TaxTMI 
TaxTMI 
2019 (6) TMI 1431
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.... 10,11,216/-. 1. In the facts and circumstances of the case, the Assessing Officer, in the order passed in pursuance of directions of the Dispute Resolution Panel (DRP) erred in disallowing proportionate interest of Rs. 10,1l,216/- on business advances of Rs. 2,13,55,159/- given to M/s Dee Greaves Limited, a ultimate subsidiary of the Appellant without appreciating the fact that the Appellant is sole sale concessionaires of the subsidiary company, which is financially weak and the advances given to the subsidiary were for commercial consideration to meet their working capital requirement, and the advances were utilized by them for the said purpose and also the fact that the subsidiary company is under constant managerial, financial and administrative control of the Appellant company since its incorporation in the year August, 1960. 2. The Assessing Officer erred in deciding that since there was no business with the subsidiary company in the year under consideration, the advances given in earlier years are not in connection with business. Ground B DISALLOWANCE U/S 14A r.w.r. 8D - Rs. 1,19,20,701/- 3. In the facts and circumstances of the ....
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....in compliance with the agreement entered into by the Appellant with the Employee's Union which are covered under the Industrial Dispute Act, 1947 and hence allowable under proviso to section 40A(9) of the Act. 9. Without Prejudice to above, the Assessing Officer should not have added the disallowance of Rs. 94,470/- in the assessed total income since the Appellant had themself added it in returned income and hence further addition results in double taxation. Ground F UNUTILISED CENVAT CREDIT - Rs. 2,91,87,584/- 10. The Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in adding the unutilized cenvat credit of Rs. 2,91,87,584/- to the total income of the Appellant as the Appellant valued the inventory as per method of accounts regularly employed and the Auditors have also certified that deviation from valuation method prescribed under sec. 145A has no impact on the profit of the Appellant. Moreover, addition of amount of unutilized cenvat credit will distort the real profit since consistency in valuation of inventory is disturbed. Ground G DISALLOWANCE V/S 40(a) (ia) - Rs. 2,58,19,665/-. ....
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....he DRP should not have disallowed Rs. 70,43,316/- u/s 14A of the Income tax Act, 1961 since no expenditure was incurred by the Appellant for earning dividend (exempt income) of Rs. 1,80,38,016/-. (ii) Without prejudice to above, on the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed a sum of Rs. 70,43,316/- as being reasonable expenditure relatable to dividend received of Rs. 1,80,38,016/- , by directly or indirectly following Rule 8D of the Income tax Rules, 1962 for the Assessment Year 2007-08 and ignoring the decision of the Bombay High Court for the Asst. Year 2001-02 and the reasonable expenses determined in earlier assessment years in Appellant's own case. GROUND: C: POOJA EXPENSES - Rs. 11,84,378/- On the facts and in the circumstances of the case, the Assessing Officer and the Dispute Resolution Panel should not have disallowed pooja expenses of Rs. 11,84,378/- treating it as non-business expenditure. GROUND: D: DISALLOWANCE U/S 40A(9) - Rs. 49,649/- On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed contribut....
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....nce and facts of the case should be amended or modified in light of the grounds deduced above. 3. Brief facts of the case are that the assessee company is in the business of manufacturing of marine and industrial gear boxes, diesel engines, generating sets etc. For the assessment year under consideration the assessee filed its return of income declaring Nill income. In the return the assessee claimed international transactions with its associated enterprises, therefore, the assessing officer made a reference to Transfer Pricing Officer (TPO) for computation of Arms Length Price. The TPO passed its order under section 92CA(3) on 15.05.2009. After receipt of order of TPO, the Assessing Officer passed draft assessment order under section 143(3) read wit section 144C (1) dated 3.11.2009. The assessee was served with the copy of the draft assessment. In the draft assessment order, the Assessing Officer made addition/disallowances consisting of disallowance under section 36(1)(ii), disallowance under section 14A r.w.r 8D, disallowance of Pooja Expenses, Club Expenses, disallowance under section 40A(9) , addition on account of Cenvat credit, disallowance under section 40(a)(ia). The as....
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....g Officer noted that the assessee has claimed interest expenses of Rs. 6.57 Crore. The assessee was asked to justify for interest paid on borrowed capital and to prove the nexus between the own funds and the interest free advance made to sister concern of Rs. 4.73 Crore. The assessee filed its reply and stated that the interest debited in Profit & Loss was paid in respect of capital borrowed for the purpose of business. The advance paid to subsidiary was on account of business expediencies. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer worked out the disallowance of Rs. 22,42,759/- under section 36(1)(iii). The ld. DRP granted the partial relief to the assessee on the loan and advances given to Greaves Leasing Company holding that the advances were given to supply of equipment, therefore, it was in normal business operation and the Assessing Officer was directed to modify the assessment order accordingly. We have noted that the assessee's own fund consisting of share capital and reserve and surplus was Rs. 175.11 Crore. The assessee has given loans and advance to is subsidiaries i.e. Dee Greaves of Rs. 2,13,55,159/- only. The Hon'ble Bombay....
