TaxTMI 
TaxTMI 
2016 (9) TMI 1684
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....ncome tax (Appeals), LTU erred in confirming the restriction of 1.25% of issue proceeds to 50% under the head fee paid to lead managers in connection with GDR and disallowing selling commission and 1.75% of issue proceeds. 2.1 The Commissioner of Income tax (Appeals), LTU ought to have appreciated that the selling commission and fee paid to the lead managers is at par with the underwriting commission/brokerage paid for the issuance of equity shares. Hence eligible for deduction u/s 35D(2)(c)(iv). 2.2 The basis to arrive at the disallowance amount as 50% of the 'Management and underwriting fees' is arbitrary and unjustified''. 3. The Brief facts of the case are that during the year relevant to the assessment year under consideration the assessee company claimed a sum of Rs.14.21 crore being Euro issue expenditure as revenue in nature. The Assessing Officer disallowed the share issue expenses against which the assessee filed an appeal before the first appellate authority. The Commissioner of Income Tax (Appeals) also partly confirmed the order of the Assessing Officer on this issue and certain expenses were allowed. Subsequently, the assessee as well as t....
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....le Madras High Court's decision in the case of CIT Vs. Ennar Steel Alloy Private Limited. (261 ITR 347). After hearing the appellant, the Assessing Officer has come to the conclusion that out of the claim of Rs.14,21,52,904 u/s 35D made by the assessee, the ld. Assessing Officer observed that only the following amounts are eligible for amortisation u/s 35D(2)(c)(iv) of the Act (i) Legal Fee = Rs.9,55,000/- (ii) Printing &Advertisement of offering circular/ prospectus = Rs.7,04,762/- (iii) Listing fee = Rs.100/- (iv) Underwriting Commission = Rs.2,71,54,138/- -------------------- Total =Rs.2,88,14,900/- --------------------- 1/10 of Rs.2,88,14,900/- = Rs.28,81,490/- The AO has worked out the above amount by following the directions of the ITAT, Chennai, which has in turn followed the decision of Hon'ble Madras High Court in the case of CIT v. Ennar Steel & Alloy P Ltd (261 ITR 347). While arriving at the Underwriting commission of Rs.2,71,54,138 (supra), the Assessing Officer has verified para 6 of the copy of the agreement of GDR issue which states as und....
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.... ITR 663 (Mad) T.C. (Appeals) Nos. 1253, 1254 & 1256 of 2005, dated 20th June, 2012, where the meaning of the "expansion" and "extension" was answered in favour of the assessee. The question raised before the High Court in the above case is as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in equating a proposal to 'expand' the capacity of production with 'extension' of industrial undertaking under section 35D of the Income-tax Act ?" The High Court has decided that ''expansion'' and ''extension'' mean the same. According to the Commissioner of Income-tax (Appeals), in the instant case, taking of business activity of TGSL is considered as extension of business by the assessee within the meaning of section 35D(1)(ii) of the Act and also relied on the judgment of Madhya Pradesh High Court in the case of Shree Synthetics Ltd vs. CIT 303 ITR 451 wherein held that expenditure incurred towards issue of debentures was in the nature of preliminary expenses falling u/s. 35D(1)(ii) and 35D(1) (ii) (c) and it is allowable as deduction in a manner provided u/s. 35D of the Act. 3.5 On the other hand, the ld. Depart....
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.... Section 350, particularly with reference to sub clause,(c)(iv) of sub section (2) of Section 35D, would be only those expenditure which are specifically mentioned: therein and nothing beyond. In the light of the decision of this Court referred to above, we reject .the reliance placed on the decision of the Madhya Pradesh High Court by the assessee, reported in [1986] 162 ITR 819 (Commissioner of Income Tax vs. Shree Synthetics Ltd). 4.2.1 From the chronology of events, it was noticed that the appellant has filed this appeal on 29.1.2010 much before the decision of the Madras High Court (supra) in appellant's own case which has pronounced its order on 20.6.2012., After the pronouncement of this order, most of the arguments raised before me have been .squarely covered and were answered by the Hon'ble Madras High Court. Now the issue to be answered by me is to see how far the claim of the expenses made by the appellant with regard to Euro Issue are fitting within the ambit of s. 35D(2)(c)(iv). To answer this question, the provisions of the Act u/s 350(2)(c)(iv) vis-a-vis the claim of expenditure of the appellant are reproduced as under: Expenditure heads use....
