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TMI Blog2020 (3) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessee is having own interest free funds in the shape of share capital, reserves surplus and profits more than the investments made - Hon ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] has held that where the assessee is having borrowed funds and own interest free funds, presumption is that the investments are made by utilizing own interest free funds. The same view has been reiterated by the Hon ble High Court in the case of HDFC vs. DCIT [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] and PCIT vs. Shreno Ltd. [ 2018 (12) TMI 1145 - GUJARAT HIGH COURT] . Thus, in principle we hold that no disallowance under section 14A r.w.r. 8D(2)(ii) is warranted if, the assessee is having sufficient own interest free funds to cover the investments made. For the purpose of verification of this fact, we deem it appropriate to restore this issue back to the file of Assessing Officer. The Assessing Officer after examining the financial statements of the assessee, if satisfied, that own interest free funds of the assessee are more than the investments made, shall make no disallowance u/r.8D(2)(ii). Purpose of computing disallowance u/r.8D(2)(iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. Respectfully following the decisions of Coordinate Bench of the Tribunal in assessee s own case for the preceding assessment years we hold ESOP expenditure as revenue in nature. Corporate Guarantee to Subsidiaries - Treating the corporate guarantee given by the appellant for its overseas subsidiary as an international transaction u/s 92 - HELD THAT:- Respectfully following the decision of the Tribunal in assessee s own case, we direct the AO to compute arm s length price of transaction as per the direction given by the Tribunal in the above order for A.Y. 2007-08 as held charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the IGIGI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to be at arms length. The difference of 0.1% can be ignored as the rate of interest on which IGIGI Bank, Bahrain Branchhas given loan to AE (i.e. subsidiary company) is at 5.5%, whereas the assessee is paying interest rate of more than 10% on its loan taken with IGIGI Bank in India. Thus, such a minor difference can be on account of differential rate of interest. Charging of interest under section. 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional High Court had held that the question raised by the revenue does not give raise to any substantial question of law and accordingly, did not entertain the same. This goes to prove that the order passed by this Tribunal on the impugned issue had attained finality. Depreciation on goodwill on account of acquisition of Madura Garments Division to be allowed. Proceedings from sale of certified emission - HELD THAT:- CIT(A) in the impugned Assessment Year granted relief to the assessee by following the order of his predecessor for assessment year 2009-10, which has now been confirmed by the Tribunal. Since, there has been no change in the facts in the Assessment Year under consideration, this ground of appeal by Revenue is dismissed for similar reasons. Provision for pension liability - HELD THAT:- Since, the assessee got benefit of deduction at the time when provision was created in the Assessment Year 2007-08, the reversal of provision would amount to income of the assessee. If the reversal of provision is not taxed, it would result in double deduction to the assessee. Thus, in view of undisputed facts, the findings of CIT(A) on this issue are reversed. The ground No. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) erred in treating 50% of audit fees amounting to ₹ 53,42,728/- as indirect expenses connected with earning the exempt income for the purpose of 14A disallowance, iii. The learned CIT(A) erred in treating common expenses of ₹ 5,84,73,070/- as indirect expenses for the purpose of 14A disallowance without any reasonable basis. The learned Additional Commissioner of Income tax (hereinafter referred as "AO") be directed to restrict the addition to ₹ 1,48,32,243/- under Rule 8D(2)(iii) for 14A disallowance or to substantially reduce the disallowance having regard to the facts and circumstances and the law." Additional Grounds of appeal:- "1. On the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing the Interest cost of ₹ 91.33 Crs u/s 14A, treating the same as Interest attributable towards expenditure incurred in relation to the Investment. The AO may be directed to reduce the disallowance u/s 14A accordingly. 