TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 1151
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....f Sesa Goa Ltd. dated 28.02.2020. Though notice in respect of the Department's appeal was received by the assessee on 14.02.2018, at that point of time assessee did not intend to file any cross appeal. But, due to later development arising out of the said judgment, assessee after taking advice from its consultant decided to file the cross appeals. Some part of delay is also on account of COVID-19 restrictions arising out of the outbreak of COVID-19. We therefore, find merit in the condonation application filed by the assessee and in the larger interest of justice condone the delay and admit the assessee's appeal for adjudication. 3. The assessee has raised the following grounds of appeal: Assessment Year 2011-12: "1. For that education cess included in the liability for income tax is an allowable deduction under section 37(1) of the Income Tax Act, 1961 (in short "the Act") and is not hit by section 40(a)(ii) of the Act. 2. For that the Commissioner of Income Tax (Appeals) erred in not directing the Assessing Officer to allow the deduction of actual payment made during the previous year relevant to the assessment year 2011-12 on account of leave liability, if the Hon'ble....
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....ts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that compensation paid Rs.35,79,586/- to obtain raw materials is Revenue Expenditure not Capital expenditure. 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the amount received by the assessee of Rs.16,94,84,638/- as Industrial Promotion Assistance from the State Govt, is capital in nature as against revenue receipt as treated in the assessment order. 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the amount received by the assessee for Rs.3,04,22,210/- as Interest Subsidy from the State Govt, is capital in nature as against revenue receipt as treated in the assessment order. 6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition made by A.O u/s 14A under Rule 8D without appreciating the CBDT Circular N0-5/2014. 7. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the impugned capital receipt is neither taxable under normal provisions of the Act nor under the MAT provision without con....
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....de through IT Return of Revised IT Return. 8. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law by deleting upward adjustment made to Book Profit for disallowance computed u/s. 14A read with rule 8D. 9. That the appellant craves for leave to add, delete and modify any of the grounds of appeal before or at the time of hearing." 4. In the cross appeals for AY 2011-12 & AY 2012-13 most of the issues raised by the Revenue are common, therefore, as agreed by both the parties, the same are taken up together and are being disposed off by this common order for the sake of convenience and brevity. 5. For the purpose of adjudication of the issues, we will take the facts for AY 2011-12. Brief facts of the case are that the assessee is a limited company engaged in manufacturing of cement, generation and selling of power, jute goods, auto trim parts, iron and steel castings. Return of income for AY 2011-12 was filed on 30.09.2011 declaring loss of Rs. 1,95,29,34,610/-. This return was further, revised on 22.05.2012. Case selected for scrutiny through CASS followed by serving of valid notices u/s 143(2) & 142(1) of the Act. Various details called fo....
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....0-11 by an order dated September 13, 2017 (Page 180 at Pp 182-185 of Paper Book-paragraphs 46 at 52-53). The orders of this Hon'ble Tribunal for the assessment years 2008-09, 2009-10 and 2010-11 were passed after taking into consideration the judgment of the Hon'ble Karnataka High Court in CIT v. Rittal India (P) Limited, (2016) 380 ITR 423 (Karn). Subsequently, the Hon'ble Madras High Court in CIT vs. Shri T.P. Textiles (P.) Ltd., [2017] 394 ITR 483 (Mad) [Page 1 at Pp 4-8 of Compilation of Case Laws] has agreed with the Hon'ble Karnataka High Court. The issue is thus covered in favour of the assessee. We find that this Tribunal in assessee's own case for AY 2010-11 dealt with this issue and decided in assessee's favour observing as follows: "52. Aggrieved by the order of CIT(A) the assessee has raised ground no. l before the Tribunal. At the time of hearing both the parties agreed that identical issue came up for consideration in assessee's own case in ITA No.971/Kol/2012, 942/Kol/2013, 298 & 329/Kol/2013 for A.Y.2008-08 and 2009-10 order dated 25.8.2017. This Tribunal on the identical issue held as follows: "7.2. We have heard the rival submissions and perused the materials ....
