TaxTMI 
TaxTMI 
2017 (12) TMI 1134
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....has erred in disallowing a sum of Rs. 2,65,70,329/- on account of administrative expenses u/s 14A read with Rule 8D made by the Learned Assessing Officer. 3. The Appellant craves leave to add to, alter, amend or Delete the aforesaid grounds of appeal from time to time as it may be advised up to the date of hearings. 3. Grounds taken by revenue reads as under:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting deduction u/s 80lA in respect of the Railway System, without appreciating the fact that the Rail System was not an infrastructure facility within the meaning of the Explanation to Section 80-IA(4)(i) of the LT.Act,1961 and that the assessee had not set up an enterprise to carry on the business of developing, operating and maintaining an infrastructure facility within the meaning of that Section. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the sales tax exemption benefits as capital receipts not liable to income-tax without appreciating the fact that the assessee had not produced any evidence to show that it was under an obligation to utilize these ....
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....receipts not liable to income tax without appreciating the fact that assessee had not produced any evidence to show that it was -under an obligation to utilize these amount for settings up a new unit in a backward area ignoring the said requirement laid down by the hon'ble Supreme Court in para no. 16 in the case of CIT VS. Ponni Sugars Chemical Limited_(306 ITR.392) 6. As the grounds taken by assessee and revenue in both the years are common, we have heard all the appeals and are disposing the same by this consolidated order. 7. At the outset, learned AR placed on record the series of orders of the Tribunal in assessee's own case wherein the issue with regard to railway sidings and sales tax exemption being treated as capital receipt is covered in favour of the assessee. Even the issue with regard to disallowance u/s.14A has been elaborately dealt by the Tribunal in assessee's own case in the A.Y. 2007-08 and 2008-09. All the orders are placed on record and we had carefully gone through these orders of the Tribunal in assessee's own case. 8. Rival contentions have been heard and record perused. Facts in brief are that in the assessment year 2009-10, assessee, Ultratec....
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....e sidings and not for any rail system [as referred to in explanation (a) to the clause (t) of sub-section (4) section 80IA in reference to the infrastructure facility] as claimed by the assessee that railway had laid down those [sidings] partly on the land belonging to the railways and partly belonging to the assessee company so as to facilitate the transportation of raw materials/cement bags through railway wagons [from / to their plant sites]. The AO also noted that the assessee [rather l & T ltd] had primarily requested the' railway department to extend the sidings [railway tracks] to the site of cement plants of the company so as to enable it to transport its goods [raw material & cement] from/to their plant sites itself [so that it could avoid transportation through the roads till the nearest railway station and loading and unloading etc]; that on such request the railway authorities conducted survey and laid down sidings and charged the assessee for laying out the railway track and other related infrastructure. The AO also noted that the wagons were actually run on those sidings by the railway authority and not by the assessee company. The AO also took note that railway a....
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....Rs 21.09 crs -Hirmi; Rs. 25.56 crs -Tadipatri & Rs. 5.73 crs -Arakkonam]. In A.Y. 2008-09, the claim extended to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs. 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs. 12. The rail systems at all these four locations viz. Hirmi, Tadipatri, Arakkonam & Durgapur are said to have commenced the operations in AY 2000-01, AY 1999-00, AY 2001-02 ft AY 2002-03 respectively [ refer assessee's reply dated 06.01.2014] It was further observed by CIT(A) that the L&T Ltd, on whose request the private sidings were set up at all these four locations, never claimed any such deduction u/s 80IA(4). The deductions are being claimed by the assessee company since AY 2004-05, after the various cements plants were transferred to the assessee company [in the year 2003-04] as per demerger scheme. In AY 2004-05, claim was made [for the first time] in respect of such Rail System at Hirmi. Then in AY 2007-08, it started claiming deduction in respect of rails systems at Tadipatri and Arakkonam and then in AY 2008-09 for Durgapur also. From AY 2009-10 and onwards the claim p....
