TaxTMI 
TaxTMI 
2015 (9) TMI 1437
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....to law and facts of the case. 2) The Ld.CIT(A) erred in deleting the additions of Rs. 1,48,72,062/- made u/s.14A of the Income-tax Act in accordance with Rule 8D of Income Tax Rules as provided by the decision given by the Mumbai Special Bench of ITAT in the case of ITO vs Daga Capital Management Pvt. Ltd.(2009) 117 lTD 169 and in the case of Lakshmi Ring Travellers Vs. ACIT ITA 2083/Mds/2011 order dated 02/03/2012 A.Y. 2008-09. 3) The Ld.CIT(A) erred in deleting the additions of Rs. 1,56,68,389/- u/s.40a(ia) towards payment of commission to foreign agents where TDS was not deducted ignoring the decision of AAR in the case of Rajiv Malhotra INRE(AAR)2841TR 564 and SKF Boilers and Driers Pvt Ltd wherein it was held that Commission income paid to export agents taxable in India in view of sec.5(2)(b) r.w.s. 9(1(i)-Fact that the agent is to render service abroad and the commission is to be remitted to it abroad are wholly irrelevant for the purpose of determining the situs of income since income is from a source in India. Further CBDT withdrew circular No. dated--- on this issue. 4) The Ld CIT(A) has erred in deleting the additions of Rs. 34,85,71,032/- made u/s.40a(ia) r.w.s. se....
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....A) that the processing of ROM amounts to „manufacture‟ of iron ore by bringing into existence a new and distinct object or article or thing by the processing plant the EOU unit. 10) The Ld CIT(A) has erred in applying the definition of „manufacture‟ given in SEZ Act 2005 which is applicable for the purpose of only section 10AA if the IT Act which imposes various conditions for the utilization of profits. 11) The Ld CIT(A) has erred in not following the decision of the ITAT Panaji Bench (coordinate bench) in the case of Chowgule & Co Ltd Vs.s ACIT (ITA No.162/PNJ/2006) where it has been held that the processing of iron ore without extraction in the processing plant does not give rise to any new product based on the Supreme Court decision in the case of Chowgule & Co. Pvt. Ltd. Vs. Union of India 1981 AIR 1014, and therefore, the process is not even "production" particularly where the "processing has been specifically omitted from the definition of "manufacturing" w.e.f. 01.04.2001 for the purpose of section 10B. 12) The Ld CIT(A) has erred in not considering new evidence on facts provided by the Assessing Officer after decision of the ITAT in the assess....
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....r the CIT(A) is right is not following the ITAT, Panaji Bench decision in the case of M/s. Dempo & Co. Pvt. Ltd., for the A.Y. 2005-06 in ITA No. 44/PNJ/2009 dated 13.04.2011 wherein the Hon‟ble Bench held that processing of ore without extraction does not amount to manufacture or production for the purpose of 10B by relying on the Supreme Court decision in the cases of Sesa Goa Ltd., 271 ITR 331 and Supreme Court decision in the case of Chowgule & Co. Pvt. Ltd. V/s Union of India (1981) AIR 1014? 19) Whether the CIT(A) is right in ignoring the detailed remand report submitted before him by the AO which contains the suppression of material facts by the assessee and also decisions of the Supreme Court which are followed by the Co-ordinate Bench viz. ITAT, Panaji Bench in the case of M/s. Chowgule & Co. Ltd., for the A.Y. 2002-03 in ITA No.184/PNJ/2006 dated 12.07.2007 and of M/s. V.S. Dempo & Co. Pvt. Ltd., for the A.Y. 2005-06 in ITA no. 44/PNJ/2009 dated 13.04.2011 while disposing the appeal for the A.Y. 2010-11?" 3. In its appeal, the Assessee has raised the following grounds m: "1.1 The Learned CIT(A) erred in upholding the disallowance to the extent of Rs. 1,48,72,06....
