TaxTMI 
TaxTMI 
2019 (12) TMI 659
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.... of the Act. 2. The CIT(A) has erred in law and on facts in partly deleting the addition made of disallowance made u/s.14A of the Act while computing Book Profit u/s.115JB of the Act. On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. The first issue raised by the Revenue is that the ''Ld.CIT (A)'' erred in deleting the disallowances made by the AO in part amounting to Rs. 3,84,43,112/- only u/s.14A r.w.Rule 8D of the Act. 2. Briefly stated facts are that the assessee is a private limited company and engaged in the business of Real estate development and financial activity. The assessee in the year under consideration has earned dividend income of Rs. 30,03,63,727/- which was claimed as exempted income u/s 10(34)....
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....s. It is therefore I am partly inclined with appellant's contention as well as ratio of my predecessor that netting of interest has to be considered for disallowances under rule 8D(2)(ii). But, such netting of interest cannot be made in a general manner. The A.O. white computing such interest disallowances of Rs. 4,01,30,0897- on gross interest expenses of Rs. 312321261/-considered average investment including investment in partnership firm M/s. ATREG and average of total assets. As against this appellant claimed that in view of netting of interest and there being effectively no net interest claim, there should not be any disallowances under rule 8D(2)(ii). It is in this regard, as discussed above, the investment in shares & securities by appellant in F.Y. 09-10 of Rs. 4.26 crore remained at Rs. 4.21 crore in F.Y. 10-11 but such investment cannot be held as that of made with interest free fund. On the other hand, appellant made investment in partnership firm M/s. ATREC which has increased from Rs. 59.94 crore to Rs. 133.76 crore but appellant received interest of Rs. 3.40 crore. It is therefore, such investment and allocation of interest be excluded from rule 8D(2)(ii). This left w....
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....727/- which was received from its subsidiary company namely Adani Mundra SEZ Infrastructure Pvt. Ltd. and from the mutual fund. The assessee against such income has not made any disallowance of the expenses. Therefore the AO made the disallowance of the expenses amounting to Rs. 4,51,72,278/- in pursuance to the provision of section 14A r.w. Rule 8D fo the Act. 7.1 On appeal the ''Ld.CIT (A)'' was pleased to delete the addition made by the AO for Rs. 3,84,43,112/- in part on account of interest expenses. Thus the ''Ld.CIT (A)'' restricted the addition on account of interest expenses amounting to Rs. 16,86,977/- only. The ''Ld.CIT (A)'' also upheld the addition made by the AO on account of administrative expenses amounting to Rs. 50,42,189/-. 7.2 Regarding the disallowance of the interest expenses, admittedly the interest income exceeds interest expenditure claimed in the profit and loss accounts. In fact there was no interest expenditure claim by the assessee in the profit and loss account. The disallowance of the interest income and interest expenditure stands as under: Particulars Amount Rs. Interest income 32,05,7....
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....lea of the assessee that Rule 8D(2)(ii) shall have no application in the given facts where the interest income earned outweigh the interest expenditure. In consonance with the decision of the Hon'ble Gujarat High Court, we decline to interfere with the conclusion drawn by the CIT(A) on the issue in favour of the assessee. 7.4 Respectfully following the same we delete the addition confirm by the ''Ld.CIT (A)'' on account of interest expense of Rs. 16,86,977/- 7.5 Regarding the administrative expenses, we note that the assessee claimed that it has not incurred any expenses. However, the learned AR for the assessee before us has not demonstrated based on the documentary evidence that the assessee has not incurred any expenses in connection with the exempted income. Accordingly, we do not find any reason to interfere in the finding of the authorities below. Hence, the ground of appeal of the Revenue is dismissed and ground of appeal of the assessee is partly allowed. The next issue raised by the Revenue is that the ''Ld.CIT (A)'' erred in deleting the addition made by the AO in part u/s 14A r.w. Rule 8D while determining the book profit u/s.....
