TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 1450
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....free securities. 2. He failed to appreciate and ought to have held that: i) the interest was not a direct expense for earning tax free income and no disallowance can be made on proportionate basis by attributing the same towards tax free income; ii) the expenses which could be attributed under section 14A of the are only those which are incurred "in relation" to earning tax-free income and no disallowance could be made based on presumption on proportionate basis; iii) the investments were made out of own funds i.e. capital and reserves and not out of borrowed funds as such no disallowance is called for; iv) where no expenditure has been actually incurred , no estimation can be made to disallow expenditure for earning exempt income; v) borrowings were made for the purpose of business and as such the conditions envisaged by s. 36(1) (iii) have been fulfilled, entire interest should have been allowed as deduction. 3. Without prejudice to the above, it is submitted that since dividend tax is payable u/s 115O of the Act, it is incorrect to hold that dividend is tax-free and hence the question of application of section 14A cannot arise. 4. Without prejudice to the....
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....he purpose of calculation of deduction of under section 80HHC of the Act. 2. He failed to appreciate and ought to have held that: a. miscellaneous income and other items is business income arising out of the business operations of the company; and b. the miscellaneous income has arisen during the course of business and they by their very nature are business income. Also, they are taxed as business income only. Hence, there is no reason why a separate treatment (of not considering them as part of business profits) be accorded to them while working out of proportionate profit eligible for deduction u/s 80HHC. 3. The Appellant prays that it be held that 90% of amount of Rs. 8,39,51,299/- not to be deducted from the "business profit" while computing deduction under section 80HHC of the Act. 4. Without prejudice to above, 90% of net income be reduced from "business profits" for calculating deduction u/s 80HHC of the Act. Ground VII: Not allowing to set-off the incentives against the profits 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO of not allowing the set-off of incentives against the business i....
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....nces of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 9,54,432/- out of interest on the ground that interest bearing funds which have been diverted for non business purposes as advances to subsidiaries." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO to recomputed the book profits without making adjustment in the respective provisions, including provisions for doubtful debts and advances and provision for diminution in the value of investments. 5. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to reduce the book profits by the quantum of notionally computed deduction u/s. 80 HHC." 6. "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that interest u/s. 234D cannot be charged for the assessment year 2003-04. The appellant prays that the order of CIT (A) on the above grounds be set aside and that of the A. O. be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2. The brief facts of the case are that the assessee compa....
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.... therefore no question of disallowance accrued. Therefore, keeping in view the said legal proposition we agree with the contention of the learned AR and delete the entire addition made by the AO of 7,61,476/-. Resultantly, ground No. I of the assesee's appeal stands allowed. 5. Ground No. II of the asessee's appeal relates to confirmation of disallowance of non-compete Fees paid to ex-directors by the learned CIT (A) amounting to Rs. 34,58,616/- made by the AO. 6. We have heard the rival submissions, perused the materials on record and carefully gone through the orders of the Revenue authorities. On perusal of the records, it is found that this issue has been decided against the assessee by the Co-ordinate 'F' Bench of ITAT Mumbai vide order dated 12th June, 2013 for assessment year 2002-03, the relevant portion of which reads as under:- "9. Ground No.2 is about disallowance of non-compete fees paid to EX-Directors amounting to Rs. 6,41,600/-. Before us, AR fairly conceded that the issue had been decided against the assessee by the Tribunal vide its order dated 25-09-2006, while deciding the appeal for AY 2000-01. Respectfully following the said order of the Mumbai Bench of ....
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....Act, including the provisions relating to carry forward and set off. 9. The learned AR during the time of argument has not pointed out or placed on record any material to controvert the decision of the learned CIT (A). On the other hand, the learned DR supported the orders of the learned CIT (A). In view of the above, we find no reason to interfere with the findings of the learned CIT (A) and uphold the same. Accordingly, Ground No. V of the assessee's appeal stands dismissed. 10. Ground No.VI of the assessee's appeal relates to the issue of deduction of Miscellaneous Income and other items from the profits while computing the deduction u/s 80HHC of the Act. 11. We have heard the rival submission, considered the orders of the authorities below and perused the materials placed on record including the paper book filed by the assessee. The learned AR drew our attention to page 84 to 88 of the paper book where break-up of the miscellaneous income and other items is available. We have noticed that the AO has not has not examined the issue in detail before making the disallowance. The learned CIT (A) also rejected the claim of the assessee by confirming the order of the AO holding ....
