TaxTMI 
TaxTMI 
2021 (2) TMI 851
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....e working results of Hind Lever Chemicals Ltd. for the financial year (FY) 31.03.2003, assessment year (AY) 2003-04 which was merged with the assessee-company) was filed on 30.03.2005 disclosing total income of Rs. 79,60,48,750/- under normal provisions and Rs. 107,21,06,283/- under the provisions of MAT (section 115JB). 3. The 1st ground of appeal The Ld. CIT(A) erred upholding the disallowance of provision for bad and doubtful debts for computing the book profit u/s 115JB. Before us, the Ld. counsel for the assessee submits that they have filed an additional ground of appeal before the Tribunal stating : "That the amount of Rs. 2,94,39,561/- written off in the appellant's accounts ought to be allowed as a deduction for bad and doubtful debts under section 36(1)(vii) of the Act." As the additional ground raised herein does not require investigation of additional facts and as it goes to the root of the matter, we admit it for adjudication by following the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC). In the computation of income u/s 115JB, the Assessing Officer (AO) has made an addition of....
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....side of balance sheet and thereafter, recompute income u/s 115JA. Referring to the decision in CIT v. Vodafone Esser Gujarat Ltd. (2017) 397 ITR 55 (Guj.) [FB], it is stated that "that prior to the insertion of clause (i) of Explanation 1 to section 115JB , the then existing clause (c) did not cover a case where the assessee made a provision for bad or doubtful debt. With the insertion of clause (i) of Explanation 1 with retrospective effect, any amount or amounts set aside for provision of diminution in the value of the asset made by the assessee, would be added back for compensation of book profit under section 115JA . However, if that was not a mere provision made by the assessee by merely debiting the profit and loss account and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such provision from its accounts by reducing the corresponding amount from the loans and advances on the assets side of the balance-sheet and consequently, at the end of the year showing the loans and advances on the assets side of the balance-sheet as net of the provision for bad debt, it amounted to a write off and such an actual write off was not hit by clause....
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....nd advances to debtors depicted on asset side in balance sheet at close of year, assessee was entitled to deduction u/s 36(1)(vii) and for that purpose, it was not necessary for it to close individual account of each of its debtors in its books. 6.1 In Syndicate Bank, Manguluru (supra), relied on by the Ld. counsel, the assessee filed its return declaring certain income u/s 115JA. The assessee claimed certain amount as provision for 'non-performing assets' covered under policy with Deposit Insurance and Credit Guarantee Corporation. The AO recomputed the income u/s 115JA and added back said amount of provision to assessee's income. The Tribunal, however, directed the AO to allow provision as deduction while computing book profit u/s 115JA. In view of the order passed by the Hon'ble Supreme Court in Vijaya Bank (supra), the Hon'ble Karnataka High Court remanded back the matter to the Commissioner (Appeals) with a direction to look into records and give a finding as to whether bad and doubtful debts were reduced from loan and advances of debtors from asset side of balance sheet and thereafter, recompute income u/s 115JA of the Act. The Hon'ble High Court thus held : "4. T....
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....e set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to re-compute income u/s 115JB by following the above ratio laid down in Vijaya Bank (supra) and Syndicate Bank (supra) after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant accounts/documents before the AO. Thus the 1st ground of appeal along with the additional ground is allowed for statistical purposes. 7. The 2nd ground of appeal The Ld. CIT(A) erred in upholding the disallowance of Rs. 3,73,88,538/- paid to Tata Sons Limited towards the subscription paid for The Brand Equity and Business Promotion(BEPB) Agreement. 7.1 During the course of assessment proceedings, the assessee submitted before the AO vide letter dated 10.10.2005 stating that the Company has entered into an agreement dated 01.01.1999 titled "Tata Brand Equity & Business Promotion Agreement" vide which it had to pay 0.25% of its annual profits to M/s Tata Sons Ltd. as premium for using the TATA logo. Explaining that the said payment is made annually on a recurring basis, the assessee explained before the AO that the same be allowable as a revenue expense. ....
