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TMI Blog2019 (6) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... round A (1 2) of appeal raised by assessee is allowed. Disallowance under section 14A r.w. Rule 8D - HELD THAT:- As noted that during the period under consideration, the assessee has shown the exempt income of 61,43,033/-. The Assessing Officer invoked the provisions of Rule 8D and disallowed 1,19,20,701/-. We have further noted that similar disallowance was made by revenue in Assessment Year 2005-06 and on appeal before the Tribunal; the disallowance was restricted to 2% of the dividend income. Considering the facts of the year under consideration and respectfully following the decision of co-ordinate bench in assessee s own case for Assessment Year 2005-06, the disallowance for the Assessment Year in the present appeal is restricted to 2% of the dividend income. The Assessing Officer is directed accordingly. Adjustment of book profit u/s 115JB of disallowance of Rule 14A - HELD THAT:- this ground of appeal is covered in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. . [ 2017 (6) TMI 1124 - ITAT DELHI] wherein held that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s identical to the ground no. B of appeal for A.Y. 2006-07, which we have allowed. There is no much variation on facts for the year under consideration. Therefore, following the principle of consistency, this ground of appeal is allowed with similar direction. The Assessing Officer is directed to restrict the disallowance under section 14A to the extent of 2% of exempt income earned by assessee during the relevant period under consideration. In the result, this ground of appeal is partly allowed. MAT credit under section 115JAA - HELD THAT:- Section 143(1) provides that where a return is made under section 139 and any tax or interest is found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to provisions of sub-section (2), an intimation will be sent to the assessee specifying the amount so payable and such intimation shall be deemed to be a notice of demand under section 156 and all the provisions of the Act shall apply thereto. This section itself makes it clear that whilst the AO determines the tax payable, he has to give credit for all ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant company since its incorporation in the year August, 1960. 2. The Assessing Officer erred in deciding that since there was no business with the subsidiary company in the year under consideration, the advances given in earlier years are not in connection with business. Ground B DISALLOWANCE U/S 14A r.w.r. 8D - ₹ 1,19,20,701/- 3. In the facts and circumstances of the case, the Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in applying retrospectively the methodology prescribed in Rule 8D, which was inserted by the I.T. (Fifth Amdt.) Rules, 2008 w.e.f. 24.3.2008 and disallowed a sum of ₹ 1,19,20,701/-, being expenditure for earning dividend and income from mutual funds of ₹ 61,68,033/- for the Assessment Year 2006-2007. 4. Since Rule 8D inserted by the inserted by the LT. (Fifth Arndt.) Rules, 2008 w.e.f. 24.3.2008 is not retrospective in nature, for the Assessment year 20062007 the Assessing Officer should have applied the reasonable disallowance of 0.4% of gross exempt income, as expenditure relatable to income which does not form part of the total income, as decided by the Hon. Income tax Appellate Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtified that deviation from valuation method prescribed under sec. 145A has no impact on the profit of the Appellant. Moreover, addition of amount of unutilized cenvat credit will distort the real profit since consistency in valuation of inventory is disturbed. Ground G DISALLOWANCE V/S 40(a) (ia) - ₹ 2,58,19,665/-. 11. The Assessing Officer; in the order passed in pursuance of directions of the DRP, erred in not allowing the claim of the Appellant to allow deduction of amount of addition made u/s 40(a) (ia) in assessment year 2005-06 since the Appellant reversed those excess expenses' provision and credited the same in respective expenditure accounts in the assessment year 2006-07. 12. The Assessing Officer also failed to appreciate that the order u/s 143 (3) making disallowance u/ s 40 (a) (ia) was passed on 26/12/2008 after the time limit prescribed u/s 139(5) i.e. on 31.3.2008 and hence the Appellant could not make their claim in revised return. 