TaxTMI 
TaxTMI 
2015 (4) TMI 7
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....ccount of valuation of closing stock of sugar. 4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. It is prayed that the order of the Ld. CIT(A)-XV, being contrary to the facts on record and the settled position of law, be set aside and that of the Assessing Officer be restored." 2. The assessee's grounds in the CO filed read as under:- 1(a). "That the learned CIT(A) erred, both on facts and in law in sustaining a disallowance of Rs. 21,15,126/- towards interest u/s 14A of Income tax Act read with Rule 8D of the Income Tax Rules. 1(b) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in applying Rule 8D in assessee's case. 1(c) The ld. CIT(A) failed to appreciate that the assessee had made investments of Rs. 10.75 crores from the redemption proceeds of earlier investments/ Realization from Debtors and / or interest free funds available with the assessee and as such disallowance u/s 14A with respect to interest of Rs. 21,15,126/- deserves to be deleted. 1(d) That the ld. CIT(A) further erred in considering that the investments of Rs. 10.75 crores were capable of earning exempt income....
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....PF Trust of the Appellant has been approved as the registered Trust by the competent authority, i.e. CIT, which has not revoked the decision, the AO could not have usurped the jurisdiction of the CIT and have held the Trust as not registered. The matter had been decided in favour of the Appellant by the ITAT for AY 2003-04 to AY 2007-08, and the Appeal of the revenue against the same was dismissed by the hon'ble Delhi High Court for AY 2003-04. Keeping in view the above, the disallowance cannot be sustained. Accordingly, the Appellant gets full relief in this regard." 4. Aggrieved by this the Revenue is in appeal before the Tribunal. 5. Ld. Sr. DR inviting attention to the proviso to section 3 para (A) of the Fourth Schedule of the Income Tax Act, 1961 submitted that the assessee has not filed a fresh application before the concerned authority stating that it satisfies the conditions set out in clause (ea) of Rule 4. Accordingly it was his submission that following the past history the claim cannot be allowed. Ld. AR on the other hand inviting attention to the assessment order and the impugned order submitted that no such case has been made out by the AO who has specifica....
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....ome Tax Appellate Tribunal was correct in law and on facts in deleting the addition made by Assessing Officer of Rs. 15,22,234/- on account of disallowance of contribution to employees provident fund? " 6.1. Considering the facts the Hon'ble High Court decide the issue in favour of the assessee on the following reasoning:- "In so far as question no.1 is concerned, the addition made by the Assessing Officer on account of contribution to the Employees Provident Fund was not recognized. The Tribunal reversed this order of the Assessing Officer and deleted the addition finding that the contribution was made to a duly recognized Provident Fund. Dr. Gupta, learned counsel appearing for the respondent/assessee has produced before us a copy of the order of CIT (A) in respect of assessment year 2003-04 which clearly demonstrate that it was a duly recognized fund inasmuch as order of the Assessing Officer on this account was reversed by the CIT(A). He further informs that no appeal is preferred by the Department against the aforesaid order. On this basis it is clear that no question of law arises in so far as proposed question no.1 is concerned." 6.2. In view of the above where a....
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.... direction may be given herein also. The Ld. Sr. DR on the other hand initially objected that the issue need not be restored as Rule 8D is fully applicable and the disallowance made by the assessee of Rs. 27,60,841/- was found to be not adequate and satisfaction to this effect has been arrived at by the AO. However on going through the detailed order of the Tribunal at pages 25 to 29 in para 7 to 7.1 it was submitted that he would have no objection if for computational purposes in judicial propriety the issue is restored to the AO with the direction to apply Rule 8D. 9. We have heard the rival submissions and perused the material available on record. On a consideration of the submission of the parties, we hold that the issue necessarily has to be restored in judicial propriety as the CIT(A) in the impugned order specifically at page 20 & 21 takes note of the fact that certain specific investments of Rs. 35 crores are brought forward investments of Rs. 10.75 crores as on 01.04.2003 and the balance of Rs. 24.25 crores had been redeemed in the last year. 9.1. A perusal of pages 15 to 21 of the Co-ordinate Bench would show that the following fact referred to by the CIT(A) in the ....