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.... the gross interest and rent of the profits for allowing deduction u/s. 80HHC of the Act. This factor to be considered after netting not the gross of the 90%. For this purpose he relied on the judgment of Supreme Court in the case of ACG Associated Capsules (P) Ltd vs. CIT 343 ITR 89. 4.1 On the other hand, the ld. Departmental Representative submitted that the only expenditure incurred to earn these income to be reduced from the gross rent or interest not the rent or interest have no nexus with this income. 4.2 We have heard both the parties, perused the material on record and judicial decision cited. The Supreme Court in the case of ACG Associated Capsules (P) Ltd (cited supra) wherein held that ninety per cent of not the gross rent or gross interest but only the interest or net rent, which had been included in the profits of business of the assessee as computed under the head ''Profits and gains of business or profession'', was to be deducted under clause (1) of Explanation (baa) to Sec. 80HHC for determining the profits of the business.'' In view of the above judgment 90% of the net interest which have been included in the profits of the business of the assessee under the....
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....sed return of income and cannot extend the same to filing of revised working submitted before the completion of TP assessment. The TPO should have determined the difference in Arm's length price only to the extent of the difference in excess of 5% and not the full difference. The ld. AR relied on the case law in the case of Development Consultants (P) Ltd v. DCIT[2008] 23 SOT 455. The ld. AR further submitted that the view taken by the ld. TPO and Assessing Officer that view taken by the TPO and AO that transaction means each transaction only and not transactions with AE as a whole has not been supported by any decisions and as such it has no legal sanction If the assessee discovers any omission or any wrong statement filed along with the Form 3CEB he may furnish, a revised working at any time before the completion of TP assessment and revision does not tantamount to non-filing of original form 3CEB. For this, ld. AR relied on the decisions of A.M. Tod Co. India (P) Ltd vs. ITO in ITA No. 492/Mum/ 2006 dated 24.06.2009 and DCIT vs. Quark Systems (P) Ltd (2010) 1 taxmann.com (Chd-ITAT) (SB). In the remand report, regarding this issue, the AO stated that the submission filed....
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....(3) of the Act and there is no specific time limit specified for filing revised form. The statutory form 3CEB is a report of Chartered Accountant furnished u/s. 92E relating to international transactions and specific domestic transactions based on the documents prescribed and maintained by the assessee in respect of international transactions. The Chartered Accountant report is based on the Audited books of accounts maintained by the assessee were the international transaction have been incorporated and are authenticated. The report of the Chartered Accountant cannot be ruled out and also factual position has to be considered to correct any mistake in calculating of Arms Length Price(ALP) for valuation, and it is evident that the revised form 3CEB includes the proper comparables in respect of vehicles, parts which are integral product of commercial vehicles. Though ld. Departmental Representative vehemently argued against filing of revised form 3CEB and limitation period, we consider the apparent facts, provisions of law, evidence and the action of TPO in rejecting the revised form 3CEB is not proper as factual comparables certified by the Chartered Accountant in Revised form 3CEB ....
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....ribunal, the ground raised by the assessee is dismissed. 7 The third ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance of depreciation restricted to 5% on residential buildings. 7.1 After hearing both the parties, this issue was considered by the Tribunal for the assessment year 2000-01 in ITA No. 2445/Mds/2005, vide order dated 27.09.2007 wherein it was held as under:- "6. We* have heard. the parties at length. The short controversy before us is that if the assessee has provided residential flats to its employees, then at what rate depreciation is to be allowed. The CIT(Appeals) has tried to interpret the circular by stating that the Board might have issued the said circular in the context of the employees' quarters built in the factory premises and not to the residential flats which. are away from the Factory. On the perusal of the CSDT Instructions/letter, we find that no such distinction is made. In our opinion, the Circular/letter issued ambiguous language and no second interpretation is required. We, therefore/hold that the AO was not justified in restricting the depreciation to 5% in re....
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....he question appropriately. In the above case, the Supreme Court has held that the expenditure paid to the ROC as filing fee for enhancement of capital base of company is capital in nature. In view of the above decision, the Commissioner of Income Tax (Appeals) uphold the disallowance made by the Assessing Officer. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 8.3 We heard both sides, perused the material on record and judicial decision cited. This issue came for consideration in following cases:- (i) CIT vs. South India Corpn. (Agencies) Ltd 290 ITR 217. (ii) CIT vs. First Leasing Co. of India Ltd 304 ITR 67. (iii) CIT vs. Secure Meters Ltd 321 ITR 611. In all these judgments wherein held that expenditure incurred on issue of debentures whether convertible or non convertible is allowable as Revenue expenditure. Being so, even foreign currency loan is subject to conversion into equity also, the issue expenses will be Revenue expenditure only in view of the above judgments. This ground raised by the assessee is allowed. 9. The fifth ground raised by the assessee is that the Commissione....
