Appeal partially allowed on adjustments, interest income, disallowance, tax treatment.

The appeal challenged the final assessment order for the assessment year 2013-14. The Tribunal partly allowed the grounds related to adjustments towards interest of outstanding receivables from the Associated Enterprise, classification of interest income, disallowance under section 14A, and treatment of income tax recoverable. The initiation of proceedings under section 271(1)(c) was dismissed as premature. Overall, the appeal was partly allowed.

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Issues involved:
1. Challenge to final assessment order under section 143(3) r/w section 144C(13) for the assessment year 2013-14.
2. Addition made on account of adjustment towards interest of outstanding receivables from Associated Enterprise (AE).
3. Assessment of interest income under the head income from other sources instead of income from business.
4. Disallowance made under section 14A r/w rule 8D.
5. Disallowance of provision for income tax recoverable from Gujarat State Electricity Board and Essar Steels Ltd.
6. Initiation of proceedings under section 271(1)(c) of the Act.

Analysis:
1. The appeal challenges the final assessment order for the assessment year 2013-14. Ground no.1 is not adjudicated as it is general in nature. Ground no.6 is dismissed as not pressed. The assessee challenged the addition made on account of adjustment towards interest of outstanding receivables from its Associated Enterprise (AE), Essar Africa Holding Ltd. The Transfer Pricing Officer made an adjustment of Rs. 8,90,803 based on the Bloomberg database rate of 6.56%. However, the Tribunal directed the Assessing Officer to compute the interest at LIBOR plus 0.5% as per the submissions made by the assessee. This ground was partly allowed.

2. The assessee challenged the decision of assessing interest income of Rs. 27,47,80,861 under income from other sources instead of business income. The Tribunal directed the Assessing Officer to assess interest earned on margin deposit as business income and interest on ICDs and bank deposits as income from other sources. This ground was partly allowed.

3. The assessee challenged the disallowance made under section 14A r/w rule 8D amounting to Rs. 1,32,89,000. The Tribunal directed the Assessing Officer to restrict the disallowance to the exempt income earned during the year, citing legal precedents. It was also clarified that while computing book profit under section 115JB, no adjustment can be made by way of disallowance under section 14A read with Rule 8D. This ground was partly allowed.

4. The challenge was against the disallowance of provision for income tax recoverable from Gujarat State Electricity Board and Essar Steels Ltd. The Tribunal held that the income tax recoverable has to be treated as income of the assessee under the normal provisions of the Act but cannot be included while computing book profit under section 115JB. This ground was partly allowed.

5. The challenge was against the initiation of proceedings under section 271(1)(c) of the Act, which was dismissed as premature. Overall, the appeal was partly allowed.

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