TaxTMI 
TaxTMI 
2019 (4) TMI 1852
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....roduction of milk products and cattle feed, filed its return of income for A.Y. 2013-14 on 27.09.2013 declaring total income at Rs. 4,81,36,780/-. Upon scrutiny notice u/s 143(2) dated 04.09.2014 was served upon the assessee. It appears that the total turnover shown by the assessee was of Rs. 685,45,67,034/-. The gross receipt under the head "other sources" was shown at Rs. 7,90,09,413/-, net profit whereof was of Rs. 3,98,33,142/-. After certain adjustments and claim of deduction u/s 80P of the Act at Rs. 88,15,734/-, the total return was at Rs. 4,81,36,780/-. During the course of assessment proceeding, the Learned AO observed that the assessee has declared profit of Rs. 6,46,875/- on sale of seeds and the assessee claimed whole of the said amount as deduction u/s 80P(2)(iv) of the Act. The assessee had not debited indirect expenses from the same and therefore relying on the judgment of Gandevi Taluka Khedut Sahakari Sangh Ltd.-vs-CIT reported in 76 Taxman 36 Guj (1994) on the ratio that deduction u/s 80(P)(2)(a)(iv) was to be allowed on net profit and gain and not with respect to gross profit and gains. The Learned AO disallowed the whole of the claim of deduction of Rs. 6,46,875....
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....amount. It is a fact that additional expenditure except transportation allocation along with milk vehicles no expenditure seems to be incurred by the assessee as it appears from the records before us. If that be so then the allocation of indirect expenses at 40% of gross profit does not seem reasonable taking into consideration the entire aspect of the matter. We, therefore, restrict the said allocation of indirect expenses at 20% of the gross profit. The Learned AO is, therefore, directed to allow deduction u/s 80(P)(2)(iv) of the Act on the balance amount. Hence assessee's this ground of appeal is partly allowed. 6. The assessee further challenged the confirmation of disallowance of deduction of Rs. 7,98,033/- u/s 14A of the Act r.w.r. 8D of the Income Tax Rules. 7. During the course of assessment proceeding, the Assessing Officer observed that the assessee had exempt income u/s 10(34) of the Act and the assessee has not made any disallowance u/s 14A of the Act. The assessee's submission to this effect was this that the investment had been made out on its own funds and the provision of Section 14A r.w.r. 8D were not applicable to the facts of its case. However, such contention ....
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.... upon the order passed by the authorities below. 9. We have heard the Learned Counsel appearing for the parties, and perused the relevant materials available on record. It appears that during the course of appellate proceeding the assessee has submitted the following: 7.2 During the course of the appellate proceedings, the assessee submitted as under on the issue- "3. On the facts of the case the learned A.O on law as well as on facts of the case in law in disallowing a deduction of Rs. 7,98,033/- u/s 14A of the IT Act, 1961. The learned AO has wrongly invoked the provision of section 14A and Rule 8d of Income Tax Rules. Your appellant is having sufficient paid up share capital and reserves and surplus of Rs. 26,23,59,906/-. The learned AO has not found any investment made out of loan/borrowed funds. Reliance is placed on the decisions of the B'Bay high court in incometax appeal No. 1398 of 2008 in the case of C.I.T v/s. Reliance Utilities & power Ltd. holding presumption that "if there are funds available both interest free and over draft and/or loan taken, then a presumption would arise that, investments would be out of the interest free fund generated or available w....
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....the Jurisdictional High Court in the matter of Banaskantha Dist. Co-op Milk Producers' Union Ltd. which was followed the decision passed by the Hon'ble Delhi High Court in the matter of CIT-vs-Kribhco [2012] 349 ITR 618/209 Taxman 252/23 taxmann.com 312 where it has been held that section 14A would have no applicability in relation to deductions to be made while computing total income under Chapter IV. Chapter IV does not postulate or state that the incomes which qualify for the said deduction will be excluded and not form part of the total income. The relevant portion of the judgment as relied by the Learned Advocate appearing for the assessee passed by the Jurisdictional High Court in dealing with the issue as to whether provision of Section 14A r.w.r. 8D of the Income Tax Rule would be applicable in relation to deductions to be made while computing total income under chapter IV of the Act is as follows: "7. Question to be addressed is as to whether section 14A would apply to provision of Chapter VIA. Provision of section 14A when examined, it operates in respect of the income not forming part of the total income. It could be noted that provisions of Chapter VIA (sections 80A t....
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....larly income of resident but not ordinary resident or nonresident, are computed in accordance with Section 5 Chapter II, which forms the basis of Charge. Secondly, Chapter III with the heading "Incomes not included in the total income", comprises of Sections 10 to 13 and these incomes are not included in total income but some exemptions are only partial and not total. Thirdly, even in case of income, profit and gains included for arriving at the total income, the entire income is not liable to tax. Deductions as stipulated in Chapter IV can apply, e.g. Sections 34, 35A and 35B etc. Even in Chapter VI, deductions for set off or carry forward of loss is allowed. Fourthly and lastly, certain deductions were permissible under Chapter VII and Chapter VIII and which had been substantial or partly replaced and were placed under Chapter VI-A. These were deductions which were reduced from the income computed in accordance with the earlier provisions/Chapters of the Act. These deductions were made in the computation of total income and, therefore, definition of "gross total income", which was/is arrived at without reference to the deduction allowable under Chapter VI-A, was introduced. The d....
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....case of complete or entire deduction of the gross amount, Section 14A will be applicable, and Section 14A will not apply in case only the net amount (as stipulated in several Sections in Chapter VIA of the Act) is allowable as a deduction. There will be a fallacy in this argument. Even were partial or net amount is to be allowed as a deduction, the figure can be minus or in a loss. Logically, as a squiter, it will follow that in case the assessee has a negative/minus figure as per the computation made any of the provisions of Chapter VIA, the expenditure incurred cannot allowable under Section 37 of the Act, in view of Section 14A. The said position cannot be accepted. Income will include negative income or a loss. The corollary is that the entire income is included under the provisions of the Act by firstly including the entire receipts or incomes as stipulated in the charging section but after excluding the income stipulated in Chapter III. Thereafter, total income is computed under the Act by applying provisions of Chapter IV, V and VI. From this income, deductions are permitted and allowed in terms of Chapter VIA. Deductions do not mean that deduction allowed has the effect tha....