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TMI Blog2021 (10) TMI 1455X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure particularly when the assessee has not made any new investment except meager amount during the year under consideration that too in the subsidiary company which has not yielded any dividend income. Hence, the disallowance made by the AO on account of interest expenditure u/s 14A is deleted. Disallowance of deduction u/s 10B - Tribunal has noted that the Revenue has accepted the miscellaneous income of compensation as part of eligible profit for the purpose of computing the deduction u/s 10B - the matter was set-aside to the record of the Assessing Officer for verification of the nature of income and then allow the claim. To maintain the rule of consistency, we follow the earlier order of the Tribunal and set-aside the issue to the record of the Assessing Officer for computing the deduction u/s 10B of the Act in terms of directions as given by the Tribunal for AY 2007-08. Reduction of the export turnover on account of the amount have not received in foreign currency - We find that if any sum is reduced from export turnover then the same is also required to be reduced from total turnover because the total turnover comprises of export turnover and non-export turnover. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions is made. Therefore, this ground of the assessee's appeal stand dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to add, alter, amend, delete, any/all grounds of appeal either before or at the time of the hearing of the appeal. 3. Ground no. 1 is general in nature and does not require any specific adjudication. 4. Ground no. 2 is disallowance made by the Assessing Officer u/s 14A of the Income Tax Act, 1961(in short 'the Act') on account of interest expenditure which was confirmed by the Ld. CIT (A) with some directions to the Assessing Officer. 5. During the course of assessment proceedings, the Assessing Officer noted that the assessee has made investment in shares which may yield tax free income in the form of dividend, capital gain, etc. which did not form part of the income of the assessee. The Assessing Officer observed that the expenditure is required to be disallowed under the provisions of sections 14A of the Act and accordingly asked the assessee to provide the details of exempt income. In response, the assessee submitted that during the year under consideration, the assessee has earned exempt income in the shape of dividend of Rs. 14,87,335/-, which is shown in the balance sheet under Schedule-14. The assessee further claimed that it has not incurred any direct or indire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds for the purpose making investment in shares. He has further contended that the during the year under the consideration, the assessee has not made any fresh investment except as sum of Rs. 19.60 Lakhs that too in the subsidiary company not yielding any dividend income. Therefore, when the assessee has it's own non-interest bearing fund more than sufficient to make the investment then the disallowance made by the Assessing Officer on account of interest expenditure is not justified and the same is liable to be deleted. In support of his contention, he has relied upon the decision of the Hon'ble Supreme Court in the case of South Indian Bank vs CIT 130 Taxmann.com 178, wherein, the Hon'ble Supreme Court has held that in absence of separate account for investment, the tax free income investment made in shares should be considered to have been made out of interest free funds which were substantially more than the investment made and therefore, the interest paid by the assessee on its borrowed money should not be considered to be expenditure incurred in relation to tax free income and consequently there should be no disallowance u/s 14A of the Act. Thus, the Ld. Sr. Counsel has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has given the details of the secured and unsecured loan which were taken for the specific purpose and acquiring assets as well as business purposes of the assessee and therefore, the expenditure on account of interest cannot be held to be attributable for earning the dividend income. Accordingly, in the facts and circumstances of the case when the assessee is having sufficient interest free own funds in the shape of reserve and surplus then no disallowance u/s 14A is called for on account of interest expenditure particularly when the assessee has not made any new investment except meager amount of Rs. 19,60,000/- during the year under consideration that too in the subsidiary company which has not yielded any dividend income. Hence, the disallowance made by the Assessing Officer of Rs. 7,11,740/- on account of interest expenditure u/s 14A is deleted. 11. Ground no.3 is regarding the disallowance of deduction u/s 10B of the Act to the extent of Rs. 13,48,416/- which is wrongly mentioned in the ground as Rs. 18,56,215/-. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed deduction/exemption u/s 10B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities below. 15. We have considered the rival submissions as well a material available on record. At the outset, we noted that this Tribunal in assessee's own case for the AY 2007-08 in ITA No. 5793/Del/2010 vide order dated 20.11.2018 has considered an identical issue in paras 3 to 6 as under:- "3.0 At the outset, the Ld. Authorised Representative submitted that while the matter was being decided by the ITAT in the first round i.e. vide order dated 15.01.2016, the assessee had specifically referred to the details of the miscellaneous income for both the undertakings, details of the compensation income and had also filed a chart showing history of deduction claimed under section 10B in respect of miscellaneous income and compensation income and treatment accorded by the Revenue and had also submitted that in none of the preceding assessment years, disallowance has ever been made. He also referred to the order of assessment passed u/s 143(3) of the Act for the immediately preceding assessment year 2006-07, wherein the AO had himself accepted that miscellaneous income and compensation income was profit derived from the undertaking as no disallowance was made. