9911796707
TMI Blog2020 (9) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... e challenged vide ground No. 1.2, the addition of Rs. 5,87,09,737/- on account of dealings in shares based on actual delivery as speculation loss, during the course of arguments such a challenge was not pressed. 2. Brief facts of the case are that the assessee company is in the business of manufacture of flavoured chewing tobacco and Kiwam under the brand name "Baba" and the main ingredients for production of chewing tobacco are tobacco, perfumery compounds, sandal, saffron, menthol etc. and silver in flake forms. For the assessment year 2014-15 it has filed its return of income on 21/11/2014 declaring an income of Rs. 36,96,45,100/-, while declaring profit of Rs. 46,17,19,442/- and adjusting it against the brought forward depreciation resulting in the current years business income of Rs. 37,12,47,070/-. The assessee declared speculative loss of Rs. 2,22,46,177/- in the commodities which is carried forward; that the tax on the taxable income of Rs. 36,96,45,093/- was declared on which the tax and interest of Rs. 13,23,84,690/- was determined whereas the MAT credit available under section 115 JA of the Act of Rs. 3,09,73,335/- was adjusted in calculation of tax payable. 3. Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Jurisdictional High Court and it was rightly followed by the authorities below. In these circumstances, unless and until there is change in the facts and circumstances or in the law holding the field, we find it difficult not to follow the decision of the jurisdictional High Court. While respectfully following the same we dismiss this ground of appeal. 8. Now coming to ground No. 2, the challenge is in respect of the sustaining the disallowance under 14A of the Act read with Rule 8D of the Rules to the tune of Rs. 38,53,244/- against the similar dividend income.Argument of the Ld. AR is threefold on this aspect. Firstly he submits that no proper satisfaction was recorded by the learned Assessing Officer for not accepting the contention of the assessee that no expenditure was incurred for earning the exempt income, and therefore any consequent assessment is bad. Secondly, his contention is that a bare perusal of the Balance Sheet would show that the share capital and reserves and surplus of the assessee aggregate to Rs. 1,83,83,78,025/-whereas non-current investment of Rs. 3,27,11,623/- and current investment was Rs. 10,07,09,739/-, which comes to Rs. 13,34,21,362/-which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning and keeping track of the fund; that the assessee also could not attribute the interest expenses to any particular income; that if the assessing officer is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to income which does not form part of the total income, section 14A of the Act comes into force; and, therefore, learned Assessing Officer was not in agreement with the claim of the assessee that no expenditure was incurred by it in relation to the investments from which exempt income was likely to be received by it. 11. It is, therefore, clear that the learned Assessing Officer not satisfied with the plea of the assessee that it is did not incur any expenditure in relation to the investment from which exempt income was derived by it, because according to the learned Assessing Officer, the assessee must have incurred some expenditure on manpower, office expenses etc. for the purpose of maintaining and keeping track of the funds. Learned Assessing Officer further noted that section 14A of the Act applies when the learned Assessing Officer is not satisfied with the correctness of the claim of the assessee in that respect. Hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Rule 8D(2)(ii)(iii), only those investments which have actually yielded dividend income during the relevant year should be considered.We are, therefore, convinced with this argument of the Ld. AR. In fact, the Hon'ble jurisdictional High Court in ACB India Ltd. (supra) held that the learned AO is required by the mandate of Rule 8D(2)(i) to (iii) detailed in the methodology to be adopted; and the learned AO cannot adopt the average value of the total investment instead of the average value of investment of which income is not part of a total income i.e. value of tax-exempt investment. In view of this binding precedent, we find that the learned AO had to consider only those investments which have actually yielded the tax-exempt income during the relevant year and not the total investment.Assessee furnished the details of the investments which yielded the exempt income, vide page No. 9 of the paper book. 15. In view of our above finding, we set aside the findings of the authorities below on this issue and remand the issue back to the file of the learned Assessing Officer for considering the extent of own funds of the assessee for investment in the shares and in case the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the eligible unit. 18. Learned Assessing Officer, on examination of the Balance Sheet of the eligible unit, further found that the liability towards head office as on 31/3/2013 was Rs. 3,03,77,120/- and as on 31/3/2014 was 3,51,69,570/-, the average of which comes to Rs. 3,27,73,345/- and therefore, considering the interest at 12% per annum reduced the profit of the eligible unit by Rs. 39,32,81/- and therefore he totally disallowed a sum of Rs. 45,83,724/- from out of Rs. 2,95,16,153/- claimed by the assessee under section 10AA of the Act and limited it to Rs. 2,49,32,429/-. 19. In the appeal before the Ld. CIT(A), it was argued on behalf of the assessee that the duties of the Directors of a company are not confined to just towards seeing the turnover of the company, that it is common knowledge that a major part of the duties of the Directors is to administer the affairs of the company with emphasis on the compliance of the companies act and a host of other acts aggregating to 3 dozen and odd; that expenses on key-man insurance, basic salary of Director, audit fees, tax audit fees and certification, taxation matter and Directors meeting fees should not be allocated to NSEZ. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey man insurance, basic salary of Directors, audit fees, tax audit fees and certification, taxation matters and Directors meeting fee etc. No doubt the Directors do not work for head office alone. The fact that they also oversee the work of the exempt unit, makes it obligation on the part of the exempt unit to contribute to such expenditure. So also, in respect of the other expenditure, other than the one which was separately accounted for in the books of NSEZ. However, it seems the authorities below missed to notice the contention of the assessee that the expenses relating to transit goods insurance and Diwali expenses in respect of NSEZ were separately claimed in the books of NSEZ and therefore, the question of allocation of such expenses does not arise. This fact needs to be verified. 24. It is further submitted before us in respect of the interest component that at the end of the every year, as observed by the authorities below, the profit of the exempt unit also is transferred to the head office and head office holds it on behalf of the exempt unit out of which the exempt unit draws the amounts for its operations and therefore, the exempt unit owing any amount to the head o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
