TaxTMI 
TaxTMI 
2024 (12) TMI 1689
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....'the CIT(A)'], whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 26/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act']. 3. The Assessee has raised the following grounds of appeal in ITA No. 502/Mum/2024: "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of Rs. 6,38,05,671 made by the Ld. AO u/s 14A(2) of the Income Tax Act, 1961(the Act), by invoking Rule 8D. 2. On the facts and in the circumstances of the case and in law, since the Ld. AO erred in invoking Rule 8D to disallow Rs. 6,38,05,671 under Section 14A(2) of the Act without coming to an objective satisfaction based on the accounts of the appellant that the disallowance made in the return of income was incorrect, the order of the Ld. CIT(A) confirming the said disallowance of Rs. 6,38,05,671 was erroneous. 3. On the facts and circumstances of the case and in law. assuming without admitting that Rule 8D is applicable and can be invoked the appellant submits that: - (a) Since no income was received by the appellant from it....
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....the facts and in the circumstances of the case and in law, the appellant submits that the Ld. CIT(A) erred in not allowing credit of tax deducted allowing credit of tax deducted at source pertaining to 8 subsidiaries that had merged into the appellant and tax deducted at source pertaining to a division of an entity that was demerged and merged with the appellant. The Ld. CIT(A) ought to have directed the Ld. Assessing Officer to examine the claim of the appellant and allow the same. 10. On the facts and in the circumstances of the case and in law, the appellant submits that interest u/s 234B of the Act is chargeable only if there is a shortfall in the tax paid as compared to the assessed tax, after granting relief as above and after granting credit of tax deducted at source as above and the Ld. CIT(A) erred in not directing the Ld. Assessing Officer to do so accordingly." 4. The Revenue has raised the following grounds of appeal in ITA No. 556/Mum/2024 "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred as deleting the addition made on account of deemed ALV for vacant flats, without appreciating the fact that the AO h....
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....ear at INR. 23,28,000/- (iii) Denial of claim of set off of accumulated loss of INR. 12,86,53,730/- and unabsorbed depreciation of INR.15,65,15,799/- relatable to real estate service undertaking of Banhem Estates & IT Parks Ltd. that demerged into the Assessee pursuant to composite scheme of amalgamation and arrangement approved by the Hon'ble Bombay High Court vide order, dated 02/12/2016 (b) Increase/reduction made to the Book Profits computed under Section 115JB of the Act: (i) Increase in Book Profits by Extra Depreciation of INR 4,38,18,551/- (ii) Increase in Book Profits by INR 6,38,05,371/- disallowed under Section 14A of the Act by invoking provisions contained in Clause (f) of Explanation 1 to Section 115JB of the Act (iii) Rejection of Assessee's claim of substitution of long term capital gain (computed by taking index cost of acquisition) in place of the profit on sale of capital asset appearing in the statement of Profit & Loss Account for the purpose of computing Book Profits (c) The Assessee also raised additional grounds seeking credit of tax deducted at source in respect of companies/undertaking forming p....
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....ed that the grounds of appeal raised by the Revenue pertaining to the additions/disallowance made under the normal provisions of the Act carry tax effect below the specified monetary of INR. 60 Lacs fixed by Central Board of Direct Taxes (CBDT) for filing Departmental Appeal before the Tribunal limit. A Therefore, the appeal preferred by the Revenue should be dismissed as withdrawn in view of Circular No. 5 of 2024, dated 15/03/2024, read with Circular No. 9 of 2024, dated 17/09/2024, issued by CBDT. 8.2. Per Contra, the Learned Departmental Representative submitted that the tax effect as stated in the memorandum of appeal should be considered for the purpose of determining the applicability of Circular No. 5 & 9 of 2024 issued by the CBDT. 8.3. We have perused the Circular No. 5 & 9 of 2024 issued by the CBDT and have given thoughtful consideration to the rival submissions. Circular No. 5 of 2024, dated 15/03/2024, when read with Circular No. 9 of 2024, dated 17/09/2024, issued by CBDT clarifies that the monetary limit of 'tax effect' for filing departmental appeals before Tribunal has been increased from INR. 50 Lakhs to INR. 60 Lakhs. It has also been clarified in ....
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.... issues against which appeal is intended to be filed. When computed as aforesaid, the tax effect in the appeal preferred by the Revenue would fall below the specified monetary limit of INR.60 Lakhs for filing departmental appeals. On perusal of the computation submitted by the Assessee we find that the tax effect in the appeal preferred by the Revenue would only be INR. 5,63,973/- for the reason that the Assessee would continue to be assessed under normal provisions of the Act even if all the grounds raised by the Revenue in departmental appeal are assumed to be allowed in favour of the Revenue. Thus, accepting the contention of the Assessee, we dismiss the appeal preferred by the Revenue as `withdrawn' in terms of Circular No. 5 & 9 of 2024 issued by CBDT. ITA No. 502/Mum/2024 9. We would now adjudicate the grounds raised by the Assessee which are taken up hereinafter in seriatim. Ground No.1 to Ground No.3 9.1. Ground No.1 to Ground No.3 raised by the Assessee pertain to disallowance of INR.6,38,05,371/- made by the Assessing Officer under Section 14A of the Act by invoking the provision contained in Rule 8D of the IT Rules. 9.2. The facts relevant for adjudica....
