AI Drafter 
TaxTMI 
TaxTMI 
2019 (4) TMI 1847
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....mited extent for adjudication of ground Nos.5 to 8. 3. Ground No.5 raised by the assessee is with regard to the issue of disallowance made u/s.14A of the Act read with Rule 8D of the rules to the tune of Rs. 10,88,24,122/- while computing the book profits u/s.115JB of the Act. 3.1. The brief facts of this issue are that the assessee derived dividend income of Rs. 2,56,66,941/- and claimed the same as exempt u/s.10(34) of the Act. The assessee made suomoto disallowance of Rs. 24,42,759/- u/s.14A of the Act in the return of income both under normal provisions of the Act as well as computing the book profits u/s.115JB of the Act. The details of the suo moto disallowance made by the assessee are as under:- Sr. No. Particulars Amount (Rs.) 1. D-MAT expenses 1,28,488/- 2. Salary paid to one employee i.e., incharge of these investment activities 15,42,847/- 3. Other overheads being 50% of salary 7,71,424 Total 24,42,759/- 3.2. The ld. AO observed that the disallowance made by the assessee is not in accordance with the computation mechanism provided in Rule 8D of the rules and accordingly proceeded to invoke Rule 8D(2....
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....ld be made based on actual amounts debited to the profit and loss account. In this scenario, assessee's disallowance should be accepted. Since the assessee has voluntarily disallowed this sum of Rs. 24,42,759/- u/s.14A while computing book profits u/s.115JB of the Act, no further disallowance need to be made thereafter. Accordingly, the ground No. 5 raised by the assessee is allowed. 4. The ground No.6 raised by the assessee is with regard to the action of the ld. DRP in confirming the disallowance of interest of Rs. 8,37,01,584/- on proportionate basis u/s.36(1)(iii) of the Act in respect of interest free advances given to the subsidiary and sister concerns of the assessee. 4.1. The brief facts of this issue are that the ld. AO observed that on perusal of the balance sheet, the assessee had shown huge amounts under the head loans and advances given by the assessee. The perusal of the balance sheet reveal that assessee had taken huge secured and unsecured loans and interest has been paid thereon. The interest free advances given by the assessee to subsidiaries and sister concerns were to the tune of Rs. 80,15,66,651/-. The assessee has taken loans to the tune of Rs. 11139,48,....
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....ade by the Assessing Officer by invoking the provisions of section 36(1)(iii) of the Act. 9.1 In this context, relevant facts are that the Assessing Officer noticed that assessee company had incurred interest expenditure of Rs. 1,66,32,240/- on borrowings of Rs. 43.00 crores raised from L&T Infrastructure Finance Company Ltd. The Assessing Officer also noted that during the year under consideration assessee had made investments of Rs. 135.00 crores in shares, which was claimed to have been made out of own non-interest bearing funds. The Assessing Officer has noted in the assessment order that on being asked to furnish any nexus between the funds utilized and investments, the assessee failed to do so. The Assessing Officer further noticed that after raising of borrowed funds from L&T Infrastructure Finance Company Ltd. on 8/01/2008, assessee had made two investments namely,(i) Alspon Infrastructure- Rs. 10,60,00,000 on 25,26,27/3/2008; and (ii)Ashford Infotech (P) Ltd.- Rs. 50.00 crores on 25/02/2008. The Assessing Officer worked out proportionate interest on such investments and made a total disallowance of Rs. 69,50,569/- out of interest expenditure under section. 36(1)(i....
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.... had sufficient own funds and , therefore, following the judgment of Hon'ble Bombay High Court in the case Reliance Utilities And Power Limited(supra), it can be presumed that no borrowed funds were used to make such investments. As per Hon'ble Bombay High Court, the principle is that, if there are funds available both interest free and interest bearing, then a presumption can be drawn that investments are made out of interest free funds, so long as such interest free funds are sufficient to meet the investments. In our considered opinion, having regard to the fact position brought out by the CIT(A), the proposition laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities And Power Limited(supra) is fully attracted in the present case. Such fact-situation has been enumerated by the CIT(A) in Para 3.4 of his order, which depicts the summarized fund flow position of the assessee, and the same has not been controverted by the Revenue before us, rather the same is also borne out of the material placed in the Paper Book filed before us. Therefore, on this count itself, we find no reason to interfere with the ultimate conclusion of the CIT(A) in deleting t....
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....cases of employee's contribution and (b) whether the itxa1002-12+1 Tribunal was right in holding that payment of employees contribution is subject to the provisions of section 43B of the I.T. Act entailing that amendment to section 43B would lead to the inclusion of the employers' contribution as well. 8. Mr. Gupta submitted that the Tribunal erred in deletion of addition of amount to the extent of Rs. 32,03,947/- and that the impugned order dated 29th July, 2011 is liable to be quashed. Mr.Gupta relied upon the judgment of Punjab & Haryana in Commissioner of Income-Tax V/s. Lakhani Rubber Works reported in [2010] 326 ITR 415 (P & H) and submitted that question Nos.1 & 2 in that case had already been decided against the revenue in view of the decision of Alom Extrusions Ltd. (supra). It is for this reason that he did not press for an answer to question No.1 in these Appeals. 9. Mr.Naniwadekar, learned counsel appearing on behalf of the assessee on the other hand relied upon the decision of the Supreme Court upon the decision of Alom Extrusions (supra) and pointed out that the scheme of the Income Tax Act, 1961 as it existed prior to April 1, 1984 and there....
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....lowing the claim of the Assessee on account of delayed payments of P.F. of employees' contribution amounting to Rs. 1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT Vs/. Alom Extrusions Ltd. (319 ITR 306) ? (B) Whether on the facts and in the circumstances of the case, the Tribunal in law, was right in deleting the disallowance of Rs. 10,00,300/- on bond registration charges and allowing the claim of the assessee u/s. 37(1) of the I.T. Act, 1961 ? 13. In that judgment, this Court held that no substantial questions of law would arise since section 43B is inserted in the I.T. Act with effect from 1st April, 1984 by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued. Under section 43B of the I.T. Act, it became mandatory for the assessee to account for such payment including to welfare funds not on mercantile basis but on cash basis. The judgment further mentions that this situation continued between 1 st April, 1984 and 1st April, 1988. It is also noticed that section 43B was again amended and the first proviso thereto has been added which was restric....
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....ment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue. 16. The facts in Income Tax Appeal No.1034 of 2012 are similar, except for the change in the assessment year and the questions arise out of the common order of the Tribunal dated 29th July, 2011 and accordingly the question Nos.2, 3 & 4 are answered in favour of the assessee and against the revenue. We hold that both employees' and employer's contributions are covered under the amendment to Section 43B of I.T. Act and the Alom Extrusions judgment. Hence the Tribunal was right in holding that payments thereof are subject to benefits of Section 43B. Both the appeals are disposed of accordingly. No order as to costs." 5.2. Respectfully following the said decision, we delete the disallowance of Rs. 74,37,578/- made by the ld. AO. 6. The ground No.8 raised by the assessee is with regard to disallowance of prior period expenses of Rs. 31,44,360....