TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 846
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...., the order u/s. 143(3) of the act was passed on 30th June, 2008 assessing total income at Rs. 73,89,94,120/-. On appeal, the ld. CIT(A) has partly allowed the appeal of the assessee. Thereafter, the ITAT vide order dated 13th Jan, 2012 has set aside the certain issue to the file of Assessing Officer for adjudicating afresh. On the issue contested in this appeal in the original assessment order the Assessing Officer has made an addition of Rs. 3,08,01,115/- u/s. 14A of the act. On appeal, the ld. CIT(A) has partly allowed the appeal of the assessee on this issue. Subsequently, vide order ITA 4092/Ahd/2008 and ITA No. 115/Ahd/2009 dated 13th Jan, 2012 the ITAT has restored this issue to the file of Assessing Officer for fresh decision in para 19 of the ITAT the observation made is reproduced as under:- "19 We have heard both the parties and perused the records. We have also gone through the decisions referred to by the learned representatives of both the sides. Both the decisions cited by both the sides are of non jurisdictional High Courts and no decision of Hon'ble Jurisdictions! High Court or of Hon'ble Supreme Court has been brought to our notice. Under this factual Po....
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....ling, miscellaneous expenditure and general expenses are not required to be disallowed and only director's remuneration has to be apportioned for such expenses. The appellant on the basis of various case laws including Hon'ble Kerala high court decision contended that only direct expenses or expenses having proximate cause with exempt income be disallowed. With due regards to various authorities, Hon'ble Bombay high court decision in the case of Godrej & Boyce Mfg. co. ltd. is a recent decision after due consideration of Hon'ble Supreme court decision in the case of Walfort share & stock Brokers (P) Ltd. as well as Hon'ble ITAT Mumbai Special Bench decision in the case of Daga Capital and management Ltd. The ratio of this decision is twofold i.e. firstly the application of Rule 8D is prospective w.e.f. 01.04.2008 and secondly for earlier years, the disaiiowance has to be made reasonably on the facts of the case. It is in this regard, Hon'ble ITAT Mumbai special Bench order in the case of Daga Capital & Management Ltd. bears an important change over compare to all earlier year decision as relied on by appellant. In Daga Capital & Management Ltd. , it was clea....
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....mental Representative has supported the order of Assessing Officer. On the other hand, ld. counsel has contended that applicability of rule 8D was prospective in nature and cannot be applied in assessment year prior 2008-09. The ld. counsel has also referred the decision of Hon'ble Supreme Court in the case of S.R. Tele Holding Ltd. (2018) 90 taxmann.com 2 (SC) 6. Heard both the sides and perused the material on record. In the original assessment order, the Assessing Officer has made disallowance u/s. 14A to the amount of Rs. 30,880,115/-. However, the ld. CIT(A) has restricted the same to the amount of Rs. 26,72,011/-, the ITAT Ahmedabad has set aside the issue to the file of Assessing Officer for deciding afresh after considering the ratio of judgment of Hon'ble Kerala High Court in the case of the Catholic Syrian Bank supra and Godrej Boyce Manufacturing Company Ltd. supra. In the set aside proceedings, the Assessing Officer has computed the disallowance after applying Rule 8D to the amount of Rs. 1,92,13,175/- which was consisting of disallowance out of interest expenses of Rs. 725.58 lacs and out of administrative expenditure of Rs. 1817.59 lacs. During the course of assessme....
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....ntested in the instant appeal are discussed while adjudicating the two grounds of appeal of the revenue as under:- Ground No. 1 (Deleting disallowance u/s. 80IC) 9. During the course of assessment, the Assessing Officer claimed deduction amounting to Rs. 4,80,00,550/- u/s. 80IC of the Act in respect of Nalagarh Unit (100% of eligible profit of Rs. 4,80,00,550/-). After considering the submission of the assessee the Assessing Officer stated that assessee has claimed interest/financial charges of Rs. 331.92 lacs in the Nalagarh unit. The Assessing Officer observed that assessee company has a common pool of funds as well as common bank accounts for its entire business being carried from head office therefore he was of the view that interest expenditure charged to P & L Account needs to be proportionately allocated in the ratio of sales on such industrial undertaking for working out eligible profit for deduction u/s. 80IC of the act. Therefore, the Assessing Officer has allocated an amount of Rs. 265.22 lacs to the Nalagarh unit. In respect of salary expenses including director's remuneration, director's contribution to P & F and welfare expenses of Rs. 2883.29 lacs, the assessee h....
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.... salary expenses , common head office expenses, Plastic Division expense's in Nalagarh Unit made on the basis of sales/turnover ratio is uncalled for. The appellant has already allocated the salary expenses of Rs. 442.85 lacs which is much more than the worked out by the AO, Rs. 4.52 lacs in the head of common head office expenses and Rs. 412.24 lacs in Plastic Division expenses based on investment ratio which is treated as a justified method for allocation of the expenses by the CIT(A) in earlier assessment years and also confirmed by the Hon'ble ITAT as quoted above. As the facts and circumstances of the case under appeal for the A.Y.2012-13 are exactly the same, I find no reason to deviate from the findings of Hon'ble ITAT. The AO is directed to delete the addition of Rs. 178.48 lacs, Rs. 7.47 lacs and Rs. 96.19 lacs made under the head the issue of salary expenses , common head office expenses and Plastic Division expenses. Accordingly, the grounds of appeal No.3, 4 & 5 are allowed. 11. During the course of appellate proceedings before us, the ld. counsel has contended that identical issue on similar facts has been adjudicated by the ITAT Ahmedabad itself in asses....
