TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 163
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....enerating unit was unreasonable and excessive. ii. Whether on the facts and circumstance of the case and in law the CIT(A) was justified in deleting the addition of Rs. 26,28,364/- u/s 14A of the Act, while failing to appreciate the grounds of appeal for A.Y. 2008-09 filed in the Hon'ble Punjab & Haryana High Court, Chandigarh in the case of the assessee. iii. Whether on the facts and circumstances of the case and in law the CIT(A) has erred in deleting an addition of Rs. 1,16,84,195/- u/s 36(l)(iii) of the Act, by relying on the decision in ITA No. 268/Chd/2015 dated 30.11.2015 for the A.Y. 2009-10 in the case of the assessee without appreciating that the issue u/s 36(l}(iii) was never a part of that order. 3. Ground. No.1 : The brief facts relevant to the issue are that the assessee company which is engaged in the business of manufacturing of Iron & Steel Products, Ferro Alloys & Generation and Distribution of Power, filed its return of income for the year under consideration on 29.09.2011 declaring therein an income of Rs. 11,89,054/-. As the tax payable by the assessee company under the provisions of section 115JB of the Act was more than the tax payable under normal p....
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....g Officer as made by him in the assessment order while denying entire claim of deduction claimed by the assessee company under section 8OIA of the Act. I have also considered written submissions filed by the assessee company through its learned AR vide letters dated 09.09.2017 and 02.11.2017 on the issue under reference. I have further considered various judicial pronouncements relied upon by the learned AR of the assessee company as well as other material placed by him on record. On careful consideration of the assessment order, it has been noticed that the Assessing Officer has denied entire claim of deduction claimed by the assessee company under section 8OIA of the Act basically on the ground that the assessee company in his opinion has shown excessive and unreasonable profits from running of its 40MW Power Plant Unit, the profits of which are eligible for deduction under section 8OIA of the Act. The Assessing Officer is of the opinion that the assessee company has not properly allocated the expenses to its 40MW Power Plant Unit which resulted in excessive and unreasonable profits of its 40MW Power Plant Unit which are exempt under section 80IA of the Act. The main reasons for ....
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....ized for setting up the Power Plant which were taken from other units of the assessee company which was required to be done as per provisions of section 80IA(8) of the Act. (j) The assessee company has not properly allocated other expenses to eligible unit thereby enhancing its profits eligible for deduction under section 80IA of the Act. (k) The auditor has not submitted working sheets on the basis of which profits of the eligible unit as well as deduction under section 80IA of the Act have been computed. (l) The Auditor has not submitted his reply with regard to allocation of interest expenses. (m) The claim of deduction under section 80IA of the Act is without any justification. On the other hand, the learned AR of the assessee company through its learned AR had submitted that the Assessing Officer has denied the entire claim of deduction claimed by the assessee company under section 80IA of the Act without appreciating the submissions of the appellant company and its auditor which were made during assessment proceedings. It has also been submitted that the assessee company's income for the A.Y. 2010-11 was assessed under section 143(3) of the Act and the deduction u....
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....een submitted that this fact has indirectly been admitted by the Assessing Officer as he has not even tried to reallocate the expenses on the basis adopted by him in A.Y. 2010-11. It has again been submitted that the claim in respect of deduction, under section 80IA of the Act may be more or less but the Assessing Officer cannot deny entire deduction to the assessee company claimed by it under section 80IA of the Act as the assessee company fulfills all the necessary conditions for claiming such deduction. On careful consideration of the rival contentions, I am of the opinion that there is lot force in the arguments of the learned AR of the assessee company. I am also of the opinion that there is no prescribed formula to allocate the common expenses incurred by the assessee company but the expenses are required to be allocated to eligible unit on reasonable basis. I am further of the opinion that the assessee company is eligible to claim deduction under section 80IA of the Act as it fulfills all the necessary conditions for claim of such deduction. I am again of the opinion that the claim of deduction under section 80IA of the Act can be reduced by reallocating the expenses if foun....
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....before us. 6. After hearing the Ld. representatives of both the parties, we do not find any reason to interfere in the order of the CIT(A) on the above issue. The Ld. CIT(A) rightly held that there was no justification on the part of the Assessing officer to disallow the entire claim of deduction claimed by the assessee. If the Assessing officer was of the view that the assessee had exaggerated the profits of the units eligible for deduction u/s 80IA of the Act, at the most, he could have allocated some part of the profits to non eligible units but without making any such exercise, he disallowed the entire claim of deduction. The Ld. CIT(A) has also observed that even otherwise though the profits of the eligible units were at Rs. 59.29 crores, however, since the gross income of the assessee from all units was at Rs. 25.60 crores, the claim was restricted to that extent. The Ld. CIT(A) observed that any minor variation in the profits of the eligible units would not make any difference. Even otherwise, if the profits of the eligible units are to be computed on turn over basis, the resultant effect will be the enhancement of the profits than that has been declared by the assessee. ....
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....d in view of provisions of section 36(l)(iii)of the Act. He, accordingly, made the impugned addition into the income of the assessee. 11. The assessee agitated the aforesaid addition made by the Assessing officer before the Ld. CIT(A). 12. The Ld. CIT(A) deleted the additions so made by the Assessing officer on this issue, observing as under:- "8.2 I have considered the observations of the Assessing Officer as made by him in the assessment order while making the impugned addition. I have also considered written submissions filed by the assessee company through its learned AR vide letter dated 09.09.2017 on the issue under reference. I have further considered various judicial pronouncements relied upon by the learned AR of the assessee company as well as other material placed by him on record more particularly, the decision of the Honourable ITAT, Chandigarh in 1TA No. 268/Chd./2015 dated 30.11.2015 for the A.Y. 2009-10 in the case of the assessee company itself vide which the disallowance under section 36(l)(iii) of the Act was deleted under identical facts. On careful consideration of the rival contentions, it has been noticed that the facts of the case of the assessee company....
