TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 1101
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....assessment year 2013-14 are reproduced as under: 1.a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition to the extent 9,35,400/- made by the AO to the income of the Appellant by way of disallowing administrative expenses on flat rate claimed to have been incurred relating to exempt income invoking provisions of section 14A. b) The Ld. CIT(A) failed to appreciate that having regard to the accounts there is no reason and basis in reaching to dissatisfaction with the correctness of the claim of the Appellant that no expenditure was incurred in relation to dividend income which does not form part of the total income. c) In reaching to the conclusion and confirming such addition the Ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 2.a) On the facts and in the Rs. 16,84,368/- circumstances of the case and in law, the Ld. CIT(A) erred in not allowing reduction of interest subsidy of Rs. 91,04,692/- under TUF Scheme, being capital receipt. from the book profit u/s. 115JB although the Ld. CI....
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....rule 8D(2) of Income Tax Rules 1961 and since the Ld. CIT(A) himself upheld the disallowance under rule 8D(2)(iii) on merit, the same should have been confirmed. 2. The Ld. CIT(A), has erred in considering the subsidy received in the form of Technology Upgradation Fund as a capital receipt, without appreciating the fact that the assessee has not proved that the application of the money received was for the purpose of acquiring a capital asset.' 3. The Ld. CIT(A) has erred in directing the assessing officer to delete the adjustment to book profit on account of disallowance u/s. 14A r.w.r. Rs. 3,08, 8D without appreciating the provision of clause) to section 115JB of the IT Act." 2.3. The ground raised by the assessee for AY 2015-16 are produced as under: 1.a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not reduction of allowing interest subsidy of 1,86,78,619/- under TUF Scheme, being capital receipt, from the book profit u/s. 115JB although the Ld. CIT(A) has allowed such reduction from total income accepting such interest subsidy being capital receipt. b) The issue of interest subsidy under TUF Scheme is covered by the decisio....
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....ce made by the Assessing Officer under Rule 14A r.w.r. 8D of the Income-tax Rules, 1961 (in short 'the Rules'). 6.1. Brief facts qua the issue-in-dispute are that the assessee shown receipt of exempted income of Rs. 3,73,165/- from its investment in shares mutual fund etc. and in the return of income filed made suo motu disallowance of Rs. 7,34,844/- u/s. 14A of the Act. During the assessment proceedings, the Assessing Officer was of the view that assessee failed to link the investment in shares & mutual fund etc. with its own fund/surplus fund available at it disposal and therefore, invoking provisions of section 14A of the Act r.w.r. 8D of the Rules, he made three disallowances. Firstly, disallowance of expenditure directly related to exempted income under Rule 8D(2)(i) of Rs. 7,34,844/-. Secondly, the Proportionate interest expenditure under Rule 8D(2)(ii) amounting to Rs. 2,25,345/- and thirdly, administrative expenses under Rule 8D(2)(iii) amounting to Rs. 6,81,255/-. 7. On further appeal, the Ld. CIT(A) deleted the addition for proportionate interest expenses under Rule 8D(2)(ii) observing as under: "7.4 The AO has computed the disallowance of interest as per Rule....
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.... expenditure after invoking rule 8D(2)(ii) is deleted." 7.1. Regarding the disallowance under Rule 8D(2)(iii), the Ld. CIT(A) noted that suo moto disallowance made by the assessee of Rs. 7,34,844/- was more than the exempted income of Rs. 3,73,165/-. Therefore, following the decision of the Hon'ble Bombay High Court in the case of Nirved Traders (WP ITA No. 149 of 2017 dated 23.04.2019), deleted the addition observings under: "7.7 The AO has computed the disallowance of indirect expenses other than interest as per Rule 8D(2)(ii) at Rs. 6,81,255/-, It is noted that the significant investments have been made by the assessee. For taking these investment decisions of acquisitions/disposals time and cost of the top management of the assessee company would have been utilized. In this context, attention is invited to the decision of ITAT, Mumbai in the case of Dufon Laboratories P. Ltd. (50 Taxmann.com 143) (Mum Trib), wherein it is held that decisions related to acquisition as well as disposal of investments are taken by the Top Management and which would only be upon expending time and resources. Accordingly, in a case wherein during the year fresh investments had been made and/o....
