TaxTMI 
TaxTMI 
2018 (12) TMI 396
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....e Act r/w rule 8D of the I.T. Rules, 1962. However, subsequently, the assessee has filed additional / supplementary grounds of appeal vide letters dated 7th July 2016, 4th October 2017 and 19th February 2018. The issues raised in the aforesaid additional/supplementary grounds relate to disallowance made under section 14A r/w rule 8D, while computing book profit under section 115JB of the Act and disallowance of deduction claimed under section 80IB(9) of the Act. Since, the additional grounds raised by the assessee are purely legal in nature and can be decided on the basis of facts available on record, we are inclined to admit the additional grounds. 3. As regards the first issue relating to disallowance of expenditure under section 14A r/w rule 8D, the facts in brief are, the assessee an Indian Company is engaged in the business of prospecting, exploration and production of mineral oil and natural gas. For the assessment year under dispute, the assessee filed its return of income on 24th September 2008, declaring total income of ` 3,18,50,000 after claiming deduction under section 80IB(9) of the Act. During the assessment proceedings, the Assessing Officer noticing that in the rel....
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....JB of the Act, the book profit has to be computed by making additions of the amount as provided under Explanation-1 of the said provision. He submitted, a reading of the said Explanation-1 would reveal that it does not refer to section 14A r/w rule 8D. However, he submitted, as per clause-(f) of Explanation-1 of section 115JB of the Act, only direct expenditure relatable to exempt income earned by the assessee can be added to the book profit. He submitted, as per the Special Bench decision of the Tribunal, Delhi Bench, in ACIT v/s Vireet Investment Pvt. Ltd., [2017] 82 taxmann.com 415, the Assessing Officer while computing book profit under section 115JB of the Act can make addition under clause-(f) of Explanation of section 115JB of the Act, without resorting to computation as contemplated under section 14A r/w rule 8D. He submitted, in view of the Special Bench decision of the Tribunal, the addition made to the book profit on account of disallowance under section 14A r/w rule 8D is unsustainable. He submitted, the assessee on a scientific basis has worked out and quantified the direct expenditure for earning exempt income at ` 2,54,989. A copy of the working of the said disallowa....
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....ofit on account of disallowance under section 14A r/w rule 8D is unsustainable. However, as per clause-(f) to Explanation-1 to section 115JB of the Act, the Assessing Officer has to determine the quantum of expenditure incurred for earning exempt income for increasing the book profit to that extent. It is the contention of the learned Authorised Representative before us that the assessee has made a working of direct expenditure attributable to earning of exempt income which is quantified at ` 2,54,989. Undisputedly, the aforesaid working was neither before the Assessing Officer nor before the learned Commissioner (Appeals). Therefore, in all fairness, the claim of the assessee requires to be examined by the Assessing Officer. In view of the aforesaid, we are inclined to restore the issue to the Assessing Officer for fresh adjudication keeping in view the relevant case laws to be cited by the assessee as well as the provision of section 115JB of the Act. Needless to say, the Assessing Officer must afford a reasonable opportunity of being heard to the assessee before deciding the issue. Grounds raised in this regard are allowed for statistical purposes. 8. The next issue which arise....
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....not be allowable, since, the exemption period of seven year for claiming deduction under section 80IB(9) of the Act in respect of CY-OS-90/1 Block expired prior to assessment year 2005-06 and in respect of CB-OS/2 Block the company incurred a loss during the impugned assessment year. The Assessing Officer after considering the submissions of the assessee observed that similar deduction claimed by the assessee in the preceding assessment years were not allowed and the first appellate authority's decision in allowing assessee's claim was not accepted by the Department in assessment year 2005-06, 2006-07 and 2007-08. Accordingly, he disallowed assessee's claim of deduction under section 80IB(9) of the Act. The assessee did not challenge the aforesaid decision of the Assessing Officer in the appeal filed before the learned Commissioner of Income-tax. Subsequently, on the basis of a decision of the Hon'ble Gujarat High Court in Niko Resources Ltd. v/s Union of India, 374 ITR 369 (Guj.), wherein, the Hon'ble Gujarat High Court struck down Explanation to section 80IB(9) of the Act as violative of Article-14 of the Constitution of India, the assessee has raised the issue of deducti....
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....ion 80IB(9) of the Act by treating each oil well as an independent undertaking. However, the provision of section 80IB(9) of the Act was amended by Finance Act, 2009 with retrospective effect from 1st April 2000 by inserting an Explanation which provided that for the purpose of computing deduction under the said provision all blocks licensed under a single contract shall be treated as a single undertaking. Thus, by virtue of Explanation to section 80IB(9) of the Act, claiming deduction by treating each oil well as a single undertaking was done away with. The aforesaid factual and legal position has not been disputed by the assessee which is evident from the submissions made by the assessee before the Assessing Officer. In fact, because of insertion of explanation to section 80IB(9) of the Act, the assessee never raised the issue of claim of deduction under section 80IB(9) of the Act in the appeal filed before the learned Commissioner (Appeals). Thus, the Departmental Authorities never had the occasion to examine assessee's claim of deduction vis-a-vis the ratio laid down by the Hon'ble Gujarat High Court in Niko Resources Ltd, which in any case of the matter was delivered after....
