TaxTMI 
TaxTMI 
2014 (12) TMI 974
X X X X Extracts X X X X
X X X X Extracts X X X X
....es in assessment year 2006-07 and 2007-08. In assessment year 2006-07, the assessee filed return of income on 29.11.2006 showing income of Rs. 1,58,69,445/-. The return was selected for scrutiny and assessed under section 143(3) of the Income Tax Act vide order dated 26.11.2008 and assessed accordingly. The assessment was reopened after recording reasons for re-opening of the assessment on 09.03.2011 and assessment was completed under section 143(3) read with Section 147 of the Income Tax Act on dated 30.11.2011 rejecting the claim of assessee for deduction under section 80IB of the Act in respect of subsidies credited to the expenses without showing separately as revenue receipts. The assessee raised the objections before Assessing Officer which were disposed of by the Assessing Officer vide letter dated 14.11.2011. The Assessing Officer had observed that the assessee had claimed deduction under section 80IB on account of freight, insurance and interest on working capital subsidies which was not permissible in view of the judgements of Hon'ble Supreme Court in the case of CIT vs Sterling Foods 237 ITR 579 (S.C) and of Hon'ble Punjab & Haryana High Court in the case of M/s ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... years challenging the re-opening of the assessment before the Tribunal. 7. The ld. counsel for the assessee reiterated the submissions made before authorities below and referred to the original assessment framed in which the Assessing Officer, after elaborate discussion allowed the claim of assessee for deduction under section 80IB in respect of Unit-I and Unit-II at Samba in assessment year 2006-07 and also made part disallowance. He has also submitted that the same decisions which are now referred to in the reasons recorded for re-opening of the assessment have already been considered by the Assessing Officer in original assessment orders. He has referred to the replies filed by assessee at original assessment stage in assessment year 2006-07 and stated that complete facts were disclosed to the Assessing Officer at assessment stage, therefore, it is a clear case of change of opinion for re-opening of the assessment which is not permissible in law. He has referred to reply of the Assessing Officer dated 14.11.2011 in which Assessing Officer admitted it to be a case of change of opinion. He has relied upon same decisions which were relied upon before the Assessing Officer and 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iated Stone Industry Ltd., 224 ITR 560 held that the assessee shall have to disclose only the primary facts. 10. Hon'ble Delhi High Court in the case of CIT Vs Orient Craft Ltd. 354 ITR 536 held as under Held, dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income "on going through the return of income "filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Officer did confirm the apprehension about the harm that a less strict interpretation of the words "reason to believe" vis-a-vis an intimation issued under section 143(1) could cause to the tax regime. There was nothing in the reasons recorded to show that any tangible material had come into the possession of the Assessing Officer subsequent to the issue of the intimation. The notice reflected an arbitrary exercise of the power conferred under section 147. 11. Hon'ble Delhi High Court in the case of CIT V Atul Kumar Swami 362 ITR 693 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e result of a failure of the assessee to fully and truly disclose all materials facts necessary for assessment. There is a difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts fully and truly. It is only in the latter case that the Assessing Officer would be entitled to proceed under Section -147. Held, allowing the petition, that the Assessing Officer had not recorded the failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment year 1997-98. What was recorded was that the petitioner had wrongly claimed certain deductions which he was not entitled to. The reassessment proceedings initiated in the year 2004 were not valid. 14. Considering the above legal propositions decided in the above cases, it is clear that AO is not justified in reopening the assessment on mere change of opinion. 15. In this case, the original assessment order in assessment year 2006-07 was passed under section 143(3) of the Act vide order dated 26.11.2008 (PB-19) the Assessing Officer considered the claim of assessee under se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid assessment year which have been credited to respective expenditure accounts. By crediting the subsidies to the expenses account, without showing them separately as revenue receipts, the assessee has, in effect, included these subsidies in profits derived from business for the said assessment year and has claimed deduction u/s 80IA/IB on these receipts. The details of these subsidies are as follows : Unit-I, Samba DG sets Rs.355323/- credited to DG set account Freight inward 1657502/- credited to freight inward account Insurance 461800/- credited to insurance account Interest of WC 1215795/- credited to interest of WC account ISO 9001-2000 certification 24996/- credited to ISO 9001-2000 account Total 37 1541 6/- Unit II, Samba DG sets 2500000/- credited to DG set account Freight inward 4401087/- credited to freight inward account Insurance 1453800/- credited to insurance account Interest of WC 1290372/- credited to WC account Total 9645259/- The assessee has, treated the above receipts as profits derived from the business of the assessee and claimed deduction u/s 801A/1B. But....