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TMI Blog2018 (11) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following substantial ground of appeal: "That the learned Commissioner of Income Tax (Appeals) - 22, Kolkata erred in holding donation of Rs. 25,00,000/- made to Gobind Ram Goel Charitable Trust to be bogus and thereby denying claim of deduction of Rs. 12,50,000/- under section 80G of the Act." 4. The brief facts qua the issue are that during the assessment year under consideration, the assessee-company made an aggregate donation of Rs. 1,52,39,000/- out of which Rs. 14,000/- comprised petty donations not eligible for deduction under section 80G of the Act. The assessee company relied upon the decision of the Hon'ble Calcutta High Court in the case of CIT vs Bata India Ltd. (1993) 201 ITR 884 in respect of claim of deduction under section 37 of the Act, in respect of such petty donations. The Investigation Wing of the Income Tax Department prepared a report on the basis of survey conducted on 04.12.2015 at the office of the assessee company. This report primarily focused on donations given to unscrupulous trusts namely Batanagar Education & Research Trust and Gobind Ram Goel Charitable Trust. The assessee company was given an opportunity to explain the purpose and modus o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee company, recorded under section 131 of the Income Tax Act, 1961 were not made available. Non-availability of such statements and other materials and not affording the opportunity of cross examining the departmental witnesses would vitiate the additions made on account of this issue and would also be against the principles of natural justice. The assessee company categorically denies having made any bogus donation to any unscrupulous trusts. 7. On the other hand, the learned DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and are not being repeated for the sake of brevity. 8. We have given a carefully consideration to the rival submissions and perused the material available on record, we note that the assessee company made an aggregate donation to the tune of Rs. 1,52,39,000/- out of which Rs. 14,000/- comprised petty donation not eligible for deduction u/s 80G of the Act. We note that the investigation wing of the Income Tax Department prepared a report on the basis of survey conducted on 4th December, 2015 at the office of the assessee company. This report primarily focused on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to in clause (h) of sub-section (2) of section 13 where the aggregate of the funds invested by it in a concern referred to in the said clause (h) does not exceed five per cent of the capital of that concern." We note that the Ld. AO nowhere stated in his impugned assessment order that the any part of income of theGobind Ram Goel Charitable Trust ( institution) has become taxable for any technical reason and also the Ld. AO did not mention that the certificate issued under section 80G(5)(v) has been cancelled by the Income Tax Department. Under these circumstances the deduction under section 80G of the Act cannot be denied to the assessee company.We also note that subsequent to the donation, the withdrawal of benefit or cancellation of certificate of section 80G in the hands of the payee would not affect the interest of the assessee. In view of the aforesaid facts and circumstances of the case, we direct the Assessing Officer to grant the deduction u/s 80G of the Act in respect of donation given by the assessee in accordance with law. 10. In the result, the appeal filed by the assessee ( In ITA No.1903/K/2017, for A.Y. 2013-14), is allowed 11. Now we shall take Revenue's appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid order of the Tribunal, a copy of which was also placed before the Bench. In this order, the Tribunal has inter alia observed as follows: "13. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee's own case vide order dated 12.05.2017,in ITA No.2149/Kol/2014, (Supra). In this order, the Tribunal has inter alia observed as follows: "4. As far as ground no.1 raised by the revenue is concerned the facts are as follows :- The Assessee is a company engaged in the business of growing and manufacturing of tea and are also blenders, packers and exporters of tea. The assessee entered into international transaction of giving of loans to its subsidiary AZO classic Russia. It is not in dispute that the transaction of giving loan to a subsidiary was an international taxation and the rate of interest that has to be charged by the assessee on such loan has to confirm to the arms length test laid down in section 92 of the Income Tax Act, 1961 (Act). It is not in dispute that the loan in question was given in foreign currency i.e., US$ and the rate of interest that was charged was at 4% p.a. which was increased to 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had charged 8% on the Loan given to Zao Classic for 01.04.2007 to 31.03.2008 which was higher than the USD Libor Rate. The assessee placed reliance on the decision of Hon'ble ITAT Chennai (2011) 46 SOT 2 (Chennai) (URO)/] 1 taxman. Com 404 (Siva Industries & Holdings Limited vs. The Assistant Commissioner of Income Tax, Company Circle - VI (4), Chennai) wherein it was held that where loan is given to the associated enterprises in US dollars then the transaction would have to be looked upon the applying the commercial principles in regard to international transaction. If that was so, then the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR rate had to be considered while determining the arm's length interest rate in respect of the transaction between the assessee and the associated enterprises. The assessee claimed that the facts of its case fairly and squarely match with that of the case decided by ITAT, Chennai and considering the interest rate of 8% charged on loan given to subsidiary Zao Classic, the provisions relating to arm's length transaction have no applicability. 