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TMI Blog2019 (12) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 14A r.w.r. 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 Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - HELD THAT:- We feel that ad-hoc disallowance will service the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument in connection with such expenses. Therefore, in the absence of documentary evidence, we concur with the finding of the learned CIT (A). There cannot be any addition to the total income of the assessee on account of such expenses for the reasons as discussed in the preceding paragraph. Accordingly, we direct the AO to reduce the value of the inventory for the work in progress as well as disallow the corresponding expenses debited by the assessee in the profit and loss account. Hence, the ground of appeal of the assessee is allowed in terms of the above. - ITA No.2173/AHD/2015, 2345/AHD/2015 (Asstt. Year: 2011-2012) - - - Dated:- 16-10-2019 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI MS MADHUMITA ROY, JUDICIAL MEMBER Assessee by: Shri S.N. Soparkar And Shri V.R. Chokshi, A.Rs Revenue by: Shri L.P. Jain, Sr. D.R ORDER PER SHRI WASEEM AHMED ACCOUNTANT MEMBER: The captioned Cross appeals have been filed at the instance of the Revenue and Assessee against the order of the Commissioner of Income Tax (Appeals)- 1, Ahmedabad [Ld.CIT(A) in short] dated 31/05/2015 arising in the matter of assessment order passed under s.143(3) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 14A r.w.Rule 8D of the Rules and made the disallowance as under: Sr. Particular Amount 1. Direct expenditure u/s.Rule 8D (i) Nil 2. Interest Expenditure u/s.Rule 8D (ii) 4,01,30,089/- 3. Administrative Expenses u/s. Rule 8D (iii) 50,42,189/- Total 4,51,72,278/- The aforesaid amount was disallowed and added to the total income of the assessee. Aggrieved assessee preferred an appeal to the ''Ld.CIT (A)''. 3. The assessee before the ld. ''Ld.CIT (A)'' among other things submitted that its net interest income exceeds interest expenses. Therefore there cannot be any disallowance of interest expenses under Rule 8D(2)(ii) of the Rules. 3.1 The assessee regarding the administrative expenses submitted that it has received the amount of dividend through ECS without incurring any administrative expenses for the earning of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st claimed 312321261 (ii) Av. Investment in share securities (investment in prop. Concern M/s. ATREC excluded from total investment) [1/2 (42142410 + 42642419)] 42392410 (iii) Av. Of total assets [as per A.O taken in working of disallowance in rule 8D(2)(ii)] 7848390042 It is therefore disallowable interest 4 2392410 X 312321262 7848390042 = 1686977 It is therefore as against the disallowance of ₹ 40130089 by A.O., such disallowance is restricted to ₹ 1686977 under rule 8D(2)(ii) or interest relatable to investment in shares securities. 3.3 The ld. CIT-A regarding the administrative expenses confirmed the order of the AO by observing that the assessee has not justified its is stand based on documentary evidence that it has not incurred any expense in the earning of such exempt income. 4. Being aggrieved by order of the ''Ld.CIT (A)'' the Revenue and the assessee are in appeal before us. 5. The Revenue is in appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,95,09,836 7.3 We further note that the ITAT in the own case of the assessee bearing no.1623/Ahd/2013 vide order dated 06/09/2018 has deleted the addition made by the AO on account of interest expenses by observing that the interest income exceeds interest expenses. The relevant extract of the order is reproduced as under: 10. In the course of scrutiny proceedings, the AO inter alia noticed that the assessee has earned dividend income to the tune of ₹ 30,42,833/- which is exempt from tax. The AO accordingly invoked the provisions of Section 14A of the Act and computed disallowance of expenditure attributable to such exempt income by resorting to formula provided in the Rule 8D of the Income Tax Rules, 1962. The disallowance under Rule 8D also included disallowance of interest amounting to ₹ 28,38,6477- in terms of Rule 8D(2)(ii) of the IT Rules which is subject matter of controversy. 11. In first appeal, the CIT(A) granted relief to the assessee against the aforesaid action of proportionate disallowance of interest of the AO and deleted such disallowance. 12. Aggrieved, the Revenue preferred appeal before the Tribunal. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 1 of section 115JB of the Act for the amount which was disallowed u/s.14A r.w Rule 8D of the Act while determining the income under normal computation. Accordingly, the amount was disallowed under normal computation of income was also added to the book profit u/s.115JB of the Act. 9. Aggrieved assessee preferred an appeal to the ''Ld.CIT (A)'' who has partly confirmed the order of the AO in the same proportion in which the profit under normal computation of income was determined. 10. Being aggrieved by the order of the ''Ld.CIT (A)'' the Revenue and the Assessee are in appeal before us. 11. The Revenue is in appeal before us against the deletion of the addition of ₹ 3,84,43,112/- whereas assessee is in appeal against the addition of ₹ 67,29,166/- in the book profit determined u/s.115JB of the Act. 12. Both the Ld.DR, and Ld.AR, before us, relied upon the order of the authorities below to the extent favorable to them. 13. We have heard the rival contentions of both the parties and perused the material available on records. 