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omplete facts before Assessing Officer at assessment stage. No new material has come in existence and possession of the Assessing Officer for re-opening of the assessment. No tangible material was found against assessee and no fresh material came on record for re-opening of the assessment. The decisions which are referred to in the reasons for re-opening of the assessment i.e. decision of the Hon'ble Supreme Court in the cases of Sterling Foods and Liberty India Ltd. (supra) were already considered by Assessing Officer while passing the original assessment order. Therefore, it is clearly a case of change of opinion on the part of the Assessing Officer and therefore, on mere change of opinion, re-opening of the assessment could not be held to be valid and justified. 18. Considering the above propositions of law decided in various judgements quoted above, it is clear that Assessing Officer is not justified in re-opening the assessment on mere change of opinion. The ld. counsel for the assessee, on the basis of the replies filed before Assessing Officer at the original assessment proceedings has been able to prove that assessee disclosed all primary fact before Assessing Office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....averi Stock Brokers Pvt. Ltd. 291 ITR 500 held that, "It is explicit from the post amendment decisions cited above that once there are reasons for the Assessing Officer to believe, whether such reasons originate out of the record already scrutinized or otherwise, he shall be within his competence to initiate the re-assessment proceedings." Since in the assessment year under appeal, the Assessing Officer has processed the return under section 143(1) and has not formed any opinion on the material available on record, the above decision of the jurisdictional High Court squarely apply against the assessee and is binding on the subordinate Courts and the Tribunal. Therefore, it may not be a case of quashing of re-assessment proceedings in the year under consideration i.e. assessment year 2007-08, this ground is therefore against the assessee and is dismissed. Issue No. 2 (Deduction under section 80IB - Subsidies) 22. This issue of deduction under section 80IB on various subsidies arises in all the assessment years under appeals in the appeals filed by the assessee. Both the parties mainly argued in assessment year 2006-07 on this issue and stated that the order in that ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as under : "The brief facts of the case are that during the year under consideration are that the appellant had two Units located in Samba in the State of Jammu and Kashmir and all these Units being engaged in the manufacturing activity were eligible for claim of deduction under Section 80-IB of the Act. The Appellant had filed the return of income wherein the deduction U/s 80-IB was claimed in respect of the profits of both the two Units at Samba and such deduction was claimed based on the Report of the Chartered Accountant of the Appellant. It is submitted that the above Units are eligible for certain subsidies as per the Scheme of Government and in accordance with such scheme the appellant had booked various subsidies namely Freight Subsidy, Insurance Subsidy and Interest Subsidy in Unit-I, Samba & 'Unit-II, Samba. The Assessing Officer disallowed the deduction U/s 80-IB amounting to Rs, 33,60,093/- for Unit-I and Rs. 71,45,259/- for Unit-II by holding that the subsidy receipts are not eligible for deduction u/s 80-IB of the Act. At the outset it is submitted that all these receipts in the nature of subsidies and benefits are capita} receipts not chargeable to tax and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dies only as per the policy of the State Government of Jammu & Kashmir and there has been a very recent Judgment of the Hon'ble High Court in the case of Shri Balaji Alloys 333 ITR 335 wherein it has been held that the incentives in the nature of excise duty refund, interest subsidy, insurance subsidy etc, given, to units who have set up their production facility at the designated area in J&K are all capital receipts not chargeable to tax and accordingly we wish to submit that all these incentives received by the assessee may not be treated as taxable income of the assessee and therefore the disallowance of deduction under section 80IB does not arise at all The above Judgment has since been followed by the Hon'ble Amritsar Bench of the ITAT in the case of the same party for the AY 2006-07 vide their order 21.06.2011 In ITA No. 163/ASR/2010, Thus relying upon the above Judgment it is submitted that there cannot be question of disallowance of deduction U/s 80-1B of the Act. The total Income of the appellant is to be computed by excluding the above capital receipts and thereafter deduction U/s 80IB is to be allowed to the Appellant, Since, these receipts are not forming ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lculated. The Judgments are discussed hereunder : a. Dinesh Kumar v ITO in ITA No. 914,975 & 976/CHD/2007 (ITAT-CHD Bench) "However, considering that it is revenue in nature, direct