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....as deduction under clause (ii)". The word "shall" used in the said clause is very significant. The benefit which is to be granted is 20 per cent, additional depreciation. By virtue of the proviso referred to above, only 10 per cent, can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent, additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent, deduction which shall be allowed. It has been consistently held by this court, as well as the apex court, that the beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the ben....
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....rs 2008-09 and 2009-10 and accordingly the grounds raised by the assessee in this regard are allowed." 53. Respectfully following the decision of the Tribunal the assessee is entitled to additional depreciation (remaining portion). Thus ground no. 1 raised by the assessee is allowed." 10.2. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee's own case for preceding assessment year i.e. for AY 2010-11 referred above and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 1 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed. Revenue's common Ground no. 2 for AY 2011-12 & 2012-13 relating to the deduction u/s 80IA of the Act in respect of thermal power plants for generating electricity: 11. We have heard rival contentions and perused the records placed before us. The second common ground raised in the Department's appeal relates to the assessee's claim for deduction under section 80IA in respect of the thermal power plants set up by it at Satna, M.P. and Chanderia, Rajasthan. The electricit....
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....or the assessment years 2008-09 and 2009-10. 11.2. It is submitted by ld. Counsel for the assessee that the question in controversy is covered by the said order dated August 25, 2017 of this Hon'ble Tribunal in the assessee's own case for the assessment years 2008-09 and 2009-10 (Page 125 at pages 133 - 136 of Paper Book). In the said order, this Hon'ble Tribunal took note of the decision of the Hon'ble Calcutta High Court in CIT v. ITC Limited (2016) 236 Taxmann 612 (Calcutta) for the assessment year 2002-03 when the provisions of Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948 were in force. It was noted that because of the provisions of the said legislation it was held by the Hon'ble High Court that a captive power plant could sell electricity only to a generating and distribution company or to a distribution company and such sale could only be made at the tariff determined by the State Regulatory Commission. It was on such basis that the Hon'ble High Court held that electricity generated and captively consumed could only be valued with reference to the price charged by a generating company to a distribution company or a generating and distribution company and t....
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.... the Act, being ITA No. 124/2019 (Memorandum of appeal at Page 31-35 of the Compilation of Case Laws). A supplementary affidavit was filed in the said appeal reformulating the questions (page 36 at pages 42 - 44 of the Compilation of Case Laws). It would appear from the order of admission dated March 11, 2020 (page 29 of the Compilation of Case Laws) that the question admitted with reference to section 80IA is only in relation to sale of electricity by the assessee to Indian Energy Exchange and Rajasthan Power Procurement Centre. We find that this Tribunal in assessee's own case for AY 2010-11 dealt with this issue and decided in assessee's favour observing as follows: "13. At the time of hearing the parties agreed that identical issue has already been decided in assessee's own case and in this regard filed a copy of the order of ITAT for A.Y.2008-09 and 2009-10 in ITA No.971/Kol/2012, 942/Kol/2013, 298/Kol/2013 and 329/Kol/2013 dated 25.8.2017. We have already seen that while deciding the issue of deduction u/s.80IA of the Act, the CIT(A) in the impugned order had followed the order of the CIT(A) in Assessee's own case on an identical issue in AY 09-10. The order of the CIT(A) f....
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....on record including the paper book and the relevant provisions of the Electricity Act, 2003 as detailed supra. We find that the main thrust of order of Id CITA was by placing reliance on the decision of this tribunal in the case of ITC Ltd, which was modified by the Hon'ble Jurisdictional High Court. The Id AR fairly brought to our attention the decision of Hon'ble Jurisdictional High Court in the case of ITC Ltd before us and had duly distinguished the same as not applicable to the facts of the instant case, as admittedly, the Asst Year before Hon'ble Calcutta High Court in ITC Ltd was Asst Year 2002-03. The said decision in ITC Ltd for Asst Year 2002-03 was rendered by taking into account the relevant provisions of Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948. These Acts were repealed and a new Electricity Act 2003 was introduced with effect from 10.6.2003. Hence for the Asst Years 2008-09 and 2009-10 (i.e. the years under appeal before us), the assessee would be governed by the provisions of Electricity Act, 2003. 5.6.1. We have already seen that the ITC's case in Hon'ble Calcutta High Court, proceeded on the basis that the open market for the captive power ....
