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2019 (7) TMI 922
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....der: Grounds of appeal of the assessee 1. On the facts and in the circumstances of the case and in Law, the Ld. CIT (Appeals) has erred in upholding the disallowance of Rs. 20,89,469/- u/s 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules 1962. 2. On the facts and in the circumstances of the case and in Law, the Ld. CIT . (Appeals) has erred in not appreciating that the assessee company is having | substantial interest free funds in the form of share capital and reserve & surplus for making investments to earn incomes which are exempt under Income Tax I Act, 1961. 3. On the facts and in the circumstances of the case and in Law, the Ld. CIT (Appeals) has erred in upholding the addition of Rs. l,29i25r650/- being done by the AO on account of treating the interest income earned by The Cooperative Electrical Society, Sircila, on special reserve fund created and maintained by it out of the interest forgone by the appellant company, as the income of the appellant company. 4. On the facts and in the circumstances of the case and in Law, the Ld. CIT (Appeals) has erred in upholding the addition of Rs. 79,74,627/- being....
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.... company was engaged in the business of providing finance for rural electrification including power generation, transmission and distribution project. The company raises fund by way of issue of priority and non-priority sector bonds, infrastructure bond, loan from LIC and other banks and those funds are then deployed for financing power projects. For the year under consideration ,the assessee filed return of income on 13/10/2010 declaring total income of Rs. 2038,74,20,592/-, which was revised further on 30/03/2012 to Rs. 2038,64,69,164/- after claiming deduction under section 36(1)(viia) and 36(1)(vii) of the Income-tax Act, 1961 (in short 'the Act'). The case was selected for the scrutiny and notice under section 143(2) of the Act was issued and complied with. The assessment under section 143(3) of the Act was completed on 28/02/2013 after making certain additions/disallowances to the returned income. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal vide impugned order dated 11/07/2014. Aggrieved with the finding of the Ld. CIT(A), both the assessee as well as the Revenue are in appeal before the Tribunal raising the grounds as reproduced ....
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.... retirement medical benefit provision has been created by the assessee in accordance with accounting standard 15 relating to employees benefit. The above provision was made on actuarial valuation in accordance with the post retirement medical scheme. The Id CIT(A) allowed the above claim holding that such provision is accrued liability and not contingent in nature. He relied upon the decision of the coordinate bench in Bokaro Power Supply Co. Ltd Vs. DCIT (4921/ Del/2010). Similar view has been taken by the Hon'ble Delhi High Court that where the provision has been created on the basis of actuarial calculation on a scientific basis the liability is not contingent but definite. We do not find any infirmity in the order of the Id CIT(A) in deleting the above disallowance. In view of this ground No. 1 of the appeal is dismissed." 4.5 Thus, respectfully following the above finding of the Tribunal, the finding of the Ld. CIT(A) on the issue in dispute is upheld and the ground no. 1 of the appeal of the Revenue is dismissed. 5. The ground No. 1 and 2 of the appeal of the assessee are related to disallowances under section 14A of the Act of Rs. 20,89,469/- sustained by ....
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.... and perused the relevant material on record. As far as disallowance of Rs. 42,01,977/- under rule 8D(2)(i) of the Rules is concerned, the Ld. CIT(A) deleted the addition observing as under: "6.5 Having held the above, I will now examine the computation u/r 8D challenged by the appellant. (i) Regarding the disallowance u/r 8D(2)(i) of Management Fees (Rs. 40,77,822/-) and Trusteeship Fee (Rs. 1,24,155/-), held to be incurred in relation to the dividend income of Rs. 5,89,451/- earned from the investment in SIB Venture Capital fund, I find that during the year no fresh investments were made in the said fund and the said dividend income has been earned on the opening investments in the said SIB fund. Further, I find that the said amount of Rs. 40,77,822/- towards Management Fees & further amount of Rs. 1,24,155/- towards Trusteeship fees have been charged by the investment broker, as annual charges towards maintaining the SIB fund. Out of this, total income of Rs. 71,67,983/- consisting of Long Term Capital Gain of Rs. 65,78,532/- and dividend income of Rs. 5,89,451/- was earned during the year. The appellant, as per the detailed statement of the said investment bro....
