TaxTMI 
TaxTMI 
2018 (4) TMI 872
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.... years involve regular assessments u/s.143(3) of the Act. 2. Learned counsel representing assessee files before us a compilation chart of all the relevant issues involved in the entire batch of eights cases. The Revenue is fair enough in not disputing correctness thereof. We take the said compilation chart as part of our record. Learned representatives further request us to treat assessment year 2007-08 involving Revenue's appeal ITA No.737/Ahd/2012 and assessee's CO No. 96/Ahd/2012 as the lead assessment year. We do not see any unreasonableness in the instant plea. The same is therefore accepted. Assessment year 2007-08 (Revenue's appeal ITA No.737/Ahd/2012 and assessee's CO No. 96/Ahd /2012) 3. The Revenue appears to have pleaded its five substantive grounds that the CIT(A) has erred in law as well as on facts in reversing Assessing Officer's action making Section 14A r.w. Rule 8D disallowance after holding that the said rule does not apply with retrospective effect in the impugned assessment year, in concluding that consequential MAT adjustment 115JB qua the amount in question of Rs. 1,49,66,635/- is not sustainable, restricting the said disallowance to the extent of adminis....
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.... submission of the appellant that the provisions of Rule 8D are not applicable prior to 01/04/1989 is acceptable. It is now judicially settled that the provisions are effective from 01 /04/1989 i.e. for A. Y. 2008-09 onwards. Therefore, the disallowance made by the A. O. by applying the provisions of Rule 8D was not justified and it is accordingly set aside. However, it is seen that the appellant company has made total investment of Rs. 652.79 crores during the year and has incurred administrative expenses of Rs. 1,49,66,635/- on various activities of the company. The investment has yielded dividend income of Rs. 67,45,61,270/- and the appellant has not apportioned any corresponding expenditure related to earning of this income. Accordingly, a show cause was issued by this office on 05/07/2011 asking the appellant to explain why disallowance on account of administrative expenses be not made. The Appellant vide his letter dated 27/01 /2012 has submitted a written reply. The appellant has submitted that apart from the income of dividend, the appellant was also having income from interest, capital gain on sale of shares, which have been offered for tax. The entire administrative ex....
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....as compared to earlier year. Considering these facts, I consider it reasonable to disallow a sum of Rs. 25 lacs on account of administrative expenses u/s. 14A of the Act. Regarding the disallowance of expenditure worked out for section 14A while working out the book profit u/s. 115JB, the appellant has submitted that in the computation of 115JB, no adjustment of notional allowance as per section 14A was permissible. The appellant has also sought to rely on the judgment of IT AT, Delhi in the case of Goetz India [32 SOT 101 I'm which it has been held that under Clause F of explanation to section 115JA, the provisions of section 2 and sub-section 3 of section 14A cannot be imported. Further, the appellant has also relied on the decision of IT AT, Ahmedabad in the case of Gujarat State Energy Generation Limited in the order dated 15/04/2011 in IT A No. 1777 and 2028/Ahd/2009. It has been held by the Hon'ble Bench that after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres, only such items which are specifically mentioned in Explanation to section 115JB need to be excluded or included and nothing more can be brought in. After the careful a....
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....ng a similar MAT adjustment. 10. The assessee on its turn takes us to paper book page 101 revealing interest free funds of Rs. 6,50,43,84,881/- as against its tax free investment of Rs. 6,52,79,37,522/-. It then points us that as per page 77 read with 102 that it has not claimed any interest expenditure in the impugned assessment year which could trigger the corresponding disallowance in question. The taxpayer's case therefore is that the said interest expenditure already stands added on suo mottu basis. We invited assessee's attention to its second and third substantive grounds (supra) now claiming the said interest figures of Rs. 8.52crores. Mr. Soparkar states that the impugned issue of Section 14A disallowance apart from administrative expenditure and MAT adjustment needs to be remitted back for the reason that if the interest amount in question is accepted in consequential proceedings, it would lead to re-computation of Section 14A disallowance amount as well. The Revenue's case before us qua this issue is that the CIT(A) has rightly rejected the above interest claim since not raised in original as well as revised return. We find the Revenue's instant technical argument to be....