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....nal agreed with the submission of the Assessee that as held in the aforesaid judgment of the Hon'ble Supreme Court, the price paid by an assessee for purchase of raw material represents the market price of such raw material produced by the assessee. The said judgment was held not to apply in ITC's case because the Hon'ble Court was of the view that electricity could not be sold to the consumer because of specific prohibition in the erstwhile Electricity Act and as such the price to the consumer could not be taken into account. We find that that is not the position in the instant case. The Tribunal also held that the method adopted by the assessee viz. to take the average rate charged by the State Electricity Board for the previous month is quite appropriate and reasonable for determining the market value for the month of supply. The tribunal held that the annual weighted average adopted by the Id CITA would result in variations occurring during the year at different times being made applicable uniformly for the whole year and therefore the assessee's method is more appropriate as it factors in variations as and when they take place. 15. On the issue whether electricity duty and c....
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....ensation of Rs.17,92,420/- relates to the assessee's Satna Cement Works and the balance amount of Rs.17,87,166/- relates to its Birla Cement Works. 12.1. For obtaining limestone, which is the main raw material for manufacture of cement, the assessee is required to pay rent/royalty to the State Government in terms of the mining lease. Such rent/royalty paid to the State Government is debited to the profit and loss account. In terms of the mining lease and requirement of the relevant State Land Revenue law, in addition to the rent/royalty, the assessee is also required to pay compensation as determined by the local authority/court to the persons whose rights are infringed because of the mining activity. No interest in land is acquired by payment of such compensation. Compensation has to be paid in order to obtain the raw material for the assessee's business, thereby facilitating the carrying on of its business. The assessee has been following the practice of claiming the amount of compensation proportionately over the period of the mining lease in order to avoid any distortion due to claim of the entire amount of compensation in the year of payment. The ld. AO, however, sought to tr....
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....facture of cement. The Assessee obtained mining lease from the State Government for quarrying limestone. It had to pay royalty to the State Government in terms of the mining lease. The terms of the mining lease also provided that over and above the royalty payable to the State Government, the Assessee is also required to pay compensation as determined by the local authority/court to the persons whose rights are infringed because of the mining activity. The Assessee claimed the compensation so paid was a revenue expenditure and allowable as a deduction while computing income from business. It was the plea of the Assessee that by incurring these expenses, no interest in land and that compensation has to be paid in order to obtain the raw material for the assessee's business, thereby facilitating the carrying on of its business. The AO however found that in earlier years such claims were disallowed treating it as capital in nature as a part of acquisition of the leasing right over and above the fees paid to Govt. The AO accordingly did not accept the claim of the assessee and disallowed the claim of the Assessee for deduction and added the sum of Rs. 23,71,340/- to the total incom....
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....ed the facts decided by the Hon'ble Apex Court in the case of Enterprising Enterprises vs. DCIT (supra) and then only had come to a conclusion that the compensation was paid for the damaged caused on the infringement of right of the land owner. He has also analysed that the payments are progressively distributed as they work, as they proceed year by year, going on with their work and the payments are in the nature of incidental expenditure to conduct the mine and the business operations. He, therefore, held that the payment of compensation to persons whose rights are infringed by the mining activity is revenue in nature. We, therefore, find no infirmity in the order of the Ld. CIT(A) on this issue and confirmed the same. Ground no. 1 of the Revenue's appeal is thus dismissed.". The facts in the years under dispute is also analogous to that in earlier years and hence respectfully following the order of this tribunal supra, we don't find any infirmity in the order of the Ld. CITA in this regard. Accordingly, the grounds raised by the revenue in this regard are dismissed. 23. Following the aforesaid decision, we uphold the order of CIT(A) and dismiss ground no.2 raised by the reve....