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....oes not raise an invoice from its railway unit to its cement unit cannot govern the tax implication of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the decision of the Supreme Court in the case of Kadernath Jute Manufacturing Company Ltd 82 ITR 362; in the case of Tutcorin Alali Chemicals Ltd in 227 ITR 172; in the case of Godhra Electricity Company in 91 Taxman 91; in the case of Bokaro Steel Ltd in 263 ITR 315 and in the case of Sutlet Cotton Mills Ltd in 116 ITR 1 and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be entitled to benefit of Sec 80IA and an assessee who does not raise internal invoices would not be entitled to such benefit. 13.2. The assessee further submitted that Sec. 80IA(8) itself contemplates a situation where goods or services are transferred by an eligible undertaking to non eligible undertaking and vice versa. In such cases, deduction is to be allowed based on the market value of such goods or services. It was further submitted that the section itself envisage....
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....ing transportation cost which it would have otherwise incurred. It was further submitted that the profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system. 13.5. It was further submitted that substantial investment has been made in developing the railway system. There is an agreement with the railways for operating and maintaining the rail system. It employs required personnel directly or through the railway authorities and it bearing the salary cost relating thereto. It was submitted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It is was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore argued that the rail system is not a part of the cement unit but is an, independent unit. It was further submitted' that the conditions specified in Sec 8OIA(4)(i) in r/o an infrastructure facility are....
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....se is whether the appellant is eligible for deduction u/s 80IA in r/o profits derived from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it" has entered into an agreement for operation and maintenance of the rail system with the railways i.e the Government. Thus all the 3 conditions required to be fulfilled as per Sec 80IA(4)(i) have been satisfied by the appellant. Moreover rail system is defined in explanation to sec 80IA(4)(i) as an infrastructure facility. Further separate books of accounts are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean that the rail system is not a profit centre. It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant t. e the AO has himself stated in the assessment order that the rail system was developed by L&T Ltd which has been inherited by the appellant as a result of the demerger and Circular No 733 dated 03.01.1996 categorically stated that benefit of sec 80IA is applicable to development of rail system and there is no gain saying that fact that the appellant ha....
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....operation of those rail systems. Rather the assessee company has started claiming exemption from AY 2004-05 after the ownership over the cement plants together with such rail systems were transferred to it following the demerger scheme in FY 2003-04. 19. The CIT(A) further observed that the provision of railway track, signals, level crossings etc are the essential components of a rail system but that in itself would not give rise to any profit. For that movement of traffic [ie. material] is to be made over those railway tracks. The profit would arise by charging the freight thereon. 20. The CIT(A) further observed that as per' the agreement, the railway track, signals, level crossings etc were laid out on the cost of L&T Ltd. The cost of maintenance was also to be borne by L&T Ltd [and now by the assessee]. On that only expenses are incurred and there would be no profit element. Then the issue arises of running the wagons onto those tracks. As per the agreement, the assessee was not permitted to run the wagon onto those tracks. 21. As per CIT(A), it is not a case of running of railways [goods train] by L&T Ltd or the assessee company on those private sidings and as suc....
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.... in accordance with the agreements entered with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various clauses particularly Class 2, 6, 7(a), 17 and 8(b) which stipulate for construction of railway sidings at the cost of the assessee. Construction work was awarded either to railway or third party contractors based on their expertise and the work was undertaken under the supervision of the Railways. Clause 6 is specifically provided for payment in advance to the railway administration, the total estimated cost of the work done by the party and thus by the railway administration. Clause 7(a) stipulate that assessee will provide and deliver at site the permanent way and other materials in accordance with the railway administration standard and specifications. Clause 17 stipulate that assessee shall provide labour for and bear the cost of all Operations on the siding. Clause 9(b) provides for maintenance and other charges for the operation of the sidings at assessee's cost and expense to the satisfaction of railway administration.' 26. Learned AR a....
