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TMI Blog2019 (5) TMI 1960X X X X Extracts X X X X X X X X Extracts X X X X ..... of amendment to Section 14A from 02/06/2016 - We are the view that due to the fact that there is a specific date mentioned regarding the applicability of the amended provisions hence the same cannot be said to be retrospective. The Assessing Officer is directed to compute the disallowance as per the rules applicable as on the date. Regarding the ruling that the Assessing Officer shall account on the those investments which have yielded exempt income, we find strength by the orders of the special Bench of ITAT in the case of Vreet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] and also the order in the case of Prime Property Development Corp Pvt. Ltd. [ 2017 (11) TMI 2000 - ITAT MUMBAI] . We direct the Assessing Officer to compute the disallowance accordingly . Capitalization of interest under section 36(1)(iii) - As we find that the assessee s own resources are to the tune of 321.17 Crores which shows the sufficiency of interest free funds to meet the expenses. We rely on the judgments in the assessee s own case wherein the judgment of Hon ble Jurisdictional High Court in the case of Abhishek Industries [ 2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT] which was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the Ld. CIT(A) was justified in law and on facts in allowing relief on account of capitalization of interest as per proviso to section 36(l)(iii) of the Income Tax Act, 1961 on investment in shares of domestic companies and capital advance for purchase of land and other advances despite the fact that Share Capital and Reserves and Surplus were already exhausted by the assessee in fixed assets? 5. That the order of the Ld. CIT (A) be set aside and that of the Assessing Officer be restored. 3. The detailed facts of the case taken from the order of the Ld.CIT(A). 4. The assessee company had made investments to the tune of Rs.74.89 crores in the equity of domestic group companies, some of which investments yielded exempt dividend income of Rs.2,96,24,955/-. It was also noted by the AO that the assessee company had significant amount of borrowed funds which were almost similar to the assessee's own non-interest-bearing funds. The assessee itself computed the disallowance at Rs.3,35,66,806/- under section 14A read with Rule 8D and added the same to its returned income. No further disallowance was, therefore, made by the AO. In the appellate proceedings, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of section 14A, particularly the merger of the erstwhile Rule 8D (2) (ii) (iii) into Rule 8D (ii) specifying the proportionate disallowance @ 1%, is undoubtedly, meant for taking care of a situation where there is a mixed use of borrowed funds and non-interest-bearing funds and consequently apportionment of expenditure is well-nigh impossible. If the said provision is interpreted in a way to mean that only expenses directly related to earning dividend income or exempt income are to be disallowed and expenses of the nature of interest on borrowings which are not directly attributable to any particular income on receipt are not covered, it would only make the provision of Rule 8D (2) (ii) otiose and redundant. Such an interpretation cannot be considered to be based on purposive construction of the Rule. It is judicially well settled that Rules are procedural law and are applicable to the proceedings, which are pending as on date. The aforesaid amended provisions of Rule 8D have been made effective from 02/06/2016 and, therefore, its applicability in the instant case is necessarily implied. It clearly indicates that the applicability of the amended Rules are not ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Jute Corporation of India Limited [1991; 187 ITR 688] in which it has been held that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. Support for this proposition was also sought from the decision of the Bombay High Court in the case of Commissioner of Income Tax, Central-1, Mumbai Vs. Pruthvi Brokers and Shareholders [2012; 349 ITR 336] wherein it was held that the appellate authorities are entitled to exercise their jurisdiction to consider the additional claim in view of the various judgments on the issue including the judgment of the Supreme Court in the case of National Thermal Power Corporation Ltd. [1998; 229 ITR 383]. Considered in this backdrop, it is held that the assessee cannot be made to suffer an inadvertent mistake made at the time of making of return and more so when a new mechanism of disallowance under the provisions of section 14A read with Rule 8D is being enforced, as has been done in the instant case herein above. Needless to say that the voluntary disallowance of Rs.3,35,66,806/- purported to have been made inadvertently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. Goetze was confined to a case where the claim was made only before the AO and not before the appellate authorities. The Court did not lay down that a claim not made before the AO cannot be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. On facts, there was nothing to show that the claim entertained by the CIT (A)/ ITAT was improper Similarly in the case of NTPC 229 ITR 383 the Hon ble Supreme Court held as under: 6. In the case of Jute Corporation of India Ltd. v. C.I.T. . this Court, while dealing with the powers of the Appellate Assistant Commissioner observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) acted in a judicious manner and hence we decline to interfere with the order of the Ld.CIT(A) on these issues. 6. Regarding issue no.(3)above- the applicability of amendment to Section 14A from 02/06/2016,we are the view that due to the fact that there is a specific date mentioned regarding the applicability of the amended provisions hence the same cannot be said to be retrospective. The Assessing Officer is directed to compute the disallowance as per the rules applicable as on the date. Regarding the ruling that the Assessing Officer shall account on the those investments which have yielded exempt income, we find strength by the orders of the special Bench of ITAT in the case of Vreet Investment Pvt. Ltd. 188 TTJ 001 (Del-Trib.) and also the order in the case of Prime Property Development Corp Pvt. Ltd. in ITA No. 7402/Mum/2016 dt. 16.11.2017. We direct the Assessing Officer to compute the disallowance accordingly . 7. Regarding the ground raised pertaining to capitalization of interest under section 36(1)(iii) we find that the assessee s own resources are to the tune of 321.17 Crores which shows the sufficiency of interest free funds to meet the expenses. We rely on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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