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....n the ground that the computation was not in accordance with provisions contained in Rule 8D of the IT Rules. It was submitted that in the appeal preferred by the Assessee for the Assessment Year 2014-15 [ITA No. 247/Mum/2024], the Tribunal had, vide order dated 30/05/2024, accepted the aforesaid submission of the Assessee and deleted the disallowance made by the Assessing Officer under Section 14A of the Act without recording proper dis-satisfaction. Without prejudice to the aforesaid, it was submitted on behalf of the Assessee that even the computation made by the Assessing Officer as per Rule 8D of the IT Rules was laden with infirmity. The Assessing Officer had included the growth funds which did not yield exempt income while computing the opening/closing value of investments for the purpose of computing disallowance in terms of Rule 8D of the IT Rules. Further, the inclusion of investments which did not yield the exempt income during the relevant previous year in the opening/closing value of the investments was also contrary to the decision of the Special Bench of the Tribunal in the case of Vireet Investments Private Limited (supra). 9.4. Per contra the Learned Departmenta....
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.... the contention of the assessee is not acceptable. It is noted that assessee has itself accepted that expenses have been incurred for both exempt income as well as taxable income. If there are common expenses incurred for the both, then there is the formula given in Rule 8D for the allocation. But the assessee has not applied Rule 8D in this case. 5.4 Further, it is noted that assessee has made investments in shares and Mutual Investments. Making investments is an informed decision making process involving study and research. It requires manpower, man-hours and funds to make the investments at a time which the assessee considers it most prudent for making investments. Even after making the investments, the assessee would still have to take decision as to the time span for which it should continue to hold its investments and finally take decision as to the best time to exit from such investments. All this activities require manpower and funds and such man hours and funds will entail a cost to the assessee. This cost, is in the form of both direct costs and indirect costs and is debited in the P & L A/c under various heads such as personnel cost, administration cost, interes....
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....he has only mentioned that disallowance was not computed by the as per Rule 8D of Rules. Similarly, in the case of Devarsons Industries (P.) Ltd. (supra), Hon'ble Court held that the Assessing Officer did not arrive at satisfaction in a particular manner while said disallowance, which would not per se destroy mandate of section 14A. In the instant case, the Assessing Officer has not recorded any kind of dissatisfaction as to the correctness of claim of expenditure of the assessee. Before us, the Ld. counsel for the assessee relied on the decision of the Hon'ble Bombay High Court in the case of Pr. CIT v. Bombay Stock Exchange Ltd. [2020] 113 taxmann.com 303 (Bombay), wherein in identically circumstances, the Hon'ble High Court observed that recording by the Assessing Officer that disallowance was not being worked out as per Rule 8D, is putting the cart before the horse. The relevant finding of the Hon'ble High Court is reproduced as under: "9. As We note that it is evident from the extracted part of the assessment order referred to hereinabove that the Assessing Officer has come to the conclusion that the disallowance claimed by the Respondent was not consi....
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....erefore, the other grounds are rendered merely academic." (Emphasis supplied) 9.8. Therefore, given the facts of the present case, the aforesaid decision of the Tribunal would not apply to the facts of the present case. We have already reproduced paragraph 5.3 & 5.4 of the Assessment Order hereinabove which clearly shows application of mind by the Assessing Officer and recording of dissatisfaction. 9.9. However, we do find merit in the alternative submission advanced on behalf of the Assessee. As per the judgment of the decision of the Special Bench of the Tribunal in the case of Vireet Investments Private Limited (supra), only the investments that yielded exempt income during the relevant previous year could be taken into consideration for the purpose of calculating the opening/closing value of the investment. Therefore, we direct the Assessing Officer to exclude investments made in growth funds which do not yield exempt income and the investment in companies (including subsidiaries) which did not yield exempt income during the relevant previous year while computing opening/closing value of investment in terms of Rule 8D of the IT Rules. The Assessing Officer is dir....
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....Holdings Company Limited ('BPHCL / 'Transferee Company') and demerger of Real Estate Services Undertaking of Banhem Estates & IT Parks Limited ('Banhem'/'Demerged Company') into BPHCL and their respective Shareholders and Creditors. Aadidev, Anagha, Aryabhata, Sushena, Shubhan, Vaidehi, Nandeeshwar, Suryashankar and Banhem are part of the Transferee Company ('the Group') and are wholly owned subsidiaries of BPHCL. The Group proposes to consolidate Andidev, Anagha, Aryabhata, Sushena, Shubhan, Vaidehi, Nandeeshwar, Suryashankar with BFHCL and, segregate the Real Estate Services Undertaking of Banhem into BPHCL. As a result of the above restructuring the following benefits will accrue to the Group: i. Consolidation of businesses of the Group, ii. Reduction in number of companies and regulatory compliances thereof, iii. Ease of management; and iv. Reduction of operating and administrative costs. The Scheme is divided into following parts: PART A : Deals with definitions and share capital PART B : XX XX PART C : Deals with demerger of Real Estate Services Undertaking of ....