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.... the business. But if on the other hand the foreign currency is held as capital asset or as a fixed capital such profit or loss would be of capital nature". In this case, the foreign currency held is not directly linked with the plant and machinery. The mere intention to use the deposit for the purchase of capital asset in future will not make the deposits a capital asset. Moreso over, the interest paid by the assessee on the deposit amount is taken on revenue account. Hence, the entire gains on exchange fluctuation which has no nexus with the capital assets representing plant and machinery already existing, section 43A is not applicable and the entire gain should be treated as revenue receipt and added to the total income. Against this, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 9.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the facts of the case and the submissions of the ld.AR. and gone through the decisions relied on by the Id.AR and-the Assessing Officer. The assessee has reaped the gains out of the exchange fluctuation for the amount un utilized during the year. The ld. Commissioner of Income Tax ....
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....ent order stating that "The mere intention of the assessee to utilize the proceeds to future purchase of plant and machinery will not make the deposit a capital asset." From this point of view, the ld. Commissioner of Income Tax (Appeals) observed that the ld. Assessing Officer is right in bringing to tax the exchange gain treating it as revenue receipt. The ld. Commissioner of Income Tax (Appeals) is of the view that until the amounts are used for purchase of any capital asset, the nature Of the amount will remain as revenue only. The decision in the case of EID Parry Ltd (supra) relied on by the assessee is distinguishable in facts. In the case of EID Parry Ltd, the funds raised in UK where in fact utilized for the purchase of plant and machinery and only the balance amount was repatriated to India for a specific purpose at Ennore Unit, Tamilnadu for which the funds were raised. The decision therefore will not 'come to the rescue of the assessee. Even the decision of CIT vs. Woodward Governor India P Ltd (312 ITR 254) relied on by the assessee is also of no help to him. In this decision, the Supreme Court has allowed the loss arisen out of exchange fluctuation to be claimed a....
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...., this ground of the assessee is dismissed. 12. The next ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the levy of interest u/s. 220(2) of the Act Rs.27,39,108/-. 12.1 The ld. AR submitted that the assessee filed stay petition before Assessing Officer as such interest u/s. 220(2) of the Act cannot be charged. 12.2 On the other hand, the ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals). 12.3 We heard both the parties and perused the material on record. In our opinion filing of stay petition cannot disentitle the Department from charging interest u/s. 220(2) of the Act. Accordingly, we do not finding any merit in the argument of the ld. Authorised Representative. This ground of the assessee is dismissed. 13. In the result, the appeal of the assessee in ITA No. 2837/Mds/2014 of assessment year 2006-2007 is dismissed. 14. ITA No. 2838/Mds/2014 of assessment year 2007-2008:- The first ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance of balance 50% of additional depreciation in the current year in r....
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....s u/s. 32(1)(iia) of the Act for claim of additional depreciation and also provisions of law on carry forward. Since the asset was purchased during the second half of financial year 2004-05 and only 50% of depreciation was allowed and pleaded for carry forward of balance 50% to be claimed in the assessment year 2006-07. On perusal of the judicial decisions and objections of Finance Minister speech Additional depreciation has to be allowed only in the case of new plant and machinery and not WDV value on subsequent years. The assessee also relied on the decision Cosmos Films Ltd (supra) where the Tribunal has allowed the claim of assessee for 50% of additional depreciation u/s. 32(i)(iia) in respect of new Plant & Machinery installed at the new eligible industrial undertaking where Plant & Machinery were put to use for less than 180 days in the year of installation and the assessee had claimed only 50% of the additional depreciation and the balance amount was claimed in the next year. Respectfully following the Tribunal decisions, we direct the Assessing Officer to allow additional depreciation claimed by the assessee. This ground of the assessee is allowed''. Accordingly, the gro....
