TaxTMI 
TaxTMI 
2019 (11) TMI 803
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....equate inquiries and as such the orders are liable to be quashed. 2. Disallowance of fine of Rs. 141.50 crores levied by EU Commission. 2.1. On the facts and circumstances of the case and in law, the lower authorities erred in disallowing the fine of Rs. 141.50 Crores levied by the ED Commission under section 37(1) of the Act. 2.2. The Ld. CIT(A) has erred in concluding that only expenses incurred for earning an income for the year should be allowed as a deduction under section 37(1) for the following reasons. 2.2.1. the settlement was purely compensatory in nature and not penal in nature. 2.2.2. the fine was designed only as a 'take back' of the amount originally received by the Appellant for entering into a non-compete agreement, which was offered to tax in FY 2004-05. 2.3. Without prejudice, the levy by ED Commission is allowable as a business loss under section 28 of the Act. 3. Disallowance of depreciation on goodwill recorded on amalgamation : 3.1. On facts and in the circumstances of the case and in law, the lower authorities erred in not allowing the depreciation on goodwill arising on amalgamat....
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....tice and in violation of statutory procedure laid down in section 251 (2) of the Act for enhancement of income of the Appellant. 4.4. Without prejudice, the learned CIT(A) has erred in not appreciating that there are no sums found credited in the books of account during the previous year and accordingly, the pre-requisite of section 68 fails at threshold. 4.5. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in making an addition in respect of an outgo of money, which is a 'debit' as an unexplained cash credit u/s 68 of the Act. 4.6. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in disregarding all the documents/evidence already on record, which proves the nature of the transaction as well as its genuineness as a loan given by the Appellant to its wholly owned subsidiaries to settle their subsisting debts. 5. Disallowance under section 14A of Rs. 3.11 Crores 5.1. On facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in upholding the action of Ld.AO in disallowing amount of Rs. 3.11 Crores under section 14A under normal compu....
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....her expenses'. The details of expenditure were called for by the AO and the assessee furnished its replies from time to time. On verification of the submissions made by the assessee the AO observed that during the FY 2009-10, the European Commission ('EC' in short), had stated that it had initiated anti-trust proceedings against the assessee company and other companies, each of which entered into agreements with another Company Les Laboratories Servier ('Servier'), relating to a product "perindopril", and that on 27th of July, 2012 the EC issued a statement of Objections against the assessee and others setting out its preliminary case and that the assessee had submitted its response to EC on the statement of objections. 3.3. Further on 9th July, 2014 the EC issued a decision to the effect that the Assessee company and Mylan Inc., as well as the other companies have violated European Union competition rules and for this violation, it imposed a fine/fee equivalent to the patent infringement settlement consideration received from Servier, of approximately Rs. 1415.09 millions (EUR 17.2 Million) including approximately Rs. 662.29 millions (EUR 8.05 Million) jointly and severally wit....
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....ave capability to produce a final perindopril product, it had the capability to produce an API at that time. It had no presence in the ED for applying Market Authorization. As a result of losing Niche, taxpayer was out of the race and would not have been able to find another partner willing and able to overcome all barriers and produce in a timely manner a final perindopril product 6. With no choice left taxpayer settled with Servier under a settlement agreement wherein for a GBP of 11.8 million - taxpayer shall not, and shall procure that its affiliates shall not, (i) carry out in relation to Perindopril made using the process any restricted act in any country of the territory; and/or (ii) manufacture and/or supply Perindopril made using the process, for use anywhere in the Territory. 7. The non-compete obligation prevented taxpayer from launching a generic version of perindopril manufactured on the basis of the process developed in cooperation with Niche in the Territory. 8. Servier had entered similar settlement agreement with Krka, Lupin,Teva and Unichem. 9. The payment received from Servier of GBP 11.8 million was fully offered to tax in F. ....
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.... 'take back' and not a fine. Therefore, the amount would be allowable as a deduction under section 28 of the Income tax Act, 1961. Under the Income tax Act, 1961 non-compete receipts are taxable as part of income irrespective of their legal enforceability. Any Court decision that declares that the amount is required to be 'given back' on the ground that they are 'gains improperly made', the deduction would also be made under the same section, i.e., section 28 of the Act. This amount is not hit by Explanation 1 to Sec 37(1) and we provide our reasons below : a. For the sake of convenience, the sub-section with explanation thereto is quoted below: "37 (1) Any expenditure (not being expenditure of the nature described in sections 3010 36 and not being in the nature of Capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation-For the removal of doubts, it is hereby declared that any expenditure incurred by an ass....
