TaxTMI 
TaxTMI 
2023 (1) TMI 1324
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....um/2017 for A.Y. 2010-11, the assessee has raised following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing interest amounting to Rs 41,38,397/- by treating the same as attributable towards Capital Workin-Progress (CWIP). 2. Without prejudice to the above ground of appeal, the Commissioner of Income-tax (Appeals) erred in rejecting the claim of the appellant that since the closing CWIP includes CWIP acquired during the year, the rate of disallowance of interest should be average rate of interest (i.e. 6%, half of the rate applied by the Assessing Officer). 3. Without prejudice to the above grounds of appeal, the Commissioner of Income-tax (Appeals) erred in rejecting the contention of the appellant that in case the aforesaid interest is held to be capital in nature then the same ought to be considered as part of the cost of asset and depreciation ought to be allowed thereon in the year in which the CWIP is capitalized. 4. On the facts and in the circumstances of the case and in law, the Commissioner....
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....sion for current tax without netting off Minimum Alternative Tax (MAT) credit entitlement while computing the book profits as per the provisions of section 115JB of the Act. 12. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in adding back an amount of Rs.2,00,000/- on account of provision for wealth tax while the computing book profits under section 115JB of the Act. 13. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing excise duty debited to the profit and loss account amounting to Rs.29,32,000/-. 14. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing a sum of Rs.30,60,000/- out of interest paid attributable to loan to a subsidiary. The Appellant hereby reserves the right to add to, alter or amplify the above grounds of appeal." 04. In ITA No.5431/Mum/2017, the learned Assessing Officer ha....
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.... passed on 20th March, 2013, determining the total income of the assessee at Rs.34,90,70,420/-. The book profit income under Section 115JB of the Income-tax Act, 1961 (the Act) was offered by assessee at Rs.3,90,10,127/-, which was revised at Rs.14,87,59,916/-. 06. Aggrieved by the order of the learned Assessing Officer, assessee preferred the appeal before the learned CIT (A), who, vide order dated 3rdMay 2017, partly allowed the appeal of the assessee. Therefore, assessee is aggrieved against the disallowance confirmed and learned Assessing Officer is aggrieved with respect to the disallowance deleted. Accordingly, both the parties are in appeal before us. 07. We fist note that assessee has raised an additional ground of appeal vide letter dated 5th November, 2019, raising following grounds of appeal:- i. "on the facts and in the circumstances and in law, the assesseeprays that the learned Assessing Officer be directed to allow deduction of prior period expenses in the year in which the said expenses are debited to the profit and loss account." 08. Assessee says that it is merely a legal ground require to be admitted. Assessee relied on the decision of Hon'b....
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....e assessee as the reply of the assessee was considered general in nature. He found that interest expenditure was incurred by the assessee at the rate of 12% to 15% per annum and therefore, applying the rate of interest 12%.He computed the interest amounting to Rs.41,38,397/- and disallowed the sum under Section 37(1) of the Act. The issue travelled before the learned CIT (A). The learned CIT (A) following the decision of first appellate authority in appellant's group concerns M/s Excel Crop Care Ltd for A.Y. 2009-10 confirmed the disallowance. He also rejected the argument of the assessee that no such disallowances were made in the earlier years and the disallowance even if to be made, should not be at the rate of 12% but at the rate of 6%. Therefore, the assessee is in appeal before us. 015. The learned Authorized Representative submitted that as per accounting policy of the assessee with respect to the cost of acquisition of fixed assets the borrowing cost related to the period till such assets are put to use is already capitalized. He submitted that the capital expenditure was not funded out of borrowed funds but incurred out of internal accruals. To demonstrate that, he refe....
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....essee that non-interest bearing funds have been used for the purpose of acquisition of capital work-in-progress. The above view is also supported by the decision of the Hon'ble Bombay High Court in case of Reliance Utilities and Power Limited 313 ITR 340 as well as the decision of the Hon'ble Supreme Court in case of CIT vs. Reliance Industries Ltd. 410 ITR 466. Accordingly, ground no.1 of the appeal is allowed. 018. In view of our decision in ground no.1, ground no.2 and 3 of the appeal becomes infructuous and hence, dismissed. 019. Ground no.4 of the appeal is with respect to the disallowance under Section 14A read with Rule 8D of the Rules. The fact shows that assessee has earned exempt income of Rs.1,33,73,241/- and has also offered SUO Moto disallowance u/s 14 A of the act of Rs.56,132/-. The learned Assessing Officer found that disallowance offered by the assessee is on ad hoc basis and without any mathematical working. The learned Assessing Officer questioned the assessee to show cause how the disallowance has been worked out and to give proof about the expenses incurred or not incurred for earning exempt income. Assessee submitted that no expenses have been in....
