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TMI Blog2017 (8) TMI 1440X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the Assessment Years have been allowed in part. The Revenue's appeals for the Assessment Years 2003-04 to 2005-06 are allowed in part but for the Assessment Year 2006-07 it is rejected as a whole. 5. For convenience's sake, we take up Income Tax Appeal No.1775 of 2014 for the Assessment Year 2003-04. 6. Mr. Malhotra, learned counsel appearing on behalf of the Revenue in support of these appeals, would submit that all the questions which have been proposed by the Revenue in the memo of appeals are substantial questions of law. 7. It is stated that the respondent/assessee, M/s. Reliance Industries Limited, is engaged in the business of oil exploration, manufacturing and trading of petro-chemicals, polyester, fibre intermediate textiles, generation and distribution of power, operation of jetties, investments, etc.. The return of income was filed and the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (for short, "the I.T. Act, 1961") in this appeal on 30-1-2006 at total income of Rs. 2719,68,29,460/- under the normal provisions and Rs. 3879,08,06,960/- under Section 115JB of the I.T. Act, 1961. 8. While passing the assessment order, copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law, the Hon'ble Tribunal was right in holding that disallowance u/s 14A cannot be imported into provisions of section 115JB in view of clause (f) to Explanation (1) to the section? 6.5 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in holding that the notional sales tax of Rs. 1252,83,84,360/- is capital in nature and not liable to tax? 6.6 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in holding that prior to insertion of Explanation-5 to section 32 of the I.T. Act, the claim of depreciation was optional and could be thrust on the assessee, if it had not claimed it? 6.7 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in holding that pre-operative expenses of Rs. 3,99,96,448/- incurred in connection with creation of Plant and Machinery in units which have not commenced production, are revenue in nature? 6.8 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in confirming the deletion of disallowance made by the Ld. CIT (A) of Rs. 105.10 crores which was incurred for ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apportionment of expenses to the earning of the exempt income has been rightly done by the Assessing Officer and the Tribunal should not have interfered with the same, is the argument of Mr. Malhotra. 17. As far as question No.6.3 is concerned, Mr. Malhotra would submit that this question is equally a substantial question of law as the Tribunal was not right in deleting the disallowance made by the Assessing Officer under Section 14A of the interest on funds utilised for exempt investment on the basis that own funds of the assessee are more than the investments made. 18. As far as question Nos.6.4 and 6.5 are concerned, Mr. Malhotra would submit that in the case of this assessee, as also in the case of another assessee, namely, RBK Share Broking (P.) Ltd. {Income Tax Appeal No.924 of 2014}, the said questions have been admitted and treated as substantial questions of law. In that regard, our attention has been invited to the orders passed in Income Tax Appeal No.924 of 2014 and Income Tax Appeal No.1018 of 2010, admitted on 20-9-2016 and 1-2-2016, respectively. 19. Mr. Malhotra, in relation to question No.6.6 would submit that the question may not have been happily worded by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal was dismissed by this Court at the stage of registration itself, the application to restore the appeal has also been dismissed today by our order passed in Notice of Motion No.684 of 2017 in Income Tax Appeal {L} No.1647 of 2012, then, all the more we must not entertain these appeals. There is no deviation or departure and on facts which has been brought to the notice of this Court from the prior assessment year. For these reasons, it is submitted that the present appeals be dismissed. 23. For properly appreciating the rival contentions, we must consider the order of the Tribunal, and which is impugned in Income Tax Appeal No.1775 of 2014 as also the other appeals. 24. The Tribunal had before it, in relation to the questions proposed as above of the Revenue, the orders of the Assessment Officer, that of the First Appellate Authority and related records. Upon a perusal of all these, the Tribunal found that the Revenue's appeals have no merit whereas the assessee's appeals deserve to be allowed in the manner done by the Tribunal. 25. With the assistance of Mr. Malhotra and Mr. Mistri, we have perused the paper-books in each of these appeals and the annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken, would not apply. This view of the Assessing Officer is ex facie contrary to the settled principle that a presumption would arise that the investment would be out of the interest free funds generated or available with the company. Then, the borrowed capital in hand in that case and interest expenditure was deductible under Section 36(1)(iii) of the I.T. Act, 1961. The Tribunal held that the interest free fund available to the assessee is sufficient to meet its investment. It can be presumed that investments were made from interest free funds available with the assessee. This position clearly emerges from the record and for the current assessment year as well. We do not see how a different view in the facts and circumstances can be taken. If the Tribunal had followed the earlier view and on facts, then, there is no perversity when nothing contrary to the factual material was brought on record by the Revenue. In such circumstances, the concurrent view on disallowance of interest was reversed and the appeal of the assessee to that extent was partly allowed. We do not see any substantial question of law arising from such a view of the Tribunal. 