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TMI Blog2019 (6) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided against revenue Addition u/s 14A - CIT(A) restricted the expenditure to earn the exempt income to the extent of 10% dividend income - HELD THAT:- It is not in dispute that the provisions of Section 14A r.w. Rule 8D of the Act is applicable subsequent to the A.Y. 2008-09. The present case is in connection with the A.Y. 2006-07. The assessee earned the exempt income in sum of ₹ 3,93,753/-. CIT(A) has restricted the expenditure to earn the exempt income to the extent of 10% dividend income which nowhere seems unjustifiable. Earlier to the period 2008-09 it was justifiable to earn the exempt income on reasonable basis unless satisfaction has been recorded by AO in the order. We also find support of law settled in case titled as CIT Vs. Essar Technology Ltd. [ 2018 (2) TMI 115 - SUPREME COURT] Godrej Boyce [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided against revenue Delayed payment of employee s provident fund - disallowance u/s 36(1)(va) - assessee deposited the said amount before filing the return of income - HELD THAT:- AO has noticed that the assessee has not made the payment earlier to filing the return of income, therefore, the said amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions prescribed for claiming deduction were not fulfilled by the assessee? ii. Whether the Ld. CIT(A) was correct in law and on facts in holding that there is no condition precedent to obtain the factory license before starting industrial undertaking, without appreciating the fact that legally, production cannot commence without obtaining the license to run the factory from the Factory Inspector as per the Factory Act and Rules? iii. Whether the Ld. CIT(A) was correct in law and on facts in restricting the disallowance of ₹ 3,60,867/- made u/s. 14A r.w. Rule 8D to 10% of exempt income i.e. ₹ 67,950/-, holding that Rule 8D was not applicable for AY.2006-07, without appreciating that, the amendment introducing the section 14A(2) is clarificatory, and hence considered as retrospective and accordingly applicable even prior to assessment year 2008-09 and accordingly application of Rule 8D while making disallowance u/s. 14A is applicable for A.Y. 2006-07 ? iv. Whether of the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in restricting the disallowance made under u/s. 14A r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22.04.2004 i.e. after 31.03.2004, therefore, necessary conditions for the claim u/s 80IB(4) was not fulfilled but the CIT(A) has wrongly allowed the claim of the assessee, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:- 6 Ground No.1 to 8 relate to disallowance of deduction u/s 80-IB in respect of Unit-II amounting to ₹ 1,20,20,832/-. This issue has been taken by the appellant in AY 2005-06 in Grounds No. 2 to 7 in Appeal No. CIT(A)-3/ACIT1(3)(2)/IT-29/2016-17. This issue was discussed elaborately and the deduction is allowed in respect of Unit-II. In view of the same, Ground no. 1 to 8 are allowed. 6. On appraisal of the above mentioned finding, we noticed that the claim of the assessee has been allowed on the basis of the decision of CIT(A)-3, Mumbai for the A.Y. 2005-06. In fact, the claim of the exemption of the assessee u/s 80IB has been accepted in A.Y. 2004-05, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l exempt income of ₹ 6,79,492/- (₹ 3,93,753 + ₹ 2,85,739), which comes to ₹ 67,950/. Therefore, Ground No. 17 is partly allowed. 8. It is not in dispute that the provisions of Section 14A r.w. Rule 8D of the Act is applicable subsequent to the A.Y. 2008-09. The present case is in connection with the A.Y. 2006-07. The assessee earned the exempt income in sum of ₹ 3,93,753/-. The CIT(A) has restricted the expenditure to earn the exempt income to the extent of 10% dividend income which nowhere seems unjustifiable. Earlier to the period 2008-09 it was justifiable to earn the exempt income on reasonable basis unless satisfaction has been recorded by AO in the order. We also find support of law settled in case titled as CIT Vs. Essar Technology Ltd. 90 Taxmann.com 2(SC) Godrej Boyce 328 ITR 81 (Bom). Taking into account of all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. In the result, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,64,418/- made u/s. 14A r.w. Rule 8D to 10% of exempt income i.e. ₹ 1,07,377/-, holding that Rule 8D was not applicable for AY.2007-08, without appreciating that, the amendment introducing the section 14A(2) is clarificatory, and hence considered as retrospective and accordingly applicable even prior to assessment year 2008-09 and accordingly application of Rule 8D while making disallowance u/s. 14A is applicable for A.Y. 2007-08 ? 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in restricting the disallowance made under u/s. 14A r.w. Rule 8D by holding that investment is made by the assessee in shares and securities out of own funds, by relying on the decision of Hon ble High Court in the case of Reliance Utilities Power Ltd. (313 ITR 340) and thereby rejecting the application of Rule 8D? 7. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was right in deciding the computation of disallowance made under Rule 8D to apply the ratio of decision given in different context and set of facts in Reliance Utilities Power Ltd. (313 ITR 340) which has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income. In this regard, the law has now been settled by Bombay High Court in the case of CIT Vs. Ghatge Patil Transports Ltd. (368 ITR 749) (Bom). If the assessee deposit employee s contribution funds before due date of filing the return, therefore, in the said circumstances, the claim of the assessee is not liable to be disallowed. In view of the said discussion, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. ISSUE NOs.5, 6 7 15. Under these issues the revenue has challenged the restriction of claim of the assessee to the extent of 10% of the exempt income in view of the provisions u/s14A r.w. Rule 8D of the Act. This issue has already been discussed and decided while deciding the appeal of revenue bearing ITA. No.1953/M/2017 for the A.Y.2006-07. The finding given in the said appeal on the issues is quite applicable to the facts of the present case also as mutatis mutandis. Accordingly, we are of the view that the finding of the CIT(A) is q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. ISSUE NOs.1 2 19. Under these issues the revenue has challenged the allowance of claim of the assessee u/s 80IB(4). These issues have already been discussed and decided in favour of the assessee while deciding the issues nos. 1 2 in ITA. No.1953/M/2017. The finding given in the said appeal is quite applicable as mutatis mutandis. Accordingly, we decide these issues in favour of the assessee against the revenue. ISSUE NOs.3 4 20. Under these issues the revenue has challenged the deletion of the addition raised in view of the provisions u/s 14A r.w. Rule 8D(2) of the Act. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:- 9.1 I have carefully considered the rival submissions and the facts of the case. The appellant company has received dividend amounting to ₹ 5,33,572/- and long term capital gains of ₹ 13,67,505/-. Since the investment is made out of its own funds available with the appellant, no disallowance u/s 14A r.w. Rule 8D(2)(ii) of the I.T. Act, 1962 is to be made. As regards, the disallowance u/r 8D(2)(iii) of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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