TaxTMI 
TaxTMI 
2012 (5) TMI 728
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....., Rs. 14,85,56,061). Ground No.2 "On the facts and circumstances of the case and in law, the CIT (Appeals) erred in upholding the action of the A.O in disallowing a sum of Rs. 5,88,30,184/- being the provision for non-performing assets while computing income under MAT thereby invoking clause (c) of Explanation to Section 115JA(2)". Ground No.3 "On the facts and circumstances of the case and in law, the CIT (Appeals) erred in upholding the action of the A.O in making an addition of the entire amount of exempt income of Rs. 14,85,56,081/- as being alleged expenses attributable for earning tax free income while computing Book profit u/s. 115JA of the Act". Further, Additional Grounds of Appeal were also filed on 18-02-2011: Additional Grounds of Appeal: "On the facts and in the circumstance of the case and in law, the Commissioner of Income Tax (Appeals)-XXX ("the CIT(A)") erred in upholding the action of the Assistant Commissioner of Income Tax Circle 2(3), Mumbai ("the A.O") in applying the provisions of section 115JA to the Appellant". "He failed to appreciate and ought to have held that the provisions of Section 115JA is applicable to only those companies ....
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....allocated towards earning of the tax free income and would be therefore disallowed as business expenditure. Therefore, the total expenses of interest and operating expenses amount to Rs. 18,09,53,825/- (Rs. 16,96,57,565/- + Rs. 1,12,96,260/-) is disallowed. Since the disallowance against tax free interest and dividend is more than tax free income the deduction under Section 10(15)(iv)(h) for tax free interest and u/s. 10(330 for dividend income is denied". 3. CIT(A) in his Appellate Order dealt the issue as under: "The fact that the appellant has claimed Rs. 14,85,56,061/- as income exempt u/s. 10(15) and 10(33) of the Act is not in dispute. It is also a fact that this income comprises of Rs. 12,27,49,118/- on account of dividend. It is also a fat that the appellant has claimed the entire income of Rs. 14,85,56,061/- as income exempt u/s. 10(15) and 10(33) of the Income Tax Act. In other words no expenditure whatsoever attributable or relating to earning of this exempt income has been claimed having incurred. Admittedly, the exemption/deduction is available not in respect of gross exempt income but on net income. As per the provisions of section 14A of the Income Tax Act, ....
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....llowable, that in the year under consideration, Rule 8D was not applicable, that disallowance made/confirmed by the AO/CIT(A) were not as per the provisions of law, that both the authorities did not consider the data relevant for the issue. He relied upon the cases of Reliance Utilities and Power Ltd., (313 ITR 340), HDFC Bank Ltd.,, (ITA No. 4529/M/2005) Reliance Capital Ltd., (ITA No. 3303/M/2003). He submitted that matter may be restored back to lower authorities to make further verification. DR also agreed that for making 'reasonable disallowance' file may be remitted back. 5. After considering the rival submissions, we are of the opinion that matter should be restored to the file of the CIT(A) for adjudicating the issue of disallowance afresh. Assessee is directed to furnish the details like availability of interest free funds, reserves, self generated fund etc., during the hearing proceedings to be held by the CIT(A). 6. Ground Nos. 2 and 3 as well as additional Grounds are about Sec. 115JA of the Act. We are of the opinion that if the basic question of applicability/non-applicability of Section 115JA should be decided first. 7. With reference to Sec. 115JA, AR submi....
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.... empowering the AO to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, he has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its accounts in a manner provided by that Act and the accounts to be scrutinised and certified by the statutory auditors and approved by the company in the general meeting and, thereafter, to be filed before the Registrar of Companies who has a statutory obligation to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. So, if there are special provisions with regard to a company, Section 115 JA will not be applicable. Thus, it is clear that Sec. 115 was incorporated in the Act with a specific purpose and special treatment has to be given to the electricity companies or companies governed by special provision of other Acts.. 10. We are of the opinion that accounts of a banking company are governed by Banking Regulation Act, and as per provisions of 211 of Companies Act, Banking Companies have to prepare their accounts in acco....