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TMI Blog2022 (5) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,49,15,940/- and has disallowed expenses to the tune of Rs. 86,400/- under section 14A of the Act as expenses relating to exempt income. Since the disallowance under section 14A of the Act was not made by the assessee by following Rule 8D, the Assessing Officer worked out the disallowance under section 14A of the Act of Rs. 50,41,454/- after taking into account an amount of Rs. 86,400/- already disallowed by the assessee. 3.2. The assessee carried the matter in appeal before the ld. CIT(A). After considering the observations of the Assessing Officer and revised working of disallowance under section 14A of the Act submitted by the assessee, the ld. CIT(A) directed the Assessing Officer to verify the same with reference to assessment record and to restrict to Rs. 24,24,160/-, by observing as under: "I have carefully gone through the observation of the AO in the assessment order as mentioned above under para 4.1 and the appellant's submission before the CIT(A) under para 4.2. 4.3.1 After noticing that the appellant earned income from mutual fund of Rs. 1.49 crores, which was declared as exempt, the AO made the aforesaid disallowance u/s. 14A by applying Rule 8D. Before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend income of Rs. 1,49,15,940/- and has suo motu disallowed expenses to the tune of Rs. 86,400/- under section 14A of the Act as expenses relating to exempt income. However, the Assessing Officer disallowed an additional amount of Rs. 50,41,454/-. However, while making additional disallowance under section 14A of the Act, the Assessing Officer has not recorded any satisfaction as to how the claim of the assessee was incorrect and had resorted to the provisions under section 14A r.w. Rule 8D. 3.6. Similar issue on identical facts was subject matter in appeal before the Tribunal in assessee's own case for the assessment year 2015-16 in I.T.A. No. 1767/Chny/2019 dated 16.12.2019, in which, the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT (supra) has been followed, the Tribunal has observed and held as under: "07. We heard the rival submissions and perused the material on record. The only issue in these grounds of appeal relates to whether or not, the Assessing Officer can resort to provisions of Section 14A of the Act without giving findings on the correctness or otherwise of the claim that assessee company had incurred only expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer, it is clear that the Assessing Officer had not assigned any reason whatsoever as to how the claim of the assessee is incorrect. In the similar facts, the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, 402 ITR 640 held that in the absence of the finding of the Assessing Officer resort to provisions of Section 14A of the Act r.w.r 8D of the Rules cannot be made. This decision was followed by the Coordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra) cited by holding as under:- "Ground No. 8 challenges the addition of Rs. 3,88,882/- invoking the provision of Section 14A of the Act. It is the contention of the appellant that the appellant had not incurred any expenditure to earn exempt income. The Assessing Officer had not given any findings as to how the claim of the assessee-bank that no expenditure was incurred to earn the exempt income was incorrect. In the absence of this finding resort to the provisions of rule 8D of the Income Tax Rules cannot be made as held by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT (2018) 402 ITR 640. Therefore this ground of appeal filed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires no adjudication. 4. The next ground raised in the appeal of the Revenue in ground No. 3 to 3.3 relates to deletion of disallowance of royalty payment of Rs. 56,43,969/-. The assessee has claimed royalty paid to Shriram Ownership Trust of Rs. 75,25,292/- for use of the logo. By treating the expenditure as capital expenditure, the Assessing Officer allowed depreciation @25% and disallowed the balance amount of Rs. 56,43,969/- and brought to tax. On appeal, by following the decision of the Tribunal in assessee's own case for previous assessment year, the ld. CIT(A) directed the Assessing Officer to allow the royalty payment as a revenue expenditure. 4.1. Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that the Revenue has filed an appeal against the order of the Tribunal before the Hon'ble Madras High Court, which is still pending and pleaded for reversing the order passed by the ld. CIT(A) against which, the ld. Counsel for the assessee has heavily relied on the decisions of the Tribunal in assessee's own case for the earlier assessment years. 4.2. On the other hand, the ld. Counsel for the assessee has submitted that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent statutory body, being a Trust, the assessee has to necessarily make payment for using the logo to Shriram Ownership Trust and such payment has to be at the market rate. Therefore, this payment of Rs. 35,87,560/- being an expenditure for using logo is an allowable expenditure u/s. 37(1) of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed." 4.5. The ld. DR could not controvert the above decision of the Tribunal in assessee's own case. Just because the Revenue has filed an appeal against the order of the Tribunal before the Hon'ble Madras High Court, we cannot take a different view until and unless the decision of the Tribunal has been reverted or modified. The ld. CIT(A) has rightly followed the decision of the Tribunal and thus, we find no infirmity in the order passed by the ld. CIT(A). Accordingly, the ground raised by the Revenue stands dismissed. 5. The next ground raised in the appeal of the Revenue in ground No. 4 to 4.4 relates to deletion of interest income not offered to tax. On perusal of the reconciliation statement as well as Form 26AS, the Assessing Officer has note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her directed the Assessing Officer to assess the corresponding interest income in the relevant assessment year in which it actually arises and to allow TDS thereof in the relevant assessment year in which interest income is offered in respect of those two parties. Consequently, the ld. CIT(A) has also directed the Assessing Officer not to allow credit for the TDS in respect of those two parties. Hence, we find no reason to interfere with order passed by the ld. CIT(A) on this issue and thus, the ground raised by the Revenue is dismissed. 6. The last ground raised in the appeal of the Revenue in ground No. 5 to 5.2 relates to exclusion of disallowance under section 14A of the Act. While computing the book profits under section 115JB of the Act, the Assessing Officer made the addition of Rs. 50,41,454/- on account of disallowance under section 14A of the Act. On appeal, by following the decision of the Tribunal, the ld. CIT(A) directed the Assessing Officer to exclude the disallowance under section 14A of the Act while computing the book profit under section 115JB of the Act and allowed the ground raised by the assessee, against which, the Revenue preferred further appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited to the statement of profit and loss, and as reduced by,- (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the statement of profit and loss), if any such amount is credited to the statement of profit and loss: (5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. 7. Thus from perusal of the relevant extract of Section 115JB, it is evident that Sub-Section (1) of Section 115JB provides the mode of computation of the total income of the assessee and tax payable on the assessee under Section 115JB of the Act. Sub-Section (5) of Section 115JB provides that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee being a company mentioned in this Section. Therefore, any expenditure relatable to earning of income exempt under Section 10(2A) and Section 10(35) of the Act is disallowed under Section 14A of the Act and is added back to book profit under clause (f) of Section 115JB of the Act, the same would amount to doing viol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion does not arise since we have confirmed the order of the ld. CIT(A) on this issue by following the decision of the Coordinate Benches of the Tribunal in assessee's own case for the assessment year 2012-13. Accordingly, the ground raised by the assessee is dismissed. 8. The next ground raised in the appeal of the assessee in ground No. 6 & 7 relates to allowability of credit for TDS by Jinal Mercantile and Mehul Chinubhai Choksi in the assessment year 2014-15. In the assessment order, the Assessing Officer has assessed the notional interest income based on TDS reflected in Form 26AS by observing that interest from the above two parties corresponding to the TDS was not admitted. By considering the submissions of the assessee that there was uncertainty in realizing interest income and since there was no provision under the Act to assess the notional income based on TDS, the ld. CIT(A) has deleted the addition of Rs. 1.23 crores made by the Assessing Officer towards undeclared interest income. Further, the ld. CIT(A) has directed the Assessing Officer to assess the corresponding interest income in the relevant assessment year in which it actually arises and to allow TDS thereof ..... 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