TaxTMI 
TaxTMI 
2018 (7) TMI 1811
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....f the case, the lower authority has erred in not appreciating the difference between a "simple investment" to earn income from dividend and a "Business Investment" made with a commercial motive of acquiring controlling interest. 4. On the facts and in the circumstances of the case, the lower authority has erred in applying Section 14A read with Rule 8D, without establishing the requisite nexus between the expenses incurred and dividend income earned. 5. On the facts and in the circumstances of the case, the lower authority has erred in holding the refund of Excise duty (Self Cenvat Credit) amounting to Rs. 2,80,82,949/-, is not a capital receipt. 6. On the facts and in the circumstances of the case, the lower authority has erred in holding that the assessee is not entitled to the exclusion of refund of Excise duty (Self Cenvat Credit) amounting to Rs. 2,80,82,949/-, being Capital in nature, in the determination of total income u/s 115JB of the Income Tax Act, 1961." Grounds raised by Revenue: "1. On the faces and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that no interest bearing funds were used by the assessee in making inv....
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....-11 and has referred to the rule of consistency to be followed by him. It is further submitted that the above issues travelled upto the stage of Tribunal and the appeals for the preceding years 2008-09, 2009-10 and 2010-11 (ITA Nos. 5124/Del./20111, 92/Del/2012, 144/Del./2013, 475/Del./2013), 4426/Del/2013 and 4906/Del/2013) filed by the assessee as well as the Revenue have been decided by Co-ordinate Bench of Tribunal vide order dated 29.06.2018, whereby the above issues have been decided in favour of the assessee and against the Revenue. Therefore, the rule of consistency, if required to be followed, shall be derived from the order of Tribunal, which squarely covers the issues in dispute. 5. On the other hand, the ld. DR relied on the order of the Assessing Officer and submitted that the ld. CIT(A) was not justified in deleting the additions, as challenged by the Revenue in its appeal, without considering the facts of the cases in right perspective. 6. We have considered the rival submissions and have gone through the entire material on record and we find that the issues involved in both these cross appeals stand covered by the decision of Co-ordinate Bench of Tribunal dated 29....
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....mu unit. However it is important to note that the assessee had obtained the licence of the technical know-how of manufacturing the sachet for Jammu unit, as the assessee had installed the plant and machinery for utilization of that technical know-how at Jammu unit. However due to some unforeseen reasons the assessee could not use the technical know-how neither at Jammu unit nor at any other units. As submitted by the Ld.AR, the assessee has commercially exploited the same and has earned Rs. 1.96 crores for the year under consideration, by subletting the technical know-how to an outside party. 5.3. Hon'ble Bombay High Court in the case of Zandhu Pharmaceuticals Works Ltd vs. CIT reported in 259 CTR 253 observed as under: "In CIT vs. Sterling Foods, reported in 237 ITR 579, the Hon'ble Supreme Court had considered a similar issue under section 80 ITIIC of the act: whether, on the facts and in circumstances of the case, the tribunal was justified in law in holding that the received from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing the relief under section 80 HHC of the IT Act, 1961? 12 The question is to be ch....
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....d relied upon the decision of Madras High Court in the case of Bush Boak Allen (India) limited versus ACIT reported in 273 ITR 152. 5.4. In our considered opinion on the present facts of assessee's case stands squarely covered by the ratio laid down by Hon'ble Bombay High Court in the case of Zandu Pharmaceuticals Works Ltd (supra). The assessee has paid certain royalty towards the technical know-how obtained by it and it had received certain license fee in respect of the same technical know-how as it was passed out to an outside party. The assessee could not exploit the technical know¬how for manufacture of goods at Jammu unit and therefore the assessee had shown the sums under corporate division. Respectfully following the decision of Hon'ble Bombay High Court in the case of Zandu Pharmaceuticals Works Ltd (supra), we hold that the sums of rupees for Rs. 4.25 crores and Rs. 1.96 crores has to be shown under corporate division and the excess along with other corporate expenses has been rightly been allocated to the 3 manufacturing units by the assessee." 8. Since, the entire basis for adverse inference by the Assessing Officer as well as of ld. CIT (A) is upon the as....