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.... the plea that no disallowance under Rule 8D(2)(ii) ought to be made as the appellant had deployed only surplus fund for the purpose of making investment in mutual funds, I find that the appellant company has significant surplus and reserves out of which the main amount of Rs. 21 Crores is out of the grant received from USAID, which is evidently without any interest liability. The appellant has also the share capital of Rs.ll Crores and has shown profit for the current year. At the same time, I find that the appellant is a finance company, which is engaged in financing Rural Electrical projects and has claimed interest expenses of a significant amount of Rs. 697.80 crores. Evidently, in the own admission of appellant, no separate books of account for taxable and non-taxable streams of income have been maintained by the appellant. However, the mainstay of the plea of the appellant was that being a PSE, it was prohibited by the Central Government from making any investment out of the borrowed funds and in this regard, reliance was placed on DPE, O.M. dated 31.08.2007, which lifted the said prohibition only in case of Navratna and mini-Navratna companies. 6.6 On careful consi....
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....In view of these facts relying on the decision of the Hon'ble Bombay High Court in HDFC Bank Ltd Vs. DCIT 383 ITR 529 and Hon'ble Gujarat High Court in case of Pr. Cit Vs. Sintex Industries Ltd 248 Taxmann 449 , the amount of interest disallowance made by the Id Assessing Officer of Rs. 21815273/- deserves to be deleted. With respect to 0.5% of average value of investment the Id AR did not submit any explanation. Therefore, the AO is directed to restrict the disallowance u/s 14A to the extent of 0.5% of the average value of the investment as provided under Rule 8D. Accordingly, ground No.1 of the appeal is partly allowed. 6.2 As the identical issue of investment out of interest-free funds available exist in the year under consideration, thus respectfully following the finding of the Tribunal, the disallowance for indirect interest expenses under rule 8D(2)(ii) amounting to Rs. 14,64,536/- is deleted. 6.3 On the issue of 0.5% of average investment, the Tribunal (supra) has upheld the disallowance under rule 8D(2)(iii), thus respectfully, following the finding, the disallowance in the year under consideration of Rs. 6,24,445/- is sustained. 6.4 Accordingly, the groun....
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....nterest income on fixed deposits made out of the special reserve funds in respect of the all the societies, to whom the loans were advanced under the scheme. The Assessing Officer rejected the contention of the assessee with the reasons listed in para 7.4 of the assessment order: "7.4 The assessee's above submissions have been carefully considered but are not found to be tenable for the following reasons as given in the Assessment: 1. The ITAT after discussing the various facts at length, had arrived at the conclusion that the ownership of the special funds remained with the petitioner and the interest income in respect of these funds as also the interest on the FDs made out of the special funds had also accrued to the petitioner and not to the co-operative society. 2. The contention that the co-operatives are the legal and beneficial owners of the funds is not correct. The fact that for the first five years the amount required to be set apart as special fund was exactly equivalent to the interest at the prescribed rate payable to the petitioner corporation, coupled with the fact that the corporation exercised full control over the operation and utilizati....
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....hese funds, which is evident from the fact that as per these rules, any amount lying in the savings account in excess of Rs. 1000 was to be automatically transferred to fixed deposits account and the original fixed deposit receipts were required to be handed over to the Chief Project Manager of the assessee. 7.4 After holding the interest income on such deposits as income of the assessee, the Assessing Officer computed the addition of Rs. 4,43,25,897/- with society wise details mentioned on the page 25 and 26 of the assessment order. 7.5 On further appeal, the Ld. CIT(A) considered the submission of the assessee and made a detailed discussion from para 6.8 to 6.12.4 of the impugned order. The Ld. CIT(A) concluded that ownership of the corpus fund created by the co-operative societies continue to lie with those societies and the assessee had only a supervisory capacity as far as utilization of the said corpus fund was concerned. The Ld. CIT(A) observed that these societies are free to take necessary decisions to use the funds within the objective laid down. He observed that the FDRs created out of the corpus funds were in the control of the said co-operative societies and that....