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....e NOG and 'Non-Schedule Operator Passenger License (NSOP) and carrying out the air service business from 2008-09 and started earning revenue from the aircraft as well: The AO rejected the reply of the assessee for the following reasons:- 1) It has been observed from the official website of Director General of Civil Aviation that the assessee has received the licence as NOli-Schedule Aircraft Operator with effect from 02.04.2009. The type of aircraft passed by the assessee is Falcon 2000 with the seat capacity of ten (10) and the said aircraft has been registered under the passenger category. 2) As per the Aircraft Rule 1937, Part-IV Rule 30, the assessee has to register its aircraft in India even though the same has been used for the purpose of its personal or sole corporate purpose. 3) As per the Aircraft Rule 1937, Part-IX Rule 67, the assessee has to maintain the following Log Books. For better clarity, the Rule 67 of the Aircraft Rule 1937 is reproduced as under:- (a) a journey log book; (b) an aircraft log book; (c) an engine log book for each engine installed in the aircraft; (d) a propeller ....
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....ithout the permission and specific licence issued by the Director General of Civil Aviation (DGCA). In the instant case, the AO has observed that the assessee who has owned the aircraft Falcon 2000 with the seating capacity of 10, has received the licence from the DGCA as non-schedule aircraft operator w.e.f. 2.4.2009 relevant to F.Y. 0910. Since the assessee is not having valid licence to operate the aircraft in the financial year relevant to A.Y. 07-08, it cannot claim depreciation on such aircraft. There is no comment from the assessee side to deny this fact. In view of this, the ld. Commissioner of Income Tax (Appeals) confirmed the disallowance made by the Assessing Officer and dismissed the ground of the assessee. Aggrieved by the order, the assessee filed an appeal before Tribunal. 17.3 Before us, the ld. Authorised Representative submitted that during the assessment year, the assessee company has procured an aircraft and put to use wholly and exclusively for the purpose of its business. The aircraft is being used by the assessee's senior management personnel for making the trips relating to its business and the assessee's customers (including prospective customers). ....
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.... to disallowance u/s. 14A of the Act. 19.2. We heard the rival submissions, perused the material on record and judicial decisions cited. Similar issue was considered by the Tribunal in ITA No. 2086/Mds/2010, for assessment year 2006-07, dated 16.02.2016 in para 8.4 as under:- "8.4 We heard the rival submissions and perused the material on record and judicial decisions cited. The ld. Authorised Representative submitted that the assessee is in receipt of exempted income and no expenditure has been incurred for earning income. In assessee's own case the Co-ordinate Bench of Tribunal has considered 2% disallowance of exempted income u/s. 14A of the Act. The action of the Assessing Officer applying Rule 8D is not correct as the provisions of Rule 8D are introduced effective from 24.03.2008 and applicable from the assessment year 2008-09 and we rely on the decision of Jurisdictional High Court in the case of Simpson and Co. Ltd. v. DCIT in Tax Case (Appeal) No. 2621 of 2006 dated 15.10.2012 and direct the Assessing Officer to disallow 2% of exempt income as disallowance u/s. 14A of the Act. This ground of the assessee is partly allowed''. Accordingly, this ground....
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..... With reference to the same, the assessee was show caused why the weighted deduction claimed on the above provision of leave encashment & gratuity should not be disallowed due to the fact that the above provisions cannot be allowed as per the amendment to the provisions of Section 43B of the Income-tax Act, thereby the weighted deduction claimed u/s. 35(2AB) of the Income tax Act is disallowed. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). 21.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the facts of the case and the submissions of the ld. AR. As per the provisions of Sec. 43B of the Act certain expense are to be allowed only on the basis of actual payments. The payments falling u/sec. 43B(f) in the assessee's case are to be disallowed since they were not paid. It is also true if certain expenditure is not an allowance as per the statutes the same is true even in the case of payments applicable u/s 35(2AB), Therefore, Assessing Officer is right in making the disallowance. With regard to alternate plea taken by the appellant that the !disallowed amount may be allowed in the year in ....
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....written back by the assessee was mainly because of the cessation of liabilities. Hence, the income received has to be taxed as per the provisions of Sec. 41(1) of the Act. Hence, the amount of Rs.32,16,087/- is being added to the total income of the current year. Further the corresponding depreciation reduced by the assessee on the capital creditor is to the tune of Rs.9,21,816/- is being allowed as deduction. Accordingly, the difference amount of Rs.22,94,271/- is disallowed and added to the total income of the current year. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 23.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the facts and the submissions of the ld. AR and gone through the decisions relied by the ld. AR and the ld. Assessing Officer. It was held by the various courts including the Apex Court, the cession of liabilities should become the income of the assessee and the same should be brought to tax u/s 41 (1) of the-Act. The argument of the assessee that since the cessation is in respect of capital creditors therefore it should go to block of assets is not acceptable. The decisi....
