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TMI Blog2022 (5) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Recording the above statement, the appeal filed by the assessee is hereby dismissed. 3. The grounds of appeal raised by the Revenue in ITA No. 251/Rjt/2016 is as follows: "1. The Hon'ble CIT(A)-1, Rajkot has erred in law and on facts of the case in deleting the addition made by the AO on account of disallowance of education and secondary and higher secondary cess of Rs. 21,25,000/- u/s. 40(a)(ii). 2. The Hon'ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of disallowance of claim of deduction/s. 80IA being profit from power generating unit of Rs. 86,04,245/-. 3. The Hon'ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition of Rs. 48,18,503/- made by the AO on account of disallowance of claim of deduction u/s. 80JJA. 4. The Hon'ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of interest of income tax refund of Rs. 15,32,971/-. 5. The Hon'ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of disallowance of interest expenses of Rs. 5,68,926/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, invoking Section 80AC of the Act, the AO denied the benefit to the assessee. The Ld. CIT(A) in this impugned order allowed the claim of the assessee is as follows:- "During the year consideration, the appellant has claimed deduction amounting to Rs. 86,04,245/- u/s. 80-IA in the revised return of income with respect to profits and gains derived from sale of electricity generated by the two windmills. Copy of Audit Report in form 10CCB, balance sheet & profit and loss account of the windmill undertakings along with working of deduction claimed u/s 80IA was furnished before the Assessing Officer and also before me during appellate proceedings in the paper book. Regarding, the first reason provided by the AO that, the windmill undertaking of the appellant is not a separate undertaking from the automobile division of the appellant and the second reason that no approval from state government authorities have been taken, it is pertinent to note that based on the same set of facts the AO has accepted the claim of the appellant u/s. 80-IA for subsequent assessment year i.e. A.Y. 2013-14 and has not raised any question on independence of the windmill undertaking from automobile divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 139(1) within due date prescribed and the assessee complied with the provisions of section 80AC of the Act by filing its original return on 29.9.2008 which is within the due date specified under section 139(1) of the Act. Hence, following the ratio laid down by various courts deduction claimed u/s 80IA through revised return of income u/s 139(5) provided original return is filed within time prescribed u/s 139(1) is accepted. Hence, in this case the original return was filed within due date u/s 139(1) and claim was made in revised return within time limit u/s 139(5), further the claim of the assesseedoes not suffer from any infirmity as provided u/s 80 IA, therefore claim of appellant u/s 80 IA of Rs. 86, 04,245/- is allowed. Ground no. 3 of the appeal is allowed." 10. The Ld. D.R. appearing for the Revenue supported the order passed by the Ld. AO and pleaded that the assessee has not made the claim of 80IA in the original return of income, but only in the revised return of income and therefore, the assessee is not eligible for the said claim. 11. Per contra, the Ld. A.R. appearing for the assessee has brought to our notice that the Coordinate Bench judgment of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court was interpreted by the Delhi High Court in Jai Parabolic Springs Ltd.'s case (supra) as under (page 46): "In Goetze (India) Ltd. [2006] 284 ITR 323 (SC) wherein deduction claimed by way of a letter before the Assessing Officer, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of the assessing authority to entertain claim for deduction otherwise than by a revised return, and did not impinge on the power of the Tribunal." 10. Accordingly following the above decision, we hold that the claim of deduction under section 80-IB can be made by the assessee before the appellate authorities. Since grounds relating to the deduction under section 80-IB were made before the appellate authorities, irrespective of whether it was claimed by the assessee before the Assessing Officer or not, or whether it was claimed through original return or revised return, the allowability of claim has to be adjudicated on the merits. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C,-Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder". The wordings of section 80A(5) clearly mentions that claim should be made in return of income. The word return of income includes return of income filed u/s. 139 of the Act. Return of Income includes revised return of income filed u/s. 139(5) of the Act. Nowhere in section 80A (5) it has been mentioned that claim shall be allowed only it has been claimed in original return of income furnished u/s 139(1) of the Act. All the decisions cited before me for claim of deduction u/s 80 IA made in ground no 3 on claim of profit on windmill also squarely applies here. Hence, return of income u/s. 80A(5) also includes revised return of income filled u/s. 139(5) of the Act. Therefore, disallowance of deduction u/s. 80JJA of Rs. 48,18,503.30/- on account of failure to make claim of deduction in original return of income is hereby deleted. Hence, Ground No. 4 of the appeal is allowed." 14. The Ld. D.R. again supported the order of the AO and relying up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f so modify the order to the extent assessee's quantum of interest to be brought to tax. 1.5. In case the entire interest granted was withdrawn by any order subsequently, the relief to the extent has to be provided to assessee. With these directions, the ground no. 5 of appeal is partly allowed." 18. The Ld. D.R. appearing for the Revenue fairly accepted that the CIT(A) has not deleted the interest amount, however, directions are being given to verify the refund status of the assessee. We do not find any infirmity in the direction given by the Ld. CIT(A). Thus, the ground no. 4 raised by the Revenue is hereby dismissed. 19. Ground No.5:- Ground No. 5 raised by the Revenue is disallowance of interest expenses of Rs. 5,68,926/- as per computation under Section 14A r.w.r. 8D of the Act. 20. During the Financial Year 2011-12 the assessee has earned tax free income of Rs. 55,32,792/- being dividend income from investment in Mutual Funds. The assessee on its own made a disallowance of Rs. 3,35,877/- being expenditure incurred to earn exempt income. Though, there were no expenditure incurred to earn exempt income. The A.O. invoking Rule 8D determined the disallowance as Rs. 5,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to be incurred for earning exempt income and as far as interest on IDBI term loan is concerned the said loan was availed for business purpose and it is fully re-paid during the year and there is not outstanding loan as on 31.03.2012. Further the interest free fund available with the assessee in the form of share capital and free reserves are also very huge compared to the amount invested. Therefore on this count also no disallowance .on account of interest can be made, I am in agreement of the contention of the appellant that interest cost incurred on term loan used for business purpose and interest cost incurred on late payment of statutory dues is directly attributable to the activity of earning of taxable income. I am of the view that under rule 8D(2)(ii) interest cost to the extent attributable to earn tax free income only can be considered and -taxable income is not to be considered. This view has been upheld in the decision of Hon'ble Delhi High court in the decision of Pr.CIT v. Bharti Overseas Pvt. Ltd.(Delhi)(HC) (ITA 802/2015). wherein vide para 19 of the said decision it was held that "What the ITAT has done in the present case instead is to follow its earlier dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has suo-moto disallowed a sum of Rs. 3,35,877/- and this does not call for any interference and hence the disallowance made by the appellant is sustained. Appellant has also contended that no satisfaction is recorded by A.O. to reject the calculation of disallowance worked out by the appellant. Invoking Rule 8D to compute disallowance u/s 14A is neither automatic nor triggered merely because assessee has earned an exempt income. Hence, the assessing officer should record a satisfaction that the expenditure incurred in relation to non-taxable income as claimed is incorrect. The satisfaction should be demonstrated 'having regard to the accounts' of the assessee. This is the prescription of section 14A (2). In other words section 14A (2) does not enable the assessing officer to apply Rule 8D automatically. From order of the AO is evident that the AO has nowhere recorded his satisfaction as to why disallowance made by the appellant is not correct and has proceeded to rework such disallowance. Recording of such satisfaction is mandatory and it has been upheld by various High Courts that in absence of such satisfaction recorded by AO the disallowance made by the AO is bad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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