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....ition crystal clear, substituted the direction of the Hon'ble High Court with the following direction: "Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turn over below and those above 10 cr. should be treated similarly. This order is in substitution of the judgment in Appeal." The learned DR could not controvert the aforesaid decision of the Hon'ble Apex Court by placing on record any relevant material. We have even noticed that the assessee's claim of deduction u/s 80HHC relates to assessment year 2003-04 i.e. prior to the date of amendment of the provisions with effect from 1st April, 2005. In view of the above, we respectfully following the decision of the Hon'ble Apex Court in the case of CIT Vs Avani Exports cited supra, hold that the order of the learned CIT (A) is not sustainable and accordingly we reverse the same. Resultantly, this ground of appeal of the assessee stands allowed. 14. Ground No. VIII of the assessee's appeal relates to deduction of income from service while computing profits u/s 80HHC of the Act. After hearing the parties and perusal of the records as well as the....
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....ected by the AO on the ground that the assessee had not filed any break-up of the income from services. The learned AR has drawn our attention to page 126 of the paper book wherein claim of deduction u/s 80HHC of the Act in the STI has been provided. The learned AR also drew our attention to pages 91 to 94 and page 96 of the paper book wherein working of deduction u/s 80HHC has been given and at page 96 the break-up/details of service income have been provided and submitted that service income is not included in the total turnover u/s 10CCAC report while computing deduction u/s 80HHC of the Act. On this basis the learned AR submitted that 90% of the net service income be reduced from the business profits for the purpose of deduction u/s 80 HHC of the Act. The learned DR on the other hand supported the orders of the authorities below. In view of the above, we find that the order of the learned CIT (A) on this ground is not sustainable since the detailed break up has not been examined by the authorities below. We, therefore, set aside the order of ld. CIT(A) and restore back the issue to the file of the AO for deciding the same afresh in accordance with law after examining the de....
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....urposes. 17. Ground Nos. X and XI relating to interest u/s 234B, 234C and 234D as well as interest u/s 220(2) of the Act are consequential and are decided as such. 18. Ground No.XII of the assessee's appeal is general in nature and hence, requires no specific adjudication. 19. In the overall result, the appeal of the assessee is partly allowed for statistical purpose. 20. Now, we will take up the Revenue's appeal in ITA No.6580/Mum/2007 (AY 2003-04) for adjudication. 21. Ground No. 1 of the Revenue's appeal: While adjudicating Ground No. 1 of the assessee's appeal in ITA No.6721/Mum/2007 for the year under consideration we have decided the issue in favour of the assessee vide Para 4 above. With a view to maintain principle of judicial consistency, by following the same, we hereby dismiss this ground of appeal of the Revenue. 22. Ground No. 2 relating to deletion of disallowance of Rs. 7,92,843/- being 2% of gross dividend on estimate basis out of general and administrative expenses has already been decided against the revenue by the coordinate Bench of the Tribunal while adjudicating the assessee's own case for assessment year 2002-03 in ITA No.6720/Mum/2007 vide order ....
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....hat matter of the assessee was directly covered by the decision of Hon'ble Supreme Court delivered in the case of S A Builders that all the transactions with subsidiaries were in the current account, that commercial expediency was evident in the case under consideration, that disallowance of interest on account of diversion of interest bearing funds to a subsidiary company was not justified. He deleted the addition made by the AO. 5.2 Before us, DR supported the order of the AO. AR submitted that loans advanced to the subsidiary companies was in the current account, that the assessee had sufficient surplus, reserves and share capital to advance loans to the subsidiary company. He replied upon the case of S. A. Builders (supra) and Reliance Utilities (supra). 5.3 We have heard rival submissions and perused the material placed before us. We find that the FAA has given categorical findings of fact about the transactions carried out by the assessee company with its subsidiary company. As per the FAA, the transactions in the year under consideration with the subsidiary company were in the current account and there was commercial expediency in the said transactions. In our opinion,....
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....assessment year 2002-03 vide Para 7 at page 9 of the Order dated 12th June, 2013. The relevant portion of the above order is reproduced herein below for reference:- "7. The last ground of the appeal filed by the AO is about the direction issued by the FAA to reduce the book profit by the quantum of notionally computed deduction u/s 80HHC of the Act. During the assessment proceedings, AO found that the assessee claimed deduction u/s. 80HHC at Rs.NIL, whereas as per the income computed u/s 115JB the same was arrived at Rs. 78.85 lakhs. AO called for the explanation from the assessee as to why deduction should not be computed in line with department's stand in assessment year 2001-02. After considering the reply, AO held that since no deduction could be allowed in computation because of the loss in the business as claimed by the assessee, that contention of the assessee was not acceptable, that the assessee had not submitted any computation for deduction u/s 80HHC. Finally, he held that no deduction u/s 80HHC was to be allowed to the working u/s 115JB of the Act. 7.1 The assessee preferred an appeal before the FAA. After considering the submissions of the assessee he held that t....