TaxTMI 
TaxTMI 
2013 (9) TMI 1295
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....from clients, to the taxable income. 2. The Ld CIT (A) erred in confirming the disallowance of Rs. 2,69,64,162/- under Rule-8D read with section 14A of the Income Tax Act, computed at ½% of the average value of investments, as expenditure relatable to exempted income." 3. Briefly stated relevant facts of the case are that the assessee is engaged in the business of generation and distribution of power. During the year, assessee filed the return of income declaring the total income at Rs. NIL on 29.9.2008, which was subsequently revised on 5.12.2008 and again on 25.3.2010 declaring the total income at Rs. NIL. The revised return was filed to give effect to the Demerger scheme of the company and to claim additional amount of TDS of Rs. 14,80,385/-. Assessment was completed u/s 143(3) of the Act determining the total income under normal provisions of the Act at Rs. NIL and income on the book profit u/s 115JB of the was determined at Rs. 34,98,42,790/-. AO made additions in the assessment. Aggrieved with the decision of the AO, assessee filed an appeal before the first appellate authority. 4. During the proceedings before the first appellate authority, CIT (A) cons....
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....is not in the nature of revenue. It is also submitted by the assessee that it is in the nature of reimbursement of expenditure and hence not income in the assessee's hand. The above stand of the assessee is not acceptable as the said amount is being received with regard to sale of power to GEB. The method followed in deciding the amount payable by GEB is immaterial as far as the nature of receipt in the assessee's hands is concerned. Whether GEB pays this amount as a reimbursement of expenditure or by way of payment for services rendered or as a return on investment of capital, the nature of such receipt cannot be different in the hands of the assessee. Assessee is required to show all the receipts from GEB as revenue and claim deductions applicable under the IT Act. In the instant case 11.07 crores is therefore required to be included from revenue from GEB and reductions if any shall be allowed as per the Act. The said amount is therefore added to the total income. Since income tax is not a deductible expenditure no further deduction is therefore considered. The addition comes to Rs. 11.07 crores. Since Rs.11.07 crore is income of the assessee as held above, the ....
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....ffset against tax payable by the company, therefore no amount of tax recoverable can be added back to income of the year under appeal. 14. The ld. Sr. counsel for the assessee for the proposition that reimbursement is not an income also placed reliance in CIT vs. Siemens Aktiongesellschaft (2009) 310 ITR 320 (Bom) wherein it has been held that at placitum 57 page 340 that reimbursement of expenses can, under no circumstances, be regarded as a revenue receipt and in the present case the Tribunal had found that the assessee received no sums in excess of expenses incurred. He further submits that similar view has been taken by the Hon'ble jurisdictional High Court in the case of Director of Income Tax (International Taxation) vs. Krupp Udhe GmbH (2010) 38 DTR (Bom) 251 wherein it has been held that reimbursement of expenses is not chargeable to tax. He further submits that in Mahindra & Mahindra Ltd. DCIT, (2009) 30 SOT 374 (Mum)[SB] it has been held that at placitum ‗D' page 403 that ―Reimbursement of expenses does not have the income element and, hence, cannot assume the character of income deemed to accrue or arise in India.'The ld. Sr. counsel for the assessee....
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....art of receipt liable to tax as income of the assessee. He further submits that under the provisions of the Act the provision for income-tax made by the assessee is not allowable i.e. in other words it is not deductible expenditure and, hence, it was rightly treated by the A.O. as income. He further submits that in the case of Louis Berger International Inc.(supra) relied on by the ld. Sr. counsel for the assessee it has been observed by the Tribunal at page 396 that ―there is a lot of difference between payment of service tax and income-tax', therefore, the decision relied on by the ld. Sr. counsel for the assessee is distinguishable and not applicable to the facts of the present case. He further submits that all other decisions relied on by the ld. Sr. counsel for the assessee are in respect of reimbursement of expenses, custom duty and service tax and are not in respect of reimbursement income-tax, therefore, all the decisions relied on by the ld. Sr. counsel for the assessee are distinguishable and not applicable to the facts of the present case. He, therefore, submits that the addition made by the A.O. and confirmed by the ld. CIT(A) be upheld. 17. We have caref....
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....ssee, shall not be deemed to be income received. 22. This section provides that the amount of tax deducted at source under the provisions of sections 192 to 196D is, so far as affected person is concerned, to be treated as income received by him. For the purpose of computation of his total income, gross salary, gross dividend or gross interest, etc. i.e. the amount actually received plus the amount of tax deducted at source, will have to be considered. 23. We further find from the copy of agreement dtd. 30-5-1996 between Gujarat Electricity Board (GEB) and Essar Power limited (assessee) that in Cl. 7.1 of the annexure -IV of Schedule of the agreement appearing at page 3 to 87 at page 81 that the tariff has been determined as follows:- TARIFF The Tariff shall be determined as follows (a) Annual Fixed Charges to be determined in terms of Section 7.1.1. (b) Variable Charges to be determined in terms of Section 7.2 (c) Incentive Payment to be determined in terms of section 7.3 7.1.1.Annual Fixed Charges: Computation and payment. The Annual Fixed Charge shall be computed on the following basis: ....
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....difference. It is the true nature and quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. 28. In Emil Webber vs. CIT (1993) 200 ITR 483 (SC) it has been observed and held at page 486-487 as under:- The definition of "income" in clause (24) of section 2 of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account the expression "income" does not lose its natural connotation. Indeed, it is repeatedly said that it is difficult to define the expression "income" in precise terms. Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provisions of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said a....
