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TMI Blog2024 (2) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... dumb documents having no evidentiary value cannot be taken as sole basis for determination of undisclosed income of the assessee. If the Department of Revenue wants to make use of dumb documents, then the onus on the Revenue Department to collect cogent corroborative evidences. The Hon ble High Court of Allahabad in the case of Kumar Trading Co. [ 2007 (9) TMI 284 - HIGH COURT OF JUDICATURE AT ALLAHABAD] held that, it is settled principle of law that if the Revenue wants to rely upon the entries of the document, seized from the premises of third party, the burden lies upon the Revenue Authorities to prove the genuineness and authenticity of the said entries to connect the said entry with the dealer. Further, it is found that the person from who s possession the seized document is recovered, was not subject to the cross examination of the assessee and no opportunity of cross examination has been given to the assessee. Therefore, for the detailed discussion made above, in our considered opinion, the Ld. AO as well as the Ld. CIT(A) have committed error in making the addition u/s 69 of the Act which deserves to be deleted. Accordingly, the ground No.2 of the assessee is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Sh. S. S. Naagar, CA For the Respondent : Ms. Sapna Bhatia, CIT-DR ORDER PER YOGESH KUMAR U.S. , JM: The above captioned appeals filed by Assessee as well as Revenue against the order of Learned Commissioner of Income Tax (Appeals)-30, New Delhi [ Ld. CIT(A) , for short], dated 17/09/2020 for Assessment Years 2014-15 2015-16 respectively. Grounds taken in these appeals are as under: ITA No. 145/Del/202 for A.Y. 2014-15 (Assessee) 1(i) That on facts and circumstances of the case, the Ld. CIT(A) was not justified in upholding disallowance to the extent of Rs. 81,01,633/- u/s 14A read with Rule 8D of the Income tax Act, 1961 even though the assessing officer has not recorded requisite satisfaction in terms of provision of section 14A(2) (3) of the Act. (ii) That in absence of recording of valid satisfaction u/s 14A(2) (3) which is sine qua non for invoking Rule 8D, the consequential disallowance is illegal and arbitrary. (iii) That the entire investment being out of interest free funds and in absence of incurring of any expenses in relation of exempt income or any nexus between borrowed funds and investments yieldin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecording of valid satisfaction u/s 14A(2) (3) which is sine qua non for invoking Rule 8D, the consequential disallowance is illegal and arbitrary. (iii) That the entire investment being out of interest free funds and in absence of incurring of any expenses in relation of exempt income or any nexus between borrowed funds and investments yielding exempt income, the disallowance of Rs. 60,27,158/-is on mechanical basis and not sustainable under the law. 2(i) That on the facts and circumstances of the case, the Ld. CIT(A) was not justified in rejecting the claim of education cess of Rs. 80,19,858/- even though same is eligible deduction under the provisions of the Income Tax Act, 1961. (ii) That in absence of any prohibition or restriction in the Income tax Act regarding claim of education cess which does not form part of income tax as referred u/s 40(a)(ii), the non acceptance of claim is on arbitrary basis and without justification. (iii) That education cess paid during the year being an eligible deduction u/s 37(1) of the Act and also liable to adjusted from book profit u/s 115JB, the rejection of claim is illegal and not in accordance with law. (iv) That th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition to Rs. 60,27,000/- (to the extent of dividend income) as against Rs. 5,08,44,000/-, made u/s 14A by the AO, without appreciating the detailed reasons given in the assessment order. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 14,65,42,563/- (incentive under FPS/ FMS of Rs. 14,65,42,563/- as capital receipt,) without appreciating the detailed reasons given in the assessment order. On similar issue in the case of M/s Nitin Spinners Ltd., Department has filed SLP in Hon ble Supreme Court. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 26,33,12,680/- (interest subsidy under TUFS of Rs. 26,33,12,680/- as capital receipt,) without appreciating the detailed reasons given in the assessment order. On similar issue in the case of M/s Nitin Spinners Ltd., Department has filed SLP in Hon ble Supreme Court. 4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,68,18,318/- (interest subsidy under RIPS of Rs. 2,68,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Amount TUFF subsidy 31,67,12,369/- RIP subsidy 4,70,52,567/- FPS/FMS subsidy 18,96,23,522/- Disallowance u/s 14A 6,10,36,000/- Undisclosed investment 1,52,45,000/- Total additions under normal provisions 62,96,69,458/- Under book profit u/s 115JB of the IT Act. Particulars Amount TUFF subsidy 31,67,12,369/- RIP subsidy 4,70,52,567/- FPS/FMS subsidy 18,96,23,522/- Total additions under normal provisions 55,33,88,458/- Further, setoff of business losses and unabsorbed depreciation was reduced from Rs. 1,11,55,93,392/- as claimed in return of income of Rs. 94,97,62,507/-. 