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....against the sales tax liability merely related to the form or mechanism through which the assistance was granted and did not determine the character of the subsidy. The amount of sales tax paid was only the measure for determining the quantum of assistance. Further, the time of payment of the assistance was also of no relevance. 13.2. The ld. AO, however, took the view that the assistance was in the form of relaxation of tax and supplemented the assessee's trade receipts and profits and was a revenue receipt. On appeal, the ld. CIT(A) accepted the assessee's claim following the decisions of the Hon'ble Tribunal in the assessee's own case for the assessment years 2008-09 to 2010-11. 13.3. It is submitted that the identical question fell for consideration in the assessee's own case for the assessment years 2008-09 and 2009-10 and was decided in assessee's favour by this Hon'ble Tribunal by a consolidated order dated August 25, 2017 (Page 115 at Pp 122-125 of Paper Book-paragraphs 4 at 4.3) and for the assessment year 2010-11 by an order dated September 13, 2017 (Page 165 at Pp 168-171 of Paper Book-paragraphs 25 at 29-30). The Department had preferred appeal against the said order ....
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....ax liability of the year of claim. The industrial promotion assistance was clearly not used directly or indirectly to acquire the assets nor any part of the cost of the assets was met directly or indirectly from the industrial promotion assistance. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee's own case for Asst Year 2007-08 in ITA No. 683 & 581 /Kol/2011 dated 8.12.2014 wherein the grounds raised by the assessee as well as by the revenue were as under: Assessee Ground No. 1 That on the facts and circumstances of the case, the learned CIT(Appeals) though holding that sales-tax incentive of Rs. 1238000 allowed by the State Govt, is the nature of capital receipt but erred indirecting the Assessing Officer (AO) for reducing the same from the cost of Fixed Assets for the purpose of computing depreciation by applying the Explanation 10 to Sec. 43(1) of I.T.Act. Revenue Ground No. 2 That Ld.CIT(A)-VI Kolkata has erred in law as well as on facts by deleting the addition made by the AO on account of Sales Tax Subsidy received by the assessee as revenue income of Rs 12,38,000/-. The decision rendered thereon by this tribunal....
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....ich is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the actual cost. Therefore, the said amount of subsidy cannot be deducted from the actual cost under sec. 43(1) for the purpose allowing depreciation. It is further held that if Government subsidy is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as a percentage of such cost, it does not partake the character of payment intended either directly or indirectly to meet the "actual cost". By implication, the above judgment also provides that if the subsidy is intended for meeting a portion of the cost of the assets, then such subsidy should be deducted from the actual cost, for the purpose of computing depreciation. As per Hon'ble Supreme Court, law is that if the subsidy is asset-specific, such subsidy goes to reduce the actual cost. If the subsidy is to encourage setting up of the industry, it does not go to reduce the actual cost, even though the amount of subsidy was quantified on the basis of the percentage of the total investment m....
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....ot be reduced from the actual cost of fixed assets for computing depreciation under the provisions of the Act. Accordingly, this issue of revenue's appeal is dismissed and that of the assessee is allowed". Respectfully following the aforesaid decision of this tribunal supra, we hold that the IPA received by the assessee would have to be construed as a Capital Receipt and the same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed. 30. Respectfully following the aforesaid decision, we hold that the subsidy in question is a capital receipt and not chargeable to tax. Ground no.3 raised by the revenue is dismissed. We also hold that capital receipt need not be reduced from the cost of the assets and under Explanation 10 to section 43(1) of the Act. We accordingly allow ground no.7 raised by the assessee in its appeal." 13.5. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee's own case for preceding assessment year i.e. AY 2010-11and Revenue being unable to controvert this fact ....
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....39 (SC) as also the judgment of the Hon'ble Supreme Court in CIT v. Meghalaya Steels Limited, (2016) 383 ITR 217 (SC).The order dated August 25, 2017 for the assessment years 2008-09 and 2009-10 was followed by the Hon'ble Tribunal for the assessment year 2010-11 decided by an order dated September 13, 2017 (Page 190 at pages 193-194 of the Paper Book - paragraphs 68 at 73-74). A still later decision in the assessee's favour is that of the Hon'ble Calcutta High Court in PCIT v. Ankit Metal and Power Limited, (2019) 416 ITR 591 (Cal) (Page 76 at Pp 84,86-87 of the Compilation of Case Laws). It is submitted that this ground is covered in favour of the assessee. We find that this Tribunal in assessee's own case for AY 2010-11 dealt with this issue and decided in assessee's favour observing as follows: "73. At time of hearing, it was agreed by the parties before us that identical issue arose for consideration in Assessee's own case for AY 2009-10 and in that year, the Hon'ble Tribunal in ITA No. 942/Kol/2013 and ITA No.329/Kol/2013 by its order dated 25.8.2017, held that the interest subsidy in question received under the very same scheme as in the present year, was a capital receipt....