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....putation book profits. Learned CIT.D.R. places strong reliance on GSFC's case (supra). We find that the tribunal's order under challenge therein at Revenue's behest sought to revive the entire Section 14A disallowance to Rs. 1,14,43,640/- as restricted to Rs. 5lacs only as well as for the purpose of book profits computation. Their lordships' another judgment in Tax Appeal No. 1249/2004 dated 20.07.2016 in Alembic Ltd's. case in assessee's favour. We consider all these factual and legal developments to conclude that the CIT(A) has rightly held that the impugned disallowance made u/s.14A is not to be added in MAT computation u/s.115JB of the Act. The Revenue's corresponding substantive ground is therefore declined. 13. This leaves us with Revenue's fifth substantive ground seeking to revive 115JB books profits adjustment of Rs. 12,60,88,128/- relating to provision made for diminution in value of investment/doubtful debts; as deleted in course of the lower appellate proceedings as follows: "5. The third ground of appeal relates to not reducing income computed u/s. 115JB by Rs.l2,60,88,128/- being provisions for diminution in value of investments and provisions for doubtful debts no....
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....of clause (i) to the explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for computation of book profit under section 115JB of the Act. However, if this was not a mere provision made by the assessee by merely debiting the Profit and Loss Account and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such provision from its accounts by reducing the corresponding amount from the loans and advances on the asset side of the balance sheet and consequently, at side of the balance sheet and consequently, at the end of the year showing the loans and advances on the asset aside of the balance sheet as net of the provision for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of the explanation to section 115JB. The judgment in case of Deepak Nitrite Limited (supra) fell in the former category whereas from the brief discussion available in the judgment it appears that case of Indian Petrochemicals Corporation Ltd. (supra), fell in the later category." 15. Learned Senior Counsel invites our atten....
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.... as Rs. 2,12,78,474/- in assessment order. Learned counsel takes us to assessee's balance sheet at page 58 indicating its interest free funds of Rs. 6,70,81,62,989/- as against tax free investments of Rs. 6,44,56,85,001/-. He seeks to apply "netting" formula as per hon'ble jurisdictional high court's decision in (2017) 85 taxmann.com 72 (Guj) Pr.CIT vs. Nirma Credit & Capital (P.) Ltd. We find the said judicial precedent to be not relevant to the instant issue as their lordships adjudicated the proportionate interest expenditure disallowance in Rule 8D(2)(ii) clause whereas instant lis involves direct and administrative expenditure in first and third clauses of the rule. We repeat that this assessee is itself an investment company having declared both exempt as well as taxable income. The Assessing Officer and CIT(A) have both taken entire administrative expenditure and remuneration benefits for the purpose of computing impugned disallowance on the premise that it does not need to spend the same on any other head. 18. Learned Senior Counsel seeks to restrict the impugned disallowance on lump sum basis as per preceding assessment year's adjudication as referred in earlier part of o....
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....ve incurred the said expenditure predominantly on its investments yielding exempt income by way of dividend. The assessee therefore partly succeeds in its first substantive ground. 20. We further notice that both the parties' second substantive ground raise the common issue of diminution in value of investments as set aside to the Assessing Officer for factual verification. Both the learned representatives agree that we have already upheld similar directions in assessment year 2007-08 in earlier part of our order. Both parties' second substantive ground is therefore declined. Assessee's appeal ITA No.1663/Ahd/2012 is partly accepted. This leaves us with Revenue's former substantive ground seeking to revive book profits adjustment of Section 14A disallowance. We have already affirmed CIT(A)'s identical action in assessment year 2007-08 hereinabove. The Revenue's instant former substantive ground as well as its main appeal ITA No.1670/Ahd/2012 fail accordingly. Assessment year 2009-10 (Revenue's appeal ITA No.1671/Ahd/2012 and assessee's CO No. 156/Ahd /2012) 21. The Revenue's first substantive ground pleads that the CIT(A) has erred in law as well as on facts in reversing Assess....