the Assessing Officer to set off the expenses to which the freight subsidy directly linked, The same view has bean taken for the Assessment year 2001-02 in assessee's own case in ITA Mo, 1129/Chandi/2005 order Dated 4.5.2006." b. Shri Sunil Gupta vs. ITO no. ITA no 977/CHD/2007 (ITAT Chd Bench) "Having considered the rival submissions and the precedent relied upon by the assessee, we direct the Assessing Officer to recompute the deduction under section 8Q-IA/IB by excluding the sum of freight subsidy calculated after setting off .the expenses which are directly linked to it," The Hon'ble Bench has placed reliance on the Judgment of Shri Dinesh Kumar (supra) at the time of giving the said decision, Judgement of the Hon'ble ITAT, Chandigarh Bench in ITA no. 293/Chd/2010 in the case of same person above i.e Shri Sunil Gupta wherein it has been clearly held as under; The assessee during the year under consideration had received subsidy of Rs, 12,33,836/- as against expenditu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been held that only the net income (if any) on account of subsidies is to be considered for considering the claim of deduction U/s 80-IB. Thus in view of the above factual legal position there cannot be any disallowance u/sec 80-IB of the Act on both the factors stated above, Firstly on account of capital receipt as per the judgment of the Hon'ble J&K High Court and secondly if the same is treated as revenue receipt even in that case there cannot be any disallowance of deduction under section 80IB of the Act as the assessee has not claimed any deduction on account of the subsidies as there is no net income from the various subsidies received by the assessee." 25. The ld. CIT(Appeals), however did not accept contention of the assessee and dismissed this ground of appeal of the assessee. His findings in para 10 to 11 of the appellate order are reproduced as under : "10. I have considered the basis of addition made by the Assessing Officer and the arguments of the AR on the issue, The first issue to be decided here is that whether the amounts received by the appellant in the form of freight, insurance and interest subsidy are in the nature of capital or revenue receip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ack as expressed by the Chandigarh Bench of the Tribunal, Their Lordships have held as under:- "That duty drawback is specifically to reduce the cost of manufacturing the goods. The very scheme of duty drawback is framed and embodies in the statutory provisions in order to relieve the goods to be exported of the burden of customs duties and excise duties. As customs duties and excise duties are admittedly an integral part of the cost of production any receipts by way of reimbursement of such duties are inextricably linked with the' cost of production which has to be reflected in the profit and loss account of the assessee, Therefore, duty drawback was "derived from'1' the industrial undertaking and eligible for deduction u/s 80J of the Act." "Hon'ble Madras High Court, however, in the of CIT Vs. Jameel Leathers and uppers (2000) 216 ITR 97 (Mad) have expressed the view in favour of the revenue. Subsequently the same High Court has reiterated the view in the case of CIT Vs. Viswanathan & Co, (2003) 261 ITR 737 (Mad.)" It is evident that there are conflicting views available in respect of the issue involved in this case, Since the decision of Chandigarh of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;ble ITAT in the case of Dinesh Kumar Vs. ITO mentioned supra shows that detailed analysis of of allow ability of deduction under section in of it subsidy has been done and in process the judgement of Hon'ble jurisdictional High Court in the case of M/s Liberty India has also been It has been made amply clear that the subsidies in are revenue in nature and can not' be said to be 'derived from the eligible business. The decision of the Hon'ble ITAT relied upon by the Assessing Officer also concurs with the view expressed by Hon'ble Jurisdictional High Court on the issue, However the direction by the Hon'ble ITAT in the said case to the Assessing Officer to allow setting off of expenses on freight against the subsidy received seems to be contrary to the main judgement in the case, It is clear that the Hon'ble Jurisdictional High Court has held the freight subsidy to be revenue in nature as well as not eligible for deduction under section 80IA/80IB and therefore respectfully following the same, the action of the Assessing Officer in disallowing the deduction is confirmed." 26. The ld. counsel for the assessee reiterated submissions made before ld. CIT(Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vailable on record. The ld. counsel for the assessee placed on record copy of the scheme dated 14.06.2002 which is new industrial policy and other concessions for State of J&K and three types of subsidies are there which is under i.e.; i) 3% capital subsidy on working capital loan ii) 90% transport subsidy from designated rail head iii) 100% insurance premium on capital investment For the purposes of determining whether subsidy is a capital or revenue in nature, one has to go to the scheme of subsidy and purpose for which subsidies have been given. 