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....t, in the absence of sufficient evidence at this point of time, the addition of interest income earned by them on SRF in the hands of appellant is confirmed. In case of Laundi(MP) (Rs. 83,229/-), no evidence was produced by the appellant. In view of this, the interest income on FDR received by them aggregating to Rs. 79,74,627/- is held as income of appellant." 7.7 Aggrieved with the finding, both the assessee and the Revenue are in appeal. 7.8 On the grounds of appeal of the Revenue, the Ld. DR supported the order of the Assessing Officer. According to Ld. DR, the coordinate bench of the Tribunal, Hyderabad in the case of Siricilla society has clearly held that interest income accrued on the fixed deposits made out of the special fund should be taxed in the hand of the assessee, however, the Ld. CIT(A) has ignored the said direction of the Tribunal while allowing the interest income in case of societies other than Siricilla Society. She further submitted that other than Sricilla societies have claimed the said interest income as deduction under section 80P of the Act and, thus, by way of the diversion of the income to societies, no tax is being paid on such interest income e....
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....income from fixed deposits out of the special reserve funds created by the societies has been held to be income of those societies, subject to the income declared in their return of income. Before us, the Ld. counsel of the assessee has requested to provide one more opportunity to furnish necessary evidence in support of claim that those societies have declared the relevant interest in their return of income. In view of the submission of the Ld. counsel and in the interest of Justice, we feel it appropriate to restore this issue to the file of the Ld. Assessing Officer with the direction to the assessee to produce all necessary evidence in support of its claim in respect of the societies concerned for verification of the Assessing Officer. It is needless to mention that the assessee shall be afforded adequate and reasonable opportunity of being heard. 8.1 The ground No. 4 of the appeal of the assessee is accordingly allowed for statistical purposes. 9. The ground No. 3 of the appeal of the assessee relates to addition of Rs. 1,29,25,650/- sustained by the Ld. CIT(A) treating the interest income earned by the Cooperative Electric Society, Siricila on the special reserve fund a....
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....elevant material on record. We find that the identical question has been decided by the Tribunal in ITA No.3078/Del/2014 for assessment year 2006-07 observing as under: "Ground No. 2 of the appeal is with respect to upholding the addition of Rs. 9070673/- by the Id CIT(A) on account of the interest income earned by the cooperative society Sirecila, Hyderabad on special reserve fund created and maintained by the society which has been forgone by the assessee as the income of the appellant. The above addition has been confirmed by the Id CIT(A) holding that decision of the coordinate bench binds him. Similar is the situation with us. If the assessee is agreed with the order of the ITAT Hyderabad Bench decision which has rendered certain findings, the assessee should have challenged the same before Hon'ble High Court. Apparently, it was not done. In this circumstances, we do not have any authority to say anything on the correctness of that decision, it binds us judicially. Further, when on examination of the rules and the all other criteria related to the creation of special reserve fund and its control the coordinate bench has held that interest has accrued in the hands ....
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.... taxed in the hand of the appellant company. The appellant craves to leave add, alter, amend, modify, delete, all or any of the grounds of appeal before or at the time of hearing. Grounds of appeal of the Revenue. 1. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 12,41,71,710/- made by AO on post retirement medical expenses 1.1 On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 2,43,17,621/- made by AO on actual payment towards post retirement medical expenses. 2 On the facts and circumstances of the case and in law Ld. CIT (A) has erred in deleting the addition of Rs. 43,58,712/- made by AO u/s14A of the IT Act read with Rule 8D of IT Rules 1962. 3. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 3,13,05,370/- made by AO on account of interest accrued to various cooperative societies but taxable in the hands of the assessee i.e. M/s REC Ltd. 4. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in allowing re computation of....