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TMI Blog2021 (9) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... case [ 2021 (3) TMI 472 - ITAT DELHI] for earlier years and for similar reasons hold that the AO was not justified in disallowing the expenses u/s 14A r.w.r 8D of the Act. We therefore direct the AO to delete the disallowance of expenses. Claim of deduction on account of payment of education cess - assessee in the return of income did not claim deduction for the education cess paid before the due date of filing return of income - HELD THAT:- We therefore, following the order of the Tribunal in assessee s own case for earlier years [ 2021 (3) TMI 472 - ITAT DELHI] and for similar reasons direct the AO to allow the claim of deductibility of cess - Thus the ground of the assessee is allowed. - ITA No. 7392/Del/2018 - - - Dated:- 6-9-2021 - Sh. Anil Chaturvedi, Accountant Member And Sh. Kul Bharat, Judicial Member For the Assessee : Shri Ajay Vohra, Sr. Adv., Shri Neeraj Jain, Adv., Shri Saksham Singhal, Adv. For the Revenue : Ms. Rinku Singh, Sr. D.R. ORDER PER ANIL CHATURVEDI, AM: This appeal filed by the assessee is directed against the order dated 31.08.2018 passed by the Commissioner of Income Tax (Appeals)-22, New Delhi relating to Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year relevant to assessment year 2010-11 and depreciation on the same was allowed in that year, thus it was not permissible to alter the written down value of the block of asset of goodwill, so as to disallow depreciation during the subject year. 2.3 That on the facts and circumstances of the case and in law the CIT(A) has erred in disregarding the decision of the Dispute Resolution Panel for assessment year (s) 2010-11 and 2011-12. 3. That on the facts and circumstances of the case and in law the CIT(A) has erred in upholding the action of the AO in disallowing an amount of ₹ 32,33,346/- under section 14A of the Act read with Rule 8D of the Income tax Rules, 1962 ( the Rules ) without appreciating the fact that no expenditure was actually incurred in earning the exempt dividend income as investments during the year were mere automatic reinvestments of units issued as dividend to the Appellant on the mutual funds held by it. 3.1 That on the facts and circumstances of the case and in law the CIT(A) has erred in upholding the action of the AO in computing the said disallowance of ₹ 32,33,346/- as per Rule 8D of the Rules read with Section 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to ₹ 71,040,132/- u/s 32 of the Act and it was the fifth year of claim of depreciation on Goodwill. Assessee also filed detailed submissions. The submissions of the assessee was not found acceptable to AO. AO noted that though for A.Y. 2010-11 being aggrieved by the order of DRP, the Department had filed an appeal before the Hon ble Tribunal wherein the claim of depreciation was allowed in favour of the assessee but following the order for A.Y. 2013-14 wherein depreciation on Goodwill was disallowed and the order was also upheld by the CIT(A), the claim of depreciation on the Goodwill was rejected and thus ₹ 71,040,132/- was added to the returned income. 9. Aggrieved by the order of AO, assessee carried the matter before the CIT(A). CIT(A) noted that the issue in the year under consideration is identical to that of A.Y. 2012-13 2013-14. He thereafter following the order of his predecessor for A.Y. 2012-13 2013-14, upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now in appeal before us. 10. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that during the A.Y. 2010-11, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials available on record. The issue in the present grounds is with respect to disallowance of depreciation on Goodwill. The claim of depreciation was denied by the AO by following the order of his predecessor for A.Y. 2013-14. We find that the Co-ordinate Bench of Tribunal while deciding the issue in favour of the assessee on identical facts in A.Y. 2012-13 2013-14 2015-16 (ITA No.5435/Del/2017 and others) by relying on the order of the Co-ordinate Bench of Tribunal vide order dated 08.03.2021 has noted as under: 13. Before us, the ld. counsel for the assessee vehemently stated that the disallowance of depreciation on good will made by the Assessing Officer in draft assessment order for A.Y 2010-11 was deleted by the DRP which was upheld by the Tribunal in ITA No. 302/DEL/2015. It is the say of the ld. counsel for the assessee that the ld. CIT(A) failed to give credence to the fact that the business was acquired on slump sale basis for ₹ 1334.15 million and out of the said total consideration, ₹ 476 million was to be received by the assessee from its parent company. 14. The ld. counsel for the assessee drew our attention to the relevant part of the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch relying on the decision of the honourable Supreme Court in CIT versus Smif securities Ltd (2012) 348 ITR 302 and the decision of the honourable Delhi High Court in case of Areva T D India Ltd versus Deputy Commissioner Of Income Tax (2012) 345 ITR 421 held that depreciation was admissible on goodwill amounting to 769,789,365 and dismissed the appeal of the revenue. The learned dispute resolution panel deleted the disallowance following its own direction issued in assessment year 2010 11. Therefore, the learned assessing officer is in appeal before us. 39. The learned departmental representative payment please submitted that for the purpose of the claim of the depreciation merely an accounting entry could not suffice. He submitted that there has to be an asset available with the assessee, which should be owned by the assessee. He submitted that it is merely an accounting entry which does not result into an asset automatically. He relied upon the order of the learned assessing officer. 40. The learned authorised representative submitted that the issue squarely covered in favour of the assessee by the decision of the coordinate bench for assessment year 2000 11 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on their book value and the difference between the purchase consideration and the value of net identifiable assets acquired have been recognized as Goodwill for ₹ 769 million. The purchase consideration includes ₹ 476 million in respect of customer relationships has been held for sale to ExlServiee Holdings. Inc. the ultimate parent company, which has been disclosed under other current assets. The company also recognized deferred tax assets on account of timing differences on liabilities assumed on acquisition. 