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.... in Ponni Sugars (supra) and further held that even if it was treated as a revenue receipt, then the assessee was entitled to deduction under section 80IB/80IC as profits derived from eligible business according to its judgment in CIT v Meghalaya Steels Ltd., (2016) 383 ITR 217 (SC). Hence respectfully following the said decision of the Hon'ble Supreme Court in Balaji Alloys supra, we hold that the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed." 74. Respectfully following the decision of the Tribunal in Assessee's own case, we hold that the interest subsidy in question is a capital receipt not chargeable to tax. Thus, ground nos. 10 and 11 raised by the assessee are allowed." 14.2. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee's own case for preceding assessment year i.e. AY 2010-11and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 5 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed. Rev....
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....dend is usually reinvested in the respective schemes without being actually received by the assessee. The assessee receives dividend warrants only in respect of some of its investments in mutual funds and in respect of the shares held by it in companies. The only activity in relation to such dividend income is deposit of the warrants received in the bank account. 15.3. Further it is submitted that during the relevant previous year, there was no change in the share investments of the assessee. In respect of its share investments, the assessee received 7 dividend warrants for an aggregate sum of Rs. 1,17,21,334 /- which were deposited in the assessee's bank account for the purpose of encashment. The rest of the dividend income of Rs. 11,67,12,929/- was from investment in schemes of mutual funds providing for declaration of dividend. Out of the said amount, a sum of Rs.10,29,03,619/- was reinvested in units without physically receiving the warrants. Only 11 warrants for an aggregate sum of Rs. 1,38,09,310/- were physically received and had to be deposited in the bank. Break-up as on March 31, 2011 and March 31, 2010 of the assessee's investments which yielded dividend during the year....
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.... K. Sharma, Asst. Manager (Accounts). The assessee also included in the said statement the other expenses incurred by it for managing/maintenance of its investment portfolio such as bank charges, telephone charges, stationery and printing charges and conveyance and other expenses. 15.6. It is also submitted by the assessee that almost the entire expenditure incurred by the assessee is in connection with its business of manufacturing diversified goods. Only the surplus business funds of the assessee are invested by it in safe and liquid investments, which activity is looked after by the aforesaid three officers of the assessee to the extent specified in the assessee's statement of expenditure. The assessee's share investments are non-moving. The expenditure of Rs. 6,40,792/- incurred in connection with management/maintenance of the assessee's investment portfolio was correctly tabulated by it in the statement submitted to ld. AO. The said statement includes not only the concerned employees' remuneration but also other office expenses. No other infrastructure of the assessee was utilised in connection with the management/maintenance of its investment portfolio. In the facts of the a....
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....' that does not form part of total income. Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in Section 14A of the Act. This is so held in Walfort Share & Stock Brokers (P.) Ltd., relevant passage whereof is already reproduced above, for the sake of continuity of discussion, we would like to quote the following few lines therefrom. "The next phrase is, "in relation to income which does not form part of total income under the Act". It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A. ** ** ** The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A." 35. The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relati....
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....even in a case where ld. AO is not satisfied with the correctness of the assessee's apportionment, it is not mandatory for ld. AO to invoke the method of calculation in rule 8D and he is free to make the disallowance on any reasonable basis. It would not therefore be correct to say that once ld. AO rejects the mode of computation of disallowance under section 14A of the Act as made by the assessee, he has no other option but to resort to rule 8D of the Rules. Reference in this behalf is invited to an unreported judgment dated July 19, 2018 of the Hon'ble Calcutta High Court in the case of PCIT vs. Britania Industries Ltd. [ITAT No.45/2017, GA No.420/2017], where the following view taken by this Hon'ble Tribunal was approved: "...Even in a case where the AO rejects the claim of the assessee that no expenses were incurred to earn the exempt income, it is not mandatory for him to invoke the method of calculation prescribed by Rule 8D(2) of the Rules and is free to make the disallowance on any reasonable basis. By applying the Rule 8D of the Rules blindly sometimes absurd disallowances would result. In our view, therefore while examining the claim of the assessee regarding expenditur....
