TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 255
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.... made under section (u/s.) 14A read with Rule (r.w.r.) 8D. 3. Briefly the facts are, the assessee is a resident corporate entity stated to be engaged in manufacturing and trading of pesticides and plant growth nutrients, seeds and tanning materials etc. For the assessment year under dispute, assessee filed its return of income on 27.11.2013 declaring income of Rs. 114,89,68,967/-. The return of income filed by the assessee was picked up for scrutiny. In course of assessment proceeding, the Assessing Officer, while verifying the return of income, noticed that in the year under consideration, the assessee had received exempt income by way of dividend income amounting to Rs. 87,61,334/-. Whereas, suo-motu assessee has disallowed expenditure of Rs. 8,294/- u/s. 14A of the Act. Upon going through the financial statements of the assessee, the Assessing Officer noticed that the assessee had incurred interest expenditure of Rs. 11,84,72,000/- on the borrowings. Whereas, it had not disallowed proportionate interest expense u/s. 14A attributable to the earning of exempt income. He, therefore, called upon the assessee to furnish the necessary details of the expenses incurred for earning ex....
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....lowing the decisions of the ITAT, learned First Appellate Authority restricted the disallowance to 2% of the exempt income. 6. Before us, learned Departmental Representative (DR) strongly relied upon the observations of the Assessing Officer and submitted that the Assessing Officer has proceeded to make disallowance in terms with Section 14A read with Rule 8D after recording dissatisfaction. He submitted, as against the exempt income earned of Rs. 87,61,334/-, the assessee has disallowed paltry amount of Rs. 8,294/- on purely adhoc basis without following the methodology under Rule 8D(2). He submitted, the learned First Appellate Authority also fell in error by directing disallowance at 2% of the exempt income. He submitted, when there are specific statutory provisions specifying the mode and manner of computing disallowance, discarding such provisions, disallowance cannot be made on adhoc basis. Thus, he submitted, the disallowance made by the Assessing Officer should be restored. 7. Countering the contentions of learned Departmental Representative, learned counsel for the assessee submitted that the assessee has computed the disallowance u/s. 14A following the method consis....
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....ourt. In so far as disallowance under Rule 8D(2)(iii) is concerned, we have already discussed the methodology adopted by the assessee to make the suo-motu disallowance. Suffice to say, assessee is following this method consistently over the years. However, in assessee's case in earlier assessment years the Coordinate Benches, while deciding identical issue, have consistently held that disallowance has to be computed at 2% of the exempt income earned during the year. In this context, we may refer to following observations of the Bench in order dated 06.04.2017 passed in ITA No. 1095/Mum/2015 for A.Y. 2011-12: "2. Only grievance of assessee relates to disallowance made u/s. 14A r.w.r.8D (2)(iii). At the outset, learned AR placed on record the order of the Tribunal in assessee's own case wherein under similar facts and circumstances, disallowance made under Rule 8D (2)(iii) was restricted to 2% of the exempt income in the A.Y.2007-08, 2008-09 and 2009-10. The precise observation of Tribunal in its order dated 16/12/2016 in A.Y. 2009-10 was as under:- 21. We have considered the submissions of the parties and perused the material available on record in the light of the....
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.... however, after careful analysis of facts of the year under consideration as also the earlier assessment years, we do not find any perceptible difference in facts. Therefore, respectfully following the consistent view expressed by the Coordinate Benches in earlier assessment years in assessee's case, we uphold the decision of the First Appellate Authority. Ground is dismissed. 10. In ground No.2, the Department has challenged the deletion of disallowance of Rs. 37,77,780/-, being professional fees paid to Shri Ajit Gujral. 11. Briefly the facts are, in course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee had debited expenses amounting to Rs. 37,77,780/-, being professional fee paid to Mr. Ajit Gujral on account of strategic planning. After calling for and verifying the necessary details, the Assessing Officer was of the view that by incurring the expenditure, the assessee would be deriving enduring benefit. Hence, it is in the nature of capital expenditure. Expressing such view, the Assessing Officer, disallowed the expenditure. Assessee contested the disallowance before learned First Appellate Authority. Noticing ....