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.... was incurred towards the investment activity. The assessee has also relied on the decision of Hon'ble Delhi High Court in the case of assessee's own case for Assessment Year 2001-02 wherein the ITAT's view that no interest has been incurred towards investment activity has been accrued. On this, we hold that the Rule 8D is applicable for Assessment Year 2008-09 and earlier decision on the disallowance u/s 14A shall not have impact for applicability of Rule 8D for the year under consideration. We would also like to state that Rule 8D of the Income-tax Rules, 1962 is mandatory by using the word "shall" in section 14A(2), the legislature made it mandatory for the Assessing Officer to determine the amount of expenditure incurred in relation to exempt income according to the prescribed method. Prior to insertion of Rule 8D of the Rules, the Assessing Officers were having discretion to determine expenditure on a reasonable and acceptable method of apportionment of expenditure between the exempt taxable income and exempt income. Now, the legislature has provided in Rules the method of apportionment of expenditure between the exempt income and taxable income, the Assessing Officer as w....
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....3.2008 total assets 674,03,88,872 Average Total Assets = 498,23,64,227 A X B C= Rs. 7,68,45,729 x 250,20,59,294 498,23,64,227 = 385,90,629 III. 0.5% percent of the average value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on 1/4/2007 and 31/3/2008 Average Investments as calculated above : 250,20,59,294 0.5% X 250,20,59,294= 1,25,10,296 Total 5,11,00,925 The total disallowance on this account comes to Rs. 5,11,00,925/-. The same is therefore, being disallowed and added to the total income." From the submissions of assessee and from the orders of the revenue authorities, we find that the Assessing Officer has not considered all relevant facts on record and has also not verified the claim of the assessee with regard to the source of investment. To reach at the conclusion that he was not satisfied with the claim of assessee with regard to expenses incurred to earn exempted income, then only he can invoke Rule 8D for working out the disallowance. Therefore, in our considered view, this issue requires a relook at the level of Assessing Off....
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....,93,802 3,59,33,848 Total 3,59,33,848 Further, the assessee has submitted that the value of closing stock has been taken as per cost or net realizable value whichever is lower. However, the valuation of closing stock on the basis of cost price amount to Rs. 3,59,33,484/-. After examining the facts of the case, it is observed that the assessee has changed its method of valuation of closing stock from "Cost" basis to "Cost or net realizable price" whichever is low. This change of accounting policy reduces the profitability of the assessee. This arbitrary change of method of valuation cannot be accepted on account of accounting norms. Besides, the Department is in appeal in the Delhi High Court in this matter. In view of above, the difference of Rs. 3,59,33,848/- is disallowed and added back to the total income of the assessee company. Penalty Proceedings u/s 271(1)(c ) of the I.T. Act are initiated on this point for furnishing inaccurate particulars of income." (emphasis in the present proceedings) 11. In appeal before the First Appellate Authority the issue it is seen is decided in assessee's favour in the follow....
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.... which the Ld. Sr. DR placed heavy reliance has already been extracted herein above. Considering the same it is seen that the addition was made only to keep the issue alive as is borne out from the last para which takes cognizance of the fact that the AO made the addition as the issue was before the Hon'ble High Court. In the light of this fact considering the finding of the CIT(A) which has also been extracted in the earlier part of this order as the Hon'ble High Court's decision was available by then which view the record shows was followed by the Coordinate Bench in 2008-09 assessment year. We find the arguments of the Ld. Sr. DR as not maintainable on facts. For ready-reference the relevant extract from the said order of the Co-ordinate Bench with which we find ourselves in agreement is reproduced hereunder:- 13. "In the ground no.3, the revenue has raised the deletion of addition of Rs. 10,79,68,722/- made on account of valuation of closing stock. 14. This issue has been decided by the CIT (A) in para 11 which read as under :- "11. Ground no 9 relates to addition of Rs. 10,79,68,722 to the value of closing stock of the appellant. During the course of appellant proceed....