TaxTMI 
TaxTMI 
2014 (5) TMI 81
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.... ITA No.2627/Ahd/2008 for AY 2005-06. The assessee has raised following grounds of appeal:- 1. The Learned Commissioner (Appeals) failed to understand the facts and circumstances of the case. 2. The Learned Commissioner (Appeal) erred in confirming the non-allowance of claim of accrued interest Rs.38,33,185/- payable to APSEB as per order of the city civil court. 3. The Learned Commissioner (Appeal) erred in confirming the disallowance of Rs.3,62,160/- being administrative expenses u/s.14A of the Act, considering them incurred in relation to exempted dividend income. 4. The appellant prays for appropriate relief on the above grounds of appeals. 5. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify. 2.1. Apart from the above grounds, the assessee has also raised an additional ground, which reads as under:- Additional ground of appeal Appellant craves leave to raise this additional ground of appeal before the Hon'ble ITAT. This is a ....
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....he Tribunal has recorded a finding that the issue is decided against the assessee, this ground of the assessee is, therefore, rejected. 6. Ground No.3 is against the confirmation of disallowance of Rs.3,62,160/- being administrative expenses u/s.14A of the Act. 6.1. The ld.counsel for the assessee submitted that this issue is decided in favour of assessee by the Hon'ble Coordinate Bench in ITA No.1476/Ahd/2006 pertaining to AY 2002-03. 6.2. On the contrary, ld.Sr.DR supported the order of the ld.CIT(A). The ld.Sr.DR has relied on the decision of Hon'ble Calcutta High Court in the case of Dhanuka & Sons vs. CIT reported at (2011) 12 taxmann.com 227 (Cal.). 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Coordinate Bench in ITA No.1476/Ahd/2006(supra) vide para-16, it has been held that since the assessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest bearing funds, disallowance....
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....n the contrary, ld.counsel for the assessee fairly submitted that under the identical facts, the Hon'ble Coordinate Bench in ITA No.2002/Ahd/2007 for AY 2003-04 (assessee's cross-appeal), dated 11/02/2011, the issue has been restored back to the file of AO. 12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Coordinate Bench in ITA No.2002/Ahd/2007 for AY 2003-04 vide para-56 has restored this issued back to the file of AO. The Hon'ble Tribunal in para-56 has given the following direction:- "56. We have heard the parties and carefully perused the material on record. In our considered view the issue regarding liquidated damages requires a fresh look by the AO. He would allow the claim on actual basis. Wherever the other party has claimed liquidated damages against the assessee in the current year Asst.Year it should be allowed. The assessee would submit individual account and the AO will examine such accounts and take a decision as per law. This ground is allowed but for statistical purposes.....
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....pported the order of the ld.CIT(A). Ld.counsel for the assessee pointed out that this issue has been set aside to the file of AO by the Hon'ble Coordinate Bench in ITA No.12/Ahd/2008 for AY 2004-05. 15.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Tribunal in ITA No.12/Ahd/2008 for AY 2004-05 (Revenue's appeal in assessee's own case) vide order dated 11/12/2011 has restored the matter back to the file of AO by observing as under:- "76. Ground No.2 relates to deletion of a sum of Rs.6,43,000/- is provisions for warranty expenses. The assessee debited a sum of Rs.25,70,000/- in the P&L a/c. The AO disallowed warranty expenses for three months on proportionate basis as pertaining to the subsequent year. The ld.CIT(A) allowed the entire claim following the decision of ITAT, Bangalore in the case of Wipro Ge Medical System Ltd. vs. DCIT 81 TTJ 455. 79. We have heard th....
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....cessary. In the present case we notice that loan funds have decreased this year as compared to earlier years. Even though investments have increased from Rs.940.32 lacs to Rs.1008.51 lacs but such increase in investment cannot be linked to any borrowed funds this year as assessee has in fact not borrowed any additional fund this year. Prior to the decision of Hon.Supreme Court in the case of Hon'ble Supreme Court in S.A.Builders vs. CIT 288 ITR 1 (SC) onus was considered on the assessee to show the nexus between the interest free funds and investment on which no income is earned. After S.A.Builders case (supra) onus is considered shifted to the Revenue and AO has to show that interest bearing capital alone were invested in investment on which no income was earned. Hon. Supreme Court in the case of Munjal Sales Corporation vs. CIT (2008) 298 ITR 298 (SC) held where assessee had sufficient profits in the current year then interest free advances can be considered to be flowing from such profits. Hon'ble Bombay High Court in CIT vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) held that if there are fund available both interest free and interest bearing, then a presumption ....