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....djudicate Assessee's claim for the set off of the business loss and unabsorbed depreciation pertaining to the Demerged Undertaking afresh as per the provisions contained in Section 72A(4) of the Act. All rights in contention of Assessee in relation to the aforesaid claim are left open. In terms of aforesaid, Ground No. 4 and 5 raised by the Assessee are allowed for statistical purposes. Ground No.6 to Ground No.8 11. Ground No.6 to 8 raised by the Assessee pertain to the computation of 'Book Profits' under Section 115JB of the Act. While advancing arguments in the appeal preferred by the Revenue it was contended by the Assessee that the assessment was framed on the Assessee under the normal provisions of the Act since the tax payable computed on income under normal provisions of the Act was more than tax payable on Book Profits. Even if the disputed issues relating to computation of Book Profit under Section 115JB of the Act are decided in favour of the Revenue, the Assessee would still be assessed to tax under the normal provisions of the Act. The aforesaid contention of the Assessee has been accepted while adjudicating the appeal preferred by the Revenue. Sin....
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....per book. It was also submitted that the there is no mismatch between the amounts mentioned in the said two letters as referred to by the CIT(A). The first letter, dated 10/02/2023, gave the bifurcation between the TDS amount and the advance tax amount, whereas in the second letter, dated 21/02/2023, gave the bifurcation with respect to the amalgamating companies and the amount relatable to the demerged undertaking. The total claim as per both the letters, was INR. 7,01,28,518/-. Therefore, it was contended that direction be granted to the Assessing Officer to allow the said claim of TDS and advance Tax. 12.1. Per contra the Learned Departmental Representative relied upon the order passed by the CIT(A). 12.2. Having considered the rival submissions and on perusal of record we find some merit in the contentions advanced on behalf of the Assessee. Accordingly, deemed it appropriate to direct the Assessing Officer to verify the factual averments made on behalf of the Assessee and to grant credit of TDS and advance tax pertaining to the amalgamated companies and the Demerged Undertaking for the relevant previous year to the Assessee after due verification as per law. In terms of ....
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....alances of investment under the said Rule. (b) Since the income earned by the appellant in mutual fund units held under growth schemes are taxable, the value of investments held by the appellant in mutual fund units under growth schemes are not includible in arriving at the monthly averages of the opening and closing balances of investment under the said Rule. 4. On the facts and in the circumstances of the case and in law the appellant submits that the Ld. Assessing Officer erred in adding the sum of Rs.67,36,800 to book profits computed u/s 115JB of the Act, being the addition made by him to Income from House Property while computing the income of the appellant under normal provisions of the Act, when no provision exists under Section 115JB of the Act to make such an addition." 17. The Revenue has raised the following grounds of appeal in ITA No. 557/Mum/2024 "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred as deleting the addition made on account of deemed ALV for vacant flats, without appreciating the fact that the AO has rightly adopted calculated Fair Rent as ALV. 2. On the facts and in the ....
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.... provisions contained in Clause (f) of Explanation 1 to Section 115JB of the Act. (c) The Assessee are also challenged the computation of interest under Section 234B of the Act 20. The appeal preferred by the Assessee was dispose off by the CIT(A) as partly allowed vide order, dated 11/12/2023. The CIT(A) granted partial relief by (a) deleting the addition made under normal provisions of the act in respect of deemed rental income, and (b) accepting Assessee's contention that no disallowance of expenses can be made in respect of any exempt income by invoking provisions contained in Section 14A read with Rule 8D of the IT Rules while computing Book Profits under Section 115JB of the Act by following the decision of Special Bench of the Tribunal in the case of Assistant Commissioner of Income Tax Vs. Vireet Investment Pvt. Ltd. [2017] 165 ITD 27 (Delhi -Trib) (SB). 21. Since, both, the Assessee as well as the Revenue were aggrieved by the order passed by the CIT(A), the present cross-appeals were preferred before the Tribunal. The grounds raised by the Assessee and Revenue are reproduced in paragraph 12 and 13 above, respectively. ITA No. 557/Mum/2024 22. We w....
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....2018 shall apply mutatis mutandis to the Ground No. 1 to 3 raised in the present appeal. Accordingly, we hold that for the Assessment Year 2018-2019 also, the invocation of the provisions contained in Rule 8D of the IT Rules cannot be rejected. Perusal of Paragraph 5.3 of the Assessment Order, dated 17/09/2021, clearly shows application of mind by the Assessing Officer and recording of dissatisfaction. However, the alternative submission advanced on behalf of the Assessee merits consideration. The Assessing Officer is directed to exclude investments made in growth funds which do not yield exempt income and the investment in companies (including subsidiaries) which did not yield exempt income during the relevant previous year while computing opening/closing value of investment in terms of Rule 8D of the IT Rules. The Assessing Officer is directed to recompute the disallowance in terms of Rule 8D of IT Rules as per the aforesaid directions and restrict the amount of disallowance under Section 14A of the Act to the amount so computed or the amount of exempt income, whichever is lower. In terms of the aforesaid, Ground No. 1 raised by the Assessee is partly allowed, Ground No. 2 raised....