7. The TPO was of the view that the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd some other cases cited by the assessee. Further, it has been held in the decision in the case of Cotton Natural (I) Pvt Ltd. (supra), that financial position and credit rating of the subsidiary would be broadly same as the holding company and LIBOR should be taken as benchmark without going into aspects like financial health of subsidiary. In one of the cited cases, viz. Aurionpro Solution Ltd. vs Addl. CIT in ITA NO.7872/Mum/2011, Hon'ble tribunal has observed that appropriate rate would be LIBOR plus 2%. In the assessee's case, the TPO has not countered the decision in the case of Siva Industries and Holdings Ltd (supra) cited by the assessee before him, nor cited any authority in support of his view. The ratio given by the Hon'ble tribunal in the cases cited by the assessee is, that in the foreign currency lending, rate of interest to be adopted is to be based on LIBOR and at the most LIBOR plus 2%. As per documents given by the assessee, the average LlBOR rate for the previous year was 4.68%. Even if a mark up of 2% is given, the rate would be 6.68% whereas the assessee has charged 8% on the loan given to its AEs. It is also not in dispute that the cost of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the appeal of the assessee by following the judgment of Tribunal in assessee's own case. Therefore, and ground no. 1 and 2 raised by the Revenue are dismissed. 15. Ground No. 3 and 4 relates to disallowance of Rs. 44,35,569/- being 40% of Rs. 1,10,88,923/- of employees contribution towards EPF which was paid beyond the due date. 16. The brief facts qua the issue are that the assessee company received contribution made by its employees towards PF and deposited the same in the accounts of the concerned statutory authority. On perusal of the relevant details furnished in the tax audit report submitted by the assessee, it was noted by the Assessing Officer that the assessee deposited the part of its employees contributions on account of PF beyond the due dates applicable to the assessee as per relevant rules and regulations of the aforesaid authority. From the relevant details as in the tax audit report, it was noted that a total amount of Rs. 1,10,88,923/- being an employee's contribution towards PF received by the assessee in the previous year, was deposited beyond the due dates. Since the amount of contribution mentioned above was deposited beyond the due dates, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n towards the PF was made by the assessee before the due date of filing the return of income and thereforeemployee's contribution towards the PF shall be allowed as deduction u/s 43(b) of the Act, therefore, respectfully following the judgment of Hon'ble Supreme Court in the case of CIT vs Alom Extrusions Ltd. (supra) we find no infirmity in the order passed by the Ld. CIT(A), that being so we declare to interfere in the order of the Ld. CIT(A) and his order on this issue is hereby upheld and the ground raised by the revenue is dismissed. 20. Ground No 5 relates to addition of Rs. 1,04,168/- u/s 14A read with Rule 8D of the IT Rules. 21. The brief facts qua the issue are that assessee company claimed to have earned dividend to the tune of Rs. 49,250/- and tax free interest of Rs. 17,84,563/- on IRFC bonds in the assessment year under consideration. The assessee claimed these income as exempt and accordingly added back an amount of related expenditure of Rs. 44,338/- in the contribution of total income. The Ld. Assessing Officer noted that logically related expenses ought to have been disallowed by the assessee in accordance with the provision of section 14A of the Act read with R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king order and Ld. CIT(A) has rightly restricted the disallowance u/s 14A to the tune of Rs. 44,338/-. 25. Ground No. 6 relates to addition of Rs. 1,48,506/- (disallowed u/s 14A) to the book profit of the assessee company u/s 115JB of the Act. 26. At the outset itself, the learned counsel for the assessee submitted that this issue is no longer res integra. Section 115JB of the Act is a code itself and whatever adjustment by way of increase or decrease to the net profit shown by the assessee company in profit and loss account is made as per section 115JB of the Act. The items which are to be added to the net profit, have been listed in explanation 1 to that section. The Ld. AO should adhere to that list and cannot travel beyond these items. 27. After hearing the learned DR for the revenue on this issue, we note that the provisions relating to adjustments by way of increase and decrease to the net profit shown by the assessee in Profit & Loss Account, are very explicit in section 115JB of the Act. The items which are to be added to the net profit have been listed out in Explanation 1 to that section. The learned AO should adhere to that list and cannot travel beyond these items. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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