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....sed the orders of the lower authorities. The learned CIT (A) after considering the explanation of the assessee rejected that no interest of disallowance can be made under Section 14A of the Act. In the present case, we find that when non-interest bearing funds are much higher than the amount invested which yielded exempt income, there is no question of making any disallowance under Rule 8D2 (1) and 8D (2)(iii) of the Act. Such claim of the assessee before us is only with respect to the interest disallowance under Rule 8D of the Rules, Assessee succeeds on this issue. . With respect to the ground no.8, being disallowance under Section 14A imputed under the computation of book profit, we find that issue is squarely covered in favour of the assessee by the decision of Hon'ble Karnataka High Court in 125 taxmann.com 72 in case of Sobha Developers vs. Dy. Commissioner of Income Tax. Even otherwise, we find that assessee has already complied with Provision of Section115JB of the Act, explanation 1 clause (f) of the Act in form no 29B. There is no finding of the learned Assessing Officer that provision of Explanation 1(f) of Section 115JB of the Act is not properly applied by the asse....
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....from the book profit computation in view of clause (i) of explanation 1 to Section 115JB of the Act. At the time, when the provision was made same was added to the book profit earlier therefore, the learned Assessing Officer inadvertently added further Rs.8,71,36,354/-. 030. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and learned CIT (A). 031. We have carefully considered the rival contentions and perused the orders of the lower authorities. During the year assessee has credited to the profit and loss account of sum of Rs.10,15,81,117/- being write back of provision of bad and doubtful debts. Assessee created the above provision from A.Y. 2003-04 to 2009-10. At the time when the provision was created, the assessee has disallowed the same in all the assessment year which is substantiated by filing the computation of total income for all these years. The learned Assessing Officer in the remand report also agreed with the above finding of the fact. The above provision for doubtful debts has been written back during this year. Naturally, this amount has not been claimed as deduction in the year in which the provision has....
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....assessee was of the view that MAT credit arises directly out of payment of minimum alternative tax. The MAT is an item of current tax which is specifically covered within clause (a) of explanation 1 to Section 115JB (2) of the Act. Thus, the claim of the assessee is that the amount of income tax paid or payable required to be added to the book profit is always under a MAT credit. 037. We find that identical view has been taken by the coordinate Bench in case of ACIT vs. JK paper Ltd in ITA No.2156/Ahd/2013 for A.Y. 2008-09,para no.23 of the order covers the issue in favour of the assessee. We also find that whenever a provision of current tax is required to be made in the profit and loss account it has to be net of MAT credit available to the assessee. Accordingly, the separate adjustment of MAT credit cannot be made and added to the book profit. Accordingly, the adjustment made by the learned Assessing Officer and confirmed by the learned CIT (A) is not correct. Ground no.11 of the appeal is allowed. 038. As per ground no.12, Rs.2 lacs added by the learned Assessing Officer being provision for wealth tax to the book profit u/s 115JB of the Act. Claim of the assessee is that ....
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....Departmental Representative vehemently supported the order of the lower authorities. 043. We have carefully considered the rival contentions and perused the orders of the lower authorities. On careful consideration of note no.18 to the annual accounts which shows that excise duty on sales amounting to Rs.1,322 lac has been reduced from sales in profit and loss account and excise duty on increased and decreased in stock amounting to Rs.29.32 lacs has been considered as in the profit and loss account. At page no.113, the assessee has also shown that difference of excise duty was arising out of duty included in opening stock as well as closing stock. At page no.114 and 115 of the Paper Book the assessee has also demonstrated that whatever is not paid before due date of filing of return of income, it is offered for disallowance. We find that addition is not correctly made for the reason that it is not double deduction as stated by the learned Assessing Officer. Accordingly, ground no.13 of the appeal is allowed. 044. Ground number 14 of the appeal is with respect to disallowance of interest expenditure of Rs. 3,060,000/- on account of interest attributable to the loans to subsidi....