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....ation to section 80IB(9) of the Act by declaring it as ultra virus of Article-14 of the Constitution of India, however, it cannot be ignored that no decision of the Hon'ble Supreme Court or the Hon'ble Jurisdictional High Court on the issue is available. Moreover, the Tribunal being a creature of the statute is not competent to examine or decide the constitutional validity/vires of a provision contained in the statute. Had it been a decision of the Hon'ble Supreme Court or the Hon'ble Jurisdictional High Court, the Tribunal would have been bound by the law declared therein. However, the legal position is different when the decision declaring a provision in the statute as ultra vires is by a non-jurisdiction High Court, whose decision is not binding but has persuasive value. In this context we may refer to the following decisions:- i) Comptroller of Estate Duty v/s Shri Ashok Kumar M. Parikh, [1990-] 186 ITR 212 (Bom.); and ii) Taylor Investment Co. (India) Ltd. v/s CIT, [1998] 232 ITR 771. 15. Moreover, it is not disputed that the aforesaid decision of the Hon'ble Gujarat High Court has been challenged by the Department before the Hon'ble Supreme Court and ....
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....pra). Therefore, the issue raised in the present appeal by the Revenue becomes redundant. Even otherwise also, the quantum of addition/deletion disputed by the Revenue in this appeal is ` 12,45,576. The tax effect on the aforesaid amount being less than ` 20 lakh, as fixedby the Central Board of Direct Taxes (CBDT) in Circular no.3/2018, dated 11th July 2018, for filing appeal before the Income Tax Appellate Tribunal, the appeal of the Revenue is otherwise not maintainable, hence, dismissed. 19. In the result, Revenue's appeal is dismissed. ITA no.4914/Mum./2012 Revenue's Appeal - A.Y. 2008-09 20. This appeal by the Revenue arises out of order passed under section 154 of the Act by the learned Commissioner (Appeals). However, the issue raised by the Revenue pertains to the disallowance made under section 14A r/w rule 8D. 21. While deciding assessee's appeal in ITA no.4887/Mum./2012, we have restored the issue relating to addition made to the book profit on account of disallowance made under section 14A r/w rule 8D. That being the case, the issue raised in the present appeal becomes redundant as it is of mere academic importance. Hence, there is no need for adjudication. 22. In....
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....he view that disallowance under section 14A of the Act has to be made as per rule 8D of the I.T. Rules, proposed to make such disallowance as per the said Rule. Though, the assessee objecting to the proposed disallowance submitted that the only expenditure indirectly attributable to earning of exempt income is proportionate salary cost of two employees, proportionate telephone expenses and related overhead, however, the Assessing Officer was not convinced with the submissions of the assessee. The Assessing Officer observed, there was net increase of ` 180 crore in investment in mutual fund within the year. Further, the assessee has made huge investment of ` 200 crore in shares of Nagarjuna Oil Corporation Ltd., which must have involved decision making process of the promoters and management of the company including top executives. Therefore, he held that assessee's claim of proportionate salary cost of two employees cannot be accepted. He also observed that since the disallowance worked out by the assessee is on ad-hoc basis it cannot be accepted. Thus, the Assessing Officer proceeded to compute disallowance under section 14A r/w rule 8D at ` 93,11,108. Being aggrieved of such disa....
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....c investment should be excluded for the purpose of computing disallowance under rule 8D(2), the same is unacceptable in view of the decision of the Hon'ble Supreme Court in case of Maxopp Investment Ltd. v/s CIT, [2018] 91 taxmann.com 154. As regards the contention of the assessee that the investment in Nagarjun Oil Corporation has not earned any dividend income during the year, hence, should be excluded, we find merit in the same. It has been held by the Special Bench of the Tribunal in case ofVireet Investment Pvt. Ltd. (supra) that investments which have not yielded any exempt income in the relevant previous year should be excluded while computing disallowance under rule 8D(2). In view of the aforesaid, we direct the Assessing Officer to verify the claim of the assessee and exclude the investment made in Nagarjun Oil Corporation from the average value of investment if it has not yielded any exempt income during the relevant previous year. As regards the final submission of the learned Authorised Representative that disallowance made under section 14A r/w rule 8D cannot be added to the book profit under section 115JB of the Act, we find merit in the said submissions. As held....