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....ld that no disallowance of interest should be made. However for certain verification, he has given to the Assessing Officer as per the direction given at pages 21 and 22 of the order. However with regard to the calculation of administrative cost @0.5% under Rule 8D (2)(iii), he upheld the action of the Assessing Officer. 25. Before us, the learned counsel submitted that, first of all there was only one dividend cheque received during the year and all investments were made in the earlier years. This aspect was clearly stated before the Assessing Officer that no expenditure has been incurred for the purpose of earning the dividend income. In so far as the disallowance of interest is concern, he submitted that there is a categorical finding by the CIT(A) which is also borne out from the record that no borrowed funds have been diverted for the purpose of investment and hence no disallowance can be made on account of interest. 26. On the other hand, learned DR strongly relied upon the order of the Assessing Officer and ld. CIT (A) and submitted that, once the assessee has a dividend income which is claimed as exempt then expenditure needs to be attributable. 27. After consideri....
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.... income and to record satisfaction in this regard etc. In the identical facts of the present case, we decide this issue in favour of the assessee and against the Revenue in the peculiar facts & circumstances of the case. It is, however, observed that our this decision shall not operate as an exemplar in other cases having different set of facts and circumstances. Accordingly, grounds Nos. 2 to 4 raised by the assessee are allowed and ground No.1 raised by Revenue is dismissed. 10. The third and fourth issues have also been decided by the Tribunal vide para 9 to 16 and 17 to 20 of their order and the same are covered in favour of the assessee and against the Revenue. The observations of the Tribunal read as under : 9. Coming to the issue of exclusion of refund of Excise duty (Self Cenvat Credit) amounting to Rs. 1,31,01,284/- being capital in nature, and therefore, same should also be not part of Section 115JB. First of all, we find that the Revenue has also raised the similar issue in ground no.1 and 2, that is, firstly, disallowance of claim for deduction at Rs. 1,31,01,284/- on account of 'Self Cenvat Credit Availment' u/s.80IB; and secondly, challenging the finding that Excis....
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....7 ITR 353 (Del.), wherein the Hon'ble High Court had clearly distinguished the nature of income by way of DEPB/ Refund/ Cenvat Credit/ Duty Draw Back and Assessing Officer was directed to consider the excise duty refund as profit derived from the business of the Industrial Undertaking while computing the eligible deduction u/s.80IB of the Income of the assessee's Jammu unit. Alternatively, it was also claimed that Excise Duty refund is a capital subsidy in view of the decision of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys v. CIT [2011] 239 CTR (J&K) 70 wherein it was held that Excise duty refund as granted by the State of Jammu and Kashmir is a capital subsidy. 12. Before us, ld. counsel for the assessee submitted that first of all, the Jammu unit falls within the jurisdiction of Hon'ble High Court of Jammu & Kashmir and if the excise refund has been treated as capital receipt, then the same has to be followed as such. He further pointed out that this decision of Hon'ble Jammu & Kashmir High Court has been affirmed by the Hon'ble Supreme Court vide order dated 19th April, 2016, wherein Hon'ble Apex Court following the ratio of CIT....
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....supra). Thus, when the excise duty refund has been treated as capital subsidy not part of taxable receipts, then entire controversy sets at rest and accordingly, the finding of the ld. CIT (A) that excise refund is a capital in nature stands confirmed. In view of this finding grounds no.1 and 2 as raised by the Revenue are dismissed. 17. Now coming to the issue, whether such capital receipt in the form of excise duty refund should be treated as part income while computing book profit u/s.115JB. Ld. CIT(A) has held assessee is not entitled to the exclusion of the said amount following the judgment of ITAT Hyderabad in the case of Rain Commodities Ltd. Vs. DCIT, [2014] 149 ITD 732 (Hyd.). 18. Before us the learned counsel has strongly relied upon the decision of ITAT Mumbai Bench in the case of JSW Steel vs. ACIT, ITA Nos. 923 & 930/Bang/2009, wherein all the decisions on this issue has been discussed and analysed and on similar capital receipt, ITAT Mumbai Bench in the case has held that such capital receipt cannot be part of book profit. Thus, he submitted that once a receipt itself is not taxable within the provision of the Act, then same cannot be held to be includable while co....