4. During the assessment proceedings, the assessee claimed that education cess was not deducted out of total income, which should be considered as an allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.) Ltd. (ITA No.502/Del/2013) and submitted that notional disallowance u/s 14A r.w.r 8D(2)(iii) has to be computed considering only investment from which exempt income is earned. 8. Per contra, the Ld. DR submitted that the Ld. CIT(A) erred in law and facts in restricting the addition to Rs. 81,01,633 as against Rs. 6,10,36,000/- made u/s 14A by the AO without appreciating the detail reasons given in the assessment order, therefore, sought for dismissal of Ground No.1 of the assessee and prayed for allowing the Ground No.1 of the Revenue. 9. We have heard the parties and perused the materials. It is the case of the assessee that the own interest free reserves are far more than the amount of investment, therefore, no disallowance u/s 14A r.w.r 8D(2)(ii) of the Rules should have been made with regard to the interest element. The assessee has also produced audited financial and the details are as under: Financial Year Share Capital Reserves Surplus Total Investment (Opening) Investment (Closing) 2013-14 2,314.87 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) while affirming the said addition held as under: 10.1. During the search proceedings an estimated uncompleted working was seized from the laptop of Mr. Vineet Agarwal employee of the appellant company obtaining details of certain land which was registered / to be registered in name of appellant company alongwith estimated cost of construction/development of said land. 10.2. The working as being prepared by the employer for estimating total project cost and bank funding required completing the project on the said land. The employee was using template of some other MIS to prepare the working of this project. The working was not in final shape as certain information still required to complete it; therefore, it was saved showing misleading information. 10.3. The investigation officer contended that the amount of Rs. 1,52,45,000/- as mentioned in the seized sheet pertaining to cash payments made to acquire the said land which was never accepted by Mr. Vineet Agarwal in his statements recorded during the search. 10.4. The investigating officer has not found any evidence in support of his contention that payments were made in cash to acquire the land. 10.5 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions:- i) Andaman Timber Industries vs. CCE, (Civil Appeal No.4228 of 2006). ii) R.W. Promotions P. Ltd. vs. ACIT (ITA 1489 of 2013) (Bom. HC). iii) Rajeshwar Singh Yadav vs. DCIT (ITA No.1909-1910/Del/2022). iv) Sree Trading Corporation vs. ITO (151 Taxmann.com 486) Telengana HC). 15. Per contra, the Ld. DR relying on the orders of the lower authorities sought for dismissal of assessee s ground. 16. We have heard the parties and perused the materials on record. During the search proceedings, from the laptop of Mr. Vineet Agarwal an employee of the assessee company an uncompleted working was seized, wherein details of certain land which was registered/to be registered in the name of Assessee Company along with estimated costs of construction/development of said land has been reflected. It is the case of the assessee that the working has been prepared by the employee for estimating total project cost and bank fund requirement in completing the project on the said land and the said employee was using the same template for some other MIS to prepare the working of the said project. 17. Admittedly, as mentioned in the assessment order, the said working seized fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Therefore, for the detailed discussion made above, in our considered opinion, the Ld. AO as well as the Ld. CIT(A) have committed error in making the addition u/s 69 of the Act which deserves to be deleted. Accordingly, the ground No.2 of the assessee is allowed and the subject addition sustained by the Ld. CIT(A) is deleted. 