TaxTMI 
TaxTMI 
2018 (8) TMI 1634
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.... case is distinguishable from the case of M/s Maxopp Investment Ltd. V/s CIT (SC)? (iii) Whether on the facts and circumstances of the case and in law the Ld. CT(A) was justified in deleting the adjustment of Rs. 19,19,91,664/- made u/s 115JB with regard to the income of the JV? (iv) Whether on the facts and circumstances of the case and in law the Ld. CIT (A) was justified in holding that clause (iic) inserted in Explanation 1 to sec. 115JB by Finance Act, 2015 is remedial and curative in nature whereas in the Act this clause is applicable from 01.04.2016 i.e. for A.Y. 2016-17? The appellant craves the right to amend alter or add to any of the grounds of appeal given above." 2. Ground No. 1 of the appeal is regarding the disallowance made on account of Employees' Contribution towards ESI and PF as the payment was not made within the prescribed time limit as per the respective Acts, which was deleted by the ld. CIT(A). 3. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. At the outset we note that this issue is covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs....
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....ment. Accordingly, following the various decisions on the point, the ld. CIT(A) has deleted the disallowance made by the Assessing Officer. 6. Before us, the ld DR has submitted that the predominant purpose of investment is not relevant for the purpose of disallowance U/s 14A of the Act as held by the Hon'ble Supreme Court in the case of M/s Maxopp Investment Ltd. V/s CIT 402 ITR 640. The ld DR has submitted that the Assessing Officer has computed disallowance as per clause (ii) of Rule 8D, which provides disallowance equivalent to 1% of the average investment. 7. On the other hand, the ld AR of the assessee has submitted that the assessee's own interest free fund comprising of share capital and reserve and surplus was Rs. 513.45 crores as on 31/3/2014 whereas no fresh investment was made by the assessee during the year under consideration for which the provisions of Section 14A of the Act can be applied. The total investment is in the subsidiary/sister concerns of the assessee and therefore, in absence of dividend accrued or received by the assessee, no disallowance can be made U/s 14A of the Act. The ld AR has relied upon the decision of Hon'ble Gujarat High Court in th....
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....uage as currently appearing in Sub-section (1) of Section 14A of the Act. Sections 14A (2) and (3) of the Act were introduced by the Finance Act of 2006 with effect from 1.4.2007. The finding of the Bombay High Court in the impugned order that Subsections (2) and (3) of Section 14A is retrospective has been before this Court. The said question, therefore, need not and cannot be gone into. Nevertheless, irrespective of the aforesaid question, what Section 14A(1) of the Act is proof of the fact that the expenditure sought to be disallowed/deducted had actually been incurred in earning the dividend income. Insofar as the Appellant-Assessee is concerned, the 1998-1999, 1999-2000 and 2001-2002. Earlier to the introduction of Subsections (2) and (3) of Section 14A of the Act, such a determination was required to be made by the Assessing Officer in his best judgment. In disallowed and the earning of the dividend income in question. In the standpoint of the requirements of the provisions of Subsections (2) and (3) of Section 14A of the Act which had by then been brought into force. It exemption claimed on account of dividend income. 37. We do not see how in the aforesaid fact situ....
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....cer on account of adjustment made in the book profit computed U/s 115JB of the Act in respect of share of the assessee in the income of the joint venture. The Assessing Officer noted that the assessee deducted a sum of Rs. 37,60,20,402/- as share of profit from OMIL & JSC (JV) from the profits of the assessee as per Schedule VI of the I.T. Act. The Assessing Officer was of the view that the said share in the profit of joint venture is not deductible as per the provisions of Section 115JB of the Act. The Assessing Officer noted that as per explanation to Section 115JB, only income which is exempt as per the provisions of Section 10 of the Act and credited to the P&L account, shall be reduced while computing the book profit. Though the amendment has been brought to the provisions of Section 115JB under clause (iic) of explanation (1), however, the said amendment is inserted by the Finance Act, 2015 w.e.f. 01/4/2016 and therefore, the same is not applicable for the year under consideration. The Assessing Officer accordingly, made an addition of the said amount of Rs. 19.19 crores. 10. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and submitted th....
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....ximum marginal rate, shall be excluded from the total income of the Assessee for MAT U/s 115JB. It gives strength to the view that once the tax has been paid at the maximum marginal rate, then on such income there will be no other tax (i.e. double tax), thus this amendment has clarified the provisions of 115JB. We also draw your kind attention on the object of taxability of income in India U/s 14(1) of Act 22 and U/s 86 of Act, 1961, it is specifically mentioned that for any income wherever it is found, tax is to be collected at the earliest possible stage. But the tax is not levied again on one passage of the money in the form of one sort of income. Thus, when a group of persons is taxed as the income of the group or otherwise, it would be double taxation. A member of family, firm or association is not liable to tax again in respect of share received by him out of the income of the assessable unit to which he belongs to. That is the provision made by this clause and Sec. 86 are to prevent the state from taxation twice over (CIT Vs. Bhagwati 15 TTR 409. 414; CIT Vs. Guan Manjuri 13 ITR 55, 63; Vedathanni Vs. CIT 1 ITR 70: Kanhaiyalal Vs. CIT 9 ITR 70). As such when any income has a....