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....ent he held that only the investments which yielded dividend income should be considered for disallowance under section 14A read with rule 8D(2)(iii) cannot be faulted. Of course, in view of the judgment of the Hon'ble Supreme Court in Maxopp's case (supra), investments in subsidiary companies would have to be considered if they yielded dividend income. To this extent finding of the ld. CIT(A) is contrary to law. It is necessary to add that the amendments made to section 14A by the Finance Act, 2022 have no relevance in the instant case. The said amendments will apply only where it is undisputed that expenditure has been incurred but the assessee does not want it disallowed on the ground that no exempt income was earned. That is not the controversy in the instant case. In the instant case, the dispute is whether any expenditure over and above the sum of Rs.6,40,792/- was actually incurred by the assessee. In any event, the said amendments are effective only from AY 2022-23 and have no application for the earlier years as held by the Hon'ble Delhi High Court in PCIT v. Era Infrastructure (India) Ltd, (2022) 141 taxmann.com 289 (Del). 15.12. Though the ld. Counsel for the assessee h....
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....ically applied Rule 8D(2) of the Rules for making disallowance u/s 14A of the Act. It was argued by the Id AR that 69.07% of the assessee's investments (including in non-equity oriented mutual funds growth schemes) did not provide for payment of any dividend Upon redemption/disposal of such investments, the assessee would be liable to capital gains tax and income from such investments is not exempt under the provisions of the Act. He argued that even in respect of the assessee's investments in other schemes of mutual funds providing for payment of dividend, the assessee is liable for capital gains tax upon disposal/redemption of the units since such schemes are also not equity oriented. We find that the ld. A R also made an alternative argument that only dividend bearing investments should be reckoned for disallowance under Rule 8D(2)(iii) of the Rules and that strategic investments should be excluded We find lot of force in the alternative argument of the Id AR that only dividend bearing investments are to be considered for making disallowance u/s 14 A of the Act. In this regard, the reliance placed by the Id A R on the decision of this tribunal in the case of REI Agro Ltd....
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.... Further. Ld. Commissioner of Income Tax (Appeals) has observed that in respect of investment of Rs 6,07,75.000/- made in subsidiary companies as per documents produced before him, they are attributable to commercial expediency, because as per submission made by the assessee, it had to form Special Purpose Vehicle (SPV) in order to obtain contracts from the NHAI and the SPVs so formed engaged the assessee company as contract to execute the works awarded to them (i.e. SPVs) by the NHAI. In its profit and loss account for the year, the assessee has shown the turnover from execution of these contracts and therefore no expense and interest attributable to the investments made by the appellant in the PSVs can be disallowed u/s 14A r.w. Rule 8D because it cannot be termed as expense/interest incurred for earning exempted income. Under the circumstances, Ld. Commissioner of Income Tax (Appeals) is correct in holding that disallowance of a further sum of Rs 40,556/- calculated @ 2% of the dividend earned is sufficient. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals), hence we uphold the same. On going through the above ob....
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.... u/s 115JB of the Act: Particulars Amount (in Rs.) Interest Subsidy received from Govt. of Rajasthan under Rajasthan Investment Promotion Scheme, 2003 Rs. 3,04,22,210 Incentive from Govt. of West Bengal in the form of Industrial Promotion Allowance Rs. 16,94,84,638 Total Rs. 19,99,06,848 The ld. AO held that the accounts were prepared in accordance with the provisions of Companies Act and these incentives were credited to Profit & Loss Account. Besides, the claim was not made through IT Return or Revised IT return and therefore fresh claim raised during the course of assessment proceedings was not accepted in view of decision of Hon'ble Supreme Court in case of Goetze (India) Ltd, [2006] 284 ITR 323 (SC). On appeal, the ld. CIT(A) granted relief to the assessee relying upon various decisions including the decision of the Hon'ble Tribunal in DCIT v. South Asian Petrochem in ITA Nos. 1222 to 1241/Kol/2014 decided on May 3, 2017. 16.1. We observe that it is settled law that subsidy granted for the purpose/object of encouraging setting up of new industrial units or expansion of existing industrial units is a capital receipt. It has already been held by this Hon'ble Tribunal i....