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....between Tata Sons and Tata Chemicals (the assessee-company) to pool their resources and make a co-operative effort to promote a unified common Tata Brand which, collectively would match the Brand Equity of well known international brand names. Explaining the above, the Ld. counsel submits that the ITAT 'H' Bench, Mumbai in assessee's own case for AY 2002-03 (ITA No. 3383/Mum/2015) on similar facts has dismissed the appeal filed by the Revenue. On the other hand, the Ld. DR relies on the order passed by the Ld. CIT(A). 10. We have heard the rival submissions and perused the relevant materials on record. Similar issue arose before the Tribunal in assessee's own case for AY 2002-03 in ITA No. 3383/Mum/2015, wherein it is noted that the same issue has been decided in favour of the assessee in its own case for AY 2000-01 (ITA No. 5446/M/2014, dated 21.06.2017) and AY 2001-02 (ITA No. 6366/M/2014, dated 15.09.2017) by the Tribunal. Also in the case of its subsidiary company i.e. Rallis (India) Ltd., the same issue has been decided in favour of the assessee by the Tribunal in ITA No. 5257/M/2008 vide order dated 30.08.2001. Therefore, the Tribunal in AY 2002-03 affirmed the order of....
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....(pertaining to TCL) is Rs. 98.25 crores (gross). Hence the average interest cost to entire capital employed is 2.73%. While computing the average cost of funds employed, assessee's contention regarding investment out of internal resources has also been taken care of. The total investment in quoted and unquoted equity shares of domestic companies (excluding investments received on account of merger of Hind Lever Chemicals Limited), dividend income from which is claimed as deduction u/s 80M is Rs. 272.72 crores as per schedule F to the balance sheet. As the average interest cost of capital employed is 2.73% the interest cost allocable to the above investments comes to Rs. 7.45/- crores. Accordingly an amount of Rs. 7.45 crores is attributed as interest expense towards the investment in shares of domestic companies, income from which is claimed as deduction u/s 80M of the I. T. Act. Therefore, net deduction u/s 80M of the Income Tax Act (after allocation of interest expenses) would be Rs. 4,55,21,432/-(Rs. 12,00,21,432/- minus Rs. 7,45,00,000/-)." 12. In appeal, the Ld. CIT(A) by following the order of the Hon'ble Bombay High Court in the case of Godrej & Boyc....
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....s in AY 1992-93 (and followed in AY 1993-94 and AY 1994-95) the Tribunal has decided the issue in favour of the assessee and held that there is no scope for allocation of interest expenses towards investment income and Department's reference to High Court on the above issue and SLP to Supreme Court has been rejected. On the other hand, the Ld. DR relies on the order of the Ld. CIT(A). 14. We have heard the rival submissions and perused the relevant materials on record. There is no dispute that in the instant case, the assessee-company has not incurred any expenses for earning dividend income. Surplus funds time to time are invested in shares, securities, units etc. of reputed company. In the impugned assessment year, there is merit in the contentions of the Ld. counsel that for earning income from investments, the assessee-company has not incurred any expenses as evident from facts mentioned at para 13 hereinabove, which is reflected in the audited accounts. In fact the 'Reserve & Surplus' as at 31st March 2003 is Rs. 1,455.16 crores, whereas the 'Investment' is Rs. 569.02 crores, as evident from the audited accounts for the year under consideration. Further, on identical ....
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.... National Thermal Power Co. Ltd. (supra). The AO noted that for the impugned assessment year, Hind Lever Chemicals Ltd. (HLCL) (since amalgamated with the assessee) filed its return of income on 28.11.2003, claiming a refund of Rs. 2.87 crores. In the return of income, section 80IB claim of Rs. 7.59 crores was made in respect of its 3 new industrial undertakings located in category "B" industrially backward district i.e. Midnapore, West Bengal. The return of income was processed u/s 143(1) and the refund arising on intimation was adjusted against the outstanding demand of HLCL for AY 1997-98. While processing the return of income u/s 143(1), TDS and advance tax payments of HLCL were not considered. The effective date of amalgamation was June 01, 2004 and the appointed date of amalgamation was April 01, 2002 i.e. HLCL amalgamated with the assessee w.e.f. April, 2002. After amalgamation, the assessee filed a revised return of income for the financial year 2002-03 relevant to the impugned assessment year, incorporating the working results of HLCL. In the revised return of income, section 80IB claimed was not made but the disclosure was made that the same will be claimed at the time....