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.... the assistance of the ld. representatives, we have gone through the record carefully. There is no dispute with regard to the proposition that if any unit, which is entitled for deduction under Chapter-VI of the Income Tax Act viz. 80IA or 80IC in the present case, if avails the benefit of certain facilities for which the expenses are incurred under common pool, then a proportionate allocation, according to the scientific method, ought to be made, While dealing with the issue for the purpose of allocation under section 80IA is concerned, we have upheld the allocation in the ratio of turnover. Similarly, we have not uphold the allocation of financial charges in the ratio of sales made from the products of 80IC units vis-a-vis the total sales made by the company, because, we have observed that such expenditure is to be worked out on the basis of actual investment made in 80IC units. With this analogy, when we examine the details, for the purpose of allocation under the present head, then it would reveal that the assessee has been maintaining separate accounts for these units. It has debited expenditure on actual basis. The AO did not find any error in that attribution. He simply jump....
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....he basis of investment. Similar in respect of deleting addition of common head expenses and plastic/corporate division expenses made on sales basis, we do not find any infirmity in the decision of ld. CIT(A) after following the decision of the Co-ordinate Bench as cited above in this order. Taking into consider the finding of the Co-ordinate Bench in the case of assessee itself on the aforesaid issues, we do not find any reason to interfere in the decision of ld. CIT(A), therefore, this ground of appeal of the revenue is dismissed." After considering the decision of Co-ordinate Bench of the ITAT Ahmedabad in the case of the assessee itself pertaining to the assessment year 2010-11 and 2011-12 on identical issue and facts, we do not find any infirmity in the decision of ld. CIT(A) on allocating common interest and financial charges on the basis of investment and deleting the addition of common head expenses and administrative/corporate division expenses made on sale basis. Therefore, we do not find any merit in this ground of appeal of the revenue and the same stands dismissed. Ground No. 2 (Deleting disallowance made by Assessing Officer u/s. 14A of the Act of Rs. 24,36,72,136/-....
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....es in the Asstt. Year 2009-10 and investment in the fund was only Rs. 144.51 crores. The assessee has also submitted that its investment in earning exempt income has been reduced during the year from 78.45 crores to Rs. 18.09 crores. The assessee has submitted these details in its submissions reproduced by the AO. Similarly, in the Asstt. Year 2010-11, it has reserve fund ofRs. 2319.17 crores and made investment of Rs. 111. 09 crores. The ld.AO has not given any heed to these submissions or figures submitted by the assessee. The assessee has further made disallowance.of Rs. 5.12 lacs in the Asstt. Year 2009-10. This was mainly for management of investment. ... ... Because, on interest expenses account, there cannot be any disallowance as the assesses has far more interest free fund than investment. We are of the view that the ld.CIT(A) has looked into all these aspects in the Asstt. Year 2009-10 before deleting the disallowance. We do not find any error in the order of the Id.CIT(A) on tin's issue in Assit. Year 2009-10. Consequently, we allow the ground of appeal raised by the assesses in the Asstt. Year 2010-1! and delete the disallowance made by the AO." Hon'ble IT....
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....2009-10 and Rs. 52,000/- in the Asstt.Year 2010-11. In the Asstt.Year 2009-10, the exempt income is of Rs. 2.02 crores whereas in the Asstt.Year 2010-11 it is Rs. 22.50 lakhs. Before embarking upon the facts of the present case, we deem it pertinent to take note of the observations of the Delhi High Court recorded in para-29 of the judgment in the case of Maxopp Investment Ltd. (supra). It reads as under: "Scope of sub-sections (2) and (3) of Section 14A 29. Sub-section (2) of Section 14A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of e....
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....ning of exempt income on actual, basis and demonstrated to the AO the incurrence of such expenditure, then AO has to record a finding that he was not satisfied with the correctness of the expenditure shown by the assessee. In other words, he has to verify the account of the assessee, and if he was not satisfied with the correctness of the claim made by the assessee, then, after assigning reasons, he would proceed to compute the expenses on the basis of the method brought in the Rule 8D. In the light of the above proposition, let us examine the facts in both the years and finding recorded by the AO. The main contention of the assessee in both the years is that it has made investment in the mutual fund with "growth option". In the case of growth option, no dividends are declared by the mutual fund, and only income declared by an investor is in the form of capital gains. The capital gains derived by the assessee on mutual fund are taxable and not an exempt income derived from such investment. In the Asstt.Year 2009-10, the assessee has offered a sum of Rs. 19.22 crores on sale of such investment for taxation as short/long term capital gain. Similarly, in the Asstt.year 2010-11, a sum ....