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....Delhi Press Patra Prakashan Ltd. [2013]355 ITR 14 (Delhi)/[2013] 260 CTR 253 (Delhi) 7. Saurashtra Cement & Chemical Industries Ltd. v. CIT [11 CTR 139] [GUJARAT] 8.Ace Multi Axes System Ltd. V. Deputy Commissioner of Income Tax [2014]367 ITR 266 (Karnataka) 9 ITO vs. Smt. Urmila Bhandari [ITA Nos.766, 2593/Del/2013] 10 Deputy Commissioner of Incme Tax v. Selvel Advertising (P.) Ltd. [2015]37 ITR(T) 611 (Kolkata Trib.) 11. Century Enka Limited vs. Deputy Commissioner of Income Tax [ITA No. 560/Kol/2010] 12.Janak Dehydration (P.) Ltd. v. Assistant Commissioner of Income-Tax [2011] 44 SOT 93 (Ahmedabad)(URO)/[201 0]134 TT J 1 (Ahmedabad)(UO) 13. U.P. State Bridge Corporation Ltd. V. Deputy Commissioner of Income-Tax [2015] 70 SOT 517 (Lucknow Trib.)/[2015] 171 TT J 353 (Lucknow Trib.) 14. Asst. Commissioner of Income - Tax vs. M/s. Apex Packing Products (P) Ltd. (ITA Nos. 145 to 150/PNJ/2013) 30. On the other hand, it was vehemently argued by learned DR that rail system of the assessee company was simply the profit siding and not any infrastructure facility of public utility, therefore, revenue authorities hav....
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....9;) has acquired the cement business of Larsen & Toubro Limited (L&T') along with the Rail systems at Hirmi, Tadipatri, Arrokonam and Durgapur in the FY 2003-04. These Railway systems were developed on or after 01/04/1995 by the L&T. year wise details of the aforesaid rail systems are as follows: Unit I Rail system Undertakings Year of Commencement of operations (A. Y.) Initial year of claim (A.Y.) Rail system at Hirmi in the state of Chhattisgarh 2000-01 2004-05 Rail system at Tadipatri in the state of Andhra Pradesh 1999-00 2007-08 Rail system at Arakkonam in the state of Tamil Nadu 2001-02 2007-08 Rail System at Durgapur in the state of West Bengal 2002-03 2008-09 35. M/s. L&T had entered into agreements with the Railway authorities to develop, operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of India....
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....y or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. Indian Railways is the statutory body under the Indian Railways Act. b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption. c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approval of the Indian Railways. 36. It was therefore contended that the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in no case it can be inferred that they are not the required agreements under section 80-IA. 37. The Govt can also enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions of the Indian Railways. M/s L& T has accordingly entered into agreement with the appropriate rail authorities to Develop, Operate and Maintai....
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....includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non-observance of such rules, regulations and orders . e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own....
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....y eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. 43. The Rail systems of assessee at Hirmi, Tadipatri, Arakkonam and at Durgapur were developed under the Agreements entered into with Indian Railways and the assessee is allowed to Operate and Maintain in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways only. The copies of agreements between M/s L& T and Indian Railways for other rail systems i.e. at Tadipatri, Arakkonam and Durgapur are placed on record and we have carefully perused the relevant terms and conditions. The Indian Railways plays role in operations and maintenance of the Rail systems, traffic Management, etc. as mentioned under the various claus....
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.... under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time to time. The entire cost was borne by the assessee and is appearing in the balance sheet of the assessee as placed on record. We have also verified the same and found it correct. 48. Contention of revenue authorities that Railways had constructed the rail system is not factually correct. In fact, M/s L& T had entered into agreement with the appropriate rail authorities to Develop its rail systems. M/s. L&T had constructed the rail system by awarding contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction/ development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. 49. From the record we found that the rail systems were developed under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and condition....
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....ipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, Maintaining signa ling systems, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc. Further, in Clause No. 14 - Traffic on Siding - it is mentioned that " .... applicant undertakes to shunt the wagons from such point to his premises and back with his own labour and the railway administration would not be responsible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting." Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant. e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the app....
