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TMI Blog2016 (10) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... ely ignoring the binding decision of Hon'ble Calcutta High Court in the case of Exide Industries Ltd. and others vs. UOI and others 292 ITR 470 wherein the Hon'ble Court has struck down the section 43B(f) itself holding that same ultra vires, therefore the action of ld. CIT (A) deserves to be hold bad in law and the expenses of Rs. 19,33,345/- deserves to be allowed as claimed. 1.1. That the ld. CIT (A) has further erred in not understanding at all the ratio of the judgment of Calcutta High Court wherein, the challenge made to the constitutional validity of the provision had been upheld by striking down the provisions and no observations whatsoever has been laid down regarding interpretation of the provision. Therefore, the order of ld. CIT (A) being bad in law and in defiance of the binding decision of Hon'ble Calcutta High Court deserves to be quashed and the expenses as claimed by the assessee deserve to be allowed. 2. On the facts and in the circumstances of the case ld. CIT (A) has grossly erred in upholding the disallowance of Rs. 1,45,25,700/- made by invoking provisions of sec. 14A out of the interest expenses claimed without appreciating the submission made, arbitraril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not to be considered for the purpose of claim of deduction under section 80IB of Rs. 9,06,889/-, interest income of Rs. 2,40,27,526/-, hence the AO computed the total income at Rs. 2,99,49,355/- against the loss of Rs. 4,58,05,585/- and book profit as computed under section 115JB at Rs. 58,84,34,128/- for MAT purposes. The assessee aggrieved by this order, preferred an appeal before ld. CIT (A), who after considering the submissions partly allowed the appeal. While partly allowing the appeal, the ld. CIT (A) deleted the disallowance made on account of depreciation. The ld. CIT (A) confirmed the disallowance made on account of provision for Leave Encashment, disallowance made under section 14A of Rs. 1,45,25,700/-. In respect of claim under section 80IB, the ld. CIT (A) partly allowed the ground of the assessee and in respect of interest income from other sources, the assessee's appeal was dismissed by the ld. CIT (A) and confirmed the addition. 4. Now both the assessee and the revenue aggrieved by the order, have filed cross appeals. 5. The ground no. 1 to 1.1 of the assessee's appeal is against the disallowance of the provision for Leave Encashment. 5.1. The ld. Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that no satisfaction is recorded by the AO. He further submitted that there is no nexus between the borrowed funds and the investment. The AO has failed to establish such nexus. The assessee has demonstrated before the AO that it has sufficient own interest free funds to make such investment. Therefore, the disallowance under section 14A in respect of the interest cannot be sustained. In support of the contention, ld. Counsel has relied upon the judgment of Hon'ble Punjab & Haryana High Court rendered in the case of CIT vs. Hero Cycles, 323 ITR 518 (P&H), judgment of the Hon'ble Bombay High Court rendered in the case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT, 328 ITR 81 (Bom.), decision of the Coordinate Bench rendered in the case of Yathish Trading Co. P. Ltd. vs. ACIT, 129 ITD 237 and the judgment of Hon'ble Bombay High Court rendered in the case of CIT vs. K. Raheja Corporation P. Ltd. ITA No. 1260 of 2009 (Bom HC) in support of the contention that in the absence of any material or basis to hold that the interest expenditure directly or indirectly was attributable for earning the dividend income. The AO ought not to have invoked the provisions of section 14A for maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds available but the fact remains that such funds were originated from the normal business receipts as also that if such funds were not diverted for excess fee reserve, surface renewable coat etc. the interest liability would have definitely be lower. Moreover, it is also fact that though the assessee has claimed that such investment was made from surplus funds available and not from the borrowed funds but the appellant has failed to conclusively prove the same. In these circumstances the AO has rightly made such disallowance of Rs. 14525700/- as per provisions of sec. 14A read with rule 8D of IT Rules. Though the appellant has relied on various case laws but the findings of such case laws are case specific and not applicable to the facts of the appellant's case. Accordingly the action of the AO in disallowance of Rs. 1,45,25,700/- is confirmed and the ground of appeal is dismissed." The ld. Counsel for the assessee has pointed out during the course of hearing that the assessee company has its own share capital of Rs. 104.50 crores and this results in surplus of Rs. 298.10 crores and the total interest free funds accumulated to