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....at in view of long line of judicial precedents, such adjustment in 'book profit' is not permissible, it is the case of revenue that in view of codified law in this regard, the 'book profit' under 115JB has been rightly increased by the revenue. 6. We notice that issue is evolved and developed by certain judicial precedents. We find at the first instance that the identical issue came up for consideration before the Hon'ble Gujarat High Court in the case of Alembic Ltd. (supra) where the substantial question of law on the point as to whether adjustment made on account of disallowance under S.14A of the can be similarly made for the purposes of computation of 'book profit' under s.IISJB of the Act was answered against the Revenue and in favour of the assessee. We also lake note of decision of the Special Bench rendered in ACIT vs. Vireet Investment Pvt.Ltd. & Anr. !65 ITD 27 lDelhi)[SB] where it was held that the AO was not entitled to tinker with book profits contemplated under s.IISJB towards disallowance made under S.I4A of the Act. We similarly find that judgement of Hon'ble Bombay High Court in C/T vs. Bengal Finance and Investments Pvt.Lt....
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....lause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." Given above, we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). 13.4 Now the question arises to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts & circumstances, we feel that ad-hoc disallowance will service the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary l....
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....enses were neither debited to the Profit and Loss Account nor claimed by the appellant company by way of deduction while computing total income. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or luring the course of hearing of the appeal. The first issue raised by the assessee in grounds no.1 is that ''Ld.CIT (A)'' erred in confirming the disallowance u/s 14A r.w. Rule 8D of the Act in part amounting to Rs. 67,29,166/- only. 14. At the outset, we note that the impugned issue raised by the assessee has already been decided along with the appeal of the Revenue bearing ITA No.2345/Ahd/2015 vide paragraph no. 7 of this order. For the detailed discussion please refer to the relevant paragraph. Accordingly, the ground of appeal of the assessee is partly allowed. The next issue raised by the assessee is that the ''Ld.CIT (A)'' erred in confirming the disallowance of Rs. 67,29,166/- while determining the book profit u/s.115JB of the Act. 15. At the outset, we note that the impugned issue raised by the assessee has already been decided along with the appeal of the Revenue b....
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....essional Fees in the subsequent assessment year. 18. Being aggrieved by the order of the ''Ld.CIT (A)'' the assessee is in appeal before us. 19. The ld.AR, before us, submitted that the impugned professional income has already been offered to tax in the subsequent assessment year and accordingly prayed for the direction to exclude such income from the subsequent assessment year. 19.1 The Ld.AR, also submitted that the assessee had paid taxes for the year under consideration under MAT and therefore even the impugned income is added to the total income of the assessee, there will not be any impact on the amount of tax. Therefore adding the professional receipts to the income of the year under consideration will be tax neutral exercise. 20. On the other hand the Ld. DR vehemently supported the order of the authorities below. 21. We have heard the rival contentions of both parties and perused the relevant materials available on records. Admittedly there is no provision under the Act to tax the same income twice as done in the instant case. The contention of the assessee that the impugned income has been offered to tax in the subsequent year has not been d....
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.... considering the submission of the assessee concluded that the assessee is engaged in land development activity and therefore the expenditure incurred in relation to the land development are eligible to be the part of inventory. However, the ''Ld.CIT (A)'' found that expenditure of Rs. 2,35,338/- out of total expenditure of Rs. 12,89,838/- was not based on any documentary evidence. Therefore the ''Ld.CIT (A)'' confirmed the addition of Rs. 2,35,338/- in part. Being aggrieved by the order of the ''Ld.CIT (A)'' the assessee is in appeal before us. 25. The Ld.AR, before us, submitted that it had not claimed any expenditure in the profit and loss account and therefore the same cannot be disallowed by adding to the total income of the assessee. 26. On the other hand the Ld. DR, vehemently supported the order of the authorities below. 27. We have heard both the parties and considered the materials available on record. The assessee in the year under consideration has incurred an expense of Rs. 12,89,839.00 only which was shown as part of closing inventory of the of work in progress. Out of such expenses, an amount of Rs. 2,35,338....