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....verted its interest-bearing funds for giving advance to its subsidiaries free of interest. Accordingly, respectfully following the decision of the coordinate bench in assessee's own case, we allow ground number 14 of the appeal and direct the learned law authorities to delete the disallowance of Rs. 3,060,000. 048. Thus, appeal of the assessee is partly allowed. 049. Now we come to the appeal of theld. AO . The Ground No. 1 & 2 are related to the disallowance of prior period expenditure. The ld. AO noticed that assessee has claimed an amount of Rs. 1,41,51,738/- as gross prior period expenses despite assessee following mercantile system of accounting. The AO questioned the assessee that why the above amount should not be disallowed. The claim of the assessee is that the above expenditure tough related to prior years have been debited, but this expenditure is accounted in this year due to non-receipt of invoices from the suppliers. Assessee also stated that if the same is not allowed in this year it should be allowed in the year to which at pertains to. The ld. AO held that assessee following mercantile system of accounting cannot book the expenses in the like manner therefore....
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.... confirmed the disallowance. The assessee is not appeal in the confirmation of disallowance on above expenditure for this year. 055. However, both the parties are in appeal before us contesting the direction of the ld.CIT(A) to the ld. AO to verify the claim of the assessee and allow it in the year to which the expenses pertain to. Therefore, we need to decide the issue whether the direction of ld.CIT(A) is correct or not. According to, assessee it is correct and according to the AO it is incorrect. 056. Identical issue arose in the case of the assessee ITA No. 5630/MUM/1991 for A.Y. 1987-88 and ITA No. 3540/MUM/1994 in A.Y. 1990-91 dated 12.09.2000. The Para No. 5 deals with this issue where an expenditure of Rs.3,13,381/- was an expenditure relating to earlier years, disallowed by the ld.AO on the ground that assessee follows the mercantile system of accounting, CIT(A) confirmed the same in Para No. 7. The facts clearly shows that assessee made claimed of expenditure for A.Y. 1986-87 but same was disallowed on the ground that no entries were made in the books of account for that year. Assessee also made the claimed in A.Y. 1987-88. The ITAT held that if assessee gives up th....
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..... 059. Accordingly for AY 2010-11 appeal of the assessee as well as of theld. AO are partly allowed. AY 2011-12 ITA No 5432 / Mum/2017 (by Ld. AO) & ITA No 5473 / Mum/ 2017 ( By Assessee) 060. Now we come to the appeal of the assessee and the learned assessing officer for assessment year 2011 - 12. Both the parties confirmed that the identical grounds are raised in their respective appeal. Their arguments are also similar. Both of them confirmed that there is no change in the facts and circumstances of the case compared to the assessment year 2010 - 11 of the impugned assessment year i.e., 2011 - 12. 061. For the impugned assessment year the assessee filed its return of income on 30/9/2011, returning total income of Rs. 201,156,899/- as per the normal computation of income and u/s 115JB of Rs 180,362,036/-. The income was assessed u/s 143 (3) of the income tax act, 1961 by order dated 28th of March 2014 wherein the total income of the assessee is determined at Rs 26,95,44,811/- as per the normal computation of income, whereas the book profit u/s 115 JB was also increased by disallowance u/s 14 A, and provision of wealth tax as well as excess provision of taxati....
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.... Accordingly ground numbers 5 - 8 are allowed to the above extent. 067. Ground number 9 is with respect to the disallowance u/s 14 A, as per rule 8D made by the learned assessing officer and in the normal computation of total income was once again added to the book profit computed by the assessee u/s 115 JB of the act. The identical issue arose in the case of the assessee as per ground number 9 of the appeal for assessment year 2010 - 11 wherein we following the decision of the Honourable High Court's and special bench has deleted the above addition. For the similar reasons we also allow ground number 9 of the appeal of the assessee. 068. Ground number 10 of the appeal is with respect to the addition in respect of the provision for wealth tax while computing the book profit u/s 115 JB of the income tax act of Rs 3 lakhs. The identical issue arose in the case of the assessee for assessment year 2010 - 11 in ground number 10 where the wealth tax provisions made by the assessee have been added to the book profit of the assessee holding that it is part of the tax provisions. While deciding that ground We have directed the learned assessing officer to delete the addition of wealth....
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....tion in respect of prior period expenses in the year in which expenses debited to the profit and loss account should be allowed. The appellant has submitted that prior period expenses ought to be allowed as deduction in the year in which the said expenses debited to the profit and loss account, relying on the decision of the coordinate bench in assessee's own case for assessment year 87 - 88 and 1990 - 91. The identical issue was decided by us in the appeal of the assessee for assessment year 2010 - 11 where we have rejected the above argument and dismissed the additional ground. For the similar reasons we dismiss this ground of appeal. 073. Accordingly appeal of the assessee in ITA No 5473/Mum/2017 for AY 2011-12 is partly allowed. 074. Now we come to the appeal of the learned assessing officer in ITA number 5432/M/2017 for assessment year 2011 - 12. 075. The ground number 1 and 2 of the appeal of the assessee is with respect to the disallowance of prior period expenses of Rs 105,25,417/- wherein the learned CIT - A, has directed the learned assessing officer to verify the claim of the assessee and allow the deduction of these prior period expenses in year in which it per....
