TaxTMI 
TaxTMI 
2020 (1) TMI 952
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....eal. We find that the assessee had derived dividend income of Rs. 16,81,44,106/- and claimed the same as exempt in the return of income. We find that the assessee had made voluntary disallowance u/s.14A of the Act in the sum of Rs. 83,04,00,000/- worked out as under:- Interest on specific borrowings - Rs. 59.66 Crores Interest on general borrowings - Rs. 20.36 Crores Direct / Indirect expenses - Rs. 3.02 Crores =========== Total Rs. 83.04 Crores 2.1. The ld. AO on verification of details of various expenses and the financial statements of the assessee agreed to the disallowance made by the assessee towards interest on specific borrowings and general borrowings as stated supra. But however, with regard to disallowance made in the sum of Rs. 3.02 Crores towards direct / indirect expenses, the ld. AO proceeded to make the disallowance based on the computation mechanism provided under Rule 8D(2)(iii) of the rules and arrived at the disallowance of Rs. 22.46 Crores thereon. After reducing the amount disallowed by the assessee in the sum of Rs. 3.02 Crores towards administrative expenses, the ld. AO disallowed the remaining sum of Rs. 19.4....
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....ministrative expenses u/s.14A of the Act. 2.4. It was further pleaded that majority of dividends were received only from the group companies of the assessee where dividend gets credited directly through Electronic Clearing Service (ECS) in the bank account of the assessee for which no expenses need to be incurred by the assessee. The assessee pleaded before the ld. CIT(A) that it had worked out the disallowance on a scientific method based on actual expenses debited in the profit and loss account and hence, there is no need to make further disallowance by applying the Rule 8D (2)(iii) of the rules. 2.5. We find that the assessee vide letter dated 22/01/2014 had furnished the details of administrative expenses and its relation with regard to the investment activity in the following tabular form:- Details of administration expenses incurred at CFD level Total Expenses as per CFD Audited Balance Sheet Already Disallowed in return Balance Expenses not related to investment activity Balance Common. expenses Remarks Audit Fee 8,683,178 - 8,683,178 8,683,178 . Statutory and tax audit fees Repair Buildings 231,707 - 231,707 . 231,707 Repair Others ....
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.... Liabilities, Excess provisions and unclaimed balances in respect of earlier years written back (net of short provisions and sundry balances written off) ( (2,125,053) (2,125,053) - (2,125,053) Total 76,324,359 26,100,697 50,223,662 43,220,563 7,003,099 2.6. We find that the ld. CIT(A) on verification of the aforesaid tabulation had observed as under:- "I have carefully examined the submissions made by the assessee on 22/01/2014 in continuation with the earlier submissions, with regard to exclusion of items of expenditure that were not directly or indirectly related to earning exempt income and found that the expenses with respect to Printing & Stationary of Rs. 49,20,462/-, postage of Rs. 40,33,372/-, courier changes of Rs. 17,99,943/-, expenses on VAT of Rs. 13,792/-, listing fee of Rs. 6,75,993/-, advertisement expenses of Rs. 8,32,765/- and loss on fixed assets of Rs. 18,622/-, the contentions of the assessee are correct that these expenses will not have any connection with the earning of exempt income. With regard to expenses on Audit fee of Rs. 86,83,178/-, the contention of the assessee cannot be accepted for the reason that the ....
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....penses: Rs. 12,50,08,837/- Add: Bad debts provisions Rs. 2,77,26,000/- Less: Printing and stationary Rs. 49,00,462/- Postage Rs. 17,99,943/ Courier Charges Rs. 6,75,993/- VAT paid Rs. 13,792/- Sale of assets Rs. 18,622/- Audit fee 50% Rs. 43,41,586/- Advertisement Rs. 8,32,765/- Less: Legal and Professional charges Rs. 1,68,08,130/- Disallowance u/s 14A Rs. 11,92,91,169/- It is, therefore, held that the disallowance under section 14A of I.T. Act, 1961 read with rule 8D(2)(iii) of I.T. Rules, 1962 should be restricted to Rs. 1,92,91,169/-instead of Rs. 22.46 crores. In short, assessee's appeal is partly allowed and disallowance u/s. 14A will be restricted to Rs. 11,92,91,169/- (which includes Rs. 3.02 Cr already disallowed by the assessee) instead of Rs. 22.46 crores while computing the business income. Having considered and decided the issue as above, the additional ground raised by the assessee cannot be considered, hence dismissed." 2.7. From the above, it could be seen that the dispute which went to the ld. CIT(A) was only with regard to disallowance of indirect expenses vis-à-vis Rule 8D(2) (iii) of the rules. Out of t....
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....)had decided the issue in favour of the assessee in following manner: "3.2.We have heard the rival submissions and perused the material before us.We find that the AO had invoked the provisions of section 40(a)(ia),though he has also discussed the principles of contingent liability,while making the disallowance.We find that FAA has passed a non- speaking order and just endorsed the views of the AO but he was also of the opinion that provisions of section 40(a)(ia) were applicable.It is found that assessee had specifically mentioned during the assessment proceedings, that it had not received the bills under various heads, that provisions of tax deducting at source were not applicable for the provisions made. We find that similar issue had arisen in the case of Mahindra & Mahindra Ltd. (supra). In that matter it was held that TDS provisions were not applicable for the provisions made at the year- end. Similarly,in the case of Industrial Development Banking Company(supra),the Tribunal had held as under: "The deduction of tax at source can only be effected when payee is known. As far as the situation before us is concerned, the regular return bonds being transferable on simple endorseme....
