TaxTMI 
TaxTMI 
2024 (2) TMI 278
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.... which is sine qua non for invoking Rule 8D, the consequential disallowance is illegal and arbitrary. (iii) That the entire investment being out of interest free funds and in absence of incurring of any expenses in relation of exempt income or any nexus between borrowed funds and investments yielding exempt income, the disallowance of Rs. 81,01,633/- is on mechanical basis and not sustainable under the law. 2(i) That on facts and circumstances of the case, the Ld. CIT(A) has grossly erred in confirming addition of Rs. 1,52,45,000/- u/s 69 on the alleged ground of unexplained investment in total disregard to facts and submissions of the appellant. (ii) That the addition being based on dumb document having no evidentiary value, the upholding of addition was illegal and not sustainable on facts and under the law. (iii) That the seized annexure being an uncorroborated document and assessing officer having failed to establish the allegation of cash payment with some independent material, the addition u/s 69 is misconceived and without any basis. (iv) That there being no case of any unrecorded cash payment or unexplained investment, the impugned addition u/s 69 is contrary to f....
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....ification. (iii) That education cess paid during the year being an eligible deduction u/s 37(1) of the Act and also liable to adjusted from book profit u/s 115JB, the rejection of claim is illegal and not in accordance with law. (iv) That the decision of Ld. CIT(A) is contrary to settled legal position and scheme of the Income tax Act. 3. The orders passed by lower authorities are not justified on facts and are bad in law. 4. That the appellant craves leaves to add, alter, amend, forgot any of the grounds of appeal at the time of hearing." ITA No.1928/Del/2020 for A.Y. 2014-15 (Revenue) "1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in restricting the addition to Rs. 81,01,633/- (to the extent of dividend income) as against Rs. 6,10,36,000/-, made u/s 14A by the AO, without appreciating the detailed reasons given in the assessment order. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 18,96,23,522/- (incentive under FAS/ FMS of Rs. 18,96,23,522/- as capital receipt,) without appreciating the detailed reasons given in the asse....
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.... 4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,68,18,318/- (interest subsidy under RIPS of Rs. 2,68,18,318/- as capital receipt,) without appreciating the detailed reasons given in the assessment order. On similar issue in the case of M/s Nitin Spinners Ltd., Department has filed SLP in Hon'ble Supreme Court. 5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 6,74,06,326/- (subsidy under SHIS of Rs. 6,74,06,326/- as capital receipt,) without appreciating the detailed reasons given in the assessment order. On similar issue in the case of M/s Nitin Spinners Ltd., Department has filed SLP in Hon'ble Supreme Court. 6. That the order of Ld. CIT(A) is erroneous and is not tenable on facts and in law. 7. That the grounds of appeal are without prejudice to each other. The appellant craves leave to add, alter or forgo any ground(s) of appeal either before or at the time of the hearing of the appeal." 2. As the issues involved in the captioned appeals of the Assessee and the Revenue are identical for the A.Y....
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....ax Act, 1961. 5. Aggrieved by the assessment order dated 30.12.2018, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 17/09/2020 upheld the disallowance to the extent of Rs. 81,01,633/- u/s 14A read with Rule 8D of the Income Tax Rules, 1962. Further confirmed the addition of Rs. 1,52,45,000/- made u/s 69 of the Act on account of unexplained investment. Further, rejected the claim of education cess of Rs. 81,43,988/-. As against the above said sustained additions/disallowance, the assessee preferred appeal in ITA No.145/Del/2021 and as against the deletion of the partial additions, the Department of Revenue preferred an appeal in ITA 1929/Del/2020 on the grounds mentioned above. 6. Ground No.1 of both Assessees and Revenue are regarding disallowance made u/s 14A r.w.Rule-8D of the Act. Facts in brief are that the assessee made investment in various group of Companies and received exempt income of Rs. 81,01,633/- as dividend. The assessee claimed to have not made any disallowance as no expenditure was incurred to earn the said income. The Ld. AO invoked the provisions of section 14A r.w.s 8D(2) of Income Tax Rules by making disallowance under Rule 8....
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....ance made by the AO is hereby deleted. Further, we direct the AO to compute the disallowance u/s 14A r.w.Rule-8D(2)(iii) of the Rules by considering only investment from each exempt income is earned. Accordingly, ground No.1 of the Revenue and the assessee are disposed off. 11. The Ground No.2 of Assessee's appeal, is regarding addition of Rs. 1,52,45,000/- made on account of unexplained investment. Brief facts are that the assessee had purchased land during the captioned assessment years. A search was conducted on the assessee on 04/08/2016, wherein an estimated working was seized from the Laptop of the employee of the assessee containing details of certain land which was registered in the name of the assessee. The assessee was asked by the A.O to file details of land purchased along with the copy of the registered deed, proof of payment along with source of investment and charges paid for registration of the plot. The assessee made reply as under: "The details of land purchased along with the statement of account and copies of registry towards land purchased for Kanyakheri Unit are enclosed herewith marked as Annexures 1.11 to 1.11 here we would also like to submit that the Co....