23rd August, 2017 34. As far as qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid plants/units. In the assessment year under consideration, the assessee claimed depreciation on the said plants/units in view of the amendment made, namely, insertion of Explanation-5 to Section 32(1) of the I.T. Act, 1961. The depreciation so claimed was on the basis of written down value as per the assessee's record and based on the written down value in the year after which depreciation has not been claimed by the assessee. The Assessing Officer allowed the depreciation on the basis of the written down value. He arrived at it after allowing depreciation to the assessee in the preceding years. Thus, the Assessing Officer computed the amount of allowable depreciation at the figure, namely, Rs. 3903,53,90,481/- as against the claim of the assessee of Rs. 4977,74,24,949/-. 39. The assessee preferred an appeal before the First Appellate Authority and the Commissioner of Income Tax (Appeals) referred to the legal position prior to 1-4-2002, namely, prior to the Assessment Year 2002-03 and after the introduction of Explanation-5. The First Appellate Authority observed that in the earlier years the assessee did not claim any depreciation on the said plants/units. Hence, it was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue is bound by the view taken by the Tribunal for the prior assessment years on facts and that applies with full force. More so, when it is allowed to gain finality. 44. We do not see any reason to interfere with such findings of fact. 45. Then comes question No.6.8 and it is conceded that the issue raised in this question is identical to question Nos.6.2, 6.3 and 6.4 of the Revenue's memo of appeal in the present case. Hence, it need not be separately answered. 46. Then comes question No.6.9 and it pertains to expenditure on estimated basis. The argument was that such a basis cannot be utilised to reduce from dividend income the expenditure. 47. The Section 80M of the I.T. Act, 1961 was relied upon. After having heard both sides, what we find is that the Revenue's appeal before the Tribunal mentioned this issue as ground No.9. The First Appellate Authority had deleted the disallowance made by the Assessing Officer under Section 80M of the I.T. Act, 1961 at Rs. 47,00,000/-. 48. The relevant facts are that the assessee received a dividend income of Rs. 26,79,94,433/- in the assessment year under consideration. The assessee claimed deduction under Section 80M in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional taxation entered by the assessee-company for consultancy charges with its Associated Enterprises ("AE" for short). In para 67.1 the representatives of both sides submitted before the Tribunal that this issue is similar to ground No.11 of the Revenue's appeal for the Assessment Year 2003-04 and whatever decision is taken therein would govern for this year and the ground as well. 53. In para 67.2, the Tribunal found that in the light of the similarity in facts, it can safely rely on the findings for the Assessment Year 2002-03. In paras 23.1 to 23.3 and also para 23.4 the Tribunal follows the reasoning for the Assessment Year 2002-03 and applies to the assessment year under consideration. The Tribunal has confirmed the order of the First Appellate Authority by rejecting the ground of appeal taken by the Department. 54. We do not see any reason to differ when such are the factual findings and appearing in the order of the Tribunal. It is based also on the concession by the Department's representative that the facts and circumstances for the prior assessment year and the assessment year under consideration are identical. Once a view is taken on facts, then all the more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not charged any commission. The Tribunal found that the details of the guarantee commission charged by Banks in India for giving non-funded guarantee through parties are referred to and set out in the order of the First Appellate Authority. The Tribunal found that the Transfer Pricing Officer has not brought on record anything which would indicate that 2.5% rate of guarantee commission has been charged. The charging of guarantee commission depends upon transaction to transaction and mutual understanding between the parties. A rate of 2.5% for guarantee commission therefore cannot be applied in the absence of relevant and cogent material. 60. The Tribunal, therefore, came to the conclusion that this exercise of the First Appellate Authority has been carried out to its satisfaction. The assessee itself paid the guarantee commission at the rate varying from 0.25% to 0.6% per annum to third party and when it has not incurred any cost for providing guarantee to the Bank for the loan given to its subsidiary, applying the rate of 2.5% by the Transfer Pricing Officer based on external comparables was not justified. 61. Equally, the assessee's argument that there sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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