TaxTMI 
TaxTMI 
2015 (5) TMI 999
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.... as well as Revenue are in appeal before us. 3. The first ground of appeal of the assessee is relating to disallowance of export commission payment. The issue raised by the assessee has been considered by the ld. CIT(A) and gave a finding that since the Assessing Officer has not taken the amount of Rs. 25,63,409/- into consideration in the final computation of taxable income, no separate relief is required while giving effect to this order. The relevant portion of the order of the ld. CIT(A) is extracted as under: "4.1.2 I have considered the assessee's submissions as well as the orders of the Hon'ble ITAT in the case of A.Y.2007-08 (in ITA No.225/Mds/2013 dated 30.05.2013). The facts involved in the A.Y.2007-08 are exactly similar to those involved in the present A.Y.2010-11 also. The payments made to the non-residents in the A.Y.2007-08 without making TDS, were similar to those made by the assessee company in the present A.Y.2010-11. In the A.Y.2007-08, the Assessing Officer disallowed the payments u/s.40(a)(i) for non-deduction of TDS u/s.195 of the Act. The CIT(A) allowed the appeals of the said companies. The Revenue preferred an appeals to the ITAT against the o....
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....hold that the above payments of "Export Sales Commission" to the non-residents for procuring export orders, are not assessable to tax in India and consequently the assessee company is not under any obligation to deduct the TDS on the above commission payments u/s.195 of the Act. The provisions of sec.40(a)(i) have no application in the present case. Accordingly, the additions made by the Assessing Officer, on account of disallowance of "Export Sales Commission" payments of Rs. 25,63,409/- for non-deduction of TDS u/s.40(a)(i) r.w.s. 195 of the Act, are not justified and deleted. However, as the Assessing Officer has not taken the amount of Rs. 25,63,409/- into consideration in the final computation of taxable income, no separate relief is required while giving effect to this order." 4. After hearing both sides, keeping in view of the above order passed by the ld. CIT(A) since the Assessing Officer has not taken the amount of Rs. 25,63,409/- into consideration in the final computation of taxable income, no separate relief is required and thus, we find no infirmity in the order passed by the ld. CIT(A). Accordingly, the ground raised by the assessee is dismissed. 5. The n....
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....ning any separate books of accounts for the investments in shares. Nor there was a separate establishment to look after the investments in shares/funds. The assessee may be having substantial interest free own funds (in the form of capital/reserves and surpluses etc). But this does not mean that the investments are made only from these own interest free funds, especially if the books are not maintained separately. Further, all the funds, i.e. the interest-free own funds and the interest bearing borrowed funds are put into a common pool of funds. From this common kitty all the outgoings (i.e. investments in shares, regular business expenses etc) are met with. In other words, once the funds, i.e. whether the interest-free own funds or the interest bearing borrowed funds, are put into a common pool of funds, they will loose their distinction and all types of funds will be treated alike. In such a situation, the only way to ascertain the investments made from the borrowed funds, if any, is on a proportionate basis. Therefore, the interest expenses, which could not be directly linked to any activity, are to be treated as common interest expenses and considered in the step-2 of the formu....
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....indirect) involved in the process, even if there are no such exempt income earned during the year. 4.3.6 As could be seen from the P&L account, the assessee has several activities including investments in shares. For the purpose of making these investments etc, the same management, manpower, machinery and infrastructural facilities of the assessee are being used. Hence, there is an element of expenditure involved in the process. This expenditure may not be direct. Thus, there is an expenditure involved in making these investments. Therefore, there is a need to identify and apportion a reasonable amount of expenses as attributable for earning the exempted income. For this purpose reliance placed on the following decisions: Dy. CIT v. SREI International Finance Ltd. (2006/10 SOT 722 (Delhi)- Trib.): In light of clear provisions of section 14A, even in case it is not possible to identify expenses incurred in earning income which does not form part of total income, disallowance has to be made on some basis. Marezban Bharucha v. Asstt. CIT [2007/12 SOT 133 (Mum.-Trib.): Where an expenditure is composite one, i.e., relating to taxable receipts as well as non-taxable receip....
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....lowance made by the Assessing Officer is confirmed." 8. On appeal, the ld. Counsel for the assessee has submitted that no borrowed funds are used for the purpose of investment and also submitted that no investment was also made in this year. So far as this argument of the ld. Counsel for the assessee is concerned, the assessee has not able to establish that the borrowed funds are not used for the purpose of investments and even the assessee has failed to establish that no investment is made in the year under consideration. Therefore, this argument of the ld. Counsel for the assessee is rejected. 9. Alternatively, he has submitted that the Assessing Officer has, without giving proper opportunity, estimated the disallowance under section 14A of the Act. We find that the Assessing Officer, after considering the details filed by the assessee, quantified the disallowance under section 14A of the Act and also the ld. CIT(A) passed very detailed order and gave specific findings that the assessee has not maintained any separate books of account for the investment in shares, there was no separate establishment to look after the investments. Even before us, the assessee has not able to....
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.... raised by the Revenue in these appeals is that the Commissioner of Income tax (Appeals) has erred in directing the assessing authority to allow the carried forward depreciation and/ or loss of earlier years pertaining to windmills, if the depreciation and/or loss of earlier years were not notional. It is the case of the Revenue that the decision of the Hon'ble Madras High Court on the very same subject, rendered in the case of Velayudhaswamy Spinning Mills and Others vs. ACIT, 231 CTR 368 and the orders of the Income-tax Appellate Tribunal in the group cases have not become final. 3. The issue has been considered by the Income-tax Appellate Tribunal, C-Bench, Chennai through their order dated 30-9-2010 in assessees' own group cases. Relying on the judgment of the Hon'ble Madras High Court, rendered in the case of Velayudhaswamy Spinning Mills, the Tribunal held that once the set off of depreciation/ loss is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. As held by the Tribunal, the issue is covered by the judgment of the Hon'ble jurisdictional High Court in the case of V....