TaxTMI 
TaxTMI 
2025 (8) TMI 366
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.... Year : 2011-12] 3. These are cross-appeals filed by the assessee and by Revenue against the order of Ld. Commissioner of Income Tax (A)-5, Delhi [ld. CIT(A)] in Appeal No. Del/CIT(A)-5/0169/2014-15 for AY 2011-12 arising from the assessment order dated 31.03.2014 passed u/s 143(3) of the Income Tax Act, 1961 (the Act). 4. Brief facts of the case are that assessee filed its return of income, declaring total income at INR 2,96,03,28,450/- on 30.11.2011 which was revised on 30.03.2013 at an income of INR 291,81,73,730/-. The case was taken up for scrutiny and after considering the submissions made, assessment was completed vide order dated 31.03.2014 passed u/s 143(3) of the Act by making additions/disallowances of INR 16,25,84,717/- and accordingly, the total income was assessed at INR 3,08,07,58,450/-. 5. Against this order, an appeal was filed before Ld.CIT(A) wherein Ld.CIT(A) partly allowed the appeal of the assessee against which the present appeal preferred by the assessee and the Revenue. 6. The assessee has taken the following grounds of appeal:- 1. A. "On the facts and in circumstances of the case and in law, the CIT(A) has erred in upholding Assessing ....
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....g used as an office though the lease deed however stated that the said property could have been used only as a residence. 3. (a) That on the facts and circumstances of the case & inlaw, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 6,08,15,000/- u/s. 14A. (b) That the Ld. CIT(A) has erred in-law by net considering the fact that the assessee is not maintaining a separate books of account with respect to investment portfolio and that some expense be it legal, financial, administrative etc. must have been incurred for the purpose of earning the dividend. As per the CBDT's Instruction No.5/2014 dated 11.02.2014 Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. 4. (a) That the Ld. CIT(A) has erred in law by ignoring the fact that some of these income are in the nature of insurance claim received, Rent recovered from employee etc which income cannot be said to be profits and gains derived by an undertaking from export of article or things though deduction u/s 10B is permissible only of such profits and gains which are derived by a 10....
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....e default in payment of advance tax installments and is payable at the time of filing of return of income. Since advance tax is to be calculated on the basis of estimation of income, thus the interest u/s 234C is to be levied on the income declared in return filed by the assessee however, in the instant case the interest u/s 234C is charged on the assessed income. He thus prayed that interest u/s 234C should be charged on the returned income and he requested accordingly. 15. On the other hand, Ld.CIT DR for the Revenue stated that it is a factual matter and may be sent to the AO for verification. 16. Heard the contentions of both parties and perused the material available on record. On the issue of levy of interest u/s 234B and 234D, no argument was made by ld. AR of the assessee. Regarding levy of interest u/s 234C, it is submitted that it should be levied on the tax payable on the income declared in the return of income filed. If a taxpayer fails to pay or delays in payment of advance tax, then it may be affected by several measures under Section 234C of the Income Tax Act. The tax department expected the advance tax payments to be received on time along with the four sched....
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....f National Thermal Power Company Ltd reported in 229 ITR 383 [Hon'ble Supreme Court] and submits that the issue which is purely legal and which goes to the root of the matter and no new facts are required to be invoked, then the same should be admitted for adjudication. 20. The ld. DR vehemently contended that when the grounds were not raised before the lower authorities thus the same cannot be raised before the Tribunal by way of additional ground. 21. Heard both the parties. Since both these grounds of appeal are legal in nature and the assessee requested for admission of same by placing reliance on the order of Hon'ble Supreme Court in the case of NTPC vs CIT [1997] 229 ITR 383 (SC) and Jute Corporation of India Ltd. vs CIT (1991) 187 ITR 688 (SC). After perusing the grounds of appeal, we find that both these grounds of appeal are legal in nature and need no verification on the part of the AO therefore, the same are admitted for adjudication. 22. Additional Ground No.1 is not pressed by the assessee during the course of hearing hence, dismissed. 23. Additional Ground No.2 raised by the assessee wherein it is requested inadvertently the incentive received under Fo....