2. The Appellant craves leave to add and/or to amend and/or to alter the above Ground of Appeal" 3.1 Shri Jehangir D. Mistri, appearing on behalf of the assessee submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. HDFC Bank Ltd., 366 ITR 505 (Bom) (2) HDFC Bank Ltd. vs.DCIT,383 ITR 529 (Bom) 3.3 The third argument made by ld. Authorized Representative for the assessee on the issue of disallowance under section 14A of the Act was that only those investments which have yielded exempt income should be considered for making disallowance. The ld. Authorized Representative for the assessee furnished a chart giving details of the securities on which the assessee has earned dividend income. As per the chart the assessee has earned dividend income on following investments:- (i) Hindalco Industries Ltd. - ₹ 4,52,33,555/- (ii) Kotak Mahindra Bank Ltd. - ₹ 770/- (iii) Aaditya Birla Finance Ltd. Praf. Share - ₹ 3,29,10,960/- (iv) Mutual Funds - Birla Sunlife Cash Balance - ₹ 19,47,050/- To support his third contention, the ld. Authorized Representative for the assessee placed reliance on the following decisions:- (1) ACIT vs. Vireet Investments Ltd. (2017) 165 ITD 27 (Del) (SB) (2) Godrej Agrovat Ltd. vs. DCIT in ITA No.4375/Mum/2017 decided on 13/03/2019. (3) PCIT vs. Shreno Ltd.(supra) 408 ITR 401 (Guj) The ld. Authorized Representative for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D, the Assessing Officer has not recorded satisfaction. We have examined the assessment order. The Assessing Officer after reproducing the extracts of the assessee's submission has negated the contention of the assessee by expressing his view in para 3.5 of the assessment order. Thereafter, in para 3.7 the Assessing Officer has computed the disallowance u/r. 8D(2). The Assessing Officer after examining books of the assessee accepted disallowance made by assessee in respect of interest expenditure. The manner of recording satisfaction under section. 14A r.w.r.8D(2) is subjective. There is no specified method or performa for recording of satisfaction by the Assessing Officer. If the Assessing Officer has recorded his express satisfaction in whatsoever manner in rejecting assessee's suo motu disallowance, the condition as envisaged in Section 14A(2) is complied with. We do not concur with the contention of the ld. Authorized Representative for the assessee that the Assessing Officer has not recorded satisfaction before rejecting assessee's method of computation of suo-motu disallowance. Hence, the first contention of the assessee fails. 5.2 The second contention of the assessee is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in :- i) Applying the disallowance quantified as per Rule 8D to book profit also, ii) Not restricting the disallowance of ₹ 1,48,32,2437- under Rule 8D(2)(iii) r.w.s.14A for computing Book Profit u/s 115JB. The learned AO be directed to allow the deduction of the above amount from MAT income and reduce the total income accordingly." 6.1 In this ground, the assessee has assailed the order of CIT(A) in upholding the findings of Assessing Officer in computing disallowance u/r.8D(2)(iii) r.w.s.14A of the Act on book profits. The ld. Authorized Representative for the assessee contended that the Hon'ble Bombay High Court in the case of Bengal Finance & Investments Pvt. Ltd., in Income Tax Appeal No.337 of 2013 decided on 10/02/2015 has held that amount disallowed under section 14A of the Act cannot be added to arrive at a book profit for the purpose of section 115JB of the Act. Similar view has been taken by the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investments Pvt. Ltd.(supra). 7. We find merit in the contentions of the ld. Authorized Representative for the assessee. For the purpose of computation of book profits under section115JB, disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the assessee. 9. We find that the Assessing Officer has disallowed the assessee's claim of additional depreciation amounting to ₹ 5,71,08,316/- in respect of the assets acquired and put to use for less than 180 days in the earlier assessment years. The Assessing Officer has allowed 50% claim of additional depreciation in the current assessment year and has directed to reduce the total income accordingly. We observe that in the immediately preceding assessment year similar issue had come up before the Tribunal. The Co-ordinate Bench of the Tribunal after placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of PCIT vs. Godrej Industries (supra) allowed the claim of the assessee. 