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....as in earlier year on 3/05/2017. The assessee is aggrieved with that and has preferred this appeal in ITA number 5474/M/2017. 082. Both the parties confirmed that the grounds in the appeal of the assessee are identical to the grounds raised by the assessee for assessment 10 - 11 and further there is no change in the facts and circumstances of the case. 083. Ground number 1 - 4 are with respect to the addition of interest cost to the capital work in progress and consequently disallowance of interest expenditure, these grounds are identical to the grounds of appeal raised by the assessee for assessment year 2010 - 11. For assessment year 2010 - 11, While deciding ground number one of the appeal of the assessee, we have directed the learned lower authorities to delete the above disallowance. For the similar reasons, we direct the lower authorities to delete the disallowance. Accordingly ground number 1 is allowed. Ground number 2 - 4 of the appeal being alternative claims of the assessee are not required to be adjudicated hence dismissed. 084. Ground number 5 - 8 of the appeal is with respect to the disallowance u/s 14 A of the act applying the provisions of rule 8D. Assessme....
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....sment year 2010 - 11. Similarly, applying those reasons, we direct the learned assessing officer to delete the above disallowance. Accordingly ground number 12 of the appeal is allowed. 089. The assessee has raised 2 additional grounds of appeal. Stop ground number one is with respect to deduction in respect of education cess paid. Assessee did not press this ground. In view of the retrospective amendment as per the Finance act 2022, therefore same is dismissed. 090. Ground number 2 is with respect to the deduction in respect of prior period expenses disallowed in assessment year 2010 - 11, if those are pertaining to this year, same should be allowed to the assessee. The assessee is relying on the decision in favour of the assessee in his own case for assessment year 1987 - 88 and 1990 - 91. While deciding the appeal of the assessee for assessment year 2010 - 11, we have dismissed this ground of appeal. Accordingly, this ground is also dismissed. 091. Accordingly, the appeal of the assessee in ITA number 5474/M/2017is partly allowed. Assessment year 2013 - 14 ITA number 914/M/2018 (by Assessee ) 092. Now we come to the appeal of the assessee for assessment year 20....
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.... to the profit and loss account amounting to Rs. 30,33,700/-. Identical issue arose in the case of the assessee for assessment year 2000 - 11. Wherein we have found that the assessee has disallowed the sum of excise duty not paid before the due date of filing of the return of income and the above sum is not double deduction. Therefore, for the similar reasons, we direct the learned assessing officer to delete the addition of Rs. 30,33,700 on account of excise duty debited to the profit and loss account. Ground number 3 of the appeal of the assessee is allowed. 098. Ground number 4 of the appeal of the assessee is with respect to the confirmation of the disallowance of sum of Rs. 91,80,000 out of interest paid attributable to the loan to a subsidiary. This issue is identical to the ground of appeal raised in the case of appeal for assessment year 2010 - 11 wherein we have deleted the above addition. For the similar reasons, we direct the learned AO to delete the disallowance and, accordingly allow ground number 4 of the appeal. 099. In the result, appeal filed by the assessee for assessment year 2013 - 14 is partly allowed. Assessment year 2014 - 15 ITA number 915/M/2018....
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....umber 2 of the appeal of the assessee is allowed. 0105. Grounds number three of the appeal of the assessee with respect to the disallowance of interest of Rs. 769315/- out of interest paid attributable to interest free loan given to subsidiary. we find that this ground is identical to ground number 14 of the appeal in the case of the assessee for assessment year 2010 - 11 wherein we have deleted the disallowance made by the learned assessing officer for the reason that assessee has higher non-interestbearing fonts available with it then the amount of advance given to the subsidiary company. In view of this, ground number 3 of the appeal of the assessee is allowed. 0106. In the result appeal of the assessee in ITA number 915/MU M/2018 for assessment year 2014 - 15 is allowed. Assessment year 2015 - 16 IT number 6444/M/2018 0107. Assessee has filed above appeal against the appellate order passed by the Commissioner of income tax appeals - 54, Mumbai for assessment year 2015 - 16 dated 28/8/2018. 0108. Assessee filed its return of income on 30/9/2015 declaring income of Rs. 343,770,588/- under normal provisions and Rs. 475,841,812 as book profit under section 115 JB ....