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.... which clearly evident that no cash payment is made in purchase of land. 10.8 The investigation officer/learned assessing officer has not made enquiry from the seller of the land/registering authority to substantiate that cash payment is made in transferring the land. 10.9 In light of above submission we request your goodself that the additions made of Rs. 1,52,45,000/- on account of cash payment in purchase of land is purely on the wrong interpretation of seized information, therefore, may we request your goodself to delete the same." 13. The Ld. Counsel for the assessee submitted that, the addition has been made based on the loose papers which cannot be sustained under the law in the absence of any corroborative evidence. Further submitted that the document relied upon by the Department was not even a part of regular books of account, but merely a loose working retrieved from a third person's laptop. Thus, in the absence of corroborative evidence to prove the authenticity of the seized material, the AO cannot make additions in assessee's income on the basis of said loose paper. The assessee has relied on the following judicial pronouncements:- i) CBI v. V. C. Shukla & Ors.....
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....arwal has accepted the said inference in his statement recorded during the search. The Investigating Officer had not found any evidence in support of the said inference that the payment were made in cash to acquire the land. There is no confirmation from any of the sellers or the employees in their statement recorded u/s 132(4) of the Act during the search proceedings to substantiate that the cash payment was made to acquire the land by the assessee. The investigation does not reveal any source generation of cash to substantiate the allegation of cash payment. On the contrary, as per the registered sale deed of the land depicts that no payment has been made in cash. At no point of time, Investigation Officer/AO have made any enquiry from the seller of the land, or registering authority to substantiate that the cash payment has been made in transferring the land. 18. It is well settled law that the dumb documents having no evidentiary value cannot be taken as sole basis for determination of undisclosed income of the assessee. If the Department of Revenue wants to make use of dumb documents, then the onus on the Revenue Department to collect cogent corroborative evidences. The Hon'b....
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....n 40(a)(ii) of the Act, and is legally allowable as a deduction u/s 37(1) of the IT Act. The appellant assessee has also relied on the decision Hon'ble Rajasthan High Court in Chambal Fertilizers Ltd. reported in 107 taxmann.com 484 (Raj.) and decision of the Hon'ble Bombay High Court in Sesa Goa Ltd. [423 ITR 426 (Bom.)] in which both have concluded that it is not covered and hence is allowable as deduction u/s 37(1) of the Act. 9.2. With respect to the above decision, attention is also drawn to the latest decision of jurisdictional Hon'ble ITAT of Kolkata in the case of 'Kanoria Chemicals & Industries Ltd' ITA No, 2184/Kol/2018 (TS-1129- ITAT 2021 Kol) which has held that the "Cess" is not to be allowed as deduction. The relevant portion of the judgment is reproduced as below: "19. However, with due respect to the decisions of the Hon'ble Bombay High Court and Hon'ble Rajasthan High Court and of co-ordinate Benches of this Tribunal, we find that the issue is squarely covered by the decision of the Hon 'ble Apex Court of the country in the case of "CIT Vs. K. Srinivasan" (1972) 83 ITR 346; wherein the following questions came for adjudication before the Hon'ble Apex Court:- " ....
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....ent of the Government to provide and finance universalized quality basic education. 23. A perusal of the aforesaid provisions of the Finance Act and Finance Act 2011 would show that it has been specifically provided that 'education cess' is an additional surcharge levied on the income-tax. Therefore, in the light of the decision of the Hon'ble Supreme Court in the case of "CIT Vs. K. Srinivasan" (supra) the additional surcharge is part of the income-tax. The aforesaid decision of the Hon'ble Apex Court and the provisions of Finance Act, 2004 and the relevant provisions of section 2(11) & (12) of the subsequent Finance Acts have not been brought into the knowledge of the Hon'ble High Courts in the cases of "Sesa Goa Ltd" & "Chambal Fertilisers" (supra). Since the decision of the Hon'ble Supreme Court prevails over that of the Hon'ble High Courts, therefore, respectfully following the decision of the Hon 'ble Supreme Court in the case of "CIT Vs. K Srinivasan" (supra), this issue is decided against the assessee. The additional ground of assessee's appeal is accordingly dismissed." 9.3. Moreover the explanation-3 to section 40(a)(ii) of the act has been amended by finance ....
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.... (2020) 116 Taxman.com 26 (Rajasthan held as under:- "As far as the question with regard to Focus Marketing Scheme was concerned, apparently the Central Government gave the subsidy to enhance Indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. The ITAT took note of judgment in Ponni Sugars & Chemicals Ltd. (supra) and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason." 24. The Judgment of the Hon'ble High Court of Rajasthan has also been affirmed by the Hon'ble Supreme Court wherein the SLP filed by the Department has been dismissed which is reported in 130 taxmann. Com 402(S.C). By respectfully following the ratio laid down by the Hon'ble High Court and the Hon'ble Supreme Court, we find no reason to entertain the Ground No. 2 of the Revenue as the same is devoid of merit, accordingly the Ground No. 2 of the Revenue is dismissed. 25. Ground No. 3 is regarding claim of interest subsidy under TUFFS as capital receipt in computing the ....
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....tion and subsidy was released under agreement dated 12-7-2005 with Small Industry Development Bank of India. The relevant clause of the agreement under which the subsidy was given is as under:- Para 8. to prevent mis-utilization of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a non interest bearing term loan by the Bank/Fis. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a prorate basis in terms of release of capital subsidy. There is no apparent or real financial loss to a borrower since the countervailing concession is extended to the loan amount." 7. In view of the above, the view taken in Sahney Steel & Press Works Ltd., could not be applied in the present case, as in said case the subsidy was given for running the business. For determining whether subsidy payment was 'revenue receipt' or 'capital receipt', character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applyin....