20. From the above facts, it can be seen that ₹ 476 million was never considered for claim of depreciation on good will. Considering the facts in the light of judicial decisions and most importantly, keeping in mind that this is not the initial year of claim of depreciation, we do not find any merit in the disallowance made by the Assessing Officer and upheld by the ld. CIT(A). We, accordingly, direct the Assessing Officer to delete the disallowance in the captioned A.Ys. The common grievance is allowed in the captioned appeals. 13. Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical issue arose in assessee s own case for A.Y. 2011-12, 2012-13, 2013-14 2014-15 and the disallowance was deleted by Tribunal. He thereafter reiterated the submissions made before the lower authorities and further submitted that the AO without pointing out any specific expenses having nexus with the investment in shares/ mutual funds or earning of exempt income therefrom had mechanically invoking the provisions of Rules 8D r.w.s 14A of the Act. He submitted that the provisions of Section 14A of the Act are not applicable as no satisfaction was recorded by the AO having regard to the accounts of the assessee, which is mandatory and for the aforesaid proposition he relied on the decision rendered by the Hon ble Apex Court in the case of Godrej Boyce Manufacturing Company Ltd. v. DCIT 394 ITR 449 (SC), Maxopp Investment Ltd. vs. CIT 347 ITR 272 - affirmed by Supreme Court in 402 ITR 640 and HT Media Ltd. vs. Pr. CIT 399 ITR 576 (Del). He thereafter submitted that on identical facts in A.Y. 2011-12, the Co-ordinate Bench of Tribunal deleted the disallowance by holding that in the absence of any satisfaction recorded by the AO with respect to the examination of the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded by the Assessing Officer having regard to the accounts of the assessee which is mandatory as held by the Hon'ble Supreme Court in the case of Godrej Boyce 394 ITR 449 and Maxopp Investment 402 ITR 640. 26. The ld. counsel for the assessee referred to the order of the Tribunal in A.Y 2011-12 in ITA No. 1482 and 1708/2016 order dated 26.08.2020 and stated that such disallowance was deleted by the Tribunal as no satisfaction was recorded by the Assessing Officer with respect to the examination of books of account. 27. Per contra, the ld. DR strongly supported the orders of the authorities below. It is the say of the ld. DR that the Assessing Officer has only applied the third limb of Rule 8D of the Rules and has made disallowance of only 0.5% of the average investment which is reasonable. 28. We have given thoughtful consideration to the orders of the authorities below. A perusal of the assessment order shows that no satisfaction was recorded by the Assessing Officer with respect to the examination of the books of account. While making disallowance, the Assessing Officer observed that It is unbelievable that for earning income of ₹ 3.70 crores, no exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. He further stated that no effort/ time was utilized in receiving the dividend income and the investment activity only requires filing of mutual fund standard printed requisition forms and issue of cheques. The dividend on maturity proceeds are straightway credited to the appellant s bank account. In the end, it was submitted that the coordinate bench in assessment year 2010 11 has set aside the matter to the file of the learned assessing officer. 24. The learned departmental representative vehemently supported the orders of the lower authority and submitted that the learned assessing officer has recorded proper satisfaction therefore the argument of the learned authorised representative that no satisfaction has been recorded is devoid of any merit. It was further stated that the learned AO has merely computed disallowance being 0.5% of the average value of the investment. He otherwise submitted that even the minimum activities that as stated by the learned authorised representative also deserves to be considered for making the disallowance and the only option left with the learned assessing officer is to invoke the provisions of rule 8D of the income tax rule for disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking the provisions of rule 8D of the income tax rules for making a disallowance u/s 14 A of the act. Therefore, in absence of any satisfaction recorded by the learned AO with respect to the examination of the books of account of the assessee to verify the correctness of the claim of the assessee, the disallowance u/s 14A cannot be sustained. Accordingly we direct the learned assessing officer to delete the disallowance of 1,252,630 made u/s On the given facts of the case in hand and respectfully following the findings of the co-ordinate bench, we direct the Assessing Officer to delete the disallowance made u/s 14A of the Act r.w.r 8D of the Rules. 30. Since we have already deleted the disallowance u/s 14A of the Act in normal computation of total income, we direct the Assessing Officer to delete the above addition while calculating the book profit u/s 115JB of the Act. This common grievance in all the appeals is allowed. 19. We find that facts of the case in the year under consideration are identical to that of the earlier years. Further no distinguishing feature in the facts of the case in the year under consideration and that of the earlier years has been pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed for relevant A.Ys, the assessee did not claim deduction for education cess paid before the due date for filing return of income for subject A.Ys It is the say of the ld. counsel for the assessee that the Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Limited in ITA No. 52/2018 order dated 31.07.2018 has held that education cess is an allowable deduction while computing the income under the head Profits and gains from profession or business . 35. Even the CBDT, in its Circular No. 91/58/66-ITJ(19) dated 18.05.1967 has clarified that the word Cess has been omitted from clause and effect of omission of the word Cess is that only taxes paid are to be disallowed in the assessments for the years 1961-63 onwards. 36. In light of the decision of the Hon'ble Rajasthan High Court [supra] we direct the Assessing Officer to allow claim of deductibility of cess from the income in the captioned A.Ys. Additional ground in all the appeals is allowed. 23. We find that facts of the case in the year under consideration are identical to that of the earlier years. Further no distinguishing feature in the facts of the case in the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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