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....ening balance in investment in plant & machinery was at Rs. 24.74 cores and investments during the year were at Rs. 42.55 crores. The closing balance of investment in plant & machinery was at Rs. 67.29 cores. The opening balance of the capital advance was at Rs. 16.37 crores which is reduced to Rs. 4.89 crores at the end of the year. The Assessing officer computed the total disallowance under the provisions of section 36(1)(iii) of the Act at Rs. 3.49 crores, out of which the assessee has already capitalized the interest expenditure of Rs. 2.32 crores in respect of term loans. The Assessing officer, therefore, has made the addition of Rs. 1.16 crores. The case of the assessee is that the assessee has already capitalized the interest expenditure on term loan and that the investment on capital in work in progress and capital advances were out of own funds of the assessee. We find from the chart that in the year under consideration the paid up capital of the assessee for the year under consideration was at Rs. 10.42 crores, reserves and surplus at Rs. 297 crores and apart form that profit during the year was of Rs. 101 crores totalling Rs. 408 crores. Apart from the aforesaid work in ....
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....on of the Hon'ble Apex Court in the case of 'Hero Cycles Vs. CIT' 379 ITR 347 (SC). Even otherwise the issue is squarely covered by the recent decision of the Hon'ble Supreme Court in 'CIT (LTU) Vs. Reliance Industries Ltd.' [2019] 410 ITR 466 (SC). 19. The Ld. DR, however, has argued that the decision arrived at by this Tribunal in the case of 'ACIT Vs. Janak Global Resources Pvt Ltd' is not a correct decision and further that the proposition of law laid down in the latest decision of the Hon'ble Supreme Court in the case of 'CIT (LTU) Vs. Reliance Industries Ltd'. (supra) cannot be applied as the Hon'ble Supreme Court has not finally decided the matter as on some other issues and that, the matter has been remanded back to the Hon'ble High Court. We are not convinced by the above arguments of the Ld. DR. If the Department is not satisfied with the decision of this Tribunal in the case of 'ACIT Vs. Janak Global Resources Pvt Ltd' (supra), it is open to the Department to file an appeal before the Hon'ble High Court against the said decision. So far as the proposition of law said down by the Hon'ble Supreme Court in the case of 'Reliance Industries Ltd.'....
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.... part of that order. 22. Ground No. 1: Vide ground No.1, the Revenue has agitated the action of the CIT(A) in deleting the disallowance of deduction u/s 80IA of the Act. The facts of the case and issue involved are identical to that have been raised vide ground No. 1 of the Revenue's appeal in ITA No. 96/Chd/2018 relating to assessment year 2011-12. Hence, our findings given above in ground No.1 of the Revenue appeal of assessment year 2011-12 will apply mutatis-mutandis on this issue and accordingly the ground No.1 of the appeal is dismissed. 23. Ground No. 2: Vide ground No.2, the Revenue has agitated the action of the CIT(A) in deleting the addition of Rs. 36,47,905/- u/s 14A of the Act. The facts of the case and issue involved are identical to that have been raised vide ground No. 2 of the Revenue's appeal in ITA No. 96/Chd/2018 relating to assessment year 2011-12. Hence, our findings given above in ground No.2 of the Revenue appeal of assessment year 2011-12 will apply mutatis-mutandis on this issue and accordingly the ground No.2 of the appeal is dismissed. 24. Ground No.3 : This ground is relating to the disallowance of interest of Rs. 90,94,421/- u/s 36(1)(iii) on invest....
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....income of Rs. 4,65,682/- from investment in share/mutual funds which has been claimed as exempt from tax under section 10 of the Act. In the opinion of the Assessing Officer, the expenses incurred by the assessee company for earning of dividend income cannot be allowed in view of the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. On the other hand, the learned AR of the assessee company has submitted that the reply furnished by the assessee company during assessment proceedings vide letters dated 09.12.2015 and 07.03.2016 has not been considered on its merits. It has also been submitted that the Assessing Officer straightway embarked upon computing the disallowance by referring to the provisions of section 14A of the Act without considering contentions of the assessee company with regard to investment made by the assessee company in shares/mutual funds. It has further been submitted that the assessee company was having sufficient interest free funds of its own in the form of share capital, reserves and surplus and other cash accruals which far exceed the investment made in shares/mutual funds. In other words, it has been submitted that the a....
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....also be made on the average of investments yielding exempt income. This contention of the learned AR of the assessee company find support from the decision of Honourable ITAT, Chandigarh in the case of Sh. Shiv Parshad Aggarwal for the A.Y. 2011-12 which has been worked out by the assessee company at Rs. 5,421/- only [0.5% of Average investment of Rs. 10,84,167/-]. So, respectfully following the decision of Honourable ITAT, Chandigarh in the case of Sh. Shiv Parshad Aggarwal for the A.Y. 2011-12, the disallowance under section 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 made by the Assessing Officer in this case is restricted to Rs. 5,421/-. However, the disallowance made by the Assessing Officer out of interest expenses by invoking provisions of section 14A of the Act read with Rule 8D(2)(ii) of the Income Tax Rules, 1962 is directed to be deleted. In nutshell, the disallowance made by the Assessing Officer in this case by invoking provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 is restricted to Rs. 17,421/- [Rs. 12,000/- being direct expenses + Rs. 5,421/-] and balance disallowance made by the Assessing Officer is dire....