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....ecision in the case of CIT Vs Manjulla J. Shah [ITA No.3378 of 2010] dated 11/10/2011 wherein similar analysis has been made by the Hon'ble Court. Accordingly, the A. O. is directed to consider the period of holding of the investment from the date when the investments were acquired by the amalgamating companies. The appellant's claim in this regard, is therefore, accepted and the ground of appeal is accordingly allowed." 22. Heard both the parties. It is clear from the CIT(A)'s above extracted findings that he has directed the Assessing Officer to take cost of acquisition of assessee's capital assets as they had been acquired by the original owner/amalgamating companies concerned. Learned Departmental Representative fails to dispute the legal position as per hon'ble jurisdictional high court's judgment in (2013) 38 taxmann.com 42 (Gujarat) CIT vs. Gautam Manubhai Amin that such a cost has to be adopted as it had been incurred by the original owner. We thus see no merit in Revenue's first substantive ground. 23. The Revenue's second substantive ground seeks to revive Section 115JB MAT adjustment qua 14A disallowance of Rs. 2,43,69,906/-. Suffice to say, we have already dec....
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....ction deleting Section 234B interest of Rs. 29,99,684/- with the following detailed discussion: "(C) Ground No.3 is against the levy of interest u/s.234B of the Act. As discussed at para 5.1 (A) above, the appellant on the basis of various legal proposition as ratio of various case laws contended that though the provisions of Advance tax are applicable for the proceedings u/s.115JB of the Act but on account of retrospective amendment in respect of "provision of diminution of value of asset", such liability cannot be foreseen at the time of filing of return of income and cannot be held as malafide in view of Hon'ble Supreme Court decision in the case of HCL Comnet System & Services Ltd. (supra). It is in this regard, I am inclined with appellant that ratio of Hon'ble ITAT, Delhi 'H' Bench in the case of Uttam Sugar Mills Ltd.(supra) and Hon'ble ITAT, Bangalore in the case of JSW Steel Ltd.(supra) are applicable in the case of appellant. Hon'ble Calcutta High Court in the case of Emami Ltd. vs. C.I.T.(2011) 337 ITR 470 and Hon'ble Karnataka High Court in the case of CIT vs. Jupiter Bio-Science Ltd. (2011) 13 taxmann.com 161 followed the ratio that the re....
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.... the details of type of investment of long term investments and current investments in shares, debentures, mutual funds, govt. securities etc. to which such value apply. Further out of this only Rs. 13,85,00,000 was debited in audited profit and loss account as "provision for diminution in value of investment." There is no details which type of shares, securities, debentures etc. are written off and why out of Rs. 83,96,21,779 only Rs. 13,85,00,000 is considered. Further as discussed in para 5.1(B) above, the appellant has business of share & securities trading being a Non-Banking Finance Company (NBFC) besides having investment activities also in shares & securities resulting into long term/short term capital gain. If the appellant has written off certain investment as claimed then it will result into corresponding short term/long term capital loss which the appellant has neither computed nor reflected. This clearly reflects that these are provisions and not the actual write off. On the proposition of law, by the amendment for insertion of clause (i) to explanation to section 115 JB (2) of the Act, the fair & consistent view as adopted by Hon'ble Delhi High Court in the cas....
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....ismissed." 29. We have heard both the parties reiterating their respective stands. Case file perused. Learned senior counsel first of all takes us to page 24 in paper book. His case is that the assessee had shown investment amount in balance sheet of Rs. 4,90,26,84,859/- as on 31.03.2003. He then refers to assessee's P&L account creating provision for the impugned diminution amounting to Rs. 13.85crores. This follows page 31(Schedule IV) indicating the assessee to have arrived at the above investment figure. Lastly comes page 57 containing details of assessee's provision in the impugned assessment order of Rs. 69,46,73,244/- as well as similar provisions written back amounting to Rs. 55,61,73,244/-. The assessee's case accordingly is it has duly followed netting principle as per hon'ble jurisdictional high court's judgment in Vodafone Essar's case (supra). These crucial facts evident from case record have gone unrebutted from Revenue side. We thus take into account all this cogent material as well as legal proposition settled by hon'ble jurisdictional high court to accept assessee's instant first substantive ground as it has duly followed the netting principle propounded in the ho....