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....relevant material on record. We find that the assessee has made suo moto disallowance of Rs. 7,34,844/- against the exempted income of Rs. 3,73,165/-. The Ld. Assessing Officer rejected the disallowance computed by the assessee mainly on the ground that there was no direct link of the investment made in shares/mutual funds out of own funds or surplus funds available on the disposal of the assessee. The Ld. Assessing Officer treated the suo moto disallowance of Rs. 7,34,844/- made by the assessee as incurred directly against the earning of exempted income. This finding of the Assessing Officer is fallacious without any evidence on record that said expenditure was connected directly with the earning of exempted income. Further, under Rule 8D(2)(ii), the Assessing Officer disallowed proportionate interest expenses incurred for investment on borrowed funds in mutual funds/shares. The said disallowance has been deleted by the Ld. CIT(A) following the decision of the Hon'ble Jurisdictional High Court in the case of Reliance Utilities & Power Ltd. (supra) and HDFC Bank (supra) as the surplus funds constituting share capital of Rs. 39.23 crores and reserve and surplus of Rs. 73.73 cror....
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....to sustain and prove the competitiveness and overall long term viability of the textile industry. The concerned Ministry of Textile adopted the TUFS Scheme, envisaging technology upgradation of the industry. The subsidy was not given for running the business. Hence interest subsidy is a capital receipt. 8.10 In order to support its view, the assessee has relied on various judicial pronouncements- i. In the case of Gloster Jute Mills Ltd. 67 SOT 21 (Kol.) the ITAT was of the view that in order to sustain competitiveness in the domestic as well international market and overall long-term viability of the industry, the concerned Ministry adopted the TUFS scheme envisaging Technology Upgradation of the Industry. Hence, the subsidy received in this regard falls into capital field. ii. the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Shri Sham Lal Bansal in ITA No. 472 of 2010, wherein it had been held that interest subsidy received under TUF Scheme is capital in nature. iii. The Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars & Chemicals Ltd. reported in (2008) 306 ITR 392 (SC) has held that it is the purpose of the incentive which decides its natu....
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....6 ITR 392 and Sahney Steel & Press Works Ltd. v. CIT [1997) 94 Taxman 368/228 ITR 253. In these circumstances, the Court is of the opinion that the amount was received as capital stream and therefore, not taxable. 7. A similar view was taken by the Calcutta High Court in CIT v. Gloster Jute Mills Ltd. [2018] 96 taxmann.com 303/257 Taxman 512/2019) 416 ITR 458. 8.12 In light of the overwhelming judicial pronouncements in favour of the assessee on this issue, the ground is decided in favour of the assessee and is allowed. The AO is directed to exclude the amount of TUF subsidy from the income of the assessee. Ground No. 4(a) to 4(c) is decided in favour of the assessee and is allowed." 12.1. We find that the TUF scheme was launched by the Ministry of Textile of the Central Government and the Ld. CIT(A) not only relied on the various decision of the High Court but also relied on the decision in the case of Nitin Spinners Ltd. (supra) of Rajasthan High Court. 13. Before us, the Ld. DR could not brought on record any contrary decision of any High Court or the Jurisdictional High Court. Therefore, we do not find any error in the order of the Ld. CIT(A) in following the decision of ....
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.... (India) Ltd. v. CIT 284 ITR 323 (SC), it was held by the Hon'ble Apex Court that the claim of deduction not made in the return cannot be entertained by the Assessing Officer otherwise than by filing a revised return. In the case of the assessee, it is evident that the claim of the deduction made by the assessee is a fresh claim and not a revised claim. The assessee has not claimed the deduction in the return of income, neither filed any revised return of income claiming the said deduction. In this regard, I am of the considered view that this claim of the assessee tantamount to revision of the Return of Income itself. If I go into the facts of the case, it is clear that assessee wants to get relief in the form of rectification of mistake in the return of income in respect of a claim which itself is of a doubtful nature. The mechanism is provided in Section 139(5) of the Act which state that an assesses can revise return of income at any time before expiry of one year from the relevant Assessment Year or before completion of assessment, whichever is earlier. The current A.Y. is A.Y. 2015-16 and the time limit for revising return expired on 31.03.2017. The Parliament in their wi....