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....duction under section 37(1) of the Income-tax Act, whenever such examination reveals the concerned impost to be purely compensatory in nature. Whenever such impost is found to be of composite nature, that is, partly of compensatory nature and partly of penal nature, the authorities are obliged to bifurcate the two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature. f. The Explanation (1) to section 37(1} was brought in to nullify the Pranav Construction Co. v, Asstt. CIT (1998] 96 Taxman 323 (Mag.)(Mum.) judgment. In that case a sum of Rs. 20 lakhs had been paid as protection money by builder as the areas were vulnerable to hafta and extortion and this money was allowed as deduction. Thus, to disallow income-tax deductions for hafta, the Explanation had been incorporated. But extending the proviso to fines was never intended. Hence, disallowing income-tax deduction for any kind of fine is not proper. g. Another noteworthy point is that the Explanation to section 37(1) is a deeming provision. It only creates a legal fiction. Next, the Explanation comes....
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....ion to this disallowance, there were also certain other disallowances and the consequential additions made by the AO and the CIT(A) had granted partial relief to the assessee which are also challenged by both the parties in the appeal filed before us. 5. We shall deal with all the issues in seriatum, after deciding the first issue before us i.e. the allowability of the litigation costs. 6. The Ld.Counsel for the assessee, while reiterating the submissions made before the authorities below, submitted as under:- (a) that prior to the year 2004, the assessee had developed and stabilized the process of manufacture of "Perindopril", an anti-high blood pressure drug, and filed the necessary regulatory applications (DMFs) for manufacture of the API drug from its manufacturing unit. (b) The assessee and Niche Generics Limited ("Niche") entered into a co-development agreement to jointly develop the generic version of Perindopril tablets, for which the API would be supplied by the assessee and accordingly Niche filed the Dossiers for manufacture of Perindopril, at its Unichem facility, based on the supplies from the assessee. (c) that "Perindopril" is Servier....
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...., 2014, the order of the EU Commission was passed imposing a fine on the assessee, under its anti-trust laws in the region, for violation of the competition laws, by way of accepting a non-compete settlement from Servier, (k) The fine imposed on the assessee was in Euros equivalent to the amount of GBP Rs. 1.18 crores received by it in settlement i.e. EUR 1.72 crores. The assessee was therefore required to disgorge the entire sum received by it from Servier. (l) Thus, the assessee incurred an amount of INR 141.50 crores from its profits for the year, as Litigation costs under the head 'other expenses'. The assessee, therefore, claimed that the payment towards levy by EU Commission constitutes business loss eligible for deduction u/s 28(i) of the Act. It was submitted that for arriving at the figure of profits and gains of the business of the assessee in a particular year, business expenditure of all types, whether specifically provided for or not, may be allowed u/s 28(i) of the Act itself. He also referred to Sections 30 to 43C of the Act, submitting that these sections expressly provide for the deductions in computing business income and if an expenditure comes ....
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....s 37(1) of the Act, wherever such examination reveals that the concerned impost is not penal in nature or that it is purely compensatory in nature, the Ld.Counsel for the assessee placed reliance upon the following cases. * Prakash Cotton Mills P Ltd. (SC) (1993) 201 ITR 684; * Swadeshi Cotton Mills Co.Ltd. (SC) (1998) 233 ITR 199; * Standard Batteries Ltd. (SC) (1995) 211 ITR 444; * Hyderabad Allwyn Metal Works Ltd. (High Court of AP) (1988) 172 ITR 1131; * Bharat Television Pvt.Ltd. (High Court of AP) (1996) 218 ITR 172. 6.2. The Ld.Counsel for the assessee further reiterated that the amount received from Servier, in settlement for non-compete, was duly offered to tax in AY 2005-06 and the same has been directed to be returned except to the extent of difference in foreign exchange fluctuation rate, and since it is a payment towards patent infringement or settlement, the same is compensatory in nature and cannot be disallowed, particularly because the expenditure is purely for commercial purposes. For this proposition, he placed reliance upon the decision of Hon'ble High Court of Delhi in the case of Desiccant Rotors International (P....