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....isallow the same or limiting the same to the extent of income offered to tax. 3.1 The Learned CTT(A) erred in determining the input costs of the iron-ores used in the three EOU Plants by adding purported "mark-ups" of Rs. 61,67,97,321/- to the total of the input costs of the said ores adopted by the Appellant, there by effectively disallowing the Appellant‟s claim for deduction u/s.10-B of the Act, in respect of the said three EOUs, to that extent. The CIT(A), considering the basis on which the Appellant had adopted the input costs of iron-ores used in each of EOUs ( as briefed in the Statement of Facts, herein), ought not to have made the purported mark-ups to the said input costs, resulting in disallowance of the Appellant‟s claim for deduction u/s. 10-B of the Act, to the extent of Rs. 61,67,97,321/- 3.2 The Learned CIT(A) erred by being influenced with the profits of the mining business during and year and thereby arbitrarily rejecting the cost of crude ore considered by the Appellant. 3.3 The learned CIT(A) also erred in arbitrarily rejecting the contentions made by the Appellant in its demonstration & working out the effect of provisions laid out in section 10....
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....lowance made u/s 14A to an extent of Rs. 1,48,72,062/- the Assessee is in appeal in ground nos. 1.1 to 1.3 of its appeal. It was the submission that there was no direct expenditure relatable to the exempt income and consequently, the provisions of Sec. 14A could not be invoked in the case of the Assessee. The ld. AR drew our attention to page 2342 of the paper book, which is the copy of the order of the co-ordinate bench of this Tribunal in the case of the Assessee in ITA Nos. 72 & 85/PNJ/2012 dt. 8.3.2013, and submitted that in para 18, page 31 of the said order the Tribunal had for the immediately preceding year i.e. A.Y 2009-10 deleted the disallowance made u/s 14A r.w.r 8D. It was the submission that on identical grounds, the disallowance confirmed by the ld. CIT(A) was liable to be deleted. At this point, it was brought to the attention of the ld. AR that the total disallowance made by the AO u/s 14A was Rs. 54,15,54,962/- and the ld. CIT(A) has only given decision in respect of the disallowance made in relation to the interest expenditure to an extent of Rs. 33,14,52,490/- out of which the ld. CIT(A) had confirmed an addition of Rs. 1,48,72,062/- and had deleted the balance o....
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.... Now coming to the merits of the issue. A perusal of the provision of section 14A(1) clearly shows the wordings, "in relation to the income which does not form part of the total income under this Act". In the present case, this income, which does not form part of the total income under the Act, is the dividend income of Rs. 1,32,638/-. Therefore, if any disallowance is to be made in respect of expenditure incurred, it should be in relation to this dividend income of Rs. 1,32,638/-. If an assessee has invested in shares, which could get dividend or there is investment which generates dividend income or exempt income as also investment which does not generate exempt income, it is only such investments in respect of which the dividend income or exempted income has been earned which can be considered when computing the disallowance under section 14A read with rule 8D. A perusal of the provisions of rule 8D also talks of satisfaction in sub-rule (1). Rule 8D(2) has three sub-parts. The first sub-part i.e. (i) deals with the amount of expenditure directly relating to the income which does not form part of the total income. That issue is not in dispute here and therefore, we do not go int....
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....e words used are the average value of the investment, income from which does not form or shall not form part of the total income as appearing in the balance-sheet as on the first day and in the last day of the previous year. Here the AO has taken into consideration the investment of Rs. 103 crores made this year, which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. This is why the question of satisfaction is provided in section 14A and rule 8D(1), that relates to the accounts of the assessee. Thus, it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income which is to be considered. A question may arise as to why the term "average of the value of investment" is then used. The term average of the value of investment would be to take care of cases where there is the issue of dividend striping. In any case, as we have already held t....