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....The Assessing Officer is directed accordingly. 10. In the result, ground no. B (3 &4) are partly allowed. 11. Ground No. B (5) relates to adjustment of book profit under section 115JB of disallowance of Rule 14A. The ld. AR of the assessee submits that this ground of appeal is also covered by the decision of Special Bench of Delhi Tribunal in ACIT Vs Vireet Investment (P) Ltd, (82 taxmann.com 415) (Delhi-Trb SB), wherein it was held by special bench that computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. 12. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 13. We have considered the submission of both the parties and have gone through the orders of authorities below. We have noted that this ground of appeal is covered in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. (supra), wherein Special Bench of Delhi Tribunal that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rul....
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.... assessee by the decision of Tribunal in assessee's own case for AY 1982-83 & 1990-91. The ld AR for the assessee also relied on the decision of Bombay High Court in Otis Elevator Company (India) Ltd Vs CIT (ITA No. 479 of 1991. 19. On the other hand the ld AR for the assessee relied on the orders of the lower authorities. 20. We have considered the submission of the parties and have gone through the orders of authorities below. We have noted that the assessee has claimed club Expenses of Rs. 79,170/-. The assessee claimed club expenses of Rs. 7,07,477/-. The Assessing Officer disallowed the expenses by following the decision of earlier years. The ld. DRP directed the Assessing Officer to allow the club membership fees only. The club membership fees was only Rs. 6,04,00/-, accordingly, the Assessing Officer disallowed the balance amount (Rs. 7,07,477 - 6,04,000). We have noted that in assessee's own case for A.Y. 1982-83 similar disallowances was allowed vide order dated 21st January 1992 in R.A No. 2569(Bom.)/1991 in ITA No. 6154/Bom/1987. Similar relief was granted to the assessee in appeal for A.Y. 1990-91 in ITA No. 7619/Bom/1993 dated 13.02.2002. We have further noted....
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..... 24. On the other hand, the ld. DR for the revenue relied upon the order of lower authority. 25. We have considered the submission of both the parties and perused the material available on record. The Assessing Officer made addition by following the order of earlier Assessment Years and made addition of Rs. 2.91 Crore. The ld. DRP also followed their order for earlier years. We have noted that the co-ordinate bench of Tribunal in assessee's appeal for A.Y. 2005-06 in its order dated 15.03.2019 in ITA No. 2482/Mum/2015 set-aside the order to the file of Assessing Officer for examination of figures furnished by assessee for reconciliation of statements. Therefore, considering the order of Tribunal for A.Y. 2005-06, the ground of appeal is also restored to the file of Assessing Officer to examine the issue afresh and pass the order by following the order of Tribunal dated 15.03.2019. In the result, this ground of appeal is allowed for statistical purpose. 26. Ground No. G (11 to 14) relates to disallowance under section 40(a)(ia) of Rs. 2,58,19,665/-. The ld. AR of the assessee submits that and amount of Rs. 2,58,19,665/- was disallowed under section 40(a)(ia). During the co....
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....ion 234C is consequential. Therefore, the Assessing Officer is directed to work out the interest accordingly. 31. In the result the appeal of the assessee is partly allowed. ITA No. 8533/Mum/2011 for A.Y. 2007-08 32. Ground No. A relates to disallowance under section 36(1)(iii). We have noted that this ground of appeal is identical to the ground no. A of appeal for A.Y. 2006-07, which we have allowed. No variations of facts are brought to our notice, therefore, following the principle of consistency, this ground of appeal is allowed with similar observation. In the result, this ground of appeal is allowed. 33. Ground No. B relates to disallowance under section 14A. We have noted that this ground of appeal is identical to the ground no. B of appeal for A.Y. 2006-07, which we have allowed. There is no much variation on facts for the year under consideration. Therefore, following the principle of consistency, this ground of appeal is allowed with similar direction. The Assessing Officer is directed to restrict the disallowance under section 14A to the extent of 2% of exempt income earned by assessee during the relevant period under consideration. In the result, this ground....
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....dit as a consequence of the assessee making payment of tax under section 115JA(1) in the year one, then the set off of such tax credit follows as a matter of course once the conditions mentioned in section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the Assessing Officer save and except that the ultimate amount of tax credit to be allowed will be dependent upon the final determination of the total income for the first assessment year. There is no provision under section 115JAA which postpones the right of the assessee to claim set off to the determination of the total income by the Assessing Officer in the first assessment year. Entitlement/right to claim set off is different from the quantum/quantification of that right. Entitlement of MAT credit is not dependent upon any action taken by the department. However, quantum of tax credit will depend upon the assessment framed by the Assessing Officer. Thus, the right to set off arises as a result of the payment of tax under section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year. Further, an assessee has a ....