13.1 At the outset we note that the identical issue in the own case of the assessee beari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al fiat available squarely on the issue, we are disposed to assign merits to the contentions on behalf of the assessee. At this juncture, we pause to note the concern of revenue seeking to plead possible redundancy of clause(f) to Explanation to S.II5JB in the event of disagreement with the action of AO. We are alive to such concerns. However, as noted, we are governed by the superior wisdom available in this regard. Hence, remedy to revenue, if any, perhaps lies elsewhere. Accordingly, respectfully following the decisions governing the field, we direct the AO to delete the adjustments made on account of estimated disallowance determined under S.14A of the Act while computing 'book profit' under u/s.ll5JB of the Act. 7. In the result, appeal of the assessee is allowed. By the same token, the appeal of the Revenue integrated to sme point requires to be decided in negative and against the Revenue 27. In the light of the aforesaid decision of the co-ordinate bench relied upon by the assessee, we do not see any error in the conclusion drawn by the CIT(A). 13.2 However, we note that admittedly the amount disallowed under section 14A r.w. Rule 8D under norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the Revenue and the assessee are partly allowed. In the result, the appeal filed by the Revenue is partly allowed. Coming to the ITA No. 2173/Ahd/2015 for A.Y. 2011-12. The assessee has raised following grounds of appeal. 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming disallowance u/s.14A of the I.T. Act, to the extent of ₹ 67,29,166 while computing total income of the appellant-compnay under the provisions of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the relevant paragraph. Accordingly, the ground of appeal of the assessee is partly allowed. The next issue raised by the assessee is that the ''Ld.CIT (A)'' erred in confirming the addition of ₹ 25,04,970/- on account of Professional Fees. 16. The AO during the assessment proceedings observed that the assessee has received sum of ₹ 25,04,970/- from Gujarat Adani Institute of Medical Services on account of professional Services. The said receipt was subjected to TDS u/s 194 J of the At. However, the assessee has not shown the same as income in its books of accounts whereas it has claimed the credit of TDS amount without showing corresponding income. 16.1 However, the assessee claim that the said income has been shown in the subsequent assessment year. But, the AO dis-regarded the contentions of the assessee by holding that the impugned income pertains to the year under consideration and accordingly the same is liable to tax in the year under consideration. Thus, the AO added the sum of ₹ 25,04,970/- to the total income of the assessee. 17. Aggrieved assessee preferred an appeal to the ''Ld.CIT (A)'' the assessee befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is made in the year under consideration, then it will amount to double addition which is against the provision of law. 21.1 The income tax has to be levied in the hands of the right assessee and the right assessment year, but the fact of the present case are different so far as the assessee is liable to pay tax under the provision of MAT. Thus we agree with the contention of the ''Ld.AR, that even if the impugned income is added to the total income of the assessee then also it will be tax neutral exercise. It is because there will not be any change on the tax amount as the assessee is paying tax under the provision of MAT. 21.2 There is no dispute that the impugned income is taxable under the Act, and therefore the same has been offered to tax in the subsequent assessment year. Thus there cannot be any benefit to the Revenue by adding the impugned income to the total income of the assessee in the year under consideration. Hence we are not inclined to uphold the findings of the authorities below. Accordingly we set aside the order of the ''Ld.CIT (A)'' and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her expenses in the ledger filed by the assessee. However, the learned CIT (A) could not verify the genuineness of the expenses and the applicability of the TDS provisions in the absence of sufficient documentary evidence. Therefore, the learned CIT (A) confirmed the addition of ₹ 2,35,338.00 and deleted the balance amount of ₹ 10,54,500.00 only. 27.1 Admittedly, the assessee did not claim the deduction of such expenditure in its profit and loss account in the year under consideration. As such the impugned expenditure was shown as part of work-in-progress on revenue account. There is no dispute regarding the facts as under: i. The impugned expenses were not claimed in the profit and loss account as a deduction. Thus, the profit shown by the assessee cannot be enhanced by disallowing such expenditure. ii. The impugned expenses being revenue in nature would be claimed as a deduction in the future year by the assessee in which such work in progress will be sold by it. 27.2 Now, the question arises whether the amount of profit declared by the assessee can be enhanced by the amount of expenditure incurred by it which were not claimed as deduction being part of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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