TaxTMI 
TaxTMI 
2023 (7) TMI 1378
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....3-14. 3. The Grounds of Appeal raised by the Assessee in ITA No. 281/Ahd/2018 for A.Y. 2013-14 reads as under: 1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has held to consider the interest on loans raised by erstwhile GEB for the purpose of disallowance under section 14A of the IT Act, 1961. It is submitted that the disallowance is uncalled for and be directed to be deleted. 1.1 The learned Commissioner of Income Tax (Appeals) further erred in law and facts has held that in the event the disallowance under section 14A of the Act computed as per the directions comes out to be lesser than the dividend income, then such dividend income shall be treated as taxable income. 2.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts has set aside the additions of 1,08,81,663/- being Guarantee Fees paid to the Government of Gujarat in consideration of it issuing the guarantee for various unsecured loans with the direction to re-verify the claim despite the fact that the documents establishing the facts were submitted at the time of appeal hearing. 3.0 The learned Commissioner of Income Tax (Ap....
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.... 5. Aggrieved against the assessment order, the assessee filed an appeal before Ld. CIT(A). Regarding the first issue of disallowance u/s. 14A, the Ld. CIT(A) observed as under: ".....5.3.1. In the current assessment year, the appellant has claimed to have paid 52.36 crores as interest on working capital. There is no fresh investment during the year under consideration. Hence, the AO is directed to recompute the disallowance u/s 14A as per Rule 8D according to the following directions: a) The interest paid on working capital borrowing of Rs. 52.36 crores will not be considered for making disallowance out of interest expenses. b) The investment made in equity share of subsidiary companies of Rs.1061.61 crores during F.Y. 2008-09, 1280.28 crores during F.Y. 2009-10, 450.21 crores during F.Y. 2010-11 and 308.2 crores during F.Y. 2011-12 will not be considered for making disallowance out of interest expenses but the same will be considered for making disallowance out of administrative expenses. The appellant gets part relief accordingly. c) If the disallowance u/s 14A r.w.r. 8D computed in view of above directions comes to less than the dividend inco....
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.......19. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, there is no ambiguity that the Learned CIT (A) has decided the issue on hand after relying on the order of his predecessor for the Assessment Years 2008-09 which was also subsequently upheld by the ITAT in ITA No. 899/AHD/2012 vide order dated 22nd June 2016. The relevant finding of the ITAT reads as under: "38. We have heard the rival contentions and perused the material on record and gone through the decision referred and relied upon by both the parties. Through this ground Revenue has challenged the action of ld. CIT(A) deleting the disallowance of guarantee fees at Rs.4.76 crores. 39. We observe that ld. AR has referred and relied on the decision of the co-ordinate bench in the case of Gujarat Energy Transmission Corpn. Ltd. (supra), wherein similar issue regarding the claim of guarantee fees paid to Government of Gujarat has been dealt with by the Tribunal as to whether the guarantee fees is an expenditure of capital in nature or revenue in nature and has observed as under :- 35. We find that the Tribunal in its....
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....vantage or collateral benefit by making such payment to the GOG. In view of the totality of the circumstances, I am of the opinion that the AO was not justified in treating the payment of guarantee commission (Rs.8,39,04,550/-) as capital in nature. The addition is directed to be deleted. 6.2. I have considered the submissions of the ld.AR and the facts of the case. The jurisdictional Bench of ITAT has held in the case of Shri Rama Multi Tech vs. ACIT, 92 TTJ 568, that in determining the nature of expenditure incurred for obtaining loan, it is irrelevant to consider the purpose of loan. The amount spent on stamp duty, lawyer fees, etc. for obtaining loan secured by charge on its fixed assets is a revenue expenditure, because the transactions were entered into directly to facilitate the business of the company and payment of consultancy charges was made on ground of commercial expediency. In India Cements Ltd. vs. CIT, 60 ITR 52, the Supreme Court had also held that the expenditure incurred for securing the use of money for a certain period was revenue expenditure. In the instant case, the assessee has secured the loan by creating a charge (hypothecation of its assets). Hence the ra....
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....the Learned CIT (A) and the ITAT for the Assessment Year 2008-09 as discussed above is that there was no enduring benefit accrued to the assessee out of guarantee fees paid by it to the government of Gujarat. As such the finding of the ITAT has to be seen in the context of the ruling of the AO and the Learned CIT (A) for the Assessment Year 2008-09. In fact, the Learned CIT(A) for the assessment Year 2008-09 held that there was no benefit accrued to the assessee which is in the enduring nature but directed the AO to verify whether such guarantee fees relates to the capital work in progress and if that be so, the same needs to be capitalized. 22. However, the assessee did not prefer any appeal against the order of the Learned CIT(A) for the Assessment Year 2008-09. In other words, the assessee was not aggrieved by the direction of the Learned CIT (A) to verify the claim of the assessee whether such guarantee fees relates to the capital work in progress for the Assessment Year 2008-09. But the assessee for the year under consideration has challenged the direction of the Learned CIT (A) to verify whether such guarantee fee relates to the capital working progress. As the asses....