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....carrying amount, which herein this case is gain on account of waiver of part of obligation to repay the loan. Further, Accounting Standard - 5 also states that, extra-ordinary items should be disclosed separately in the profit and loss account. The objective of AS-5 is to prescribe the classification and disclosure requirements. The relevant text of the standard 5 reads as under: "8. Extraordinary items should be disclosed in the statement of profit and loss as a part of net profit or loss for the period. The nature and the amount of each extraordinary item should be separately disclosed in the statement of profit and loss in a manner that its impact on current profit or loss can be perceived." A con-joint reading of the above accounting standards suggests that, there are two types of compulsions while preparing annual accounts, one are accounting compulsions and second are disclosure compulsions. The accounting compulsion comes into play since there is a double entry system of accounting, for instance, when a loan amount is waived, a debit goes to the liability account and a credit has to go to any of the liability/ reserve account, which in the present case has been taken t....
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....nnot be regarded as income, profit or gain. This view is further reiterated by the interpretation clause 7 appearing in Part III of Schedule VI of the Companies Act which reads as under:- "7(1) For the purpose of Parts I and II of this Schedule, unless the context otherwise requires._ (a .................................... ) (b .................................... ) (c) the expression "capital reserve" shall not include any amount regarded as free for distribution through the profit and loss account; and the expression "revenue reserve" shall mean any reserve other than a capita! reserve; " A capital surplus thus, in respect of waiver of loan amount cannot be regarded as being amount available for distribution through the profit & loss account. This follows from the very definition of expression 'capital reserve' that it must be accounted directly to the credit of the capital reserve account instead of being credited to the profit & loss account so as to ensure that it is not left for being distributed through the profit & loss account. 16. From our above analysis and discussion of the various provisions of the Companies Act as well as Accounting Standard....
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....rtain interest dues, as a part of a restructuring package with its tenders Out of these amounts, the Company has not considered the write-back of principal amounts (amounting to Rs. 228,46,76,328) as a taxable income since the same is in the nature of capital receipt in the hands of the Company. Further, these amounts do not represent the revers al of any amount allowed as a deduction in any earlier year. Hence the provisions, of section 41(1) do not apply in respect of this write-back. As regards the write-back of the balance amount relating to waiver of interest dues, the Company has offered for tax those amounts which had been claimed as a deduction in earlier years on provision basis amounting to Rs. 76,27,96,973 (refer clause A(l) of Annexure 8 of TAR). The balance amount of Rs. 86,01,30,698 had not been allowed as a deduction in earlier years due to the provisions of Section 43B of the Act and consequently, the write-back of this amount is not considered as a taxable income in this year Accordingly, the loss computed has been increased to the extent of the provision writtenback. In connection with the above contentions, the Company relies on the following decisions:- * ....
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....y to decide as to whether a particular category of assessee is to pay a particular tax or not. Even if we agree that Assessing Officer could not have entertained such a fresh claim but in view of the decision of Hon'ble Supreme Court in the case of Goetz India Ltd. vs. CIT (supra) as heavily relied upon by the Ld. CIT D.R., however, it does not impinge upon the powers of the appellate authorities including Ld. CIT (A) and Tribunal. This has been clarified by the Hon'ble Supreme Court itself in the concluding part of the said judgment. There is no such bar or statutory restrain on the appellate authorities to permit/entertain such additional claims which has been raised by the assessee before them. This proposition is strongly supported by the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd., (2012) 349 ITR 336 (Bom.). It is also equally a salutary principle of tax laws that entries in the books of account or in the profit & loss account is not a determinative factor for taxing the income because income can be taxed only by the express provisions of law. We have already discussed in detail in our earlier part....