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.... in the nature of enduring benefit nor in capital in nature. This view of ours is supported by the decision of Hon'ble P&H High Court in the case of CIT Vs. Max India Ltd. (74 taxmann.com 263). Even on P&H High Court in the case of CIT Vs. JCT Electronics Ltd. (188 Taxman 191) also considered identical issue and held that word 'capital' connotes permanency and capital expenditure is therefore closely akin to the concept of securing something tangible or intangible property, corporeal or incorporeal right so that they could be of a lasting or enduring benefit to the enterprise in issue. The Revenue nature expenditure, on the other hand, is operational in its perspective and solely intended for the furtherance of the enterprises. In our view professional fees paid by the assessee to one of its adviser is for furtherance of business of the enterprise and hence revenue in nature. We find no infirmity in the order of the learned CIT(A) and hence the same is upheld." 13. Finding parity in facts, respectfully following the decision of the Coordinate Bench, we uphold the order of learned First Appellate Authority on the issue. Ground raised is dismissed. 14. In Ground No.3, the R....
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....nuing for more than ten years. Thus, ultimately, having no chance of recovery, the assessee wrote off the debt in its books of account. The Assessing Officer has not doubted the fact that the bad debt has actually been written off by the assessee. The Assessing Officer is only doubting the efforts made by the assessee to recover the debt. This line of reasoning of the Assessing Officer, in our view, is contrary to the ratio laid down by the Hon'ble Supreme Court in the case of TRF vs. CIT (Supra). Therefore, finding no merit in the grounds raised, we uphold the decision of leaned First Appellate Authority on this issue. 19. In the result, appeal is dismissed. CO No.06/Mum/2026 (A.Y. 2013-14) 20. In view of our decision in the Departmental Appeal, the cross objection, which is on the issue of section 14A disallowance, having become infructuous, is dismissed. ITA No. 78 53/Mum/2025 Revenue's (AY 2014-15) 21. Ground no. 1 relates to relief granted by ld. First appellate authority in the matter of disallowance made u/s. 14A read with Rule 8D(2). 22. Briefly the facts are, in the previous year relevant to the assessment year under dispute, the assessee had earned exemp....
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....he A.O. to restrict the disallowance to 2% of the exempt income earned during the year. 26. Being aggrieved, the Revenue is before us. Of course in the cross objections, the assessee has raised various grounds for accepting the suo motu disallowance. 27. We have considered rival submissions and perused the materials available on record. It is noted from materials placed before us, in course of assessment proceeding, while explaining the mode and manner of suo motu disallowance, the assessee had stated before the A.O. that some employees in the treasury department, in addition to their normal work look after investments activities. It was submitted that the total salary expenditure of such employees during the year was to the tune of Rs. 94,07,812/-. The other ancillary expenditure attributable to the treasury department was to the tune of Rs. 9,40,781/-. It was submitted by the assessee that only a small part of the activities of the treasury department is directed towards investment, 10% of the aggregate expenditure can reasonably be considered for contribution to earning of exempt income. Accordingly, the assessee has disallowed the amount of Rs. 10,34,859/-. 28. So far ....
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....nies, including the present assessee. As per the cost sharing model, Tata Sons Ltd. will bear 50% of the entire cost, representing payments to be made to Rediffusion and the remaining 50% was to be distributed amongst rest of the companies at the same ratio as was in the past. Assessee's share in the cost was fixed at Rs. 5.50 lacs per month, excluding taxes, which roughly worked out to 1.10% of the over all cost. Assessee's share in the cost paid during the year amounting to Rs. 66 lacs was debited to the profit and loss account as 'expenditure'. At this stage, we must mention, the assessee along with the other companies, entered into separate deed of confirmation ratifying the main agreement. 31. In course of assessment proceeding, the A.O. called upon the assessee to furnish the requisite details involving such expenditure and also to justify the claim. In response to the query raised, the assessee furnished the agreement and other details in relation to the expenditure incurred. After going through the details furnished by the assessee, the A.O. observed that the deed of agreement did not specify the exact nature of services rendered by Rediffusion. He further alleged that t....
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....le on record. As discussed earlier, Tata Sons Ltd., on behalf of all other group companies, entered into an agreement with Rediffusion on 17.11.2011 to avail certain services and their experts. The scope of services to be availed have already been narrated earlier. As per the cost sharing model, Tata Sons Ltd. was to bear 50% of the cost and rest 50% was to be borne by the other group companies, including the assessee. It is a fact on record that the main agreement between Tata Sons Ltd. and Rediffusion was subsequently ratified by the other group companies, including the assessee through deed of confirmation. While disallowing the expenditure claimed by the assessee, the A.O. has made two broad allegations. Firstly, the agreement did not specify the specific service provided by Rediffusion and secondly, no evidence was furnished by the assessee to demonstrate actual availing of services to prove the commercial expediency. As discussed earlier, as per the scope of services, Rediffusion was to provide strategic planning, media relations, public affairs, strategic advice and public relations management in India by allocating resources and expertise to each of the group companies, inc....
