TaxTMI 
TaxTMI 
2018 (10) TMI 1288
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....) 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 were out of own resources of the appellant from dividend, interest, sales realisation and realisation of assets. As the loans on which interest....
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....n 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 from Total Income 20. The learned Commissioner (Appeals) erred in confirming the action of Assessing Officer in not excluding from the total income of the appellant, the CFC grant of Rs. 8,57,75,798 received pursuant to the Montreal Protocol for phasing ....
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....e 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 consideration from grounds 1 to 12 is disallowance of interest in respect of advances to companies / other concerns of Rs. 2,25,14,307. The Ld.AR for the assessee, at the time of hearing submitted that this issue is covered in favour of the assessee by the decision of ITAT, Mumbai Bench "I" in assessee's own case for AY 2001-02 in ITA....
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....ent 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 years 1994-95 to 1997-98 has decided the ground against the assessee. Respectfully following the same, we dismiss this ground of the assessee. 6. The assessee made an alternative claim that the addition should also be made for the opening stock. This alternative claim was allowed by the Tribunal. Consistent with the view taken by the Tribunal, we allow t....
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....5. 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 claim of payment made to relatives of deceased employees. This issue of the assessee's appeal is accordingly allowed." 13. In this view of the matter and being consistent with the decision of co-ordinate bench, we direct the AO to allow payments made to relatives of deceased employees. 14. The next issue that came up for our consideration is disallowance of expenditure in relation to exempt income u/s 14A....
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....fficer 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 adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case' In the present case, the assessee neither before the AO nor the Ld.ClT(A) or the Tribunal produced any documents how the assessee is eligible for deduc....
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....nvestment & 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 connection with its business, the same needs to be allowed as business expenditure incurred and accordingly claimed deduction u/s 37(1) of the Income-tax Act, 1961. 18. The AO disallowed loss claimed on account of sale of share by ILFS on the ground that such loss is a capital loss as the assessee has incurred loss on account of compensation paid to two subsidiary companies as per the contractual agreement. The AO further observed that the assessee had t....
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....mpensation 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 the assessee has incurred loss on account of enforcement of security by ILFS. In fact, M/s ILFS has sold shares belonging to two subsidiary companies and recovered loss of Rs. 12,60,000 and Rs. 1,58,40,000. It is also an admitted fact that there is a contractual obligation in terms of agreement between the parties that in case any loss incurred on account of enforcement of security by the lender for non repayment of loans, then such loss shall be indemnified and re....