30. It is not in dispute that the assessee obtained subsidies in question in respect of unit No. I and II Samba which falls in territory of State of J&K and the dispute of disallowance of deduction under section 80IB pertains to Samba unit only which is in the State of J&K. The scheme has not been disputed by the revenue department and the said scheme provides incentives to new industrial units and specially expansion of existing units generate employment through acceleration of industrial development in public interest. 31. The Hon'ble J&K High Court in the case of Shree Balaji alloys & others Vs CIT (supra) have d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Policy and Promotion) eloquently demonstrates the Central Government's intention in extending the incentives. The Government's objective, as conveyed by the Prime Minister at Srinagar on 19th April, 2003, was, for creation of one lac employment and self-employment opportunities in Jammu & Kashmir State. To achieve this purpose and objective, it was, inter alia, provided in the Central excise notifications that the exemptions contained in the notifications would be available only on production of certificate from General Manager of the concerned District Industry Centre to the jurisdictional Dy. CCE or the Asstt. CCE, as the case may be, to the effect that the unit had created required additional regular employment, which would not, however, include employment provided by the industrial units to daily wagers or casual employees engaged in the units. A close reading of the Office Memorandum and the amendment introduced thereto with para No. 3 appearing in the Central Excise Notification Nos. 56 and 57 of 11th Nov., 2002, makes it amply clear that the acceleration of development of industries in the State was contemplated with the object of generation of employment in the Stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ove, the finding of the Tribunal that the excise duty refund, interest subsidy and insurance subsidy were production incentives, hence revenue receipt cannot be sustained. The finding of the Tribunal that the incentives were revenue receipt is, accordingly, set aside holding the incentives to be capital receipt in the hands of the assessees.- CIT vs. Ponni Sugars & Chemicals Ltd. & Ors. (2008) 219 CTR (SC) 105 : (2008) 13 DTR (SC) 1 : (2008) 306 ITR 392 (SC) , Mepco Industries Ltd. vs. CIT (2009) 227 CTR (SC) 313 : (2009) 31 DTR (SC) 305 : 2009 (7) SCC 564 and Sahney Steel & Press Works Ltd. Etc. vs. CIT (1997) 142 CTR (SC) 261 : (1997) 228 ITR 253 (SC) relied on; Shree Balaji Alloys vs. ITO (2010) 127 TTJ (Asr) 129 : (2010) 33 DTR (Asr)(Trib) 67 set aside. 32. The ITAT Amritsar Special Bench in the case of Shri Vinod Kumar Jain Vs ITO & ors in ITA No. 65/2010 vide order dated 26.10.2012 considering the identical question, decided the issue in favour of the assessee by following judgement of the Hon'ble J&K High Court in the case of Shree Balaji alloys & Ors Vs CIT (supra) and held in para 4 to 6 as under : 4. We have considered the rival submissions carefully in the ligh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in such development, and (ii) generation of employment in the State of Jammu & Kashmir. 27 Amendment introduced to the Office Memorandum vide notification of November 28, 2003 of the Government of india, Ministry of Commerce and Industry (Department of industrial Policy and Promotion) eloquently demonstrates the Central Government's intention in extending the incentives. The Government's objective, as conveyed by the Hon'ble Prime Minister a Srinagar on April 19, 2003, was, for creation of one lakh employment and self-employment opportunities in Jammu and Kashmir State. 28 To achieve the purpose and objective referred to hereinabove, it was, inter alia, provided in the central excise notifications that the exemptions contained in the notifications would be available only on production of certificate from general manager of the concerned District Industries Centre to the jurisdictional Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, to the effect that the unit had created required additional regular employment, which would not, however, include employment provided by the industrial units to daily wagers or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of new assets cannot be viewed in isolation, to treat the incentives as production incentives, as held by the Tribunal, for the measure so taken, appears to have been intended to ensure that the incentives were made available only to the bona fide industrial units so that larger public interest of dealing with unemployment in the State, as intended, in terms of the Office Memorandum, was achieved. 34 The other factors, which had weighed with the Tribunal in determine the incentives as production incentives may not be decisive to determining the character of the incentive subsidies, when it is found, as demonstrated in the Office Memorandum, amendment introduced thereto and the statutory notification too that the incentives were provided with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the State by accelerated industrial development." 