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....ion that reference to the word 'law' in the relevant section means the law of the land i.e. the law of India as the definition under the General Clauses Act is applicable to all the Central Acts and Regulations, including the Income Tax Act. 6.4. The Ld.Counsel for the assessee further submitted that the expenditure incurred towards levy by EU Commission was incurred for the purpose of carrying on its business and, therefore, it cannot be disallowed u/s 37(1) of the Act. He placed reliance upon the decision of Hon'ble Supreme Court in the case of Udaipur Distillery Co.Ltd. reported in 224 CTR 32 (2009). Thus, he prayed that the disallowance of litigation cost made by AO and confirmed by CIT(A) be deleted. 7. The Ld.DR, on the other hand, supported the orders of the authorities below and submitted that the assessee had resorted to Anti Competitive Practices by way of delaying the entry into market of certain generic medicines and this issue was investigated by the European Commission and the EC has levied the fine for infringement of EC Treaty Rules that outlaws cartels and other restrictive business practices as well as abuse of dominant position. He submitted that the EC lev....
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....n 1 to Sec.37(1) of the Act. 8.2. The CBDT Circular, explained the amendments made to the Finance Act, 1998 for the introduction of the Explanation 1 to Sec.37(1) of the Act as under: "20.1. Section 37 of the Income-tax Act is amended to provide that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and no deduction or allowance shall be made in respect of such expenditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on account of protection money, extortion, hafta, bribes etc. as business expenditure. It is well decided that unlawful expenditure is not an allowable deduction in computation of income. 20.2. This amendment will take effect retrospectively from 1st April, 1962 and will, accordingly, apply in relation to the assessment year 1962-63 and subsequent years." 8.3. The General Clauses Act also defines an 'offence' u/s 3(38) of the Act to mean "any act or omission made punishable by law for the time being in force". 8.4. The Hon'ble Allahab....
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.... By virtue of Article 367(1), the General Clauses Act, 1897, is, subject to such adaptations and modifications that may be made therein under. Article 372, apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature of the Dominion of India." 8.5. Further, in the case of Susanta Mukherjee cited (supra), the Hon'ble Calcutta High Court was considering the case of a person, who was an employee of Food Corporation of India at Calcutta, and on a visit to Switzerland, he was arrested by Swiss Police and later was convicted and sentenced to imprisonment for a period of eight days on a charge of repeated thefts. After release from imprisonment, the said person returned to India and resumed his duties. However, on receipt of information about the imprisonment and conviction in Switzerland, he was put under suspension under the CCS Rules. In this context, the Hon'ble Calcutta High Court, after considering various provisions of the Constitution of India and also the Hon'ble Supreme Court judgements on the issue, held that a reference to the word 'law' is any law for the time being in force in Indian territory and not in the f....
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....ence between "an existing law" and a "a law in force". It has been further observed that the words "a law in force" a used in Article 372 are wide enough to include not merely a legislative enactment but also any regulation or order which has the force of law. "As already stated, the proposition of law which has been laid down by the Supreme Court in the above decision is not relevant to the issue with which we are concerned." 8.6. Therefore, according to him, it is only laws of the land i.e. the laws in force in India, if violated, the extent of such violation is to be disallowed. 8.7. He also placed reliance on the decision of Hon'ble Supreme Court in the case of Hari Shanker Jain vs. Sonia Gandhi dated 12th September, 2001 in CA no.4400/2000 wherein it has been held as under: "Italian law is a foreign law so far as the Courts in India are concerned. U/s 57(1) of Indian Evidence Act, 1872, the Court shall take judicial notice of, inter alia, all laws in force in the territory of India. Foreign laws are not included therein. Sections 45 and 84 of Evidence Act permit proof being tendered and opinion of experts being adduced in evidence in proof of a point of foreign ....
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....tion 37 in respect of penalty, etc. finding by a competent Court was not a condition precedent to attract the Explanation to Section 37(1). According to the CIT (A), the Explanation simply states that if expenditure is incurred for any purpose, which is an offence, or which is prohibited by law, such expenditure will not be deeded to have been incurred for the purpose of business. The Explanation does even imply that there must be a finding of a Competent Authority or Court that an offence was committed or that any law was infringed. In fact, there may be numerous situations where expenditure is incurred for a purpose, which is prohibited by law, but there may not necessarily be any order of any authority or Court to this effect. Payment of protection money, hafta money, ransom, etc. are examples of such expenditure. There may not be any order prohibiting a person from making payment of protection money but nonetheless the payment will be for a purpose prohibited by law and would not be allowable under Section 37 of the Act. 18. At the outset, we are inclined to accept the submission of the assessee that the paramount and governing consideration behind such a settlement/ag....
