TaxTMI 
TaxTMI 
2018 (10) TMI 1288
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....) Mafatlal V K Intex Ltd. 38,00,000 (d) Repal Apparel P. Ltd. 75,76,557 (e) Silvia Apparel Ltd. 80,00,000 (0) Sushmita Holdings Ltd. 4,75,02,610 (g) Mafatlal Engineering Industries Limited (MEIL) 3,91,15,000 00 MEIL by Mafatlal Fine Spg. and Mfg, Co.Ltd 2,77,50,000 Total: 15,00,95,377 2. The learned Commissioner (Appeals) ought to have appreciated that the Assessing Officer was not justified in charging to tax notional interest of Rs. 2,25,14,307 which had not at all accrued to the appellant. 3. The learned Commissioner Appeals) ought to have appreciated that the advances to the above parties were for the purpose of business of the appellant. 4. The learned Commissioner (Appeals) erred in not appreciating that the above amounts were advanced in the course of the appellant's business of entrepreneurship and project promotion. The learned Commissioner (Appeals) failed to appreciate that the appellant had not borrowed from Banks/Financial Institutions for financing these companies. 5. The learned Commissioner (Appeals) ought to have appreciated that advances advances made to MEIL....
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....ayments to relatives of deceased employees 15. The learned Commissioner (Appeals) erred in not specifically allowing the payments made to relatives of deceased employees of Rs. 49,260. Disallowance under section 14A 16. The learned Commissioner (Appeals) erred in confirming disallowance of interest expenses of Rs. 6,79,30,000 on an estimate basis under section 14A for earning income not forming part of total income. 17. The learned Commissioner (Appeals) ought to have appreciated that the learned Assessing Officer estimated and disallowed interest expenses of Rs. 6,79,30,000 without establishing any nexus between investments generating tax-free income and borrowed funds. 18.The learned Commissioner (Appeals) ought to have appreciated that no specific borrowings had been made for the purpose of making investments. 19. Without prejudice to the above, the learned Commissioner (Appeals) erred in not appreciating that the disallowance of Rs. 6,79,30,000 under section 14A was excessive and unreasonable and ought to have directed the learned Assessing Officer to reduce the disallowance substantially. Non exclusion of CFC Grant....
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....ture incurred in relation to exempt income u/s 14A, non exclusion of CPC grant from total income, disallowance of loss on compensation on enforcement of security and disallowance of penalty and fine and also disallowance of forex loss. 3. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has challenged additions made by the AO towards various disallowances and filed elaborate written submissions. The Ld.CIT(A), after considering relevant submissions of the assessee partly allowed appeal filed by the assessee wherein he has deleted addition made by the AO towards disallowance of forex loss; however, confirmed remaining additions including interest in respect of advances to companies, disallowance of expenditure in relation to exempt income, addition towards revaluation of closing stock, disallowance of pooja expenses, payment to relatives of deceased employees, non exclusion of CPC grant and disallowance of loss on compensation on enforcement of security and also disallowance of penalty and fine. Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us. 4. The first issue that came up for our conside....
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.... AY 2001-02 in ITA No.4598/Mum/2005 where the co-ordinate bench, by following its earlier order held that adjustment made by the AO towards inclusion of excise duty for valuation of closing stock of finished goods is in accordance with law. However, further stated that once adjustment is made to closing stock, the AO is bound to make adjustment to give effect to the opening stock. Otherwise it gives a distorted figure. The relevant observations of the ITAT is extracted below:- "7. We are of the view that this issue has to be allowed in favour of assessee by giving direction in regard to alternative claim that the addition to closing stock of finished goods made by the AO should be given consequential effect to the opening stock of next year also. We find that the Tribunal in ITA No.4029/Mum/2009 for assessment year 2003-04 vide order dated 29.4.2011 has given some direction vide para Nos.5 & 6 as under: "5. Ground No .2 is on the issue of valuation of closing stock of finished goods, s) confirmed the addition of estimated amount of excise duty of s on account of valuation of closing stocks of finished goods. The. the assesses's own case from the assessment yea....