5. On the basis of the above observations, the Hon'ble J&K High Court has held as under : "35. For all what has been said above, the finding of the Tribunal on the first issue that the excise duty refund, interest subsidy and insurance subsidy were production incentives, henc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve been discussed and after discussing the objects of the policy held that the subsidies clearly of capital nature and set aside the orders of authorities below. The said order of the Chandigarh Bench is also on the same reasoning as have been adopted by Hon'ble J&K High Court in the case of Shree Balaji alloys & Ors Vs CIT (supra). The ld. counsel for the assessee has also filed catena of orders of ITAT, Chandigarh and Amritsar Bench in which by following the judgement of the Hon'ble J&K High Court in the case of Shree Balaji alloys & Ors Vs CIT (supra), the Tribunal had taken the same view in favour of the assessee. The copies of the said orders of different Benches of the Tribunal are placed on record in the name of M/s R.N. Knitfab Pvt. Ltd., M/s Fine Aromatics, M/s Hari Nagar Sugar Mills, M/s Singla Cables, Shri Amit Jain, Prop. M/s J.K. Polypack, M/s Shivam Metal Shaper Industries and M/s Trimurti Menthol Industries. In all the orders, it was held that different subsidies received by assessee are capital in nature and allowed deduction under section 80IB. Considering the above discussion and judgements cited above, it is clear that the various subsidies received by as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntention and would be entitled to set off of the expenses under the grant of above subsidies on various issues. Considering the above discussion, we set aside the orders of authorities below and direct the Assessing Officer to grant deduction to the assessee under section 80IB of the Act and delete and addition accordingly. This ground of appeal of the assessee is allowed in assessment year 2006-07. 39. The same issue arises in remaining appeals of the assessees, therefore for following the same reason for decision as have been given in assessment year 2006-07, the orders of authorities below in remaining assessment years under appeals are also set aside and it is directed that assessee would be entitled for deduction under section 80IB of the Act. 40. In the result, all the appeals of the assessee on the issue of deduction under section 80IB of the Act are allowed. Issue No. 3 (Issue of Section 80IB on inter unit investments - interest allocation on deemed basis) 41. This issue arises in assessment year 2008-09 and 2009-10 in assessee's appeal as well as in departmental appeal. In assessment year 2008-09, assessee raised ground No. 2 challenging the order of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....K). It was submitted that each of the unit maintained independent and separate bank account which also means that borrowings made by each unit of the company are separate and independent. Each unit is also maintaining separate and independent books of account. It was submitted that funds were transferred for the purpose of business, therefore, could not be questioned by the Assessing Officer and he has placed recourse on Section 80IA(8) and (10) wrongly for the purpose of making disallowance. There cannot be any disallowance under section 80IB on account of notional expenditure not incurred. The Assessing Officer has totally ignored the fact that there is no nexus between the amount borrowed by the Ludhiana unit and the amount invested by the unit with other inter-units. The assessee also made additional submissions before ld. CIT(Appeals) reiterating the same stand that all funds finalized from the bank were utilized for the fixed assets being land and building and machinery and all working capital borrowed has been utilized for the purpose of business. Therefore, addition is unjustified. 44. It was further submitted that Assessing Officer has erred in applying the rate of 12% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ticular Unit-I Unit-II Unit-III Total Capital from Ludhiana invested in units 5,43,18,787 5,93,58,704 4,04,08,147 15,40,85,638 Proportionate capital invested out of borrowed funds 30961708 3,38,34,461 2,30,32,644 8,78,28,813 Interest rate (Average) 11% 11% 11% Interest to be allocated 34,05,788 37,21,791 25,33,591 96,61,170 Therefore, the interest to be allocated to the three units comes to Rs. 34,05,788/-, Rs. 37,21,7917- and Rs. 25,33,591/- respectively. The addition made by the Assessing Officer is therefore confirmed to the extent mentioned above. 46. The ld. counsel for the assessee reiterated the submissions made before authorities below. He has submitted that assessee has own capital and reserves and interest free funds with Ludhiana unit and no borrowed funds had been transferred to the unit at J&K. Therefore, addition is wholly unjustified. 47. On the other hand, ld. DR relied upon order of the Assessing Officer. 48. We have considered rival submissions and material available on record. The Assessing Officer has specifically noted that interest expenditure on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claim of the assessee partly on which no further interference is required. The ground No. 2 of appeal of assessee and ground No. 1 of departmental appeal are accordingly, dismissed. 51. In assessment year 2009-10, assessee raised similar ground No. 2 on the same issue and revenue raised ground No. 1 in their departmental appeal on the identical issue. following the order for assessment year 2008-09, both the grounds of appeal are dismissed. 