TaxTMI 
TaxTMI 
2012 (12) TMI 189
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....Appeals) is not called for, same is liable to be deleted. 2. That while determine and disallowing the expenditure at Rs. 7414230/- u/s 14A of I.T. Act, the authorities below have not appreciated, that the appellant has not incurred any amount of expenditure in relation to the income which does not form the part of the total income under the I.T. Act., all the investment alleged to be made with share holdings were not made in the year under consideration and is fully explained being invested out of the accumulated profit and also out of the interest free deposits with the Co., the provision of section 14A of I.T. Act is not applicable in the case of appellant, addition sustained on this score is liable to be deleted. 3. That authorities below have completely ignored that no expenditure has been incurred in relation to the income which does not form the part of total income, the AO has wrongly determine and worked out the amount of expenditure at Rs. 7414230/- in relation to the income which does not form the part of the total income which is incorrect and is against the law. Provisions of section 14A of Income Tax is not applicable in the case of appellant. 4. That the Authoritie....
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....allowed by the AO without properly appreciating the facts of the case, especially that the common funds are utilized and there is no scientific method to apportion the other income unit wise except making reliance in the proportions of sales between two units. 2. The order of the ld. CIT(A) being erroneous in law and on facts deserve to be quashed and that the order of AO to be restored. 3. The appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal." 4. First we will deal with ITA No.42/Agr/2012 filed by the assessee. The first, second and third grounds of assessee's appeal are pertaining to disallowance of interest expenditure of Rs. 74,14,230/- by invoking the provisions of section 14A of the Income tax Act, 1961 ('the Act' hereinafter). 5. The brief facts of the case are that the assessee is engaged in the business of manufacturing of Ghee and Milk products. During the assessment proceedings, the Assessing Officer (A.O.) noticed that the assessee has invested Rs. 13,00,00,000/- in shares to earn the exempt income. After considering the assessee's submission, the A.O. was of the view that section 14....
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.... which is sufficient to cover the investment of Rs. 13 crores made towards purchase of shares. We find that the issue is squarely covered by the order of I.T.A.T., Agra Bench in favour of the assessee in assessee's own case for A.Y. 2007-08 in ITA No.142/Agr/2011. The relevant finding from the order of I.T.A.T. (supra) is reproduced as under :- 6. We have heard the ld. Representatives of the parties and records perused. We find that the assessee was having own capital reserves and surplus of Rs. 64,24,17,895/-. The claim of the Ld. Authorised Representative was that the deferred tax liability of Rs. 2,80,56,200/- is also assessee's own capital or interest free fund is not acceptable as this liability pertains to the business. The net available own capital available with the assessee as on 31.03.2007 was Rs. 64,24,17,895/- against investment in shares of Rs. 13 Crores. The I.T.A.T., Agra Bench in the case of M/s Lala Ram Finance & Investment Co. Pvt. Ltd. vs. DCIT in ITA No.260 & 261/Agr/2011 order dated 08.06.2012 has held as under :- "8. We have heard the ld. Representatives of the parties and records perused. We find that the case of Assessing Officer is disallowance of....
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....d discussions made by the I.T.A.T., Mumbai Bench in its order in the case of H.P. Shah & Co. ITA No.3694/Mum/2006 order dated 15.01.2009. Since in the case under consideration, the assessee was having sufficient own funds to make investment in shares, under the circumstances, the disallowance is not warranted. We accordingly delete the addition of Rs. 21,94,877/-. 10. As regards the judgement of Bombay High Court in the case of Godrej & Boyce vs. DCIT, 328 ITR 81 on which the CIT(A) has relied upon, we notice that there is no dispute that Rule 8D is applicable from A.Y. 2008-09 but the issue under consideration is not whether Rule 8D is applicable from A.Y. 2008-09 or not. The issue under consideration is to decide the issue considering the facts of the case which has been decided as above. 11. As regards various decisions cited by the A.O. & CIT(A), the ratio of decisions have been considered by the I.T.A.T. in its order for A.Y. 2007-08 in assessee's own case (supra). Therefore, those decisions do not help the Revenue. Further objection of the ld. Departmental Representative that at the time of investment in shares the assessee has failed to furnish necessary evidence of nexus....