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....t, the payment of such interest is inextricably connected with the assessee's tax liability. If income-tax itself is not a permissible deduction under section 37, any interest payable for default committed by the assessee in discharging his statutory obligation under the Income tax Act, which is calculated with reference to the tax on income cannot be allowed as a deduction. 30. Now let us consider the decisions relied on by the ld. Sr. counsel for the assessee. 31. In Siemens Aktiongesellschaft (supra) it has been inter alia observed and held at placitum 57 to 59 at page 340-341 as under:- That leaves us with the last contention as to whether the amounts by way of reimbursement are liable to tax. To answer that issue, we may gainfully refer to the judgment of a Division Bench of the Delhi High Court in CIT v. Industrial Engineering Projects P. Ltd. [1993] 202 ITR 1014. The learned Division Bench of the Delhi High Court was pleased to hold that reimbursement of expenses can, under no circumstances, be regarded as a revenue receipt and in the present case the Tribunal had found that the assessee received no sums in excess of expenses incurred. A similar is....
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.... the Division Bench of the Calcutta High Court in CIT v. Dunlop Rubber Co. Limited (supra). The learned Division Bench was answering the following question : Whether, on the facts and in the circumstances of the case, the amounts received by the assessee (English company) from M/s. Dunlop Rubber Co. (India) Ltd., (Indian company) as per agreement dt. 29th Jan., 1957 constituted income assessable to tax ? On considering the issue the learned Bench noted that the Tribunal was of the view that what was recouped by the English company was part of the expenses incurred by it. The learned Court upheld the said finding. The learned Bench was pleased to hold that sharing of expenses of the research utilised by the subsidiaries as well as the head office organisation would not be income which would be assessable to tax. A similar view was taken in CIT v. Stewarts & Lloyds of India Ltd., (supra). Consequently, in view of the judgment in Siemens, the first and second issue would not raise any substantial question of law since they are covered against the Revenue 33 In Mahindra & Mahindra Ltd. (supra) it has been observed and held at placitum D at page....
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....―profits derived from exports'also finds place in section 80HHC(3)(a). It says that where the export is of goods, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business. In fact, the earlier section 80HHC(3) consisted of two parts, namely, where the assessee carried on a business as 100 per cent. exporter and secondly where the assessee carried on a composite business. In the latter case, it was provided that the profits derived from exports shall be the amount which bears to the profits of the business as computed under the head ―Profits and gains of business', the same proportion as the export turnover bears to the total turnover. The emphasis is on the words ―profits derived from the exports'. Therefore, weightage must be given to such profits. Such profits cannot be reduced artificially by including statutory levies in the denominator, namely, total turnover. Therefore, the turnover should be restricted to such receipts which have an element of profit in it. It is only the actual sale price which is relev....
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....see and, therefore, the said amount without allowing any deduction is liable to be included in the income of the assessee. Accordingly, the ld. CIT(A) was fully justified in upholding the order of the A.O. in treating the same as income. The ground taken by the assessee is, therefore, rejected.' 6. From the above it is evident the issue adjudicated by the Tribunal in favour of the revenue is identical and Tribunal made reference to plethora of decision in this regard. On perusal of the above order of the Tribunal, we find that it is a binding on us to following the said decision of the Tribunal in assessee‟s own case. Accordingly, ground no.1 is decided against the assessee and the ground is therefore dismissed. 7. Regarding ground no.2, Ld Counsel mentioned that the issue relates to the disallowance of expenditure of Rs. 2,69,64,162/- u/s 14A read with Rule-8D of the IT Rules, 1963. In this regard, Ld Counsel brought our attention to the additional ground filed by the assessee vide letter 21.9.2013 arguing that the additional ground being legal in nature may be admitted and the said additional ground reads as under: "The Ld CIT (A), while upholding the disallo....
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....all grant a reasonable opportunity of being heard to the assessee. Accordingly, ground no.2 and the additional ground raised by the assessee are allowed for statistical purposes. I.T.A. No.7413/M/2011 ( By Revenue) 11. This appeal filed by the Revenue on 3.11.2011 is against the order of the CIT (A)-9, Mumbai dated 8.8.2011 for the assessment year 2008-2009. In this appeal, Revenue raised the following grounds which read as under: "1. Whether on the facts and in the circumstances of the case an in law, the Ld CIT (A) erred in directing the AO to treat the interest income on loan given to employees, margin deposits and converting debenture as "Business Income" instead of "Income from Other Sources" as assessed by the Assessing Officer. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in directing the AO to delete the provisions of the income tax recoverable from the customers amounting to Rs. 3,96,76,000/- for the purpose to compute the book profits u/s 115JB of the Act." 12. At the outset, Ld Counsel filed a chart and mentioned that ground no.1 relates to the treating of the interest income (i) on loan given to....
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....dering the above settled position of the issue, we are of the opinion that this part (i) of the ground no.1 raised by the revenue is decided in favour of the assessee and against the Revenue. 14. The second limb of the ground no.1 relates to whether the interest earned on non-convertible debentures should be treated as "business income‟ or "income from other sources‟ as treated by the AO. During the first appellate proceedings, CIT (A) considered the submissions made by the assessee and decided the issue in favor of the assessee relying on the earlier orders of the CIT (A) for the AYs 2005-06 and 2007-08. Before us, Ld Counsel reiterated the submissions made before the lower authorities and relied on the order of the CIT (A) and submitted that the assessee earned interest on NCD of Rs. 4,89,767/- issued by Essar Oil Limited in the course of the business of the appellant. Therefore, the interest income earned on such investments should be considered as business income. 15. Per contra, Ld DR heavily relied on the order of the AO and submitted that these receipts being interest earned by the assessee on the debentures should be treated as income from other sources in....