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.... No. of Engines / Locomotives No.of Wagons Hirmi 2 49 Tadipatri 2 76 Arakkonam 1 30 Durgapur 2 30 53. Unitwise details of amount of claim of deduction u/s.80-IA on the profits of Rail System for AY 04-05 to AY 09-10 is as under:- Rail Systems at AY 04-05 AY 05-06 AY 06-07 AY 07-08 AY 08-09 AY 09-10 Hirmi 15.63 16.13 20.95 21.09 24.33 28.26 Tadipatri -- -- -- 25.56 25.22 31.03 Arakkonam -- -- -- 5.73 6.30 7.11 Durgapur -- -- -- -- 5.71 6.72 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the basis adopted for calculating the revenue from rail system is, lower of the Freight chargeable through Road and Rail. The Rail Freight being lower is considered after discounting it further by 50% based on the Circular of Indian railways for the freight chargeable upto the nearest railway station. Freight Rates are considered as per the Freight Rate chart & Freight Circulars issued from time to time by Indian Railways, based on the classification of the g....
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....een laid down by the Hon'ble Supreme Court in the context of a Chamber of Commerce [CIT vs. Andhra Chamber of Commerce (1965)] (55 ITR 722) wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point o....
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....ntain the terms and conditions of the construction of railway siding i.e. development of siding (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well. 60. Our attention was also invited to letter No. 99/TC(FM)26/1/Pt-II (Sub Liberalisation of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. 61. As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its goods, viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of a....
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....outh Eastern Railway March 2000 Tadipatri South central Railway 03-05-1999 Arakkonam Southern Railway 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard to CIT(A)'s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the Indian Railways and not by the assessee Company. 69. We found that the CIT(A) has equated "running of goods train" with the "operation of Rail System". This is the sole basis on which he has arrived at his conclusion that since the assessee is not running the goods train it is not operation of Rail System and hence not eligible for claiming deduction under section 80IA(4). 70. As per our considered view, the operation of Rail System is not simply running of goods train. Operation of Railway System....
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....ailway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division. 77. After verifying the computation of income eligible for deduction u/s.80IA, as filed by assessee, we found that the CIT(A) has misunderstood the working of the revenue calculation and alleged that such working is ill-conceived as the actual transportation of materials on the siding is carried out by the railway authorities. Based on such misunderstanding, he further alleged that assessee has claimed deduction for notional profits whereas section 80lA allows deduction for profits derived from actual operations. 78. In this regard, we observe that the railway systems of the assessee has been rendering following services to the cement division: * shunting of the wagons, * placin....
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....nds, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operation of railway siding with merely hauling of wagons. The operations of railway siding involves various activities other than the hauling of wagons. Mere haulage of wagons cannot be equated with operations of railway siding. We found that assessee has filed reports in Form 10CCB from M/s G.P.Kapadia & Co., Chartered Accountant. The CIT(A) himself has allowed the deduction in AY 2009-10 based on the similar facts available on records but changed his decision merely based on the replies to questionnaire from various Railway Department. 83. The CIT(A) has also raised a query as to whether the L& T Ltd, which had developed said rail system was eligible for deduction u/s 80lA in respect of profit, if any, otherwise on operation & maintaining that system under the provisions that existed at the relevant time [prior to 01.04.2002] when such infrastructure facility is....
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....isting expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction " 86. In terms of the above averments, after acquiring the cement business from L&T, the assessee started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards since it satisfied all the conditions as prescribed u/s 80IA(4) as it stood during AY 2004-05, viz: a) It is owned by a company registered in India. b) It has entered into an agreement with the Government for developing / operating / maintaining the infrastructure facility, and c) It has started operating and maintaining the infrastructure facility on or after April,1995. 87. Thus, under the amended conditions of t....
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....industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the year in which the assessee was not a small scale industry, and, therefore, the assessee did not fulfill the condition of section 80-IA in the initial year. On appeal, the Commissioner (Appeals), allowed the assessee's claim under section 80-1A. On Revenues appeal, the ITAT held that for claiming deduction under section 80-IA, it has to be determined at end of relevant previous year that as to whether assessee is registered as SSI and there is no condition in Act that an industrial undertaking should fulfill all conditions as laid down under section 80-IA in very initial year itself and not thereafter. 90. Eve....