52. In the result, appeals of assessee and departmental appeals on this issue in assessment year 2008-09 and 2009-10 are dismissed. Issue No. 4 (Disallowance under section 14A of the Income Tax Act) 53. This issue arises in assessment year 2008-09 in appeal of the assessee on which assessee raised ground No. 3 challenging the addition of Rs. 7,09,562/- by applying provisions of Section 14A read with rule 8D of the Income Tax Act. The Assessing Officer observed that assessee company had made investments in shares and mutual funds on which exempt income accrued and no disallowance in respect of expenditure incurred to earn the exempt income have been made. The assessee, however claimed before Assessing Officer that no expenditure h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he working capitallimits have been utilized by the assessee for smooth functioning of the business. The assessee relied upon several decisions including the decision in the case of CIT V Hero Cycles 323 ITR 518 (P&H) in which it was held "disallowance under section 14A requires finding of incurring of expenditure, where it is found that for earning exempted income, no expenditure has been incurred, disallowance under section 14A cannot stand." It was, therefore, submitted that since Assessing Officer has not recorded any satisfaction of incurring of any expenditure by assessee, therefore, addition is wholly unjustified. 54. The ld. CIT(Appeals), however, did not accept contention of the assessee and dismissed this ground of appeal of the assessee and confirmed the addition. The ld. CIT(Appeals) further observed that the decision cited by the assessee are clearly distinguishable on facts. 55. The ld. counsel for the assessee reiterated the submissions made before ld. CIT(Appeals). He has submitted that at the time of making addition, the authorities below have considered the amounts which is made as investment in subsidiary companies namely Bharat Paper Ltd. and J.C. Man....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... A.O., considering explanation of the assessee concluded that assessee had not been able to establish the claim that no expenditure had been incurred and therefore disallowance had to be worked out by applying Rule 8D of the Act. It is also not in dispute that assessee earned dividend income in the year under consideration. The ITAT Chandigarh Bench in the case of M/s Chadha Super Cars P.Ltd. Vs ACIT in ITA 1241/2011 etc. by considering Section 10(2A) in the light of various decisions on the matter in issue including the judgement in the case of Hero Cycles (supra) and judgement of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Punjab State Industrial Development Corporation Ltd. dated 18.07.2011 and Memorandum explaining Section 14A in the light of Rule 8D of IT Rules held as under : Thus above rule was found to be valid and rational. Coming back to the case in hand, the perusal of the assessment order shows as observed earlier, no where before the Assessing Officer or the ld. CIT(A), the assessee has made a specific mention to show which particular funds were borrowed for which particular requirement and in the absence of such specific utilization Rule 8D, would....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r interest has been charged. It is not a case where funds have been advanced without any exigency. The complete details of utilization of funds were furnished at the assessment stage and all funds have been used only for the purpose of business. The assessee relied upon decision of the Apex Court in the case of M/s S.A. Builders 288 ITR 1 . It was submitted that decision in the case of M/s Abhishek Industries (supra) is not applicable to the facts of the case. It was further submitted that assessee has sufficient interest free funds and there is no nexus between the borrowed funds and the amounts advanced to the above company. The assessee relied upon several decisions in support of contention that addition is unjustified. 60. The ld. CIT(Appeals) accepted contention of the assessee and noted that the Assessing Officer has wrongly applied ratio of the judgment of the Hon'ble Punjab & Haryana High Court in the case of Abhishek Industries (supra) as this is not a case where assessee had diverted funds to the sister concern without charging any interest, rather interest has been duly charged by the assessee which fact is not controverted by the Assessing Officer. The ld. CIT(Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....No. II, Samba which was not claimed as per revised return. The Assessing Officer, in this regard has observed that he cannot entertain claim of deduction otherwise than by filing revised return. The Assessing Officer applied the ratio of the decision of the Supreme Court in the case of Goetze (India) Ltd. V CIT 284 ITR 323 to hold that claim of assessee cannot be accepted. The assessee challenged before ld. CIT(Appeals) that Assessing Officer has erred in not allowing claim of deduction under section 80IB of Rs. 45,35,176/- in respect of Unit II, Samba which was claimed as less due to inadvertent error. The assessee's written submission is incorporated in the appellate order in which the assessee has explained that a lesser claim was made of deduction under section 80IB in respect of unit II Samba while preparing return inadvertently. The computation of income and other details clearly show the proper claim of assessee. It was submitted that at the assessment stage, assessee filed application before Assessing Officer for allowing proper claim under section 80IB of the Act. The assessee relied upon decision of Hon'ble Punjab & Haryana High Court in the case Ramco Inter....