13. The Assessing Officer failed to appreciate that non allowance of deduction of reversal of expenditure would result in double taxation, firstly at the time of disallowance u/s 40(a) (ia) in A.Y. 2005-06 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooja expenses of ₹ 11,84,378/- treating it as non-business expenditure. GROUND: D: DISALLOWANCE U/S 40A(9) - ₹ 49,649/- On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed contributions to various Employees' Welfare funds being statutory payments that are not covered under section 40A(9) of the Income tax Act, 1961. GROUND: E: UNUTILISED CENVAT CREDIT - (₹ 2,95,78,424/- (-) Rs.l,49,82,050) Rs.l,45,96,374/- (i) On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have added unutilized Cenvat Credit to the total income of the Appellant. (ii) Without Prejudice to above, on the facts and in the circumstance of the case, the Assessing Officer and the DRP should not have reduced the incorrect amount of unutilized cenvat credit as on 31/3/2006 of ₹ 1,49,82,050/- instead of reducing the correct amount of ₹ 2,91,87,584/- and thereby enhancing the net addition of unutilized cenvat credit for the assessment year 2007-08 from ₹ 3,90,840/- (as assessed by the Assessing Officer in draft assessment order u/s 144C} to net addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(1)(ii), disallowance under section 14A r.w.r 8D, disallowance of Pooja Expenses, Club Expenses, disallowance under section 40A(9) , addition on account of Cenvat credit, disallowance under section 40(a)(ia). The assessee exercised its option for filing objection before the ld. DRP. The DRP after hearing the assessee granted partial relief on disallowance under section 36(1)(iii) and on addition of Cenvat credit in its direction dated 15.07.2010, however, the other remaining additions / disallowances were sustained. On receipt of direction from ld. DRP, the Assessing Officer passed the final assessment order under section 143(3) r.w.s 144C(13) dated 24.09.2010. Aggrieved by the various additions/ disallowances made in pursuance of direction of ld. DRP, the assessee has filed present appeal before this Tribunal. 4. WE have heard the submission of ld. AR of the assessee and ld. DR for the revenue and perused the material available on record. Ground No.1 relates to disallowance under section 36(1)(iii). The ld. AR of the assessee submits that during the assessment, the Assessing Officer issued show cause for disallowance of proportionate interest in respect of interest free advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee's own fund consisting of share capital and reserve and surplus was ₹ 175.11 Crore. The assessee has given loans and advance to is subsidiaries i.e. Dee Greaves of ₹ 2,13,55,159/- only. The Hon'ble Bombay High Court in Reliance Utility & Power Ltd. (supra) held that if the assessee have funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interestfree fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. Therefore, in view of the decision of jurisdiction High Court as referred above, we are of the view that the assessee has sufficient interest free fund available with the assessee and therefore, no interest disallowance under section 36(1)(iii) was justified. Hence, the ground A (1&2) of appeal raised by assessee is allowed. . 7. Ground No. B (3) to (4) relates to disallowance under section 14A r.w. Rule 8D. The ld. AR of the assessee submits that during the relevant period under consideration, the assessee earned exempt income of ₹ 61,68,033/-. The Assessing Officer made disallowance under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Investment (P) Ltd. (supra), wherein Special Bench of Delhi Tribunal that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Therefore, respectfully following the decision of Special Bench, we direct the Assessing Officer to follow the decision of Vireet Investment Ltd. (supra) and pass the order for adjustment under section 115Jb of the Act accordingly. 14. In the result, this ground of appeal is also allowed for statistical purpose. 15. Ground no. C-(6) relates to Pooja Expenses. The ld. AR of the assessee submits that this ground of appeal is covered in favour of assessee by the decision of Hon'ble Bombay High Court in assessee's own case for Assessment Year 1998-99 wherein the assessee was allowed relief by Tribunal and on appeal before the Hon'ble High Court, the department filed appeal, further, the same was withdrawn with the permission of the Hon'ble High Court. The ld. AR of the assessee submits that the Tribunal has allowed the similar relief in Diayton Greaves Ltd. in ITa No. 5889/Mum/1992 dated 15.03.2001. 16. On the other hand, the ld. DR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar disallowances was allowed vide order dated 21st January 1992 in R.A No. 2569(Bom.)