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....ory". This territory mentions some specific countries in Europe as well as Japan, Australia and Korea. There is no mention of India at all. That clearly implies that SEMCO has no objection if the assessee continues to manufacture the goods in the same manner using same patent which it has been using and marketing it in India or any other countries, which are not stipulated in the territory with respect to which only restraint is provided in the agreement. It is for this reason the assessee even today continues to manufacture those goods and is selling the products in this country. Once we find that the settlement has arrived at under the aforesaid circumstances, there is no room to hold that it was because of the reason that the assessee was violating the patent laws or the payment was made for an objective prohibited by law. This is our view even when we presume that the expression prohibited by law would include US laws and would not be confined to law in India. 20. Moreover, we also agree with the contention of the learned counsel for the assessee that the payment under the settlement is compensatory in nature. The remedy for infringement of patent involves civil action....
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....omposite nature, that is, partly of compensatory nature and partly of penal nature, the authorities are obligated to bifurcate the two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature." 23. It was an expenditure which was motivated purely by commercial purpose and would be allowable under Section 37(1) of the Act as held by the Apex Court in the case of Sri Venkata Satya Narayana Rice Mill Contractor Co. Vs. Commissioner of Income Tax [223 ITR 101]." 8.9. Thus, from the above decisions, it is clear that what has to be disallowed under Explanation 1 to Sec.37(1) of the Act is a payment made, for contravention of laws in force in India and not of any foreign country. The laws are specific to each of the countries according to their rules and regulations and an offence in one country may not be so in another country. Therefore, we agree with the contentions of Ld.Counsel for the assessee that it is only payment made for contravention of laws in force in India that disallowance under Explanation 1 to Sec.37(1) of the Act is to be made. 8.10. The next....
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.... d) Net assets taken over (B-C) = (1,068) Mn e) Intangible assets valued including goodwill As residual value = 43,860 - (1068) Mn = 44,928 Mn. 10.1 In terms of the amalgamation scheme, the excess of investment made over the aggregate value of the net assets acquired and liabilities assumed, the intangibles including goodwill were depreciated @ 25% on WDV from the Financials submitted. The AO observed that the price of the intangible asset was in the form of goodwill has been introduced in the books of the assessee, only as a result of amalgamation undertaken by the company and also that goodwill does not exist in the books of ASPL prior to the amalgamation. In order to understand the introduction of goodwill in the books and tax implications thereon, AO issued a show cause notice dated 15/12/2017 to the assessee calling for its reply by 22/12/2017. Assessee vide its letter dated 22/12/2017 explained the transaction and also relied upon the decision of Hon'ble Supreme Court in the case of Smiff Securities Ltd., [2012] 348 ITR 302, to argue that depreciation on goodwill is allowable. However, AO was of the opinion that since the goodwill was not existent in ....
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.... of the assessee with effect from 6th December, 2013. He submitted that pursuant to the scheme of amalgamation, the assets and liabilities of ASPL and OTL vested with the assessee with effect from 6th December, 2013 and both the Agila and Onco legally ceased to exist. As per the Accounting Standard - 14, which deals with accounting for amalgamations and as per the 'Purchase Method', the amalgamating company is required to account for the amalgamation by allocating the consideration to individual identifiable assets and liabilities of the amalgamating company based on their fair values on the date of amalgamation and if the amount of the consideration is in excess of the fair value of the net assets taken over by the amalgamating company, such excess is to be accounted as good will arising on amalgamation under intangible assets. In case of a deficit, the shortfall is to be accounted as capital reserve under reserves and surplus. It is submitted that in the light of the above position, the assessee allocated the consideration of INR 55 crores as fair value of the identifiable assets and liabilities taken over and the excess of net consideration amounting to INR 4,331was accounted as....
