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TMI Blog2020 (12) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... was held for 9 days. In these peculiar facts and circumstances, we direct the ld. AO to adopt the disallowance workings given by the assessee during the course of assessment proceedings computing disallowance u/s.14A of the Act at ₹ 99,600/-. The disallowance of ₹ 99,600 could be treated as expenses incurred for 9 days attributable to investment activity and that would meet the ends of justice in the peculiar facts and circumstances of the instant case. Disallowance u/s.14A while computing book profit u/s.115JB of the Act - HELD THAT:- We find that the Special Bench of Delhi Tribunal in the case of Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] had already held that the computation mechanism provided in Rule 8D(2) of the Rules cannot be applied for the purpose of disallowance of expenses under Clause f of Explanation to Section 115JB (2) of the Act. However, certain expenses need to be disallowed as per Clause f of Explanation to Section 115JB (2) of the Act. Hence, we hold that the disallowance computed by the assessee on rationale basis at ₹ 99,600/- be disallowed under Clause f of Explanation to Section 115JB(2) of the Act. The ld. AO is dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,742/- and claimed the same as exempt in the return of income. We find that assessee had not made any disallowance of expenses incurred for the purpose of earning such exempt income u/s.14A of the Act while filing its return of income. However, the assessee did file workings for disallowance of expenses u/s.14A of the Act totalling to ₹ 99,600/- which was submitted before the ld. AO during the course of assessment proceedings. The assessee had considered salary cost of employees working with senior management of finance department, middle management of finance department and considering their respective time allotted for investment activities had sought to attribute part of the salary cost for the purpose of investment activity and accordingly, arrived at the disallowance of ₹ 99,600/-. The ld. AO disregarded the contentions of the assessee and proceeded to compute the disallowance under third limb of Rule 8D(2) of the Rules and arrived at the figure of ₹ 12,55,853/- while completing the assessment. 3.1. We find the ld. CIT(A) had observed that the ld. AO by dealing with the facts of the case had clearly recorded his satisfaction rejecting the contentions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings computing disallowance u/s.14A of the Act at ₹ 99,600/-. The disallowance of ₹ 99,600 could be treated as expenses incurred for 9 days attributable to investment activity and that would meet the ends of justice in the peculiar facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee are partly allowed. ITA No.1442/Mum/2019 (Revenue Appeal) A.Y.2014-15 4. The first ground to be decided in this appeal is with regard to disallowance made u/s.14A of the Act in the sum of ₹ 12,55,853/- while computing book profit u/s.115JB of the Act. 4.1. The facts narrated hereinabove with regard to the disallowance made u/s.14A of the Act in assessee s appeal would hold good for revenue s appeal also. The disallowance worked out by the ld. AO u/s.14A of the Act r.w.r. 8D(2)(iii) of the Rules under normal provisions of the Act amounting to ₹ 12,55,853/- was considered verbatim for disallowance while computing the book profits u/s.115JB of the Act also by the ld. AO. We find that the Special Bench of Delhi Tribunal in the case of Vireet Investments reported in 165 ITD 27 had already held that the computation mec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudication in assessee s own case in ITA No.6020/Mum/2011 for A.Y.2007-08 dated 31/08/2012 wherein the facts and decision rendered thereon are as under:- 2. The relevant facts are that assessee acquired certain assets from Tata Motors Limited (TML) in the year under consideration i.e. F.Y. 2006-07. Since assessee was 100% subsidiary of TML during the financial year 2006-07, depreciation on the assets so acquired was claimed on the Written Down Value (WDV) as appearing in the books of TML, though the assessee had acquired those assets at a higher price than the cost of the assets to TML. The said depreciation was claimed at WDV as per Explanation 6 to sub-section (1) of Section 43 of the Income tax Act. In the subsequent period i.e. F.Y. 2007-08, TML transferred certain shares of assessee company to Tata Sons Limited (TSL), another company. Hence, assessee company ceased to be 100% subsidiary of Assessment Year: 2007-08 TML. In view thereof, it was stated that the treatment of the transfer of the said assets acquired by assessee from TML had to be changed in the hands of the assessee company as well as in the hands of TML in view of clause (ii) of section 47A(1) of the I.T.Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1992. In the relevant assessment year, assessee claimed depreciation on the fixed assets and for that purpose; it had taken WDV of the fixed assets as appearing in the books of EG. However, assessee company ceased to be wholly owned subsidiary of the transferor company 'EG' on 30.9.1994. The AO allowed the depreciation by considering WDV of those assets as appearing in the books of the 'EG' in view of Explanation 6 to section 43(1) of the I.T.Act. Ld CIT(A) also confirmed the action of the AO. However, in further appeal before the Tribunal, the Tribunal held that the cost for which the assessee had acquired the assets should be the cost of acquisition for the purpose of computation of depreciation if the transferor company ceased to be the 100% holding company of its subsidiary within a period of eight years. We consider it prudent to reproduce para 10 of the said order, which reads as under: Having heard both the parties extensively and having considered the material on record, we find that the dispute relates to the value of the in the hands of the assessee for the purpose of computing the depreciation. In the present case, the following undisputed fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the situation as the date of transfer is concerned. But by 30-9-1994, the assessee company ceased to be the subsidiary of the transferor holding company. Section 47 grants exemption from section 45 while section 47A withdraws exemption granted under section 47 on the occurrence of the events mentioned therein. Section 47 reads as under :-- '47. Nothing contained in section 45 shall apply to the following transfers: (i) to (iii) ... (iv) any transfer of a capital asset by a company to its subsidiary company, if-- (a) the parent company or its nominees hold the whole of the share capital of the subsidiary company, and (b) the subsidiary company is an Indian company; Clause (ii) of section 47A provides that the exemption granted under - Section 47 shall be withdrawn if the subsidiary company ceases to be so from the holding company within a period of 8 years from the date of transfer of the capital asset and it shall be treated as the income of the year which the transfer has taken place. The fact that the assessee has ceased be the subsidiary of the holding company on 30-9-1994 was brought to notice of the Assessing Officer during the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such asset was acquired by it. Thus, in the present case, the cost 1vr which the assessee has acquired the asset should be the cost of acquisition for the purpose of computation of depreciation. 7. At the time of hearing before us, it was also submitted by ld A.R. that the department filed appeal before the Hon'ble Bombay High Court being Income tax Appeal No.3160 of 2010 against the order of the Tribunal and the Hon'ble High Court vide its order dated 7th July, 2011 confirmed the order of the Tribunal. To substantiate his submission, ld A.R. filed a copy of the said order of Hon'ble High Court. 8. Considering the facts of the case before us, we agree with ld A.,R. that the issue is squarely covered by the order of the Tribunal in the case of Essar Oil Ltd (supra), which has been confirmed by the Hon'ble High Court and ld CIT(A) has decided the issue relying on the above said order of the Tribunal. Therefore, we do not find any infirmity in the order of ld CIT(A). Hence, we uphold his order and reject the ground of appeal taken by the department. 9. In the result, appeal filed by department is dismissed. 5.4. We also find that for A.Y.2008-09, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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