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TMI Blog2019 (4) TMI 2094X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. Correct head of income - assessing the interest income under the head income from other sources instead of income from business - HELD THAT:- We direct the AO to assess the interest earned on margin deposit as business income and interest on ICDs and bank deposits as income from other sources. This ground is partly allowed. Disallowance made u/s 14A r/w rule 8D - HELD THAT:- We direct the Assessing Officer to restrict the disallowance under section 14A r/w rule 8D to the exempt income earned by the assessee during the year. Further, while computing book profit under section 115JB of the Act, no adjustment can be made by way of disallowance under section 14A read with Rule 8D. However, Explanation-1(f) of section 115JB of the Act empowers the AO to increase the book profit by disallowing expenditure incurred for earning exempt income. Therefore, the Assessing Officer may look into this aspect. This ground is partly allowed. Disallowance of provision for income tax recoverable from Gujarat State Electricity Board (GSEB) and Essar Steels Ltd. - HELD THAT:- Following the consistent view of the Tribunal, we hold that the income tax recoverable has to be treated as income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g receivables from the AE is an international transaction, however, certain computational errors pointed out by the assesseewas accepted by the DRP and they directed the Transfer Pricing Officer to exclude the allowable credit period to the AE of 30 days while computing the interest chargeable on outstanding receivables from the AE. In compliance to the directions of the DRP, the Transfer Pricing Officer ultimately made an adjustment of ₹ 8,90,803, on account of interest on outstanding receivables from the AE. 7. The learned Authorised Representative submitted, while applying Bloomberg rate of 6.56% for computing the interest on outstanding receivables, the Transfer Pricing Officer has not brought any comparable to show that such rate applied by him is at arm's length. The learned Authorised Representative submitted, as a normal business practice, the assessee does not charge any interest on outstanding receivables both to AEs and non-AEs. Further, he submitted, before the Transfer Pricing Officer the assessee had made a specific submission that as per the LIBOR rate the interest chargeable on the outstanding receivable is LIBOR plus 0.5%. He submitted, the aforesaid con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Departmental Representative submitted, the issue has been decided partly in favour of the assessee by the Tribunal in the preceding assessment years. 15. We have considered rival submissions and perused material on record. Notably, while deciding identical issue in assessee's own case for assessment year 2009-10 in ITA no.1849/Mum./2015, dated 17th October 2017, the Tribunal has held that interest earned on margin deposit has to be treated as business income, whereas, interest on ICDs and fixed deposit with Bank are to be treated as income from other sources. The same view was reiterated by the Tribunal while deciding assessee's appeal for the assessment year 2011-12 and 2010-11 inITA no.1388/Mum./2016 and ITA no.2233/Mum./2015, dated 3rd July 2018 and assessee's appeal for the assessment year 2012-13, in ITA no.1332/Mum./2017, dated 19th September 2018. Following the consistent view of the Tribunal in assessee's own case, as referred to above, we direct the Assessing Officer to assess the interest earned on margin deposit as business income and interest on ICDs and bank deposits as income from other sources. This ground is partly allowed. 16. In ground no.4, the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 476 (P&H). While dismissing the SLP of the Revenue, the Hon'ble Supreme Court upheld the aforesaid decision of the Hon'ble P&H High Court as reported in PCIT v/s State Bank of Patiala, [2018] 99 taxmann.com 286 (P&H). In view of the legal principle laid down in the aforesaid decisions, we direct the Assessing Officer to restrict the disallowance under section 14A r/w rule 8D to the exempt income earned by the assessee during the year. Further, while computing book profit under section 115JB of the Act, no adjustment can be made by way of disallowance under section 14A read with Rule 8D. However, Explanation-1(f) of section 115JB of the Act empowers the Assessing Officer to increase the book profit by disallowing expenditure incurred for earning exempt income. Therefore, the Assessing Officer may look into this aspect. This ground is partly allowed. 21. In ground no.5, the assessee has challenged disallowance of provision for income tax recoverable from Gujarat State Electricity Board (GSEB) and Essar Steels Ltd., amounting to ₹ 9,63,52,708. 22. Brief facts are,the assessee had entered into a power project agreement with GSEB and Essar Steels Ltd., under which the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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