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....Act. 2) Here, it is pertinent to mention that the AOP and Partnership Firm are very much distinguishable in nature. 14 3) Further, the ITAT Bench, Hyderabad in the case of ACIT Circle Hyderabad V/s Seenaiah & Co. Projects Ltd Hyderabad has held that the adjustments have to be made only on the basis of explanation contained under section 115JB of the Act and the explanations of the provisions are clear that no such adjustment as made by the assessee i.e. reduction of profit from JV is allowable under eyes of law. 4) Moreover, clause (iic) has been inserted in Explanation 1 below sub-section (2) of section 115JB by the finance Act 2015 w.e.f. 01.04.2016 (i.e. A.Y. 2016- 17). It is apparent that the amendment (to exclude share of the assessee in the income of an AOP on which no income tax is payable in accordance with the provision of section 86) has not been made applicable retrospectively. Hence Rs. 37,60,20,402/- as per profit from OMIL & JSC (JV) shall not be deductible in accordance with as per Part II & III of schedule VI and accordingly be added to the Book Profit. 14. The assessee challenged the action of the Assessing Officer before the ld. CIT(A....
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....d not otherwise. The reliance is placed on the cases of JSW Steel Ltd. Vs ACIT [2017] 82 taxmann.com 210 (Mumbai - Trib.); Sicpa India (P.) Ltd. Vs DCIT [2017] 80 taxmann.com 87 (Kolkata - Trib.), Dy. CIT v. Binani Industries Ltd. [2016] 178 TTJ 658 and Hon'ble ITAT, Jaipur in the case of ACIT Vs Shree Cement Ltd. in ITA No. 614, 615 & 635/JP/2010 for AY 2004-05, 05-06 & 06-07. (vii) In view of the above discussion and looking to the totality of facts and circumstances of the case, it is held that the Assessing Officer was not justified in not excluding profit of share of the appellant from its AOP while computing book profit u/s 115JB of the Act and thus, the AO is hereby directed to exclude the same while computing book profit u/s 115JB of the Act. " Thus, it is clear that the ld. CIT(A) has given a finding on the issue by following the decisions of this Tribunal. We further note that the provisions of Section 86 of the Act contemplates that no income tax shall be payable by the assessee in respect of his share in the income of association of persons or body of individuals and such share in the association or body is computed in the manner provided U/s 67A of the Act.....
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....mission or remuneration aforesaid paid to the member by the association or body in respect of the previous year shall be adjusted against that amount, and the result shall be treated as the member's share in the income of the association or body. (2) The share of a member in the income or loss of the association or body, as computed under sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the association or body has been determined under each head of income. (3) Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head "Profits and gains of business or profession" in respect of his share in the income of the association or body, be deducted from his share. Explanation.-In this section, "paid" has the same meaning as is assigned to it in clause (2) of section 43.] Section 86. Where the assessee is a member of an association of persons or body of individuals (other than a company or a co-operative society or a society registered un....
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....he parity of share in partnership firm, the amendment in Section 115JB of the Act vide Finance Act, 2015 was brought by inserting clause (iic) w.e.f. 1/4/2016. Therefore, the purpose and intention to bring the amendment is to remove the mischief or hardship of the assessee on MAT in respect of the income being share in the association of persons or body of individuals which is otherwise not subject to income tax in accordance with the provisions of Section 86 of the Act. The Mumbai Benches of the Tribunal in the case of M/s Goldgerg Finance Pvt. Ltd. Vs ACIT (supra) while dealing with this issue has held in para 10 and 11 as under: 10. We have heard the rival contentions and perused the relevant findings given in the impugned order. The addition of share income of AOP in the book profit has been made on the ground that the assessee itself has credited the share income from AOP in the P&L account and consequently the book profit has to be computed on the basis of amount shown in the P&L account. On a perusal of Explanation to Section 115JB specifically the second part dealing with exclusion/reduction from the book profit it can be seen that clause (ii) permits certain deduc....
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....eased or reduced by certain adjustments, as specified in the section. Section 86 of the Act provides that no income-tax is payable on the share of a member of an AOP, in the income of the AOP in certain circumstances. However, under the present provisions, a company which is a member of an AOP is liable to MAT on such share also since such income is not excluded from the book profit while computing the MAT liability of the member. In the case of a partner of a firm, the share in the profits of the firm is exempt in the hands of the partner as per section 10(2A) of the Act and no MAT is payable by the partner on such profits. In view of the above, it is proposed to amend the section 115JB so as to provide that the share of a member of an AOP, in the income of the AOP, on which no incometax is payable in accordance with the provisions of section 86 of the Act, should be excluded while computing the MAT liability of the member under section 115JB of the Act. The expenditures, if any, debited to the profit loss account, corresponding to such income (which is being proposed to be excluded from the MAT liability) are also proposed to be added back to the book profit for....
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....nding Act. This proposition find strong support from the judgments of the Hon'ble Supreme Court in the case of Allied Motors (P.) Ltd. (supra) and in the case of Alom Extrusions Ltd. (supra). The Hon'ble Apex Court while interpreting the proviso to section 43B brought in the statute with a particular date was treated as curative and was held to be applicable retrospectively. The relevant observation of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. following the ratio of in the case of Allied Motors (P.) Ltd. (supra) reads as under:- "Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only w.e.f. 1st April, 2004, would become curative in nature, hence, it would apply retrospectively w.e.f. 1st April, 1988 (i.e. the date on which the related legal provision was introduced). Secondly, it may be noted that, in the case of Allied Motors (P.) Ltd. v. CIT [1997] 139 CTR (SC) 364: [1997] 224 ITR 677 (SC), the scheme of s. 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales-tax collected by the assessee....
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....int out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March (end of accounting year) but before filing of the Returns under the IT Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under s. 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under s. 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, the....