9.1 The ld. Departmental Representative has not been able to controvert the findings of Co-ordinate Bench of the Tribunal on this issue in assessee's own case. We find no reason to take a different view, hence, following the decision of the Tribunal in assessee's own case in the immediate preceding assessment year, ground No.3 of the appeal is allowed in similar terms. Expenditure on Corporate Advertisement: 10. Ground No.4: " On the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had claimed ESOP expenditure of ₹ 9,83,772/-. The Assessing Officer held the expenditure to be on capital account and disallowed assessee's claim. The ld. Authorized Representative for the assessee pointed that similar expenditure was claimed by the assessee in assessment year 2009-10 and the same was disallowed by the Assessing Officer for identical reasons. The Tribunal in assessee's appeal for assessment year 2009-10 in ITA No.2525/Mum/2014(supra) allowed the assessee's claim holding the expenditure to be on revenue account. 13. We have heard the submissions made by rival sides. We find that identical issue was raised in an appeal by the assessee before the Tribunal in assessment year 2009-10. The Tribunal in turn following the order of Co-ordinate Bench in assessee's own case in ITA No.3033/Mum/2012 for assessment year 2008-09 decided on 09/12/2015 allowed assessee's claim and held he expenditure in respect of ESOP as revenue in nature. No contrary decision has been placed by ld. Departmental Representative. Respectfully following the decisions of Coordinate Bench of the Tribunal in assessee's own case for the preceding assessment years we hold ESOP expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 317 (Mum- Trib) 16. Both sides heard. The ground No.6 of the appeal is against confirming of addition in respect of corporate guarantee given by the assessee for its foreign AE. The CIT(A) has confirmed the addition by adopting 0.5% commission rate. The ld. Authorized Representative for the assessee has fairly admitted that in the case of assessee's sister concern, similar addition has been confirmed by the Tribunal. For the sake of completeness the relevant extract of Tribunal's decision in the case of Aditya Birla Minacs Worldwide Ltd. is reproduced below:- 2.5 Having considered the rival submissions as well as relevant material on record, we agree with the alternative plea of the Ld. AR that the arm's length guarantee commission charges can be considered at the rate of 0.5% as held by this Tribunal in a series of decisions referred above. In the case of Everest Kanto Cylinder Ltd (supra), the Tribunal while considering an identical issue has held in para 9 as under:- "9. Now, coming to the merit of the addition so made, we found that the issue has already been decided by the Tribunal in immediately preceding year in assessee's own case, wherein charging of 0.5% gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve order for A.Y. 2007-08. 2.6 Similar view has been taken by the Tribunal in all above referred decisions. Accordingly, following the earlier decisions of this Tribunal, we direct the AO/TPO to adopt 0.5% as arm's length guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the AE. Thus, in view of above findings of Tribunal in assessee's group concern and the nature of transaction in the present case being similar, the ground No.6 of the appeal is decided against the assessee, for parity of reasons. Interest under section.234B,234C & 234C:- 17. Ground No.7: " On the facts and in the circumstances of the case and in law, the learned AO has erred in charging interest u/s 234B, 234C & 234D. The learned AO be directed to delete / reduce the interest u/s 234B, 234C & 234D accordingly" 17.1 Charging of interest under section. 234B,234C & 234D is mandatory and consequential. Accordingly, the ground No. 7 is dismissed sans-merit. . Penalty under section 271(1)(c) 18. Ground No.8: " On the facts and in the circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings u/s 271(l)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I. T. Act." 23.1 Ground No.1 of appeal is corresponding to Ground No.1 and Additional ground No.1 & 2 of the assessee's appeal. Since, the ground No.1 and additional grounds No. 1 &2 of the assessee in respect of disallowance under section 14A r.w.r. 8D, have been allowed for statistical purposes, the ground No.1 of the appeal by Revenue is also allowed for statistical purpose. 