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....n 115JB is a complete code in itself and the book profits of an assessee can only be altered in line with the items enumerated in the section itself (Apollo Tyres Limited [2002] 122 Taxman 562 (SC)/255 ITR 273 (SC). 8.22 In its submission, the assessee has relied on the above decision of the Supreme Court to conclude that an item which cannot be brought to tax under section 4 cannot be brought to tax under section 115JB. For this, reliance has also been placed on the decision of the Bombay ITAT in the case of Alok Industries Ltd. (supra) wherein it has been held that once a receipt cannot be taxed under section 4 of the Act, there cannot arise any taxability under section 115B of the Act. The decision of the Hon'ble Supreme Court has been examined and no such intent is visible in the decision. Once the accounts of the assessee have been prepared in accordance with the Companies Act and is certified by the auditors, the AO or the assessee, both are precluded from making any changes to the book profits so determined unless mandated by the section itself. Since the profits of the company under section 115JB are to be determined as per companies Act the income as defined under se....
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....ts on capital account from taxation is totally misplaced and deserves to be outrightly rejected. 8.25 The assessee has brought to my notice the contents of Explanation 1 wherein certain income of an assessee is required to be excluded while computing the book profit. For clarity, the relevant provisions are reproduced below: Explanation 1:........................... if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss] or if any amount referred to in clause (i) is not credited to the statement of profit and loss), and as reduced by,- i. the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April. 1997 otherwise than by way of a debit to the 60(statement of profit and loss]), if any such amount is credited to the 60[statement of profit and loss): Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased ....
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....e that the book profits of the company have to be computed in accordance with the provisions of section 115JB and the authorities cannot travel beyond. The Hon'ble Supreme Court also holds that the statute is to be interpreted strictly at the threshold stage. (Apollo Tyres(Supra)) 8.29 In light of the above clear guidance given by the statute as well as the Highest Court of the Country, the provisions cannot be interpreted on the basis of intent and logic. There is no logic in taxation. As far as section 115JB of the Act is concerned, the profit is required to be determined in accordance with Companies Act and not Income Tax Act. Hence, the presumption of the assessee that such income is to be determined in line with section 4 and section 2(24) as far as section 115JB is concerned is not found tenable. The reliance placed by the assessee on the decision of the Supreme Court referred above is not found to be correct. In light of the clear and unambiguous language of the section, there is no need for relying on indirect judicial pronouncements cited by the assessee. It is also noted that the decisions cited by the assessee did not take into account the five member Supreme Court....
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....s proposed herein does not give rise to any substantial question of law as it also stands concluded against the Revenue. ii. Recently in PCIT v. Ankit Metal & Power Ltd. (ITA 155 of 2018, dated 0907-20 19) it has been held that, But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115JB of the Income Tax Act, 1961. In Alok Industries Ltd. v. DCIT (ITA No. 1017/Mum/2017, dated 21-0520 18) it has been held that, ..... Once the subsidy received cannot be taxed under section 4, there cannot arise any taxability under section 1153B of the Act, which merely provides for an alternate mechanism for computation of income and tax thereon. 29. More importantly, the decision of the Jaipur Tribunal in the case of Shree Cement Ltd. (ITA No. 614/JP/2010) has exhaustively discussed the issue under consideration and also referred to the order of Rajasthan High Court wherein the ground taken (sic) by the reve....
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....e are not at all chargeable under the entire Income-tax Act. Further, recently Hon'ble Calcutta High Court in the case of Ankit Metals (supra), Hon'ble Rajasthan High Court in the case of Shri Cement Ltd. (supra) and Jurisdictional High Court in the case of Harinagar Sugar Mills Ltd. (supra) and Jurisdictional Tribunal in the case of Alok Industries Limited (supra) considering the various decisions on the said issue has specifically held that, once the subsidy are treated as capital receipt and, not chargeable to tax has also to be excluded from computing the book profit u/s. 115JB of the Income-tax. Respectfully following the said decisions, it is held that subsidy in nature of capital receipt should also be excluded from computing the Book Profit u/s. 115JB of the Income-tax. This ground of appeal is thus allowed." 17.1. The issue-in-dispute before us being identical to the issue-in-dispute before the Tribunal in the case of Shri Pushkar Chemicals & Fertilizers Ltd. (supra), respectfully following the finding of the Tribunal, we set aside the order of the Ld. CIT(A) on the issue-in-dispute and direct the Ld. Assessing Officer to exclude the amount of interest subsidy whi....