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....e Court in Goetz India Ltd. Vs. CIT, reported in [2006] 284 ITR 323 and Hon'ble Bombay High Court in case of CIT Vs. Prithvi Brokers and Shareholders Pvt. Ltd., reported in [2012] 349 ITR 336 (Bom.) has held that the appellate authority can entertain a fresh claim made by the assessee, even if such a claim was not made in return of income or by way of revised return of income. We have already admitted the additional grounds of appeal taken by the assessee, accordingly the claim made by the assessee through additional ground filed is hereby admitted for adjudication on merits. 27. The brief facts of the case pertaining to this issue are that the assessee in its original return of income treated the incentives received under the foreign trade policy as revenue receipt and accordingly included the same in the computation of total income. Before us, in terms of application for the admission of additional grounds of appeal filed on 23.09.2020, the assessee has raised a claim that incentives received under the Foreign Trade Policy, towards FPS should be treated as capital receipt. The assessee by placing reliance upon the decision of the Hon'ble Supreme Court in Sahney Steel And P....
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....subsidy under this scheme was not to enable the assessee to run the business more profitably. The object was primarily to provide encouragement and support, which would create benefits of enduring nature, for the Industry as a whole in certain sectors of economy. 30. Similar issue of the subsidy granted under the FPS scheme came up for consideration before the Hon'ble Rajasthan High Court in PCIT Vs. Nitin Spinners Ltd. (supra), wherein the Hon'ble High Court observed as under: "8. 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." 31. It is also relevant to mention here that the Hon'ble Supreme Court dismissed the Revenue's Special Leave Petition in PCIT Vs. Nitin Spinners Lt....
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....oyment opportunities especially in rural and semi-urban areas. Under the policy of Special Focus Initiative certain special focus initiatives for market diversification, technological upgradation, support to status holders were identified for which specific schemes like Focus Market Scheme (FMS), Focus Product Scheme (FPS), Technological Upgradation Fund Scheme (TUFS), Status Holders Incentive Scheme (SHIS) were started. 12. In Foreign Trade Policy 2006, under the Special Focus Initiatives, Focus Product Scheme (FPS) was introduced with an objective to incentivize export of such products which have high employment intensity in rural and semi-urban areas, so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products. The scheme was launched in 2006 and subsequently, several amendments were made to the scheme by adding more products eligible for export incentives under the scheme and giving different rate of duty credit scrip concessions. 13. Focus Product Scheme (FPS) was first introduced with the objective to incentivize export of such products which have high export intensity/ employment potential, s....
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....al ground of appeal No. 2 is allowed. 34. In the result, appeal of the assessee is partly allowed. 35. Now, we take up the Revenue appeal in ITA No.1000/Del/2016 [Assessment Year 2011-12]. 36. Ground No.1 is general in nature, needs no adjudication hence, dismissed. 37. Ground No.2 raised by the Revenue is with respect to the deletion of the disallowance of rent of INR 12,00,000/- paid for the guest house maintained by the assessee company. The AO while making the disallowance, observed that the assessee paid rent of the flat at Mahalaxmi, Mumbai and during the course of assessment proceedings, no details were submitted to established that the said flat was used for the purpose of business. Since the same was not used for the purpose of business, AO disallowed the claim of the rent paid. Before ld. CIT(A) assessee filed details of the persons who stayed at the said flat during their visit to Mumbai office of the assessee in connection with the performance of their official duties and thus it was claimed that the said flat was wholly and exclusively used for the purpose of business. After considering the same, ld. CIT(A) deleted the disallowance of rent paid of the said ....