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....cal issue disposed of the ground by remitting the same to the file of the Ld. AO to adjudicate de novo with the following observation: "12. During the course of assessment, the Assessing Officer noticed that assessee company has shown prior period income of Rs. 130.05 lacs after adjustment of prior period expenses for Rs. 408.01 lacs. On query, the assessee has explained that all expenditure booked under this head crystallized in the hands of the company only during the year under consideration therefore same expenditure cannot be added back. The Assessing Officer has not accepted the submission of the assessee stating that assessee was following mercantile system of accounting in which the expenses related to the prior period were not an allowable expenses. Therefore, the prior period expenses amounting to Rs. 408.01 lacs was disallowed and added to the total income of the assessee. 13. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee stating that assessee has not made any submission showing that the prior period income was crystallized in the previous year relevant to the assessment year under con....
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....urnishing relevant details before the revenue authorities. The bonafides of the Assessee is also augmented by the facts that the Assessee has reported staggering carry forward losses in its returned income. Thus, there is no immediate tax advantage accrued to the assessee by the claim of impugned prior period expenses per se. We therefore deem it expedient to restore the issue back to the file of AO for examining the issue de novo after verifying facts as may be considered necessary and expedient in accordance with law. The AO shall bear in mind the ratio laid down by the Hon'ble Gujarat High Court in the case of Adani Enterprises Ltd. (supra) while adjudicating the issue. Needless to say, reasonable opportunity shall be provided to the assessee while adjudicating the issue. Hence, all the contentions of the assessee are kept open. The issue raised as per Ground No.4 is thus set aside to the file of AO in terms of directions noted above. As a result, Ground No.4 is allowed for statistical purposes." In the light of the decision of Co-ordinate Bench as cited above, we restore this issue to the file of Assessing Officer for deciding de-novo after verification the facts a....
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.... the disallowance made by the Assessing Officer was as per the formula given in Rule-8D for deriving proportionate interest disallowance. In the rule there is nowhere mentioned to reduce the interest portion which is related to business purposes. In Rule 8D the formula is given for deriving proportionate interest disallowance and the AO had already had made computation of disallowance u/s.14A read with rule 8D accordingly. 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow the Guarantee fee after verification disregarding the applicable statutory provisions contained under section 37 of the I.T. Act which do not allow any expenditure of capital nature.". 3. "On the facts and in the circumstances of the case and in law, without following the ratio taken earlier in the case of M/s. Dakshin Gujrat Vij Co. Ltd. and other subsidiary companies of the assessee, the ld. CIT(A) erred in deleting the addition of Rs. 3750 lacs being 15% of capital grant received by the assessee which was neither reduced from the cost of capital assets nor offered portion of it as revenue receipts as treatments of....
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.... Ld. Counsel that the assessee has not received any fresh grant from Government of Gujarat during the Financial Year, hence the assessee has not offered any income on account of receipt of grant in the Profit and Loss Account. However the Ld. A.O. without appreciating the vital fact of non-receipt of grant made an addition on the wrong premises that the assessee should have offered 15% out of total grant of 250 crores which works out to Rs. 37.50 crores and added to the total income of the assessee. 14.1. Ld. Counsel further submitted that this issue is now in settled in favour of the assessee by the Hon'ble High Court of Gujarat in assessee's own case for A.Y. 2010-11 filed by the Revenue in Tax Appeal No. 63 of 2020 vide judgment dated 17-02- 2020 wherein it was held as follows: "....9 So far as question No.2[c] proposed by the Revenue is concerned, the Assessing Officer in the assessment order has stated that the assessee has not received any grant of subsidy during the year under consideration but the subsidy or grant which was received in the earlier years was to be considered as income or to be reduced from the cost of assets. Therefore, the Assessing Officer esti....