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....unsel, the Court made following order. Delay condoned Leave granted. Upon hearing the final disposal of the Civil Appeal, the department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as on date is concerned, it would be open to the department to recover that amount in case civil appeal of the department is allowed. We further make it clear that the assessee would during the pendency of this civil appeal pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns. 4.2. Hence, from the aforesaid Hon'ble Supreme Court judgment, it can be inferred that the Hon'ble Supreme Court in the subsequent order had not stayed the judgement of Hon'ble Calcutta High Court. We find that the Hon'ble Supreme Court had passed an interim order giving the aforesaid observations. Hence, we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of the ld. AO to pass orders based on the outcome of the main appeal on merits by the Hon'ble Supreme Court as stated supra. Accordingly, the g....
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....would restrict Assessee's claim of depreciation to 50% in case, the assets are acquired by the Assessee during the previous year and put to use for the purposes of business or profession for a period less than 180 days in the said previous year. 7. In the context of such statutory provisions, the Revenue has raised the question - whether when 50% of the additional depreciation is claimed by the Assessee in a particular Assessment Year, since the acquisition and putting in to use of the assets in the previous Year was for less than 180 days, the Assessee can claim the remaining depreciation in the subsequent Assessment Year. Such a question came up for consideration before the Division Bench of Karnataka High Court in Commissioner of Income Tax and Another v/s. Rittal India Pvt. Ltd., reported in 380 ITR 423. The Court, after referring to the statutory provisions, held and observed in para 8 as under: "8. The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 2006. The grant of additional....
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....tional allowance. We are in full agreement with such observations made by the Tribunal. In view of the aforesaid, we do not find that any interference is called for with the order of the Tribunal, or that any question of law arises in this appeal for determination by this court."After the said judgment of the Karnataka High Court in Rittal India Pvt. Ltd., (supra), legislation has also amended The statutory provisions by adding the third proviso clause (ii) of Sub-section 1 of Section 32 of the Act, which reads as under:- "Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this subsection in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under th....
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....ue chose to interpret the provision, as it stood prior to its amendment would lead to discrimination, in respect of plant and machinery, which was used for less than 180 days, as against that, which was used for 180 days or more. 11.3. In our opinion, as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The memorandum cannot be read in the manner, in which, the Revenue has sought to read it, which is, that the amendment brought in would apply only prospectively. 11.4. We are, clearly, of the view that the memorandum,which is sought to be relied upon by the Revenue, only clarifies as to how the unamended provision had to be read all along. 11.5. In any event, in so far as the court is concerned, it has to go by the plain language of the unamended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the assessee could not claim balance depreciation in the assessment year, which follows the assessment year, in which, the machinery had been bought and used, albeit, for less than 180 days....
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.... only to individual products manufactured by it but also towards corporate advertisement to the extent of Rs. 5.47 crores. (b) The Assessing Officer disallowed the expenditure claimed towards corporate advertisement amounting to Rs. 5.47 crores on the ground that the same is on capital account as corporate advertisement helps in building the company's brand value. The benefit of such build up of brand value would endure over a period of years and therefore fall in the capital field. This view was taken by the Assessing Officer in his final order after his draft Assessment order taking an identical view was upheld by the D.R.P. (c) On appeal to the Tribunal, the impugned order allowed the Respondent Assessee's appeal by inter alia holding that the expenditure is revenue in nature, even if the same is incurred for promotion of a corporate brand, as it facilitates the business of the Assessee and results in increased sales and profitability. The impugned order further holds that the enduring benefit, if any, on account of brand building would not be in the capital field. (d) Mr. Malhotra, learned Counsel for the Revenue, urges that an expenditure incurred to create/im....
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.... on sales and profitability of the Respondent-Assessee. (f) In the above circumstances, the view taken by the impugned order that corporate advertisement enhances the business of the Assessee resulting in increased sales of its product in Revenue field, is a possible view, on the present facts. Consequently, the question as raised does not give rise to any substantial question of law. Thus, not entertained. 7.1. Respectfully following the aforesaid decision, the ground No.6 raised by the assessee is allowed. Disallowance of ESOP Expenses - Rs. 1,28,70,639/- Ground No.7 of original grounds of appeal 8. We have heard rival submissions. We find that the assessee had claimed an expenditure of Rs. 1,28,70,639/-, being the intrinsic value of 329373 stock options granted by the company to its employees. The right to exercise of options by the employees was to accrue to the employees only after certain number of years. We find that the lower authorities had observed that this expenditure was in relation to raising of the capital at certain rates which would benefit the employee of exercising the option by the employee and thereby the expenditure would go to expand the capital bas....
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.... issue had been remanded back to the file of the ld. AO in earlier year for denovo adjudication. Respectfully following the said decision, we deem it fit to remand this issue to the file of the ld. AO for denovo adjudication in accordance with law. Accordingly, the additional ground No.3 raised by the assessee is allowed for statistical purposes. 13. The additional ground No.4 raised by the assessee is with regard to claim of deduction towards the education cess and secondary and higher education cess. 13.1. We find that this issue is a legal issue and it goes to the root of the matter and does not involve any verification of facts. Hence, the said additional ground is admitted and taken up for adjudication. We find that this issue is squarely covered by the decision of the Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT in Income Tax Appeal No.52 & 68 of 2018 dated 31/07/2018. We note that Hon'ble Rajasthan High Court had taken into account the CBDT Circular dated 18/05/1967 for holding such education cess, secondary and higher education cess to be allowable as deduction. Their Lordships had held that Section 40a(ii) of the Act applie....