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.... the selling price of the fertilizer in AY 2002-03 was much less than the MRP and that in case of DAP, while the MRP fixed by the Government was Rs. 9,350/- per metric ton, the selling price of the assessee was only Rs. 8,458/- per metric ton; the assessee was not able to sell the product at MRP fixed by the Government; also as noted by the AO as against pre-1994 when the price concessions were computed separately for individual units, now said concessions were being given uniformly to all the units in respect of similar variety of fertilizer and this also reflected that the concession by the Government was merely an aid to the assessee. Further dismissing the contentions of the assessee that the fertilizer concessions being related to the sale of fertilizer products flew directly from the operations of the industrial undertaking, the Ld. CIT(A) observed that the concessions being received from the Government is a 'step removed' from the principal activity of the assessee-company namely-production and sale of fertilizer; it was not the industrial undertaking which yielded the subject income by way of sales tax concession but the scheme of the Government which made it possible fo....
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....n respect of erstwhile HLCL was made. It is explained that the audit report in Form No. 10CCB along with audited accounts of the new industrial undertakings, duly certified by Chartered Accountant were also filed at the time of assessment. Regarding the disallowance made by the AO of Sales Tax remission of Rs. 3.31 crores and price concession (subsidy) of Rs. 105.40 crores, included in the computation of section 80IB claim, the Ld. counsel submits that the sales tax collected is a part of trading receipt as held by the Hon'ble Supreme Court in the case of Sinclair Murray & Co. Pvt. Ltd. v. CIT 97 ITR 615 (SC) and cannot be excluded from the income of the unit. Further, it is submitted that the fertilizer concession received by the assessee is nothing but part of the sale proceeds, which cannot be excluded while working out profit u/s 80IB of the Act. 19. On the other hand, the Ld. DR submits that the sales tax remission/subsidy has been received on account of the Scheme of the Government for setting up the industrial unit in 'backward district', hence, it is not the industrial unit from which this benefit was derived by the assessee but the Government's Scheme allowing such b....
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....f Rs. 105.40 crores, it is the contentions of the assessee that to support industries, certain portion of price is reimbursed by Central Government in the name of fertilizer concession ; while selling the fertilizer, the assessee-company recovers part cost from farmers and part cost through Government by way of concession; the subsidy is related to the business activity of the assessee as the subsidy claim arises only upon sale of the fertilizer to the farmers ; the subsidy is nothing but a difference between cost of sales and MRP indicated by the Government; it is the subsidy amount which alone permits the manufacturer, like the present assessee to recover is uncovered cost of production including distribution cost and minimal margin allowed; it is only pursuant to the sale of fertilizer to the farmers would the assessee be eligible to receive subsidy; the fertilizer concession received by the assessee is nothing but part of sales proceeds, which cannot be excluded while working out profit u/s 80IB of the Act; In respect of sales tax remission of Rs. 3.31 crores, it is the contentions of the assessee that it sold its products at notified prices and charged sales tax in the invo....
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....litigation. 24. CBDT vide Circular No. 3/2018 dated 11.07.2018 has specified that appeals shall not be filed before the Income Tax Appellate Tribunal (ITAT) in cases where the tax effect does not exceed the monetary limit of Rs. 20,00,000/-. For this purchase, 'tax effect' means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of issues against which appeal is intended to be filed. Further, 'tax effect' shall be taxes including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty order, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. At para 13 of the said Circular, it has been mentioned that: "13. This Circular will apply to SLPs/appeals....