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....ssee filed an appeal before Commissioner of Income Tax (Appeals). 24.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) observed that from the submissions of the assessee the expenditure incurred on software licence was meant for use of copyrighted article but not use of copyright. This line of argument of the assessee cannot be accepted since as per the details furnished by it before the AO the payments made for the software licence is in the nature of copyrights of the software. Therefore, it should be taken as 'royalty' and the payments made should have been subjected to TDS. With regard to DTAAs and non-reference to royalty in DTAAs, the decision of Delhi ITAT relied on by the AO clarifies the issue. The Hon'ble Delhi Bench has observed that the proposition that the DTAA will prevail over the Act is not infallible. If an amendment in the Act comes subsequent to DTAA like in the case of DTAA with USA which was entered In 20.12.90, the principle of DTAA will prevail over the Act is no relevance. Therefore, the argument of the assessee is rejected. Further, it is to be noted as admitted by the assessee that as per Explanation 4 to s. 9(1 )(....
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....4 as under:- "4.4 We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Authorised Representative drew attention to the provisions u/s. 32(1)(iia) of the Act for claim of additional depreciation and also provisions of law on carry forward. Since the asset was purchased during the second half of financial year 2004-05 and only 50% of depreciation was allowed and pleaded for carry forward of balance 50% to be claimed in the assessment year 2006-07. On perusal of the judicial decisions and objections of Finance Minister speech Additional depreciation has to be allowed only in the case of new plant and machinery and not WDV value on subsequent years. The assessee also relied on the decision Cosmos Films Ltd (supra) where the Tribunal has allowed the claim of assessee for 50% of additional depreciation u/s. 32(i)(iia) in respect of new Plant & Machinery installed at the new eligible industrial undertaking where Plant & Machinery were put to use for less than 180 days in the year of installation and the assessee had claimed only 50% of the additional depreciation and the balance amount was claimed in the next year. Respectfully foll....
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....We, therefore, allow ground no.2 in favour of the assessee and on this issue set aside the order of Commissioner of Income Tax (Appeals) . Accordingly, this ground is decided in favour of the assessee. The ground of the assessee is allowed. 29. The fourth ground raised by the assessee is with regard to disallowance of depreciation on Aircraft of Rs.38,81,02,135/-. 29.1 As discussed in ITA No. 2838/Mds/2014 in assessment year 2007-2008 in para 17.5, this ground of the assessee is remitted to ld. Assessing Officer for fresh consideration. 30. The fifth ground raised by the assessee is with regard to difference in Arm's Length price of Rs.1,06,80,935/-. 30.1 The facts in this case are that there are TP adjustment in respect of foreign transaction as sale of spare parts to Rs.6,93,253/- and Guarantee commission Rs.99,87,682/- total aggregating to Rs.106,80,935/-. Regarding addition towards sale of spare parts, the ld. Authorised Representative submitted that the assessee is entitled for volume discount. Regarding guarantee commission it is submitted that there cannot be an TP adjustment in view of the order of Tribunal in the case of Redington India Ltd vs. ACIT 155....
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....lt, the appeal of the assessee in ITA No. 2839/Mds/2015 in assessment year 2008-2009 is partly allowed. 38. Departmental Appeal in ITA No. 2825/Mds/2014 of assessment year 2005-2006 :- 38.1 The first ground raised by the Revenue is that the ld. Commissioner of Income Tax (Appeals) erred in directing the ld. Assessing Officer to disallow only 2% of exempted income u/s. 14A of the Act, in place of amount of Rs.3,19,35,900/- disallowed by the Assessing Officer by invoking the provisions of section 14A r.w. Rule 8D. 38.2 This issue came up for consideration in the assessment year 2006-2007 in ITA No. 2086/Mds/2016, for assessment year 2006-07 vide order dated 16.02.2016 wherein it was held at para 8.4 as under:- ''8.4 We heard the rival submissions and perused the material on record and judicial decisions cited. The ld. Authorised Representative submitted that the assessee is in receipt of exempted income and no expenditure has been incurred for earning income. In assessee's own case the Co-ordinate Bench of Tribunal has considered 2% disallowance of exempted income u/s. 14A of the Act. The action of the Assessing Officer applying Rule 8D is not correct....