Rs. 402.60 crores as against investment made of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-payment premium was to be paid in that case and why it was not prudent to get rid of heavy instt. payment every year instead of one time premium for pre-payment. (iii) It has been claimed that the assessee had to do Surface Renewal Coat to the Pavement for smooth running of the highway. That 's why it had to keep sufficient funds in its hands. However, it is noticed from the reply of the assessee itself that it had to recoat the road after every 5 years, as per Terms & Conditions of the Concession Agreement. In such facts, the assessee was well aware of this requirement and there should have been minimum diversion of funds in the year of such occurrence. However, it is interesting to observe that though during the year the assessee had to recoat the existing Highway for the first time, it had maximum funds to Rs. 43 crores invested in Mutual Funds as at 31.03.2010. This fact explains how much of its plea worth on the assessee count. (iv) The assessee has not furnished such details which conclusively establish that the funds blocked in Mutual Funds, i.e. dividend earning funds, do not have any nexus with the interest paid by it during the year under consideration. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the AO to delete the disallowance. This ground of the assessee's appeal is allowed. 7. Ground No. 3 is with regard to the computation of book profit under section 115JB in respect of the amount of disallowance made under section 14A. 7.1. The ld. Counsel for the assessee has reiterated the submissions as made in the written submission. 7.2. On the contrary, the ld. D/R opposed the submissions. 7.3. We have heard rival contentions and perused the material available on record. We have already allowed ground no. 2 of the assessee's appeal by directing the AO to delete the disallowance made under section 14A. Accordingly, the AO is directed to re-compute the book profit in view of our decision in ground no. 2. This ground of the assessee is allowed for statistical purposes. 8. Ground No. 4 is against rejecting the claim of deduction under section 80IB of the Act on the Miscellaneous Income to the tune of Rs. 1,40,300/-. 8.1. The ld. Counsel for the assessee reiterated the submissions as made in the written submission. Submissions made in written submission in respect of this disallowance are as under :- "In this ground of appeal, assessee has challenged the order of ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsel for the assessee has reiterated the submissions as made in the written submission. 9.2. On the contrary, the ld. D/R has opposed the submissions. 9.3. We have heard rival contentions and perused the material available on record. There is no dispute with regard to the fact deduction u/s 80IB is available if the gross total income of the assessee includes any profits and gains derived from any business referred to in sub-section 3 to 11, 11A and 11B of that section. In the present case, the contention of the assessee is that the toll collection and the cash flows pending incurrence of expenditure/payment out of the total receipts from toll collection are retained within the company which is routed through the Escrow Group of Accounts only opened under the Escrow Agreement between the assessee company, NHAI, Lenders and the Axis Bank. It is contended that the surplus so available from time to time have been invested in terms deposit on which interest income is earned and such interest income is received only due to the timing differences as explained above. The ld. Counsel has placed reliance on the decision of the Coordinate Bench rendered in the case of J.P. Morgan Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a building in nature. 12.1 The ld. D/R has relied on the order of the A.O. 12.2. At the outset, the ld. Counsel for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench of the Tribunal in the assessee's own case in Revenue's appeal bearing no. 878/JP/2011 for the assessment year 2008-09. Therefore, he prayed that ground no. 1 of the revenue's appeal be rejected. 12.3. We have heard rival contentions and perused the material on record. We find that the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench in ITA No. 878/JP/2011. The ld. D/R could not controvert that the issue is already decided in favour of the assessee by the Coordinate Bench decision supra. Therefore, respectfully following the decision of the Coordinate Bench, we reject this ground of the revenue. 13. Similarly in respect of Ground No. 2, the Coordinate Bench of the Tribunal vide its order dated 13.05.2016 in ITA No. 112/JP/2015 has decided the issue in favour of the assessee by following its earlier order in ITA No. 193/JP/2009 for the A.Y. 2006-07. The facts and circumstances involved in the present a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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