/1991 in ITA No. 6154/Bom/1987. Similar relief was granted to the assessee in appeal for A.Y. 1990-91 in ITA No. 7619/Bom/1993 dated 13.02.2002. We have further noted that after the decision of Hon'ble Bombay High Court in Otis Elevator Co. Ltd. (supra), this issue is no more res-integra wherein the Hon'ble High Court while considering the question of law about the allowance of club fees incurred/paid to employees, allowed the question in favour of assessee. Therefore, respectfully following the decision of Hon'ble Bombay High Court in Otis Elevator Co. Ltd. (supra) and decision of Tribunal in assessee's own case for A.Y. 1982-83 and 1990-91, this ground of appeal is also allowed in favour of assessee. 21. Ground No. E (8 & 9) relates to disallowance under section 40A(9) of ₹ 94,740/-. The ld. AR of the assessee fairly conceded that these grounds of appeal are against the assessee by the decision of Tribunal in assessee's own case for A.Y. 2004-05 in ITA No. 7356/Mum/2011 dated 13.10.2015. The ld. AR submits that this ground of appeal may be dismissed by following the decision of Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed for statistical purpose. 26. Ground No. G (11 to 14) relates to disallowance under section 40(a)(ia) of ₹ 2,58,19,665/-. The ld. AR of the assessee submits that and amount of ₹ 2,58,19,665/- was disallowed under section 40(a)(ia). During the course of hearing, the assessee furnished certificate of C.A. that disallowance for A.Y. 2005-06 was Nil. The Assessing Officer made the disallowance of ₹ 2,58,19,665/- in A.Y. 2005-06. The said provision was reversed in A.Y. 2006-07. The ld. AR submits that the assessee has accepted the disallowance in A.Y. 2005-06 and no further appeal was filed, therefore, the similar disallowance would be a double disallowance. The ld. AR prayed for deleting the entire addition. 27. On the other hand, the ld. DR for the revenue submits that these facts can be verified by the Assessing Officer. 28. We have considered the submission of both the parties and perused the material available on record. We have noted that during the assessment the assessee made similar submissions to the assessing officer that amount of ₹ 2,58,19,665/- was disallowed under section 40(a)(ia) in AY 2005-06. During the course of hearing, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistency, this ground of appeal is allowed with similar direction. The Assessing Officer is directed to restrict the disallowance under section 14A to the extent of 2% of exempt income earned by assessee during the relevant period under consideration. In the result, this ground of appeal is partly allowed. 34. Ground No. C relates to Pooja Expenses. We have noted that this ground of appeal is identical to the ground no. C of appeal for A.Y. 2006-07, which we have allowed. Therefore, following the principle of consistency, this ground of appeal is allowed with similar observation. In the result, this ground of appeal is allowed. 35. Ground No. D relates to disallowance under section 40A(9). We have noted that this ground of appeal is identical to the ground no. G of appeal for A.Y. 2006-07, which we have dismissed by following the order for A.Y. 2004-05, therefore, following the principle of consistency, this ground of appeal is dismissed with similar observation. In the result, this ground of appeal is dismissed. 36. Ground No. E relates to unutilized Cenvat credit. We have noted that this ground of appeal is identical to the ground no. F of appeal for A.Y. 2006-07, which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. Thus, the right to set off arises as a result of the payment of tax under section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year. Further, an assessee has a right to take into account the set off even while estimating its liability to pay advance tax on the 'current income' in accordance with the provisions of Chapter XVII-C. Although section 209(1)(d) does not make any specific provision either before or after the amendments carried out by the Finance Act, 2006 to the effect that an assessee is entitled to set off the tax credit that would be available in terms of section 115JAA(1) while computing the quantum of advance tax that is to be paid, it must follow that an assessee would be entitled to do so; otherwise it would result in absurdity, viz., that an assessee pays advance tax on the footing that it is not entitled (when in fact it is so entitled) to the credit and thereafter claims a refund of such advance tax paid as a consequence of the set off. Moreover, when an Assessing Officer makes an intimation under section 143(1), he accepts the return filed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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