TaxTMI 
TaxTMI 
2026 (8) TMI 288
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....rounds of appeal:- "1. Ground No. 1: Disallowance of deduction under section 80-IB/80-IE in respect of interest on staff advances & statutory/bank deposit 1.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in disallowing the interest income earned in respect of staff advances and statutory / bank deposits on the basis that the same have not been derived from the industrial undertaking. 1.2. The Ld. CIT(A) has failed to appreciate that the deduction under section 80- IB/80-IE is allowable in respect of the profits and gains derived from the specified business as opposed to 'profits derived from the industrial undertaking'. 2. Ground No. 2: Disallowance under section 14A read with Rule 8D - Rs. 22,33,819/- Act. 2.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in sustaining the disallowance of Rs. 22,33,819/- made by the Ld. AO under section 14A of the Income-tax Act, 1961 ('Act') read with rule 8D of the Income-tax Rules, 1962 ('Rules') in relation to earning of income exempt under section 10 of the Act. 2.2. The....
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.... 263,69,11,581/-: 4.1. On the facts and in circumstances of the case and in law, the Ld. CIT(A) grossly erred in sustaining the disallowance of the short-term capital loss suffered by the Appellant on transfer of interest in Silverstreet Limited Liability Partnership ('Silverstreet LLP'). 4.2 The Ld. CIT(A) grossly erred in disallowing the short term capital loss incurred by the Appellant without appreciating that the interest in the LLP constituted capital asset as per section 2(14) of the Act and therefore short term capital loss arising on transfer and computed as per the provisions of section 48 read with section 45 of the Act ought to be allowed. 4.3. The Ld. CIT(A) failed to appreciate that the Appellant had made genuine investments by contributing sizeable actual capital in Silverstreet LLP, and thus loss incurred by it on account of loss of its capital cannot be regarded as a paper loss. 4.4 The Ld. CIT(A) grossly erred, in law and on facts, in alleging that no loss was incurred and loss claimed by the Appellant is fictitious loss without appreciating that the investment made by Silverstreet LLP has been eroded, consequently resul....
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....ation I to Section 115JB(2) of the Act. 5.3. The Ld. CIT(A) failed to appreciate that the Appellant Company had suffered actual loss and the same was debited to the Statement of Profit and Loss Account. The Ld. CIT(A) failed to appreciate that the treatment of the Appellant Company was in accordance with the provisions of applicable accounting standards and the same was duly confirmed and certified by the Statutory Auditors of the Company. 5.4. The Ld. CIT(A) failed to appreciate that the claim of the Appellant Company was in accordance with the provisions of section 115JB of the Act and the deduction from the book profit ought to be allowed. 5.5. The Ld. CIT(A) failed to consider that it is not open for the Revenue to tinker with or discard any amount for the purpose of computing book profit under section 115JB of the Act, based on the ratio laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v CIT [2002] 255 ITR 273 (SC). 5.6. The Ld. CIT(A) has grossly erred in stating that the accounting treatment adopted by the Appellant Company is not based on the prudent accounting policies and principles. The Ld. CIT(A) has made abo....
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....allowing the claim of the assessee for deduction u/s 80IE of the Act of Rs. 761,33,69,563/- in respect of Sikkim Unit even though the assessee firm was formed by splitting up and reconstruction of the existing business of M/s. Sun Pharma Industries and the condition of using less than 20% of old/used machinery has not been fulfilled by the assessee. 2) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing the claim of the assessee for deduction u/s 80IB/80IE of the Act in respect of interest income of Rs. 54,25,44,720/- derived on overdue bills from M/s Aditya Medisales Ltd. 3) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing the assessee's ground on disallowance of Rs. 22,33,819/- u/s 115JB r.w.s. 14A of the Act without appreciating the fact that the said amount was disallowed u/s 14A of the Act and hence was required to be added to the book profit as per clause (f) to Explanation 1 of Section 115JB(2) of the Act. 4) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing the assessee's ground on disallowance of depreciation/amortization of intan....
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....erred in deleting the disallowance of expenses incurred towards consultancy fees paid to Makov Associates Limited amounting to Rs. 10,72,73,655/-, without appreciating the findings of the AO in assessment order and also the fact that the assessee company itself declared that the benefits of the services provided by M/s Makov Associates Limited would provide enduring benefits to the company in domestic as well as global level market. 8.2) On the facts and circumstances of the case and in law, the Ld.CIT(A) failed to appreciate that the disallowance in the assesse's case was made by the AO on the basis of agreement between the assessee company and Makov Associates Limited. 9) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 104,16,66,667/- made by the Assessing Officer on account of the amount transferred to Debenture Redemption Reserve while calculating book profit under section 115 JB of the Act,without appreciating the findings of the AO in the assessment order. 10) On the facts and in the circumstances of the case and in, law, the Ld.CIT(A) erred in allowing the claim of the assessee to reduc....