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....to be encouraged. I therefore propose to notify the automobile industry as an industry entitled to 150% deduction of expenditure on In-house R & 0 facilities." The ld. Commissioner of Income Tax (Appeals) observed that even though the Notification has come on 21.9.04, as per the 2004-05 budget the provisions are applicable from the beginning of the year. By reading together both the budget contents and the Notification, the assessee is entitled for the benefit for the whole year. So, the ld. Commissioner of Income Tax (Appeals) allowed the appeal of the assessee. Aggrieved by the order, the Revenue is in appeal before us. 39.3 After hearing both the parties and going through the above order of the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) has rightly observed that though the notification has come into effect on 21.09.2004 but it is to be applicable for the full previous year relevant to assessment year 2005-2006. Accordingly, we confirm the findings of the ld. Commissioner of Income Tax (Appeals) on this issue. This ground of the Revenue is dismissed. 40. The next ground raised by the Revenue is that the ld. Commissioner of Income Tax (....
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....ate that the Wealth Tax paid in respect of business assets is not a allowable expenditure even as per the explanation to Sec. 40(a)(iia) of the Act. 41.2. We heard the rival submissions and perused the material on records. We are of the opinion that this issue came for consideration before this Tribunal in assessee's own case for the assessment year 2006-07 in ITA No. 2086/Mds/2010, dated 16.2.2006 wherein it was observed at para 9.2 as under:- "9.2 On appeal before Tribunal, the ld. Authorised Representative reiterated his submissions and relied on the grounds of appeal and argued that Wealth Tax paid on business assets should be allowed. The arguments of the ld. Authorised Representative are not convincing and the provisions are very clear u/s. 40(iia) as any sum paid on account of Wealth Tax is not deductable. Considering the apparent facts, we confirm the disallowance of the Assessing Officer and dismiss the assessee ground''. Accordingly, this ground of the Revenue is allowed. 41.3 In the result, the appeal of the Revenue in ITA No. 2825/Mds/2014 of assessment year 2005-06 is partly allowed for statistical purpose. 42. ITA No. 2826/Mds/2014 ....
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....annum. While converting, these FCCN were given a value increase of 42.2%. Thus the holders of the FCCN woth 2,27,00,000 U.S. Dollars were compensated with an additional income of 95,79,400 dollars. In terms of rupees, this amounted to Rs.42,26,91,504/-. This amount, indirectly represents the increase in asset value occurred to the non-resident in the form of compensation against accrued interest. On the specific query in this regard on the taxability and the tax deductibility, the assessee has pleaded that Section 115AC does not mandate taxation of such FCCN. The assessee also pleaded that this conversion is not a transfer as per section 47(xa) of the Act. The plea of the assessee that this income is not to be taxed u/s. 115AC is superfluous. Section 115AC is meant for taxing certain incomes at a lower rate (10%) than the normal rate. If a particular income is not included in Chapter XII of the Act, then it has to be taxed at the normal rates. Assessee's plea is not that the income is exempt from tax. The conversion of FCCN to shares has resulted in an income to the non-resident and can be seen as an "other income" envisaged in section 195 of the I. T Act. The assessee should h....
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.... the Assessing Officer to disallow only 5% of exempted income u/s 14A of I. T. Act, in place of amount of Rs.4,13,16,188/-. disallowed by the Assessing Officer by invoking the provisions of section 14A r.w. Rule 8D. 45.1 We heard the rival submissions, perused the material on record. Similar issue came for our consideration in assessee's own case in ITA No. 2086/Mds/2010 for assessment year 2006-07, vide order dated 16.02.2016 wherein held at para 8.4 as under:- "8.4 We heard the rival submissions and perused the material on record and judicial decisions cited. The ld. Authorised Representative submitted that the assessee is in receipt of exempted income and no expenditure has been incurred for earning income. In assessee's own case the Co-ordinate Bench of Tribunal has considered 2% disallowance of exempted income u/s. 14A of the Act. The action of the Assessing Officer applying Rule 8D is not correct as the provisions of Rule 8D are introduced effective from 24.03.2008 and applicable from the assessment year 2008-09 and we rely on the decision of Jurisdictional High Court in the case of Simpson and Co. Ltd. v. DCIT in Tax Case (Appeal) No. 2621 of 2006 dated....