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2018 (3) TMI 662
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....sing in the present appeal relates to disallowance made under section 14A r/w rule 8D(2)(iii). 3. Brief facts are, the assessee a company is engaged in the business of executing contract work for industrial coating, water proofing and also power generation. For the assessment year under dispute, the assessee filed its return of income on 29th September 2008, declaring income of Rs. 76,02,02,481. During the assessment proceedings, the Assessing Officer noticed that the assessee in the relevant previous year has earned the following exempt income:- Dividend on shares Rs. 6,64,522 Income from mutual fund Rs. 15,68,577 Interest on tax bond Rs. 24,96,000 4. He also found that the assessee on its own has disallowed expenditure of Rs. 27,78,869 under section 14A of the Act. The Assessing Officer, however, called upon the assessee to explain why disallowance should not be made in the manner prescribed under rule 8D. In response, it was submitted, the assessee having already disallowed expenditure relating to exempt income no further disallowance should be made. However, the Assessing Officer did not find merit in the submissions of the assessee and proceeded to comp....
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....llowing decisions:- i) Kotak Mahindra Capital v/s DCIT, ITA no.5748/Mum./2012 and ITA no.248/Mum./2013; ii) Vakrangee Ltd. v/s ACIT, ITA no.6908/Mum./2014 iii) Jigar Shah v/s ACIT, ITA no.4366/Mum./2014 iv) DCIT v/s Mahendra Brothers Exports Pvt. Ltd., 161 ITD 772; v) Fiduciary Euromax Global Markets Ltd., ITA no.1349/Mum./ 2012 and ITA no.955/Mum./2014; and vi) Usha Martin Ventures Ltd. v/s DCIT, ITA no.847/Kol./2013. 7. The learned Authorised Representative submitted, amount of Rs. 10 crore invested in share application money cannot be treated to be in the nature of investment giving rise to exempt income. Therefore, it has to be excluded from the average value of investment. For such proposition, learned Authorised Representative relied upon the decision of the Tribunal, Mumbai Bench, in Rainy Investment Pvt. Ltd. v/s ACIT, [2013] 56 SOT 61 (Mum.) (Trib.) (URO). Further, the learned Authorised Representative submitted, the assessee has not earned any dividend income either on the incremental strategic investment or on the share application money in the relevant previous year. Therefore, such investments not yielding any ex....
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....lowance under section 8D(2)(iii). We do not find any rationale or logic behind such decision of the learned Commissioner (Appeals). Once the learned Commissioner (Appeals) has found that the investments made in the group companies are in the nature of strategic investments then no differentiation can be made between the old investments and the incremental increase made during the year. The decisions relied upon by the learned Authorised Representative lay down the ratio that strategic investments have to be excluded from the average value of investment for computing disallowance under section 148 r/w rule 8D. It is the contention of the learned Authorised Representative before us that the amount of Rs. 47,91,70,021, represents incremental increase in investments in group companies during the year. Learned Authorised Representative also attempted to demonstrate this fact from the material on record. In view of the aforesaid, we direct the Assessing Officer to examine assessee's claim and if it is found that the amount of Rs. 47,91,70,021 is in the nature of strategic investment, then it has to be excluded from the average value of investment for computing disallowance under section ....
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....ged the decision of the learned Commissioner (Appeals) in execluding old investments made in group companies for computing disallowance under section 14A r/w rule 8D. 13. In view of our decision, while deciding assessee's appeal in ITA no.3739/Mum./2015, for the assessment year 2008-09, this ground has become infructuous, hence, dismissed. 14. In grounds no.2 and 3, the Revenue has challenged the decision of the learned Commissioner (Appeals) in deleting the addition of service tax to the trading receipt by invoking provisions of section 145A of the Act. 15. Brief facts are, during the assessment proceeding, the Assessing Officer after calling upon the assessee to furnish details of service tax component forming part of trading receipt, service tax payable on purchases, CENVAT, credit accrued on actual payment towards purchases, service tax liability accrued on actual receipt from clients observed that the assessee did not explain the manner in which the entries corresponding to service tax component in sales and purchase bills are made in its books of account. The Assessing Officer observed, the assessee should have followed the inclusive method of accounting insofar as t....
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....ct. In that context, the Hon'ble Supreme Court held that the CST refund is in the nature of revenue receipt and taxable. However, no such facts or issues are involved in the present appeal. Therefore, the decision of the first appellate authority on the issue being in conformity with the decision of the Tribunal in assessee's own case for assessment year 2007-08 which has been upheld by the Hon'ble Jurisdictional High Court, we uphold the order of the learned Commissioner (Appeals) by dismissing the grounds raised. 20. In the result, Revenue's appeal is dismissed. ITA no.3740/Mum./2015 Assessee's Appeal for A.Y. 2009-10 21. The issue raised in grounds no.1 to 3 relate to disallowance made under section 14A r/w rule 8D. 22. Facts relating to this issue are more or less identical to similar issue raised by the assessee in ITA no.3739/Mum./2015, except for the fact that in addition to rejecting assessee's plea for exclusion of incremental investments in group companies amounting to Rs. 171,73,70,059 and share application money of Rs. 23,92,75,570, the learned Commissioner (Appeals) also rejected the plea of the assessee to exclude investment of Rs. 5....
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....d no.4, the assessee has challenged disallowance of expenditure amounting to Rs. 1,77,99,929. 27. Brief facts are, during the assessment proceeding, the Assessing Officer noticed that the assessee has claimed expenditure of Rs. 1,77,99,929 on account of professional / consultancy fees paid to Kotak Mahindra Bank. The Assessing Officer called upon the assessee to explain why the expenditure should not be disallowed under rule 8D(2)(i). In response, it was submitted by the assessee that Kotak Mahindra Ltd. advised the assessee on how to raise money at the lowest cost from banks / vendors national as well as international through equity / debt or combination of both. The money was required for working capital credit and Kotak Mahindra Ltd. through their contacts with companies helped the assessee to augment its logistic, painting, dredging business by getting more work and help it to carry out its business more efficiently. The Assessing Officer, however, did not find merit in the submissions of the assessee. After calling for information under section 133(6) of the Act from the concerned bank the Assessing Officer found that the funds was required to be raised for making investmen....
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....ial stake. The aforesaid fact has been accepted by both the parties. Therefore, it is required to be seen whether the expenditure directly related to such an investment / activity is for the purpose of assessee's business. Though, the learned Authorised Representative has submitted before us that making investment in other companies is also one of the objects of the assessee, however, relevant documentary evidence to establish such fact have not been brought before the Bench. As could be seen from the assessment order which is also relied upon by the learned Departmental Representative the assessee is in the business of industrial abrasive blasting and painting, anti corrosion water proofing reclamation off-shore contractor, supply of electricity from wind mill, execute construction contracts for corporate, logistics, dredging and margin contracts. On a careful reading of the judgment in Amalgamation Pvt. Ltd. (supra), it is seen that the High Court that has held that holding of investments in other companies can be considered to be a business if it is a real substantial and systematic or organised course of activities or conduct with the said purpose of earning profit. However, th....