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....interest paid on borrowed funds on the assumption that borrowed money has been used for acquisition of investment as on balance sheet date. As per AO the Company had made total investment to the extent of Rs.1008.51 lacs in the equity shares and Mutual funds. During the year the investment in shares and Mutual funds were increased from 940.32 lacs to Rs.1008.51 lacs. Out of this investment, to the tune of Rs.61 lacs, is made in subsidiary Companies namely Karamsad Investment Ltd. & Karamsad Holding Ltd. Since the assessee had purchased shares in those companies being sister concerns, the nature of investment is the same as in shares and Mutual Fund of other companies. The assessee company had earned dividend income of Rs.94.47 lacs during the year and has claimed as exempt under section 10(33). Invoking section 14A AO held that expenditure for earning exempted income cannot be allowed as deduction. Similarly, the AO identified that administrative expenditure which could have been incurred for handling the investment in shares and Mutual Fund. A part of such expenditure was considered attributable to investment made in sister concerns, the income therefrom was exempt under section 1....
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....ee could not prove the increase in the installed capacity. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the ld.CIT(A) is justified in deleting the disallowance. He drew our attention towards page No.163 of the paperbook, wherein it has been submitted by the assessee-company that it had set up new shed in which New Plant & Machinery installed for manufacturing of parts, which are used in manufacturing of Glass Lined Vessels/Reactors and are sold directly to the customers. Upto this year the company had no separate facility for the production of said parts. They were manufactured in the existing manufacturing facilities. By setting up new shed for manufacturing of parts the assessee-company has achieved higher production of Glass lined Vessels/Reactors and simultaneously reduced the cost of manufacturing of parts. Thus, the company has made expansion of its existing unit. In the annual report, the installed capacity in respect of manufacturing of parts has not been reported. In annual report, it is stated that, "The company has during the year expanded capacity by adding a new facility for manufacturing Glass Lined Parts & Compo....
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.... right of user only. Since, AY 1989-90, the user charges claimed as royalty have been allowed in the assessments, the rate of user charges is 1% of the sales during the year under consideration. TDS has been made in respect of royalty payments. As it is a recurring expenditure payable on the basis of sales and the appellant has not acquired any capital asset or permanent right, the payment of royalty is allowable as business expenditure. The Revenue has not controverted this fact by placing any material on record, therefore, we do not find any infirmity in the order of the ld.CIT(A), the same is hereby upheld. Thus, this ground of Revenue's appeal is rejected. 21. Ground No.8 is against the deletion of addition of Rs.1,04,889/- on account of arm's length price in respect of sale of material to associated concern. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) is not justified in deleting the addition. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the order of the ld.CIT(A) is justified. 21.1. We have heard the rival submissions, perused the material available on record and gone through the ord....
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....f Apollo Tyres Ltd. vs. Commissioner of Income-Tax reported in (2002) 255 ITR 273 and in the case of Commissioner of Income-Tax vs. HCL Comnet Systems and Services Ltd. reported in (2008) 305 ITR 409(SC), the Assessing Officer, could not have varied the Profit and Loss Account of the company duly audited and prepared in terms of the provisions contained in the Companies Act." 22.2. Therefore, respectfully following the judgement of Hon'ble Jurisdictional High Court, this ground of Revenue's appeal is dismissed. 23. Ground No.10 is against the direction of the ld.CIT(A) to the AO not to include provision for doubtful debts of Rs.44,74,000/-, provision for warranty expenses of RS.21,74,000/- and interest expenses of Rs.13,44,876/- being expenses related to earn exempt income for the purpose of computation of book profit u/s.115JB of the Act. The ld.Sr.DR supported the order of the AO and placed reliance on the decision of the Hon'ble High Court of Delhi in the case of CIT vs. ILPEA Paramount (P.) Ltd. reported at (2010) 192 Taxman 65 (Delhi). On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and relied on the decision of Hon'ble Coordinate Bench ....
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....upra) has held that the provisions of section 14A cannot be imported into while computing the book profit u/s.115JB of the Act inasmuch as clause (f) of Explanation to Section 115JB refers to the amount debited to the profit & loss account which can be added back to the book profit while computing book profit u/s.115JB of the Act. In this connection, the Hon'ble Coordinate Bench placed reliance on the decision of ITAT Delhi Bench in the case of Goetze (India) Ltd. vs. CIT (2009) 32 SOT 101 (Del), wherein it has been held that provisions of sub-sec.(2) & (3) of section 14A cannot be imported into clause (f) of the Explanation to Section 115JA of the Act. 23.3. So far as provision for warranty is concerned, ld.CIT(A) has given a finding that there liabilities are ascertained, therefore book profit would not be increased. 23.4. After considering the totality of the facts and the decisions of the Coordinate Benches, we do not find any infirmity in the order of the ld.CIT(A), the same is hereby upheld. Thus, this ground of Revenue's appeal is dismissed. 24. Ground Nos.11 & 12 are general in nature which require no independent adjudication. 25. In the result, Revenue's appeal....