24. Ground No.2: 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deciding that the TDS provisions were not applicable for the provisions made at the year-end relying on the decision the Hon'ble Tribunal in assessee's own case for A. Y. 2006-07 which interalia relied upon the cases of the Hon'ble Tribunals namely, Mahindra & Mahindra Ltd ('Mahindra') and Industrial Development Banking Company ('IDBI'), ignoring the fact that, the facts and circumstances of the relied upon cases of Mahindra & IDBI were completely different from that of the assessee." 24.1 The ground No.2 of the appeal by Revenue is with respect to disallowance under section 40(a)(ia) of the Act on the provision made at the end of the year ₹ 5,84, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has been brought before us by the ld.Departmental Representative distinguishing facts or the findings of Tribunal on this issue in A.Y. 2008-09. We see no reason to interfere with the findings of CIT(A) on this issue. Accordingly, the same are confirmed and ground No.3 of appeal is dismissed. 26. Ground No.4: 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the provision for leave salary relying on the decision of the Id. Tribunal in assessee's own case for A. Y. 2002-03 to 2006-07 which interalia relied upon the decision of the Hon'ble Apex Court in the case of Bharat Earth Movers (245 ITR 428) which was delivered before the introduction of section 43(B)f. The judgment of Hon'ble Calcutta High Court in the case of Exide Industries Ltd. has also been stayed by the Hon'ble Apex Court" 26.1 The ld. Authorized Representative for the assessee submitted that ground No.4 of the appeal by the Revenue is against provision made for leave salary under section 43B(f) of the Act. The ld. Authorized Representative for the assessee submitted that this issue is perennial in nature. The Tribunal has considered this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier years orders. We find that the Tribunal had dealt the issue as under,while deciding the appeal for the AY.2006-07(ITA/8427 & 8483/Mum/10 dt.17/09/2014): "4.Ground no.4 deals with disallowance of ₹ 1.73 crores,made u/s.43B(f) of the Act,being provision made for leave salary.We find that similar issue had arisen in the AY 2002-03, 2003-04, 2004-05 and 2005- 06 also.While deciding the appeal for the last three AY.s.,the Tribunal had dealt the issue as under: 4.Second common Ground is about disallowance of provisions made for the leave salary u/s.. 43f of the Act and the amount involved are ₹ 2.48 crores, 1.76 crores and 2.6 crores.During the course of hearing before us,Representatives of both the sides conceded that issue was decided by the Tribunal in the year 2002-03 (supra). 4.1.We find that Tribunal in its order has decided the issue as under: "15.7.We have carefully perused the orders of the lower authorities and the claim of the assessee vis-à-vis Sec.43B(f).A perusal of Sec. 43B(f) shows that the explanation to Sec. 43B referring to the amendment of the word any sum payable is applicable only for clause (a) of Sec.43B which means that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be stay of the impugned judgment, until further orders." 4.1. Later, the Hon'ble Supreme Court in Special Leave to Appeal (Civil) No.(s) CC22889/2008 dated 08/05/2009 had held as under:- "The petition was called on for hearing today. Upon hearing the Counsel, the Court made following order. Delay condoned Leave granted. Upon hearing the final disposal of the Civil Appeal, the department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as on date is concerned, it would be open to the department to recover that amount in case civil appeal of the department is allowed. We further make it clear that the assessee would during the pendency of this civil appeal pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns 4.2 Hence, from the aforesaid Hon'ble Supreme Court judgment, it can be inferred that the Hon'ble Supreme Court in the subsequent order had not stayed the judgement of Hon'ble Calcutta High Court. We find that the Hon'ble Supreme Court had passed an interim order giving the aforesaid observations. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is allowed." The CIT(A) has allowed relief to the assessee by following the decision of Tribunal in assessee's own case for assessment year 2003-04 to 2006-07. We find no infirmity in the impugned order. Accordingly, ground No.5 of the appeal is dismissed. 