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....reciation gets allocated between the amalgamating and amalgamated company in the year of amalgamation and has no applicability for any new asset arising on account of the amalgamation in the hands of the amalgamated company. He also referred to the memorandum explaining the provisions of Finance Bill, 1996, introducing the six proviso to section 32(1) of the Act, to argue that the intent of the legislature behind introduction of the proviso was to cover within its ambit only those assets which were recorded in the books of account of the predecessor company and which are transferred pursuant to the amalgamation. He argued that sixth proviso was introduced to curb the practice of claiming depreciation on the same assets, by both the predecessor company and the successor company in the case of a merger or succession and therefore, the said proviso is not applicable to the assessee. He also tried to distinguish the facts between the case of the assessee and United Breweries Ltd. (supra). 12.4 The ld. Counsel for the assessee also submitted that similar issue had arisen before the Hon'ble Kolkata High Court, on revenue appeal, in the case of Smifs Securities ltd. (supra) for the AY ....
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....e value at which the asset is recorded for the purpose of claiming depreciation. He therefore, prayed that the depreciation claim by the assessee in ITR should be allowed in full. 13. The ld. DR, on the other hand, supported the orders of authorities below and submitted that the assessee acquired the shares of Agila Specialities Ltd. along with its wholly owned subsidiary Onco Therapies Ltd. on 05/12/2013. The net assets acquired were valued at Rs. (-) 106.8 crores after reducing the liabilities. He submitted that when the net asset value is negative, there cannot be any goodwill because no positive value can be attributed to a negative asset. He also submitted that the purchase of shares was part of global acquisition of the Strides Acro Lab Group and there was a global agreement prior to the acquisition of shares. He submitted that it is only after the shares were acquired and the assessee became 100% owner of M/s Agila Specialities Ltd that the amalgamation took place and, therefore, when the assessee company is the owner of another company through shareholding, subsequent merger would not lead to transfer of assets u/s 2(47) of the Act. Therefore, u/s 2(47)(v), transfer of c....
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....e on the decision of the ITAT, Bangalore in the case of United Breweries Ltd., [2016] 76 taxmann.com 103 and decision of ITAT Panaji Bench in the case of Chowgule & Co. (P) Ltd., [2011] taxmann.com 224 (Panaji). 14. Having regard to the rival submissions and material on record, we find that on account of amalgamation, the consideration paid by the assessee to the vendor is much more than the net value of assets and liabilities taken over by the assessee. Such excess consideration paid by the assessee has been treated by the assessee as goodwill and has claimed depreciation thereon at the applicable rate. The finding of the AO that the goodwill cannot be self-generated and that the claim of the assessee is on account of self-generated goodwill is not correct. The consideration to be paid to Strides for acquisition of the shares of Agila and Onco is after negations between the assessee and Strides. It is an admitted fact that Strides is not a related party to the assessee and therefore, the consideration agreed upon cannot be doubted and in fact is not disputed by the AO or the CIT(A). The AO has relied upon the sixth proviso to section 32(1) of the Act, to hold that the claim of ....
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....erred to and vest in the company. In the process goodwill has arisen in the books of the company." It was further explained that excess consideration paid by the assessee over the value of net assets acquired of YSN Shares and Securities Private Limited [Amalgamating Company] should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards the reputation which the Amalgamating Company was enjoying in order to retain its existing clientele. 2 http://www.itatonline.org The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 [`Act', for short]. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: "Explanation 3.-- For the purposes of this sub-section, the expressions `assets' and `block of assets' shall mean-- [a] tangible assets, being buildings, machinery, plant or furniture; [b] intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature." Explanation 3 states that the expression `asset' shall me....
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....fore us. The following decisions relied upon by the ld. Counsel for the assessee also hold that depreciation on goodwill is allowable.: 1. Zydus Wellness Ltd., 348 ITR 302 (SC) 2. Sri Krishna Drugs Ltd., TS-5874-ITAT-2011 (Hyd. Trib.) 3. AP Paper Mills Ltd., TS-5628-2009 (Hyd. Trib.) 4. Zuari Cement Ltd., TS-5823-ITAT-2016 (Hyd. Trib.) 5. MTANDT Rentals Ltd., TS-7175-ITAT-2018 ( Hyd. Trib.) 6. Dr. Reddy's Laboratories Ltd., 78 Taxmann.com 63 (Hyd.Trib.) 7. Cosmos Cooperative Bank Ltd., TS-47-ITAT-2014 (Pune Trib.) 8. Areva T&D India Ltd. 345 ITR 421 (Del.) 9. Triune Energy Services (P) Ltd., 237 Taxmann 230 (Del.) 10. CLC & sons Pvt. Ltd., 95 Taxmann.com 219 (ITAT-Del.-SB) 11. Volvo India Pvt. Ltd., IT(TP)A No. 1537/Bang/2012. 14.1 The decisions relied upon by the ld. DR are all decisions of coordinate benches of the Tribunal and also are all distinguishable on facts. Respectfully following the above precedents relied upon by the assessee on the issue, we are inclined to allow the ground of appeal No. 3. 15. The next ground is against the enhancement made by the Ld. CIT(A) u/s 6....
