TaxTMI 
TaxTMI 
2015 (8) TMI 1031
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....) erred in upholding the order of the Ld. Assessing Officer who had disallowed proportionate interest expenditure incurred on bank loan for Rs. 1,03,98,313/- since the assessee company had extended interest free loan to its sister concerns M/s.Bharat Mines Pvt Ltd., Rs. 5,60,45,897/-. 3. The Ld. CIT (A) erred in upholding the order of the Ld. Assessing Officer who had disallowed expenditure of Rs. 3,11,34,630/- invoking provisions of section 40(a)(ia) of the Act since the assessee company had made investment of Rs. 71,55,33,570/- for earning exempt income. 4. The Ld. CIT (A) erred in upholding the order of the Ld. Assessing Officer who had disallowed the claim of depreciation of Rs. 10,64,87,188/- being depreciation worked out under Companies Act since the assessee had not submitted the depreciation schedule as per the Income Tax Act. 5.(a) The Ld. CIT (A) erred in upholding the order of the Ld. Assessing Officer who had enhanced the "book profit" for computing the tax payable U/s.115JB of the Act, by giving effect to the disallowance of expenditure made by the Ld. Assessing Officer while computing the profit under the normal provisions of the Act. 5.(b) The Revenue had....
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....efore we have no other option but to confirm the addition. Accordingly, we hereby confirm the disallowance of expenditures made by the Ld. Assessing Officer towards mining and production/processing of Rs. 1,18,14,359/- & Rs. 4,12,843/- respectively. Thus, the ground No.1 of the assessee is dismissed. 5.1. Ground No. 2 - Disallowance of the proportionate interest due to interest free loan advanced to sister concern U/s.36(1)(iii) of the Act for Rs. 1,03,98,313/-. The Ld. Assessing Officer observed that the assessee had extended interest free loan to its subsidy M/s.Bharat Marines Co. Pvt Ltd., for Rs. 5,60,45,897/-. It was also revealed that the assessee had paid Rs. 6,20,12,327/- as interest towards secured loans. Therefore, the Ld. Assessing Officer disallowed the proportionate interest of Rs. 1,03,98,313/- by invoking the provisions of section 36(1)(iii) of the Act. The Ld. CIT (A) confirmed the order of the Ld. Assessing Officer by agreeing to his view. At the outset we find that the addition made by the Ld. Assessing Officer is not sustainable because from the order of the Ld. CIT (A) it is clearly revealed in para 6.2.1 that the assessee had Rs. 87.72 crores of Reserves ....
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....he Ld. CIT (A) is justified, we do not find it necessary to interfere with his order. However, it is pertinent to mention that the Ld. Assessing Officer ought to have given the benefit of depreciation to the assessee as provided under the Income Tax Act instead of disallowing the entire claim of depreciation because the details of the items on which the depreciation is claimed is before him and normally rate of depreciation allowable as per the Income Tax Act is higher than the rate of depreciation prescribed under the Companies Act. Further to simplify the proceedings of the Revenue, we hereby direct the assessee also to furnish the schedule of depreciation computed as per the Income Tax Act before the Ld.Assessing Officer. Accordingly this ground raised by the assessee is allowed for statistical purposes as indicated herein above. 8.1. Ground No.5.(a) - Computation of book profit U/s.115JB of the Act by giving effect to the disallowance of expenditure made invoking the provisions of the Section-14A of the Act for Rs. 3,11,34,630/- and also the disallowance of expenditure under the normal provisions of the Act. 8.1.1 The Ld. Assessing Officer while computing the tax as per p....
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.... not refer to any disallowance made U/s.14A of the Act while arriving at the Book Profit for the purpose of Section-115JB(2) of the Act. Further Section 14A of the Act is a provision with fiction disallowing the deemed expenditure attributable to exempt income viz., dividend income U/s. 10 of the Act and Section 115JB of the Act is also a provision with fiction for payment of tax in respect of deemed income. Therefore while computing the profit for the purpose of Section 115JB of the Act another provision with fiction cannot be superimposed. Hence the question of increasing the 'Book Profit' due to the disallowance U/s.14A of the Act will not arise. However, in the instant case of the assessee, since we have already deleted the addition made U/s.14A, increasing the book profit will not arise. Further the decision of Hon'ble Apex Court cited by the assessee in the case M/s.Apollo Tyres Ltd. Vs. CIT reported in 255 ITR 273 is also squarely applicable to the case of the assessee. The gist of the same is reproduced herein below for reference:- "The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, has only the power of e....
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....fits and gains derived by 100% export oriented undertaking from the export of article of things or computer software shall be allowed for a period of 10 consecutive years beginning with the assessment year in which the undertaking beings to manufacture or produce articles or things or computer software as the case may be from the total income of the assessee. Therefore, even if there are some disallowances of expenditure under the normal provisions of the Act due to which the profit of the export undertaking increases, the assessee will be entitled for the benefit of Section-10B on the entire profit arrived by the Ld.A.O because there are no provisions in the Act to restrict the benefit of Section-10B of the Act for such increase in profits. From the order of the Ld. CIT (A) we find that he has held the appellant to be eligible for the benefit of Section-10B of the Act, therefore as discussed herein above we hereby hold that the assessee will be entitled for the benefit of Section 10B of the Act even for the increase in profit arising out of any disallowances of expenditure made by the Revenue. However we also make it clear that while computing the profit of the 100% export orienta....
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....h says that the TDS provisions U/s.195 are not applicable if the amount in question is not chargeable to tax in India, is squarely applicable. Therefore, the question of making TDFS does not arise and disallowance u/s.40(a)(ia) is not called for. Accordingly the addition is deleted. The ground raised by the appellant is allowed." From the facts of the case, it is evident that the Ld. Assessing Officer has invoked the provisions of section 40(a)(ia) of the Act because the assessee had not deducted tax at source towards the sales commission paid to foreign agents outside India in foreign exchange and for the services rendered outside India. At the outset we find that this issue is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case CIT Vs. Fazian Shoes Pvt. Ltd. reported in 367 ITR 155(Mad.) wherein it is held that "on a reading of Section.9(1)9vii), commission paid by the assessee to the nonresident agents would not come under the term "fees for technical services". For procuring orders for leather business from overseas buyers, wholesalers or retailers, as the case may be, the non-resident agent was paid 2.5%, commission on free on board basis. This....