32. Ground No.6: 6. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation of ₹ 33,42,442/- on goodwill on account of acquisition of Madura Garments Division from Madura Coats Ltd in the A. Y. 2000-01 without appreciating the facts of the case." 32.1 This issue is identical to the one already adjudicated by the Tribunal in assessee's own case for assessment year 2009-10. The relevant extract of the finding of the Tribunal read as under:- "15. The ground No.2 raised by the revenue is with regard to deletion of depreciation on goodwill amounting to ₹ 1,11,98,382/-. We find that this issue has already been decided in favour of the assessee in assessee's own case by the order of this Tribunal in ITA No.3033/Mum/2012 dated 09/12/2015 wherein it was held as under:- "11.Ground No.9 deals with disallowance of depreciation on goodwill on acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings of CIT(A) in A.Y. 2009-10 have now been upheld by the Tribunal. We find no infirmity in the impugned order. Accordingly, ground No.6 of the appeal is dismissed. 33. Ground No.7 : 7. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the proceedings from sale of certified emission reduction of ₹ 4,11,58,512/- relying upon the decision in the case of My Home Power Ltd vs. DCIT, Central Circle - 7 (2012) 27 taxmann.com.27, without appreciating the facts of the case." 33.1 This issue is identical to the one already adjudicated by the Tribunal in assessee's own case for assessment year 2009-10. The relevant extract of the finding of the Tribunal on this issue read as under:- "16. The ground No.3 raised by the revenue is with regard to challenging the action of the ld. CIT(A) in treating the receipt on account of sale of certified emission as capital receipt (Carbon Credit receipts). We find that the Hon'ble Andhra Pradesh High Court in the case of CIT vs. My Home Power Ltd. reported in 365 ITR 82; Hon'ble Karnataka High Court in the case of CIT vs. Subhash Kabini Power Corporation Ltd reported in 385 ITR 592; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31-03- 2015) was passed prior to the order of Tribunal for Assessment Year 2007- 08 (dated 24-11-2015) allowing assessee's claim of deduction in respect of provision for pension liability. The CIT(A) had no occasion to consider the order of Tribunal on this issue. Since, the assessee got benefit of deduction at the time when provision was created in the Assessment Year 2007-08, the reversal of provision would amount to income of the assessee. If the reversal of provision is not taxed, it would result in double deduction to the assessee. Thus, in view of undisputed facts, the findings of CIT(A) on this issue are reversed. The ground No. 8 of the appeal by Revenue is allowed. 35. Ground No.9& 10: 9. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the ALP of guarantee fees in respect of corporate guarantee given by the assessee to its AE viz. Aditya Birla Minacs Worldwide to enable the AE to borrow funds from foreign banks to 0.5% as against 2.42% as held by the AO/TPO." 10. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the ALP of performance guarantee fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar view has been taken by Mumbai Tribunal in the case of ACIT vs. SVG Fashions Ltd. in ITA No.704/Mum/2016 for assessment year 2012-13 decided on 17/07/2018. The ld. Authorized Representative for the assessee to further buttress his submissions placed reliance on the following decisions:- (1) CIT vs. Gloster Jute Mills Ltd. ,96 taxmann.com 303 (Cal) (2) CIT vs. Sshyam Lal Bansal, 200 Taxman 14 (P&H) 38.2 The ld. Authorized Representative for the assessee further submitted that CIT(A) has decided this issue after seeking remand report of Assessing Officer and examining TUF scheme in details. The ld. Authorized Representative for the assessee further submitted that the Tribunal in assessee's appeal for assessment year 2009-10 (supra) has admitted this issue raised in additional ground of appeal and has restored to Assessing Officer for fresh adjudication. 39. The ld.Departmental Representative submitted that the issue may be restored to Assessing Officer for reconsideration in line with Tribunal order in assessee's appeal for Assessment Year 2009-10. 40. Both sides heard. The assessee has received subsidy under TUF scheme. The assessee has claimed the subsidy as capital rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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