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....triction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L & T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L& T Ltd in the FY 2003-04 on account of demerger, could be treated as eligible to the deduction under the aforesaid section in respect of profit, if any, of those rail system for the later years. In this regard we observe that assessee has inherited the cement business from L&T Ltd., in FY 2003-04 on account of merger. Post merger it started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards as it satisfied all the conditions as prescribed u/s 80IA(4). Section 80IA(12) provided that in the scheme of amalgamation or merger, the deduction is available to the amalgamated / resulting company. The relevant provision of sec. 80IA(12) reproduced hereunder:- "Where any undertaking of an Indian company which is entitled to the deduction under....
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....3 (ITAT, Spl. Bench Mumbai)], Ponni Sugars Chemicals Ltd [2008 TIDL 174-SC-IT]. However, the AO observed that as per the relevant sales tax incentive schemes the assessee was not required to charge any sales tax from its customers and/or to pay any purchase tax on its purchase for a particular period, subject to overall limit based on capital invested; that the State-Government had not given any amount of subsidy either in cash or-in kind to the assessee to enable them to establish plant; that the primary object of the Government in granting sales tax exemption was to attract investment 'by giving them a competitive edge and develop industries in backward areas. 98. By the impugned order CIT(A) allowed assessee's claim by observing that the Tribunal have decided to issue in favour of the assessee vide order dated 20/08/2009 in the case of assessee for A. Y. 2004-05 to 2005-06 in ITA Nos. 7735 & 7736/Mum/2007. For ready reference, the relevant para 5.1, 5.2 & 6 of that order is re-produced hereunder: "5. 1 The scheme under which the assessee claimed exemption benefit of sales tax was similar to the scheme in the case of Reliance Industries. The Hon'ble President: con....
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....olding that subsidiary was capital in nature therefore, not liable to tax as revenue receipt. 101. In the Assessment Year 2009-10, the assessee is also aggrieved for disallowance of interest expenditure on exempt income u/s.14A. Our attention was invited to the cash flow statement as placed at page 70 of the Annual Report according to which there was net cash surplus of Rs. 1457.57 crores from operating activities. Attention was also invited to the investment made by assessee during the year in units of mutual funds amounting to Rs. 817.83 crores, the income from which is exempt from tax. Contention of learned AR was that this investment was out of cash surplus of Rs. 1457.57 crores generated during the year. As per the working submitted before the revenue authorities, it was contended that investment in mutual funds was out of cash surplus generated by the assessee. As per learned A.R, following the order of Jurisdictional High Court in case of Reliance Utilities and Power Ltd., and HDFC Bank, no disallowance of interest u/s.14 r.w.r 8D of the IT Act is warranted. 102. We have considered rival contentions and carefully gone through the orders of the authorities below. In vie....
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....decision of the Tribunal in assessee's own case, we restrict the disallowance under Rule 8D(2)(iii) to the extent of Rs. 55,40,932/-. Following the same reasoning, we direct AO to restrict disallowance under Rule 8D(2)(iii) to the extent of Rs. 64,30,155/- as offered by assessee in the A.Y 2010-11. We direct accordingly. 105. Similarly in the A.Y.2010-11, assessee is aggrieved for disallowance made u/s.14A amounting to Rs. 13,85,61,471/- on account of interest and sum of Rs. 4,92,15,823/- on account of administrative expenses. 106. We have considered rival contentions and found from record that during the previous year, the assessee company had invested Rs. 617.19 Cr. in units of Mutual funds, of which the investments from which the income is exempt from tax is Rs. 407.19 Cr., out of the cash surplus of Rs. 1571.93 Cr. generated during the year. Instead of keeping the cash generated during the year from operations idle, the same was invested temporarily in units of Mutual Funds. It was also shown to us that on none of the occasions CC facility of the assessee was utilized for making investments in units of mutual funds, income of which is exempted. Since assessee has invested....