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.... The appellant has submitted that the same has been used as guest house for its employees travelling to Mumbai from its other units who are mainly from HO. A perusal of the financials of the appellant reveals that it had incurred an expenditure of Rs 3632 crores during the year under consideration which has been allowed by the AO. During the course of hearing AR of the appellant pointed out to me that AO has disallowed the Rental expenditure of Rs. 12,00,000/- of Mumbai flat by treating the same to be of personal in nature. He has argued before me that it is a settled principle of law that in case of companies no expenditure can be disallowed by holding the same to be of personal in nature. The decision of the Gujarat High Court in the case of Sayaji Iron & Eng. Co. Ltd. V CIT 253 ITR 749 has been followed in the following jurisdictional ITAT decisions:- (i) MITSUI & co. India p. Ltd. V ADDL. CIT ITAT Delhi E Bench in ITA No. 1362/De/2011 as decided on 3/6/2011 (ii) DCIT v Haryana Oxygen Ltd. 76 ITD 32 (DEL) (iii) Midland International LTd. V DCIT 109 ITD 198 (Del). 5.3. I have perused the decisions in hand. These decisions pertain to disallowanc....
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....ore, by following the judgements of various Hon'ble High Courts deleted the same. Regarding disallowance of INR 2.47 crores, it is submitted that only dividend yielding investments should be taken into consideration. He prayed accordingly. 46. Before us, Revenue has not been able to controvert the findings of Ld.CIT(A). Moreover, now it is settled law where the assessee's own interest free funds are more than the amount of investment which yield exempt income, no disallowance should be made u/s 14A of the Act. Therefore, we do not find any reason to interfere in the order of Ld.CIT(A) on this score and accordingly, the deletion of INR 3.56 crores by Ld. CIT(A) is hereby upheld. Regarding the administration and other expenses at INR 2.47 crores, it is seen that the assessee was having dividend income of INR 12,939/- only and as against this, assessee sue moto made disallowance of INR 5,15,901/- while computing the total income. The disallowance so made represents expenses to administer and manage the investment. The Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT (New Delhi) [2018] 402 ITR 640 (SC) has held that "the disallowance u/s 14A should not be in exces....
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....inction between the provision of section 10A & 10B vis-a-vis section 80IA & 80IB & 80HH of the Act inasmuch as wherein for the purpose of computing deduction u/s 10A & 10B, entire business profit is to be considered as eligible for deduction whereas in section 80IA & 80IB & 80HH, the profits derived from such business is to be considered as deduction." Therefore, Ld.AR submits that Ld.CIT(A) has rightly deleted the disallowance made out of deduction claimed u/s 10B of the Act and he prayed accordingly. 50. Heard both the parties and perused the material available on record. In the instant case, it is seen that the AO has reduced the amount of deduction u/s 10B of the Act on account of scrap sales, insurance claim and other rent recovered from employees and damages recovered totaling to INR 5,10,11,393/- being not eligible for deduction u/s 10B of the Act and reduced the amount of deduction u/s 10B by INR 4,74,84,925/- claimed by the assessee. It is further seen that while allowing the deduction, Ld.CIT(A) has followed the decision of Special Bench of ITAT in the case of Maral Overseas Ltd. vs ACIT (supra) wherein it is held that for the purpose of computation of amount of deduct....
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....d upon by the AO and the appellant, there is found to be a distinction in the provisions of section 80HHC, 10A and 108 vis a vis provisions of section 801A, BOIB and 80HH etc. In as much as in the former section/s, profits of the business has been defined to mean business profits of the undertaking. In other words, this means entire business profits of the undertaking has to be considered as eligible for deduction instead of only profits derived from the undertaking. While the Supreme Court decision as cited by AO, is fully applicable to a case covered u/s 801B, 80IA, and 80HH, the same does not apply to the appellant's case. This proposition of law has been very lucidly explained by ITAT in its Special Bench decision in the case of MARAL OVERSEAS LTD. V ADDL. CIT (2012) 16 ITR (TRIB) 565 (INDORE) [SB] as cited by AR. It is also seen that while rendering its decision, the Spl. Bench ITAT has also duly considered the Supreme Court decision in Liberty India. I therefore agree with the appellants counsel that the concept of profits derived from the undertaking does not apply to section 10B deduction. The AO is directed to consider these scrap sales as business profit eligible for ....
