TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1442
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.... 2. The ground No.1 raised by the assessee is challenging the disallowance made u/s.14A of the Act r.w.Rule 8D(2) of the Rules. 2.1. We have heard rival submissions and perused the materials available on record. The assessee company is registered with Securities and Exchange Board of India (SEBI) as category I Merchant Banker and Portfolio Management Service (PMS) provider and is engaged in the business of advisory and transactional services and PMS services. Its principle and core business is of providing investment banking services such as acting as lead manager to IPO, advisors in open offer, Mergers and Acquisitions, Restructuring of companies etc., The assessee had filed its return for A.Y.2014-15 on 29/11/2014 declaring total income at Rs.18,41,61,150/- under normal provisions of the Act and book profit of Rs.53,02,93,945/- u/s.115JB of the Act. Subsequently, a revised return of income was filed by the assessee on 30/03/2016 to claim tax relief u/s.90 of the Act and additional TDS credit. 2.2. The assessee declared an amount of Rs.46,24,88,738/- as dividend and claimed the same as exempt u/s.10 of the Act. The assessee made suomoto disallowance of expenses u/s.14A of....
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....s of voluntary disallowance made by it in the return of income. These written submissions are enclosed in pages 55-63 of the paper book filed before us. Admittedly, the ld. AO had not recorded any objective satisfaction as to why the voluntary disallowance made by the assessee is incorrect before proceeding to apply computation mechanism in Rule 8D(2)(iii) of the Rules in the instant case. This issue is no longer res-integra in view of the decision of this Tribunal in assessee's own case for A.Y.2016-17 and 2017-18 in ITA Nos. 92 & 93/Mum/2022 respectively dated 23/06/2022 wherein this Tribunal had elaborately discussed the very same issue of disallowance u/s.14A of the Act made under identical circumstances from para 5 to para 8 and deleted the disallowance made by the lower authorities. We further find that this issue is also settled by the Hon'ble Supreme Court in the case of Maxopp Investments reported in 402 ITR 640 and by the decision of the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., vs. Dy. Commissioner of Income Tax Range 10(2), Mumbai reported in 328 ITR 81. It is also pertinent to note that this decision of the Hon'ble Bombay H....
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....closed in page 76 of the paper book filed before us. It is a fact on record that assessee had filed its revised return of income on 30/03/2016. Even in the said revised return we find from the perusal of the entire income tax return, the assessee had duly disclosed the figure of long term capital loss of Rs.1,57,45,360/- in the relevant column. In the schedule of carry forward of losses of future years i.e. Schedule C F L in the income tax return form, this figure of Rs. 1,57,45,360/- ought to have been reflected automatically as apparently the said figure is to be picked from column No. B-9 of the Income Tax return. In Column No.B-9 the assessee had duly reflected the long term capital loss of Rs.1,57,45,360/-. But the same was not automatically picked by the Income Tax e-filing system by posting the said figure under Schedule C F L. The ld. AO concluded that the assessee had withdrawn the claim of long term capital loss of Rs.1,57,45,360/-. We have gone through the entire income tax return form filed at the time of filing revised return. These documents are enclosed in pages 84-91 of the paper book. From the above narration, it could be seen that failure to reflect the long term ....
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....n. Hence, the assessee would be eligible for TDS credit of Rs.5,05,620/- in A.Y.2014-15 i.e. year under consideration. The ld. AO is directed accordingly. The ld. AO is further directed to ensure that assessee had not claimed this TDS credit of Rs.5,05,620/- in the A.Y.2015-16 based on form 26AS. This direction is given in order to protect the interest of the Revenue by not giving double credit of TDS to the assessee. 4.2. With regard to the remaining TDS credit of Rs.55,51,748/-, the same represents taxes deducted by four payers but the TDS was not remitted by the payers to the account of the Central Government. The assessee pleaded that it had duly offered the income relatable to the said TDS in the year under consideration. It was argued that merely because the deductor had not remitted the TDS to the account of the Central Government having deducted the taxes from the amounts due to the assessee, assessee cannot be deprived or denied of its legitimate credit. This is a clear case of default committed by the deductor against whom the department is entitled to take suitable action as per law. The assessee cannot be denied TDS credit for no fault of it. We find that similar issue....
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.... the materials available on record. We find that assessee had earned dividend income of Rs.56,03,07,986/- and claimed the same as exempt u/s.10 of the Act. It had voluntarily disallowed the sum of Rs.5,44,377/- u/s.14A of the Act in the return of income as expenses incurred for the purpose of earning exempt income. The assessee furnished a detailed note together with the workings of suomoto disallowance made by it before the ld. AO which are enclosing in pages 64 - 72 of the paper book filed before us. On perusal of the said note we find that assessee had pleaded that it had sufficient own funds in its kitty which are much more than investments that had yielded exempt income to the assessee. Apart from that assessee had also pleaded that even assuming interest is required to be disallowed in terms of Rule 8D(2)(ii) of the Rules, only the net interest paid, if any should be considered i.e. interest expenditure less interest income earned by the assessee. The assessee also gave details before the ld. AO that it had earned interest income of Rs.425.68 Crores as against interest expenditure of Rs.50.40 Crores, thereby resulting in net interest paid becoming negative. Accordingly, it wa....