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....cles used for business of hire in view of the provisions of Entry No.III(ii)E(1-A) of Part I of Appendix I to the Income-tax Rules, 1962, and since the assessee used the vehicles for its own business of transporting its goods only 30 per cent. depreciation was allowable." 15. Respectfully following the above order of the Hon'ble High Court of M.P., the order of the CIT(A) is confirmed. 16. Ground no.5 of the assessee's appeal is in respect of disallowance of deduction under section 80-IB of the Act. This is a common ground raised vide ground no.1 of Revenue's appeal and ground no.5 of assessee's appeal which is pertaining to deduction under section 80-IB of the Act. During the assessment proceedings, the A.O. noticed that certain items of other income on which the assessee is not entitled to deduction under section 80-IB of the Act. The A.O. noticed that the assessee is not entitled for deduction under section 80-IB of the Act on duty draw back to an amount of Rs. 95,48,466/- which is against the sale made from Dholpur Unit. The A.O. further noticed that the assessee was having two units i.e. Dholpur unit and Kosi Unit. The assessee utilized common funds to earn income. The A.O. ....
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....inally had claimed deduction of Rs. 94,53,191/- u/s 80IB of the Act in the case of Dholpur Unit. However, during the course of assessment proceedings, this claim was brought down to Rs. 69,01,085/-. But the AO has allowed the claim of the assessee at Rs. 51,74,202/-. The disallowance of duty draw back amounting to Rs. 95,48,466/- while determining the deduction u/s. 80IB by the AO, is not in dispute. However, what is in dispute, is the action of the AO wherein he has apportioned the total of "other income" of the group on the turnover basis. The total other income of the group is Rs. 2,68,62,430/-. Out of this other income of Dholpur Unit, on which the assessee is claiming deduction u/s. 80IB is Rs. 1,09,60,574/-. The assessee has himself deducted the sum of Rs. 95,48,466/- received on account of duty draw back while calculating the deduction u/s 80IB. I intend to agree with the assessee that once the assessee is maintaining separate profit and loss account for the unit on which 80IB is available unless and until a case is made out by the AO that the other income appertaining to Dholpur unit on which deduction u/s. 80IB is available has been diverted to the other unit, the claim ma....
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....iscellaneous receipts and scrap sales of which details have been reproduced above. The details of insurance claim is given at page no.47 of the assessee's Paper Book. on perusal of such details, we notice that the insurance claim of Rs. 31,232/- is in respect of claim received against insurance claim of car and other items of insurance claim is in respect of goods damaged in transit. We notice that insurance claim in respect of receipt/income on goods damaged in transit is eligible for deduction under section 80-IB as held by Hon'ble Delhi High Court in the case of CIT vs. Sportking India Limited, 183 324 ITR 283 (Delhi). We, therefore, following the above judgement of Delhi High Court, allow the claim of the assessee in respect of insurance of damaged goods in transit. However, insurance claim of car of Rs. 31,232/- is rightly disallowed. The A.O. is directed to allow deduction under section 80-IB of the Act of Rs. 4,63,716/- in respect of insurance claim of goods damaged in transit. Other Charges - Rs. 14,903.17 21. The assessee furnished the details of other charges which is appearing in assessee's Paper Book from page nos.48 onwards. On perusal of details, we notice that thes....
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....e assessee's appeal is partly allowed. 26. Ground no.6 is in respect of addition of Rs. 1,00,000/- on account of interest attributable to the payment of Income Tax. The A.O. noticed that the assessee paid Rs. 2,21,31,192/- on account of Income Tax. The A.O. further noticed that the loan amount has increased from Rs. 38.11 crore to Rs. 67.94 crore. Therefore, interest burden has been increased from Rs. 3.49 crores to Rs. 6.86 crores. The A.O. drew presumption that the assessee has used the borrowed fund for the purpose of payment of Income Tax which is not allowable. In absence of cash flow, the A.O. made lump sum addition of Rs. 1,00,000/- by disallowing interest expenditure and added to the total income on account of interest attributable to the payment of Income Tax. The CIT(A) confirmed the action of A.O. 27. We have heard the ld. Representatives of the parties and records perused. In the light of detailed discussions made while deciding the ground nos.1 to 3, we find that the assessee was having sufficient own funds, therefore, such lump sum disallowance on presumption basis is not warranted. Therefore, the same is deleted. 28. Ground no.7 is in respect of addition of....