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....012 dt. 8.3.2013 the Tribunal had not considered Explanation - 2 to Sec. 195 which had been introduced by the Finance Act, 2012 with retrospective effect from 1.4.1962. It was brought to the ld. Counsel's attention that in the case of one of the group concerns of the Assessee, M/s. Sesa Resources Ltd. in ITA Nos. 252 & 267/PNJ/2015 dt. 20.8.2015, the co-ordinate bench of this Tribunal has held the issue against the Assessee as follows : "8. We have considered the submissions. A perusal of the assessment order in the Assessee‟s case shows that the AO has disallowed the commission paid to the foreign agents on two grounds; one on account of non-deduction of TDS and second that the expenditure has not been paid for the purposes of the business of the Assessee. A perusal of the decision of the co-ordinate bench of this Tribunal in the case of Sesa Goa Ltd. referred to supra shows that the Tribunal has only decided the issue in respect of payment made to the agents as being for the purpose of the business and commercial expediency. The reasoning given by the AO in respect of non-deduction of TDS and applicability of the provisions of Sec. 40(a)(ia) of the Act has not been adjudi....
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....0(a)(ia) but it was in terms of Sec. 37, as not wholly and exclusively for the purpose of the business. At this point, the statement of facts filed by the Assessee before the ld. CIT(A) was verified and it showed that the Assessee has in the statement of facts in the issue raised in 1(ii) challenged the disallowance made by the AO by raising argument in respect of disallowance u/s 40(a)(ia) of the Act. Further, a perusal of the order of the ld. CIT(A) shows that the AO ha not considered the provisions of Sec. 195 or Sec. 40(a)(ia) of the Act for the purpose of disallowing the commission paid to non-residents. The ld. CIT(A) has decided the issue of the commission payment to non-resident in respect of the provisions of Sec. 37, but has not decided the issue in respect of disallowance by invoking the provisions of Sec. 40(a)(ia) of the Act on account of non-deduction of TDS. 11. We have considered the rival submissions. A perusal of the order of the ld. CIT(A) at page 33 shows that for the A.Y 2006-07 the AO has held that there was no necessity for engaging commission agents and accordingly, the commission payment was not held to be allowable as business expenditure u/s 37 of the Ac....
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....es insofar as the A.Y 2009-10 was the first year of the claim of deduction u/s 10B and the fresh evidences, if any, could be considered only in that assessment. It was the submission that the order of the ld. CIT(A) was liable to be reversed. 15. In reply, the ld. AR submitted that the appeal for the A.Y 2009-10 was pending before the ld. CIT(A) and the hearing for the same was also concluded though the order has not been received. It was the submission that the said fresh evidences as produced by the AO, which was found in the course of the survey on the Assessee, were also produced before the ld. CIT(A). It was the submission that this issue could be restored to the file of the ld. CIT(A) for re-adjudication in line with his decision for the A.Y 2009-10. 16. We have considered the rival submissions. As it has been admitted that the appeal for the A.Y 2009-10 is under adjudication before the ld. CIT(A) and that fresh evidences have been found in the course of the survey conducted after the order of the Tribunal which has been followed by the ld. CIT(A), we are of the view that this issue in respect of ground nos. 6 to 16 of this appeal in relation to the claim of deduction u/s 1....
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....iness expenditure. The ld. AR drew our attention to page 71 of the order of the ld. CIT(A) to show that this was an enhancement of the interest disallowed as non-business expenditure. It was the submission that no enhancement notice has been given to the Assessee. The ld. AR drew our attention to para 4.5 and 4.6 at pages 23 & 24 of the order of the ld. CIT(A). It was the submission that the Assessee had borrowed an amount of Rs. 2,350 crores for the expansion of the pig iron project at Amona during the relevant assessment year. The Assessee had utilised only Rs. 21,26,74,593/- and the balance amount had been kept in fixed deposits as per the RBI guidelines. It was the submission that this deposit had earned an interest of Rs. 39.36 crores whereas on the total loan the Assessee had paid interest of Rs. 45.36 crores. It was the submission that the different amount of Rs. 6 crores was treated by the ld. CIT(A) as non-business expenditure. It was the submission by the ld. AR that the ld. CIT(A) has not issued any enhancement notice to the Assessee and consequently, this disallowance was not liable to be made. At this point, it was pointed out to the ld. AR that in view of the provisio....