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....sessment proceedings, the assessee filed revised workings of short term capital loss and long term capital loss. The assessee sought to set off the short term capital loss (STT paid) of Rs.3,54,731/- against business income. The assessee furnished the revised working of capital gains together with supporting documents before the ld. AO as under:- (i) Short Term Capital Loss (STT paid) Rs.(3,54,731) (ii) Long Term Capital Gain (STT paid-Exempt Income) Rs.20,59,114 8.2. It was pleaded that assessee had inadvertently offered short term capital gain of Rs.25,07,167/- on sale of units of mutual funds under the head 'short term capital gains' in the return of income as against short term capital loss (STT paid) of Rs.3,54,731/- and long term capital gain (STT paid-exempt income) of Rs.20,59,114/-. The ld. AO did not take cognizance of the same and there was absolutely no discussion regarding the same in his assessment order. The ld. CIT(A) by placing reliance on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd., reported in 284 ITR 323 stated that this revised claim was only made by the assessee during the course of assessment proceedings and the same was ....
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....t created for the welfare of the employees of the assessee. This loan is admittedly interest free. The ld. AO held that the said loan is not meant for the purpose of business of the assessee and accordingly, proceeded to disallow proportionate interest u/s.36(1)(iii) of the Act and disallowed a sum of Rs.20,04,27,101/- in the assessment. The contention of the assessee that amount advanced for the welfare of the employees of the assessee ultimately results into employee satisfaction which becomes a big asset, which in turn improves the efficiency and productivity thereon and hence, the same shall be eligible as deduction u/s.36 or 37 of the Act as staff welfare expenses. The assessee, on without prejudice basis, further pleaded that the borrowings made by it were utilised only for the purpose of business and that no part of the borrowings has been used for advancing loan to employee welfare trust. The assessee pleaded that it had sufficient interest free funds available with it to make advance of interest free loan to its employee welfare trust. The assessee placed reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Reliance Utilities & Power Ltd., repor....
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....ase of the Revenue that the said lending has been given out of borrowed funds of the assessee. When interest free loan has been given in earlier year and no disallowance of interest has been made in the year in which lending was made, that lending is deemed to have been accepted as meant for business purposes of the assessee. The said finding cannot be disturbed by the Revenue in the subsequent assessment years. Reliance in this regard has been rightly placed by the ld. AR on the decision of the Hon'ble Karnataka High Court in the case of Sridev Enterprises reported in 192 ITR 165. Hence, we have no hesitation in directing the ld. AO to delete the disallowance of interest made u/s.36(1)(iii) of the Act in the facts and circumstances of the instant case. Accordingly, the ground No.1 raised by the assessee is allowed. 13. The ground No.2 raised by the assessee is challenging the disallowance u/s.14A of the Act. 13.1. We have heard rival submissions and perused the materials available on record. We find that assessee had shown dividend income of Rs.61,06,54,600/- which was claimed as exempt u/s.10 of the Act in the return. The assessee had made suo-moto disallowance of Rs.5,68,254/-....
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....u/s.115JB of the Act. We find that the assessee had duly explained that it being a listed company, the annual accounts are to be finalized and submitted to SEBI before the end of May i.e. within two months from the end of the financial year. Accordingly, if certain services are rendered to the assessee and value of services are not determined up to the date of finalization of accounts, the assessee in order to comply with the mercantile system of accounting regularly employed by it and in order to adhere to the matching concept of Revenue and income, resorts to make provision for expenses based on proforma invoice or a contract which is evident from table given in pages 119 & 120 of the paper book filed before us. The assessee has also given subsequent date of payment of the said expenditure in the said table. Hence, these are regular business expenses that had already accrued during the year under consideration for which provision has been made by the assessee. The consistent practice followed by the assessee is that the provisions as and when made as on 31st March of each year are being reversed on first April of the subsequent year by offering it to tax and the actual expenses b....
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....g the same in both A.Y.2013-14 as well as in A.Y.2014-15. The ld. CIT(A) deleted the disallowance made by the ld. AO both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. 5.3. Before us, the ld. DR vehemently argued that the assessee had made a provision on an estimated basis and the said expenditure had not crystalized into an ascertained liability during the year and that the provision has been made only as a contingent liability in the books with an intent to reduce the profitability of the year of the assessee. He argued that the ld. CIT(A) had granted relief to the assessee on the premise that the said provision has been reversed by the assessee voluntarily in the subsequent year and duly offered to tax and hence, there cannot be any double taxation. The ld. DR vehemently argued that correct income should be taxed in the correct assessment year. 5.4. At the outset, there is no dispute that assessee had made provision for certain expenses on an estimated basis during the year and claimed the same as deduction in the return of income. But we find from the perusal of the order of the ld. CIT(A) that there is a proper rea....
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....sessee are on estimate basis which is duly required by the AS issued by the ICAI which by virtue of section 211 of the Companies Act, 1956 mandatorily have to be followed by the Companies. Therefore, the ld AR submitted that the expenses booked by the assessee on the basis of estimation are duly allowable; hence, the disallowance thereof made by the AO shall be deleted. 5.7. We also find that this manner of making provision for expenses has been duly approved by the Hon'ble Supreme Court in the case of Bharat Earth Movers vs CIT reported in 245 ITR 428 (SC). It is also not in dispute that the assessee had duly reversed the said provision in A.Y.2014-15 and 2015-16 and had offered to tax as other income reflected in the profit and loss account of the assessee and hence taxing the very same provision for expenses in this year would result in double taxation. This practice has been consistently followed by the assessee over the years which has been accepted by the Revenue. It is also a fact that assessee being a subsidiary of Edelweiss Financial Services Ltd., which is a listed company had to get its accounts audited on or before 31st May from the end of the accounting year in orde....