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of both the parties for the issue being restored to the file of the AO for verification, we restore the issue to the file of the AO with a direction to allow the claim of the assessee after due verification and also after duly appreciating the fact that similar income/s had been held to be includible in eligible profits in the preceding assessment years." 16. Thus, the Tribunal has noted that the Revenue has accepted the miscellaneous income of compensation as part of eligible profit for the purpose of computing the deduction u/s 10B of the Act. However, the matter was set-aside to the record of the Assessing Officer for verification of the nature of income and then allow the claim. To maintain the rule of consistency, we follow the earlier order of the Tribunal and set-aside the issue to the record of the Assessing Officer for computing the deduction u/s 10B of the Act in terms of directions as given by the Tribunal for AY 2007-08. 17. As regards the reduction of the export turnover on account of the amount have not received in foreign currency we find that if any sum is reduced from export turnover then the same is also required to be reduced from total turnover because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recipient to be taxed in India. He has further submitted that the Assessing Officer has not given proper opportunity to the assessee being heard and to explain the nature of payment. The payment is in the nature of fee for participation in various books fares and exhibition held outside India would not be liable for TDS u/s 195(2) of the Act being no service received by the assessee company and the same is covered under Article-7 of DTAA between India- UK and India USA. 22. On the other hand, the Ld. DR has submitted that the Assessing Officer has recorded in the assessment order that the assessee has not even furnished the details regarding the nature of payment and TDS liability. He has relied upon the orders of the authorities below and submitted that the Ld. CIT (A) has already granted substantial relief where the amount paid by the assessee in foreign currency for purchase of spares, general charges and bank charges are excluded from the disallowance. 23. We have considered the rival submissions as well a material available on record. At the outset, we note that the Assessing Officer has made the disallowance of Rs. 1,15,64,807/- u/s 40(a)(i) of the Act for want of TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel has submitted that the disallowance made by the Assessing Officer and the confirmed by the Ld. CIT (A) is unjustified and the same is liable be deleted. 28. On the other hand, the Ld. DR has submitted that the assessee has failed to substantiate its claim by producing any evidence before the authorities below. He has relied upon the orders of the authorities below. 29. We have considered the rival submissions as well as material available on record. So far as the interest expenditure incurred on the secured loans is concerned, it is matter of record that the loan is taken for specific purpose and utilized for specified the assets. Therefore, the expenditure incurred on secured loans which is not utilized for capital working in progress cannot be attributed towards the capital work in progress. However, it is a matter of fact to be verified whether any unsecured loan is taken by the assessee for specific purpose being part of the capital working in progress. As regards the unsecured loans, it is primary onus of the assessee to prove that the unsecured loan is not utilized for the expenditure incurred towards capital work in progress. In the absence of these specific details, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law; 3(b) That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of Rs. 4,30,687/- towards exemption u/s 10AA by calculating the profits derived from export of article or things after reducing other incomes; 3(c) That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of Rs. 4,30,687/- towards exemption u/s 10AA by not treating the other incomes earned from export activities as export turnover but treating the same as total turnover; 4(a) That the Ld. Commissioner of Income Tax (Appeals) has further gone wrong in disallowing a sum of Rs. 26,62,862/- [out of Rs. 47,09,848/- towards payment made in foreign currency; (b) That the Ld. Commissioner of Income Tax (Appeals) has further gone wrong in disallowing a sum of Rs. 26,62,862/- by presuming that the provisions of TDS as required u/s 195(2) read with section 40(a)(i) has not been complied with by the assessee company. 5. That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of Rs. 14,41,183/- towards proportionate interest on capital work in progress; 6. That the appellant reserves the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3(e) That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of Rs. 56,16,135/- towards provision for doubtful debts [section 10AA] on account of rate of net profit to sale; 4(a) That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowance a sum of Rs. 1,03,71,827/- towards leave encashment in light of section 43b(f) of the IT Act 1961; 4(b) That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in ignoring the fact that there are many cases where in it has been held that that leave encashment would be allowed on accrual basis; That the appellant reserves the right to add, alter, amend, delete, any/all grounds of appeal either before or at the time of the hearing of the appeal. 31. The majority of these grounds are common to the grounds for AY 2010-11. We will discuss in brief each of the ground for these two Assessment Years. 32. Ground No. 1 is general in nature and does not require any specific adjudication. 33. Ground No. 2 is regarding the disallowance made u/s 14A, which is common for both the assessment years and identical to the AY 2010-11. Accordingly, in view of our finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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