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....n hereinabove, the Ground of appeal No.1 of the assessee is partly allowed. 60. Ground of appeal No.2 of the assessee and grounds of appeal No. 1 to 3 taken by the Revenue are with regard to the disallowance u/s 14A of INR 16,92,40,123/-. 61. The facts in the present case are identical to the facts of the case of the assessee in AY 2011-12 except the difference in suomotto disallowance made by the assessee at INR 6,19,633/- u/s 14A on account of administrative expenses in respect to the investments made. Further, no dividend income is received by the assessee during the year under appeal therefore, Ld.CIT(A) by following the judgement of Hon'ble Jurisdictional High Court in the case Cheminvest Ltd. vs CIT-IV (supra) has disallowed the disallowance made by AO. As the facts and observations in the year under appeal are similar to the facts as well in AY 2011-12 which fact is admitted by both the parties. Thus, by following the observations made in AY 2011-12 in ITA No.1000/Del/2016 while dismissing Ground No.3 of the Revenue, the order of ld. CIT(A) deleting the disallowance made u/s 14A is hereby confirmed. Accordingly, the Ground of appeal No.2 raised by the assessee is allow....
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....g employment opportunities especially in rural and semi-urban areas. Under the mother policy of Special Focus Initiative certain special focus initiatives for market diversification, technological upgradation, support to status holders were identified for which specific schemes like Focus Market Scheme (FMS), Focus Product Scheme (FPS), Technological Upgradation Fund Scheme (TUFS), Status Holders Incentive Scrip (SHIS) were started. In Foreign Trade Policy 2006, under the Special Focus Initiatives, Focus Product Scheme (FPS) was introduced with an objective to incentivise export of such products which have high employment intensity in rural and semi-urban areas, so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products. The scheme was launched in 2006 and subsequently, several amendments were made to the scheme by adding more products eligible for export incentives under the scheme and giving different rate of duty credit scrip concessions. As per the FPS policy, exports of notified products to all countries shall be entitled for duty credit scrip equivalent to 2-5% of the value of exports for eac....
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....oduction of the Policy. If the purpose of the subsidy was to enable the assessee to run the business more profitably, then, the receipt is on revenue account. If the object of the assistance was to enable the assessee to set up a new unit or to expand the existing units, then the receipt was on the capital account. In the present case, the subsidy was granted primarily for the "purpose" of increasing India's percentage share of global trade and to create employment opportunities in rural and semi-urban areas and to ensure optimum utilization of human resources and hence constituted capital receipt not liable to tax under normal provisions of the Act as well as while computing book profit in terms of section 115JB of the Act. The additional ground of appeal is being raised on the applicant being recently advised of the correct legal position and the omission to raise the aforesaid additional ground of appeal earlier was neither wilful nor deliberate. Further, the aforesaid additional ground raises purely a legal issue regarding the character of the subsidy, which has to be decided on the basis of the purpose set out in the Scheme, which is a government/gazette/....
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.... hold that the incentive received during the year under FPS is capital receipt and not chargeable to tax under normal provisions of Income tax. Further, we direct the AO to exclude the same from the book profits for the purpose of charging MAT u/s 115JB of the Act. 67. In additional ground of appeal No. 2, in this year, the assessee has also made further claim that the incentive received under Status Holders Incentive Scrip ("SHIS") which is offered for tax in Profit & Loss Account as revenue receipt is also capital receipt. 68. In this regard, we find that the nature and object of this scheme is akin to FPS Scheme where the sum received has already been held as capital receipt and not chargeable to tax under Income Tax Act as revenue receipt. In this regard, reliance is placed on the judgement of the Hon'ble Rajasthan High Court in the case of PCIT vs Nitin Spinners Ltd. (supra) and Narayan Industries (supra) whereas it is held that the incentive received under FPS is capital receipt. 69. From the perusal of the scheme promoted by the Government in terms of Foreign Trade Policy, 2009 to 2014, the SHIS incentive was given with the objective to promote investments in upgrad....