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.... assessment years. Whereas, the A.O. following the methodology adopted in earlier assessment year, disallowed interest expenditure amounting to Rs. 24,09,822/- under Rule 8D(2)(ii) and administrative expenditure of Rs. 13,07,180/- under Rule 8D(2)(iii). Consistent with the view expressed in earlier assessment years, ld. First appellate authority restricted the disallowance to 2% of exempt income earned during the year. 40. Having heard the parties and examined the materials on record, we note that in the year under consideration, the interest free surplus fund available with the assessee was to the extent of Rs. 865.46 crores. Whereas, the investments are to the tune of Rs. 305.58 crores. Thus, there was sufficient interest free fund available with the assessee to take care of the investments. In view of the aforesaid, our decision on the issue in A.Ys. 2013-14 and 2014-15 (supra) will apply mutatis mutandis. Accordingly, we uphold the decision of ld. First appellate authority and dismiss the ground. 41. In ground no.2, the Revenue has challenged the deletion of disallowance of Rs. 66 lacs, being payment made to Rediffusion towards public relation services. This ground is ide....
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....ubmitted, ld. First appellate authority was wrong in allowing assessee's claim of deduction. 46. Per contra, ld. Counsel for the assessee submitted that all statutory conditions for claiming deduction were fulfilled by the assessee. He submitted, in the audit report, the statutory auditors have confirmed the deduction. In this context, he drew our attention to the audit report in Form No. 10CCB. He submitted, the assessee manufactures various pesticides (agro chemicals). In course of manufacturing process various types of waste is generated which has to be thermally decomposed under high temperature by way of incineration in Primary Combustion chamber & secondary combustion chamber with a residual timeline. He submitted, the waste has to be incinerated at temperatures between 1000° C & 1150°C. For this purpose, the assessee has installed the incinerator having all required controls with due permission from the regulatory authority, which is the Pollution Control Board. He submitted, the incinerator has been designed to meet the minimum thermal capacity of 6 million K calories with a suitable support fuel and maintained minimum temperature of 1150°C in primary and sec....
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....the incinerator. The services of incineration is captively provided by the assessee to its manufacturing plants at Ankleshwar. When the assessee did not had the capability to provide such service, it had to incur such expenditure to deal with such waste. 49. In fact, sub section (8) of section 80IA of the Act provides for setting up of infrastructure facility for captive consumption. As per the said provision, when the transaction of such services are between related parties, the market value in relation to such services would be the price at which such services are ordinarily available in the open market. While computing the deduction u/s. 80IA of the Act, for the incinerator services the assessee had referred to a Circular issued by Bharuch Enviro Infrastructure Limited dated 22.12.2014, wherein the market value of various types of solid and liquid waste has been prescribed. Notably, in Form No. 10CCB, the statutory Auditor has reported that the gross revenue from incinerator-2 declared at Rs. 1165.40 lacs is based on market price. Form No. 10CCB further states that incinerator-2 was set up in 08.03.2011 and the initial assessment year wherein the deduction was claimed for the....
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....y the A.O. in A.Ys. 2014-15 and 2015-16. There being no difference either in the factual position or the eligible conditions in the impugned assessment year, a contrary view with regard to assessee's claim of deduction u/s. 80IA of the Act cannot be taken in the impugned assessment year, as, in absence of any factual difference, rule of consistency has to be followed. Thus, on over all consideration of facts and materials on record, we are inclined to concur with the view expressed by ld. First appellate authority. Ground raised is dismissed. 52. In the result, the appeal in ITA No. 7854/Mum/2025 for AY 2016- 17 is dismissed. CO No.08/Mum/2026 (A.Y. 2016-17-15) 53. The main grounds raised in the cross objection are with reference to disallowance made u/s. 14A read with Rule 8D. In view of our decision with reference to ground no. 1 in Revenue's appeal being ITA No. 7854/Mum/2025 (supra), the grounds having become infructuous do not require separate adjudication. In addition to the main cross objection, through letter dated 12.02.2026, the assessee had raised an additional ground challenging the levy of interest u/s. 234A of the Act for an amount of Rs. 2,10,590/-. Since, t....