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....have the power to question the taxability of income from a new source, which was not considered by the AO. In support of this submission, he placed reliance on the following other decisions: 1. Shapoorji Pallonji Mistry, 44 ITR 891 (SC) 2. Sardarilal & co., 251 ITR 364 (Delhi) 3. Bikram singh, 48 ITR 689 4. Hari Mohan Sharma in ITA No. 2953/Del/2018 5. B.P. Sheraffudin, 23 SOT 227 (2008) 17.1 Further, he also submitted that CIT(A) cannot enhance an assessment unless the assessee has been given a reasonable opportunity of being heard. He submitted that no enhancement notice was given to the assessee and therefore, the enhanced income cannot be sustained. According to him, enhancement made by the CIT(A) is contrary to the facts and law and invalid and beyond jurisdiction and it is to be deleted. 18. The ld. DR, on the other hand, relied upon the order of CIT(A) and submitted that ld. CIT(A) had the powers of enhancement and had accordingly issued enhancement notice on 17/09/2018 to the assessee, to which, assessee filed its reply on 08/10/2018 and only after considering the reply of the assessee, the CIT(A) has passed the order. He, ....
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....s if a court should come to a different conclusion was inescapable in law even though its decision may lead to serious difficulties in the way lead to loss of revenue or evasion of tax, it should hesitate before it comes to a particular conclusion. Now, in this case, our decision will not in any way put difficulties in the way of the taxing department. In this very case two remedies were open to the Department neither of which was resorted to. It was open to the Income-tax Officer to have proceeded against the assessee under the first part of section 34; or alternatively, the Commissioner could have exercised his powers of revision under section 33B. Section 34 expressly deals with a case where an assessee fails to disclose fully and truly all material facts necessary for his assessment; and clearly this is a case where the assessee failed to disclose the sum of Rs. 40,000. Now, if we were to hold that the Appellate Assistant Commissioner has the power - which Mr. Joshi contends he has - he in effect would be bringing to tax an income which the assessee had failed to disclose and which had never been subjected to the process of assessment. That surely is not the power which section....
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....nt of view of its taxability. But since the Income-tax Officer has not applied his mind to the question of the taxability or nontaxability of the amount of Rs. 5,85,000, the Appellate Assistant Commissioner had no jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of Rs. 5,85,000 or of any portion thereof. As we have already stated. it is not open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income- tax Officer with a view to find out new sources of income and the power of enhancement under s. 31(3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context "consideration" does not mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability ....
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....r under section 263 of the IT Act, but, CIT(A) could not have embarked on bringing a new source of income to tax. Therefore, respectfully following the above judicial precedents on the issue, we delete the income enhanced by the CIT(A) and brought to tax. The ground No. 4 is allowed. 20. The next issue is with regard to the addition of Rs. 3,11,70,470/- towards disallowance of expenditure u/s 14A of the Act. 21. Brief facts of the case are that on 31/03/2014, the assessee had shown under the head 'non-current investments' a sum of Rs. 2,48,80,000 and Rs. 152,91,50,000/- as current investments. AO observed that assessee had debited interest & finance cost of Rs. 248,46,20,000/- and that the assessee had taken secured loans of Rs. 340,33,50,000/- and unsecured loans of Rs. 199,56,60,000/-. He observed that since the income from such investment was not taxable, no deduction shall be allowed in respect of expenses incurred by the assessee in relation to such income. Therefore, assessee was asked to justify as to why interest expenditure should not be disallowed u/s 14A of the Act rwr 8D of the IT Rules. Assessee submitted that provisions of section 14A are not applicable to th....