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....ed at by the CIT(A) as well as the Tribunal as the assessee did not acquire any fixed assets on which depreciation has been claimed, and therefore, grants cannot be reduced from cost of fixed asset of the assessee. Therefore, appeal stands dismissed qua question No.2[c] proposed by the Revenue. 14.2. Respectfully following the Jurisdictional High Court judgment, we hereby delete the addition made by the Assessing Officer and the Grounds raised by the Revenue is hereby rejected. 15. Ground No. 4 namely treatment of interest income of Rs. 62.67 lacs and miscellaneous income of Rs. 270.83 lacs as "business income" instead of "income from other sources". The Ld. Counsel submitted that his issue is also covered against the Revenue's appeal before the High Court of Gujarat in Tax Appeal No. 63 of 2020 wherein it was held as follows: 13 With regard to question No.2[d], the Assessing Officer noticed that as per Schedule 14, the assessee has shown other income consisting of interest on loan and advances, incentives from CPSU, etc. The Assessing Officer was of the view that this income was to be assessed as income from other sources instead of business income shown by the asse....
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.... while computing book profit under Section 115JB of the Act, 1961. The Assessing Officer while computing taxable income under Section 115JB of the Act, 1961 also added addition made under Section 14A of the Act, 1961 to the book profit. 5 The assessee being aggrieved by the addition made by the Assessing Officer under Section 14A while computing book profit of the assessee under Section 115JB of the Act, 1961 preferred an appeal before the CIT(A). The CIT(A), however, deleted addition made in the book profit on the ground that no addition could have been made in view of the decision of this Court in the case of Alembic Ltd (Tax Appeal No.1249 of 2014) and the provisions of sub - sections (2) and (3) of Section 14A cannot be made applicable to clause (f) of Explanation to Section 115JB of the Act, 1961. 6 The Revenue, therefore, went in appeal before the Tribunal and the Tribunal relying upon the decision of the Special Bench of the ITAT in the case of ACIT vs. Vineet Investment vide 165 ITD 27 (Delhi) and the decision in Alembic Ltd upheld the order passed by the CIT(A). 7 The issue as to whether the addition made under Section 14A of the Act, 1961 while ....
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....ld that DRP is not bound by the ratio laid down by the Special Bench. The discussion made by the DRP on this issue in the assessment year 201314 reads as under: "10.3 In the case of Viraj Profiles Ltd. [2015] 64 taxmann.com 52 (Mum Trib), the Hon'ble Bench has elaborately discussed the issue and held that the disallowance is liable to be calculated as per Rule 8 D of the Rules. After discussing the decisions which have also been relied on by the appellant, the Hon'ble Bench has concluded that; "In view of our foregoing discussion, we find no infirmity with the orders of the AO and we hold that the AO has rightly disallowed the expenditure of Rs.73,07,018/by invoking the provisions of Section 14A of the Act read with the Rule 8D of Income Tax Rules, 1962 for computing book profit u/s. 115JB(2) of the Act read with clause (f) to Explanation 1 to clause 115JB(2) of the Act. We, therefore, set aside the orders of the CIT(A) and restore the orders of the AO. We order accordingly. In the case of CIT (Central-II) Vs. Goetze (India) Limited, the Hon'ble Delhi High Court has in ITA No.1179/2010 vide order dated 09.12.2013, held that the disallowance u/s.14A is to be taken into cons....
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....wo decisions of the Hon'ble Delhi High Court diagonally opposite to each other. One referred by the ld. DRP also in the present case, rendered in the case of CIR Vs. Goetze India Ltd. (Supra) and other in the case of Pr. CIT Vs. Bhushan Steel. ITAT, Special Bench has reproduced both these orders in Vireet Investment P. Ltd. (supra) and thereafter it considered as to which decision ought to be followed by a subordinate authority. The department advanced an argument that in the case of Bhushan Steel, Hon'ble Delhi High Court failed to consider subsequent decision of CIT Vs. Goetze India Ltd. (supra). However, the Tribunal after placing reliance upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) and other decisions has held that it is incumbent upon it follow the decision of Hon'ble Delhi High Court in the case of Bhushan Steel. In this case, Hon'ble Delhi High Court has held as under: " However, Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under: " ITA 593/2015 PR. CIT &nbs....
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....ction 14A is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profit? 22. The Hon'ble Gujarat High Court has replied this question as under: 7. So far as issue Nos.(iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income tax-I v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat) Where this court has held in paragraph Nos.6 to 6.5 this court has observed as under: 6. So far as the fourth question is concerned, it pertains to addition of Rs.1,14,43,040/under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the said provision of Section 115JB(2) of the Act added the said amount considering that any amount of expenditure relatable to the income exempted under Section 10 of the Act shall need to be added in the profit shown in the 'Profit and Loss Account'. When the matter travelled to the CIT (Appeals), since it deleted the add....
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.... the circumstances of the case, and in law, the ITAT is justified in deleting the addition of Rs.78,84,387/- under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd. Vs. CIT (2009) 32 SOT 101 (Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case?" ...... 4. So far as question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. Vs. DCIT in ITA No.3850/Mum/2010 to held that an amount disallowed under section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue's Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law. 24. Respectfully following the above decision, we....