, the Ld. CIT(A) after hearing the submission of the assessee that no borrowed fund has been utilized in the impugned investment as there was sufficient own fund available with it deleted the addition by following the order of the ITAT in assessee's own case for AY 2008-09. Aggrieved, revenue is before us. We note that the issue i.e. disallowance made under Rule 8D(2)(ii) of the Rule is squarely covered in favour of the assessee and against the revenue by the Coordinate Bench decision in assessee's own case in ITA Nos. 2009-2010/Kol/2014 for AYs 2010-11 and 2011-12 dated 02.06.2017 wherein vide para 7 the ITAT has held as under: 7. We have heard rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. At the outset, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance u/s 14A is required to be made. The Head Note reads as under:- "Business expenditure-Disallowance under section 14A-Apportionment of expenditure- When investments are made from own funds, merely because the assessee had to subsequently borrow the funds for business use, it cannot be said that the borrowed funds have been used for the purposes of investments". CIT -vs.- HDFC Bank Ltd reported in 366 ITR 505 (Bom.) Held, dismissing the appeal, (i) that the finding of fact given by the Tribunal was that the assessee's own funds and other non-interest bearing funds were more than the investment in the tax-free securities. This factual position was not one that was disputed. Undisputedly, the assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax free securities. In view of this factual position, it would have to be presumed that the investment made by the assessee would be out of the interest free funds available with the assessee. 6.1. Similar views were expressed in the following decisions:- Woolcombers of India Ltd. -vs.- CIT reported in 134 ITR 219 (Cal.) East India Pharmaceuticals Works Ltd. -vs.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal of revenue is partly allowed. 5. Ground no. 3 of revenue's appeal is against the order of Ld. CIT(A) in deleting the addition of notional interest of ₹ 75,00,000/- on sticky loan. Briefly stated facts are that the AO observed from the note to Financial Statement of Accounts contained in the Annual Report that the assessee company has not recognized income on account of interest earned on sticky loan amounting to ₹ 5,00,00,000/-. According to AO, since the assessee was following mercantile system of accounting, an amount of interest of ₹ 75,00,000/- calculated @ 15% on the said sum of ₹ 5,00,00,000/- he added to the returned income of the assessee. On appeal, the Ld. CIT(A) directed to delete the addition by following the Coordinate bench decision in assessee's own case in ITA No. 684/Kol/2012 dated 02.02.2013. Aggrieved, revenue is before us. 6. We have heard rival submissions and gone through the facts and circumstances of the case. We note the issue is squarely covered in favour of the assessee by the decision of Hon'ble jurisdictional High Court in assessee's own case vide GA No. 1501 of 2014, ITAT 47 of 2014 dated 19.11.2014 wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals)." Therefore, following order of Hon'ble High Court cited supra, we dismiss this ground of appeal of revenue. 9. Ground no. 5 of revenue's appeal is against the order of Ld. CIT(A) in deleting the addition of ₹ 4,43,94,734/- made by the AO at the time of computation of book profit ignoring the provision of clause (f) of explanation 1 to section 115JB of the Act. Briefly stated facts are that during the course of assessment proceedings the AO computed the book profit u/s. 115JB of the Act as under: Particulars Amount Amount Profit as per revised return: Add: i) Expenses disallowable u/s. 14A of the Act Book profit u/s. 115JB Rounded off : Rs.29,21,88,924/- ₹ 4,43,94,734/- Rs.33,65,83,658/- ₹ 33,65,83,660/- Since the amount of tax computed under normal provisions of the Act is more than the tax on the book profit computed u/s. 115JB, According to AO, the assessee is required to pay the tax calculated on the total income computed under normal provisions of the Act and hence, he added a sum of ₹ 4,43,94,734/- to the book profit computed u/s. 115JB of the Act on account of disallowance u/s. 14A of the Act. On appeal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." Therefore, the argument placed by Ld. AR for the assessee that the instant issue is already covered in favour of assessee does not hold good. Indeed the disallowances made under the provisions of Sec. 14A r.w.s 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble jurisdictional High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). Therefore, the AO shall work out disallowances in terms of the clause (f) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law. Thus this ground of appeal of the Revenue is partly allowed." We also note that the issue is squarely covered by the decision of Hon'ble jurisdictional High Court in assessee's own case vide GA No. 1501 of 2014, ITAT 47 of 2014 dated 19.11.2014 wherein the similar question arose which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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