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....) disallowing the claim of payment made to relatives of deceased employees. For this, assessee has raised following ground Nos. 14, 15 & 16 : "Payment to relatives of deceased employees 14. The learned Commissioner (Appeals) erred in not specifically allow the appellant's claim in respect of amount of Rs. 57,684 being payment made to relatives of deceased employees. 15. The learned Commissioner (Appeals) erred in holding that the claim of the appellant of Rs. 57,684 in respect of payment to relatives of deceased employees was allowable if the payments have been made in pursuance of written agreements with the employees. 16. The learned Commissioner (Appeals) ought to have appreciated that the Commissioner (Appeals) in the assessment years 1987-88, 1988-89, 1991-92 and the Income-tax Appellate Tribunal in the appellant's own case for the assessment years 1985-86 and 1986-87 had in fact deleted the disallowance in respect of payment to relatives of deceased employees." 21. As the facts circumstances are exactly identical in this year, respectfully following the Tribunal's order in earlier years, we direct the AO to allow the cl....
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..... The assessee also earned dividend income and claimed expenditure as deductible business expenditure. On perusal of the decision rendered by the Hon'ble Jurisdictional High Court; the Hon'ble High Court observed and held that: "Even prior to assessment year 2008-09, when rule 8O was not applicable, the Assessing Officer has to enforce the provisions of sub-section (1) of section 14A. For that purpose, the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; The proceedings for assessment year 2002-03 shall stand remanded back to the Assessing Officer, The Assessing Officer snail determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income/income from mutual funds which does not form part of the total income as contemplated under section 14A. The Assessing Officer can ad....
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....ovided to indemnify the subsidiary companies. Accordingly, a mortgage agreement has been executed between the assessee, subsidiary companies and the bank. Since the assessee could not repay the loan borrowed from ILFS, the lender has enforced the security of aforesaid NOCIL shares which was pledged by M/s Mishapar Investment Ltd & Vibhadeep Investment & Trading Ltd. The lender, ILFS has sold shares of NOCIL held by M/s Mishapar Investment Ltd & Vibhadeep Investment & Trading Ltd and recovered Rs. 12,60,000 and Rs. 1,58,40,000, respectively. The assessee has provided loss incurred by subsidiary companies on account of sale of shares by ILFS by taking into account cost of shares, as per books of account of subsidiary companies and sale proceeds received by ILFS from sale of shares and ascertained total loss to be reimbursed to two subsidiary companies at Rs. 7,15,39,300. The assessee claims that since the loss incurred on account of enforcement of security by the lender, the assessee was liable to indemnify and reimburse loss incurred by M/s Mishapar Investment Ltd & Vibhadeep Investment & Trading Ltd, as per terms of agreement between the parties. Since the said loss was incurred in....
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....Ld.CIT(A). 21. We have heard both the parties, perused material available on record and gone through the orders of authorities below. The assessee has claimed loss incurred by two subsidiary companies M/s Mishapar Investment Ltd & Vibhadeep Investment & Trading Ltd on the ground that the said loss has been incurred wholly and exclusively in connection with its business for borrowing loan from ILFS. The AO disallowed loss claimed by the assessee on account of compensation paid to two subsidiary companies on the ground that the said loss is in the nature of capital expenditure which is incurred in connection with repayment of loan borrowed from two subsidiaries, therefore, the said loss cannot be allowed as expenditure. The AO has analysed the facts in the light of evidences filed by the assessee to come to the conclusion that the said expenditure is not incurred wholly and exclusively in connection with the business, therefore, merely for the reason that there is a contractual obligation between the parties, compensation paid to reimburse loss incurred by two subsidiaries on account of enforcement of security cannot be allowed as deduction. The AO has not disputed the fact that t....