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.... part of "total income" and cannot be subjected to tax either under the normal computation provisions or under section 115JB of the Act. The absence of provision in section 115JB of the Act for exclusion of such capital receipt credited to the profit and loss account cannot result in its taxation. 16.3. It is submitted by ld. Counsel for the assessee that this issue is now squarely covered in favour of the assessee by the judgment of the Hon'ble Calcutta High Court in PCIT vs. Ankit Metal & Power Ltd., [2019] 416 ITR 591 (Cal) [Page 76 of the Compilation of Case Laws]. The said decision also deals with the aspect relating to claim made otherwise than by filing a return/revised return. Particular reference is invited to Paragraphs 30-33 of the judgment [Pages 87-88 of the Compilation of the Case Laws], which are extracted hereinbelow: "Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit u/s 115JB of the Income Tax Act, 1961 as contended by the revenue by relying on the decision in....
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....our Court in the case of Britannia Industries Ltd. (supra) holding that Tribunal has the power to entertain the claim of deduction not claimed before the Assessing Officer by filing revised return. Respectfully following the aforesaid decision as well as the view already taken by us in this case that the aforesaid subsidies are capital receipt and not an 'income' and not liable to Tax Tribunal in exercise of its power under Section 254 of the Income Tax Act justified this claim though no revised return under Section 139 (5) of the Act was filed before the Assessing Officer. We answer both the question Nos. 1 and 2 in negative and in favour of assessee." (emphasis added) 16.4. Since the issue stands squarely covered by the Hon'ble Jurisdictional High Court in the case of Ankit Metal and Power Limited (supra), we fail to find any infirmity in the finding of ld. CIT(A) holding that the subsidy/incentive received by the assessee which have been held to be capital receipts are to be excluded from the book profit u/s 115JB of the Act. Thus, common ground no. 7 raised by the Revenue for AY 2011-12 & AY 2012-13 are dismissed. Revenue's common Ground no. 8 for AY 2011-12 & 20....
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.... computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." (emphasis added) 17.2. The same view was taken by the Hon'ble Karnataka High Court in CIT v. Gokal Das Images Private Limited, (2020) 429 ITR 526 (Karn) - paragraph 10 at page 533 of the Reports (Page 156 at page 163 of the Compilation of the Case Laws). Relevant portion of the decision of the Karnataka High Court in Gokaldas Images' case (supra) is extracted hereinbelow: "10. The Commissioner of Income-tax (Appeals) has held that as per section 115JB of the Act, the assessee being a company is liable to tax on book profits in accordance with the aforesaid provision and there is no exemption granted to the non-dividend company in this regard. However, the tribunal by placing reliance on decision of the Supreme Court in Apollo Tyres v. CIT [2002] 122 Taxman 562/255 ITR 273 has held that Assessing Officer while determining book profits under section 115JB of the Act cannot tamper with the profits as per prof....
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....provision made for leave encashment relying upon the decision of the Hon'ble Calcutta High Court in Exide Industries Limited v. Union of India, (2007) 292 ITR 470 (Cal) whereby clause (f) of Section 43B of the Act was held unconstitutional. Ld. AO disallowed the claim by observing that the matter was sub judice before the Hon'ble Supreme Court. On appeal, ld. CIT(A) directed ld. AO to allow deduction in respect of the provision only if the Hon'ble Supreme Court upheld the decision of the Hon'ble Calcutta High Court by rectifying the assessment once the judgment was rendered by the Hon'ble Supreme Court. The assessee's ground of appeal was dismissed subject to the said observation. 22.2. The Hon'ble Supreme Court in Union of India v. Exide Industries Limited, (2020) 425 ITR 1 (SC) upheld clause (f) of Section 43B of the Act as constitutionally valid (pages 220 - 249 of the Compilation of Case Laws). Therefore, in view of the judgment of the Hon'ble Supreme Court, deduction in respect of leave encashment is available only in the year of actual payment. It is then submitted by ld. Counsel for the assessee that ld. AO may be directed to allow deduction in respect of the amount actuall....