20. Ground No.3 is regarding allow-ability of claim of education Cess. Facts in brief that the assessee raised claim the education Cess as eligible business expenditure u/s 40(a)(ii) of the Act. The contention of the assessee that prohibition contained in section 40(a)(ii) of the Act is only with reference to payment of Income Tax and same does not apply to claim of education Cess paid along with Income Tax. The assessee also made reference to CBDT Circular No. F. No.91/58/66-ITJ(19) dated 18/05/1967 and the decision of M. M. Aqua Technologies Ltd. vs. CIT [2021] 129 taxmann.co. 145. The above contentions of the assessee has been negated by the Ld. CIT(A) on the ground that additional surcharge are part of income tax and as such the same is not allowable in terms of express provision of section 40(a)(ii) of the Act. 21. We have heard both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to s, 2 of the Finance Act 1963 it would lead to the result that income tax and super tax were to be charged in four different ways or at four different rates which may be described as (i) the basic charge or rate (in part I of the First Schedule); (ii) Sur- charge; (iii) special surcharge and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way the additional charges form a part of the income tax and super tax . The Hon ble Supreme Court, therefore, has decided the issue in favour of the revenue and held that surcharge and additional surcharge are part of the income tax. At this stage, it is pertinent to mention here that education cess was brought in for the first time by the Finance Act, 2004, wherein it was mentioned as under:- An additional surcharge, to be called the Education Cess to finance the Government s commitment to universalise quality basic education, is proposed to be levied at the rate of two per cent on the amount of tax deducted or advance tax paid, inclusive of surcharge. 22. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cess can t be allowed as an allowable expense of the assessee u/s 37(1), and accordingly the additional grounds of assessee in this regard are hereby dismissed . In view of the above settled position of law, we hold that the education Cess can t be allowed as an allowable expense, accordingly, we find no merit in Ground No. 3 of the assessee and the Ground No. 3 of the assessee is dismissed. 22. The Ground No. 2 of the Revenue is regarding claim of FPS/FMS as capital receipt received as per foreign trade policy in computing the total income of the assessee. Brief facts are that the assessee availed FPS/FMS subsidy in the form of export during the captioned Assessment Year, which was subject to the addition made by the A.O. The Ld. CIT(A) while deleting the addition relied on the Judgment of Hon ble Rajasthan High Court in the case of PCIT Vs. Nitin Spinners Ltd. wherein it was held that the subsidy has to be treated as capital in nature and is excludable from book profit u/s 115JB of the Act. The Ld. Counsel for the assessee submitted that the issue involved in Ground No. 2 of the Revenue is squarely covered in Assessee s own case for Assessment Year 2013-14 by the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m book profit under 115JB of the Act. 26. The Ld. Counsel for the assessee submitted that the issue regarding allow ability of claim of interest subsidy under TUFFS and RIPS have been decided by the Hon'ble High Court of Rajasthan in the case of PCIT Vs. Nitin Spinners Ltd. which has been confired by the Hon'ble Supreme Court by dismissing SLP filed by the Department. The Counsel for the assessee relied on following Judgments:- (i) PCIT Vs. Nitin Spinners Ltd. (116 Taxmann.com26) (Rajasthan High Court). (ii) PCIT Vs. Nitin Spinners Ltd. (130 Taaxmann.com 402)(S.C). 27. We have heard both the parties and perused the material available on record. The allow-ability of claim of interest subsidy under TUFFS and RIPS have been decided by the Hon'ble High Court of Rajasthan in the case of PCIT vs. Nitin Spinners Ltd. 116 Taxman.com 26 (Rajasthan High Court) wherein held as under:- 5. In its order, the ITAT took note of several previous Bench ruling as well as judgment of the Punjab and Haryana High Court in CIT v. Sham Lal Bansal [2011] 11 taxmann.com 396/200 Taxman 14 (Mag.) (Punj Har.). In Shyam Lal Bansal (supra) the Punjab and Haryana High Court observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received as capital stream and therefore, not taxable. 6. A similar view was taken by the Calcutta High Court in CIT v. Gloster Jute Mills Ltd. [2018] 96 taxmann.com 303/257 Taxman 512/[2019] 416 ITR 458. 28. By respectfully following the ratio laid down by the Rajasthan High Court (supra), we find no merit in the Ground No. 3 and 4 of the Revenue, accordingly, Ground No. 3 4 of the Revenue are dismissed. ITA NO. 146/DEL/2021 (ASSESSEE) ITA NO. 1929/DEL/2020 (REVENUE) (A.Y 2015-16). 29. The issues involved in the Appeals of the Assessee as well as the Revenue for Assessment Year 2014-15 are identical to the above appeals filed by the Assessee and the Revenue for the Assessment Year 2015-16. 30. The Ground No. 1 of the assessee is regarding disallowance made u/s 14A read with Rule 8D of the Act. The said issue has been already considered in Ground No. 1 of both the Revenue and the assessee in A.Y 2014-15, finding the parity the disallowance made under Rule 8D(2)(ii) are hereby directed to be deleted and we further direct the A.O. to compute the disallowance u/s 14A read with Rule 8D (2) (iii) of the Rules by considering only investment from each exempt inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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