9911796707
TMI Blog2019 (11) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... rom income tax department to the tune of Rs. 43.81 crores and also paid interest to income tax department on its tax demands to the tune of Rs. 6.57 crores. The assessee sought to set off the interest paid on income tax demands with the interest received from income tax department in the return of income. The ld AO disallowed the interest paid on income tax demands to the tune of Rs. 6.57 crores as the same is not allowable in terms of section 40(a)(ii) of the Act and accordingly taxed the gross interest received from income tax department of Rs. 43.81 crores under the head income from other sources. The ld CITA by placing reliance on the order passed by his predecessor for the Asst Years 2007-08 and 2005-06 in assessee‟s own case upheld the action of the ld AO. The ld CITA further directed the ld AO to verify the assessment records of Asst Year 1990-91, 2003-04 and 2005-06 in order to ensure that there is no double addition. Aggrieved, the assessee is in appeal before us. 2.1. We have heard the rival submissions and perused the materials available on record including the judicial pronouncements relied upon by both the sides at the time of hearing. We find that the ld AR pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior occasion as well. In such circumstances we are of the opinion that the second question also does not raise any substantial question of law." 2.2. Respectfully following the said decision, the ground no. 1 raised by the assessee is allowed. 3. Disallowance under section 14A of the Act read with Rule 8D of the Rules Ground No. 2 (i) to 2(v) and Ground 2 (vii) including modified Ground No. 2(vi) of assessee appeal Additional Ground No. 2A of assessee appeal Ground Nos. 2 & 3 of revenue appeal The brief facts of this issue are that the assessee earned dividend of Rs. 1008.49 crores on long term investments from subsidiary companies and Rs. 570.18 crores from others. The assesee claimed the entire dividend of Rs. 1578,67,47,807/- as exempt in the return of income. The assessee was showcaused by the ld AO as to why the expenditure should not be disallowed u/s 14A of the Act read with Rule 8D of the Rules. The assessee submitted before the ld AO as under:- Rs in crores Gross interest income earned 354.01 Less: (a) Interest received from 54EC Bonds offered to tax under Income from other sources 59.66 (b) Interest on income tax refunds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee made detailed submissions vide letter dated 10.12.2012. The ld CITA observed that assessee had submitted that there is a nexus between amounts borrowed during the year which have been deployed in bank fixed deposits. Accordingly, the interest paid on such borrowings which amounted to Rs. 89.74 crores should not be considered for disallowance u/s 14A of the Act as the interest earned from bank deposits was offered to tax. The assessee also submitted its objections to the enhancement proposed u/s 14A of the Act. 3.4. The ld CITA directed the ld AO to recompute the disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules as under:- For-the- purpose of computing the- disallowance under-Rule 8D(2)(i)7 only direct expendfture-relating to exempt income is to be considered as held at Para 3.3.2 of Page 15 of the Appeal Order for the AY 2007-08 and estimation of direct expenditure is not correct as the direct expenditure must be direct as held at Para 1.6 at Page 8 of the Appeal Order of AY 2006-07 .accordingly, the estimated interest expenditure of ^ 82.07 Crores under Rule 8D(2)(i) as per the Remand Report (the AO in the assessment order at Page 9 Para 5.7.1 has estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.34 Less: Disallowed under Rule 8D(2)(i) 39.73 Interest Expenditure to be considered for disallowance under Rule 331.61 3.5. Aggrieved, both the assessee as well as the revenue are in appeal before us. 3.6. We have heard the rival submissions and perused the materials available on record including the judicial pronouncements that were cited by both the sides at the time of hearing before us. We find that the elaborate arguments were advanced by both the sides with regard to various grounds raised by both the sides before us. We find that the issues in dispute are practically settled by various decisions of Hon‟ble Supreme Court, Hon‟ble High Courts , Special Bench of Tribunal and other co-ordinate benches of tribunal. Considering the totality of facts and circumstances of the case and the settled legal positions with regard to the issue in dispute before us, we direct the ld AO to recompute the disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules as under:- a) Consider only those investments which had actually yielded exempt income while computing disallowance under Rule 8D(2) of the Rules. b) Netting off Interest received with I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% shares of TCS and arrived at long term capital gains. Since TCS shares were listed in stock exchange and the said shares were sold in the open market after suffering due securities transaction tax (STT), the long term capital gains derived by the assessee thereon was claimed as exempt u/s 10(38) of the Act by the assessee in the return of income in the sum of Rs. 2749.84 crores. The ld AO observed that assessee company is an investment holding company of TATA group of companies, which is one of the biggest industrial houses of the country. M/s Tata Sons is the holding company from where investments were made in the businesses of various group companies. The ld AO observed that Tata Sons either directly makes the investment in the business by promoting as a division unit or through Special Purpose Vehicle (SPVs) which could be a joint venture, a private limited or a company listed on stock exchange. He observed that the group conceives the ideas, promotes them, foresee business opportunities, nurtures them, develops them, provides them with infrastructural , financial, branch support and makes them viable and profitable business models. Over a period of time, the group has ventur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es held by it in the group companies and the gains received therefrom were offered to tax as long term capital gains and the same was accepted by the revenue as such. The ld AR even stated that the claim of long term capital gains were accepted by the revenue in earlier years even earlier to the STT regime. Hence the introduction of STT had not made the assessee to change the character of acquisition of shares from investment to stock in trade or vice versa. We find that there is no allegation that the assessee had transferred some of the shares from stock in trade to investment for the purpose of claiming any benefit of exemption u/s 10(38) of the Act. We find from Asst Years 2001-02 to 2006-07, the revenue has accepted the gains received on sale of shares as capital gains and assessed as such. When a particular method has been followed consistently by the assessee in its books as well as for tax purposes, then there is no reason to take a divergent stand when there is no material change in the facts and circusmtnaces. Reliance in this regard is placed on the decision of Hon‟ble Jurisdictional High Court in the case of Gopal Purohit reported in 336 ITR 287 (Bom). We also fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