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.... the decisions of the Coordinate Benches of the Tribunal in the assessee's own case for Assessment Years 2013-14 to 2015-16. For the sake of completeness, the relevant findings of the Coordinate Bench in the assessee's own case for Assessment Year 2015-16 in ITA No.741/Ahd/2019 are reproduced below::- "4. We have heard the rival contentions and perused the materials available on record. Identical issue has been decided against the Assessee by the Co-ordinate Benches in A.Yrs. 2011-12 to 2014-15 [cited supra] and relevant portion of the said order is reproduced as follows: "... 34. We have heard the rival contention of both the parties and perused the material available on record. We found that the issue on hand is covered against the assessee by the order of the coordinate bench of Amritsar Tribunal in the own case of the assessee for AY 2004-05 followed in subsequent years being AY 2006-07 to 2010-11. The relevant finding of the coordinate bench in ITA No.2465/Mum/2014 reads as under: "23. Ground No IV pertains to adjustment of delayed payments, staff advances and statutory/bank. The issue regarding interest on delayed payments from customers is ....
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....ow the said decisions and uphold the order of the Ld. CIT(A) on this issue. Accordingly, Ground No.1 raised by the assessee is dismissed. 9. Ground No. 2 raised by the assessee relates to disallowance u/s 14A r.w. Rule 8D amounting to Rs. 22,33,819/-. The assessee earned exempt income of Rs. 2,98,76,675/- from tax-free bonds and, in the return of income, suo motu disallowed Rs. 1,02,500/- under section 14A of the Act. The Assessing Officer, after recording satisfaction that the disallowance offered by the assessee was inadequate, invoked the provisions of section 14A read with Rule 8D and made a further disallowance of Rs. 22,33,819/-. The Ld. CIT(A) confirmed the disallowance by following the orders passed in the assessee's own case for earlier assessment years and the decision of the Coordinate Bench in the case of the flagship company of the group. Before us, it was submitted that the investments in tax-free bonds were made in earlier years, no fresh investments were made during the year, and the assessee had sufficient own interest-free funds to cover such investments. 9.1 We have considered the rival submissions and perused the material available on record. It is ....
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.... loss. According to him, Silverstreet LLP and Suraksha Buildwell LLP were entities controlled directly or indirectly by the promoters and family members of Sun Pharma Group; therefore, no real loss had actually arisen. The Assessing Officer further held that the investment in Ranbaxy shares had substantially remained within the same group and that the transaction merely resulted in book entries without any genuine commercial loss. He accordingly treated the impugned loss as fictitious and disallowed the same while computing income under the normal provisions as well as under section 115JB of the Act. 10.3 Aggrieved by the assessment order, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A), after reproducing in detail the submissions of the assessee, upheld the action of the Assessing Officer. According to the Ld. CIT(A), the entire sequence of transactions indicated that all the concerned entities were either directly or indirectly under the control of Sun Pharma Group and that the investment in Silverstreet LLP was made with the knowledge of the impending amalgamation. The Ld. CIT(A) further observed that since the investment in the books of the assessee had....
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....gamation. It was argued that the investment made by the assessee in Silverstreet LLP was real, genuine and substantial. The subsequent cancellation of RLL shares pursuant to a court-approved scheme resulted in complete erosion of the value of Silverstreet LLP, thereby drastically reducing the value of the assessee's partnership interest. Consequently, when the assessee assigned its partnership interest for Rs. 5 lakhs, it actually suffered a genuine commercial loss. Merely because the investment did not yield the intended commercial result cannot render the loss fictitious. 10.7 The Ld. Senior Counsel further contended that the Assessing Officer as well as the Ld. CIT(A) have wrongly adopted a "look-through" approach by treating SPIL, the assessee and Silverstreet LLP as one economic entity. It was submitted that each of these entities is a separate juristic person recognized under law and their corporate identities cannot be ignored in the absence of any statutory provision. Reliance was placed upon the judgment of the Hon'ble Supreme Court in Vodafone International Holdings BV v. Union of India (341 ITR 1) wherein it has been held that a look-through approach cannot be....
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....eed of reconstitution dated October 30th, 2013, in turn is also become group concern of the Sun Pharma. It was argued that the business activities of the Silverstreet LLP were added with the provision to do business in nature of investment in shares, securities, fixed deposits, mutual funds or other body corporates as and when required which was specifically provided only during the Reconstitution through the deed executed by October 2013 while the assessee-company became the partner of the LLP. In April 2014, the board of the directors of SPIL and RLL approved a scheme for the amalgamation of RLL with SPIL. The Scheme was approved by Hon'ble High Court of Punjab and Haryana on 9th March 2015 and that by Hon'ble High Court of Gujarat on 14 November, 2014. As per the scheme the share held by Silverstreet LLP stand cancelled without any substitution as on 1.4.2014 onwards without any compensation. Later Silverstreet LLP was transferred to Suraksha Buildwell LLP for a value of Rs. 5,00,000 and the assessee has claimed the short-term capital loss. The Ld. DR argued that Suraksha Buildwell LLP is also a concern controlled by the promoters family members and accomplices while the....
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....eet LLP by the appellant company are recorded as Nil in its books of accounts and not the original amount invested due to that fact the shares stand cancelled by the order of the Honourable High Courts. Hence on subsequent transfer of its interest in Silverstreet LLP for a consideration of Rs. 5,00,000, then in all probability the cost of acquisition needs to be treated as zero only as per the books and not the original value, if that is the case the capital loss if any arose in the above transaction will be of 5 lakhs only. In conclusion, the Ld. DR argued that the Assessing Officer is correct in his observation and deciding that the transactions were planned for taxation purpose and there is no actual loss to any party involved in the transactions. 10.9 We have heard the rival submissions and perused the material available on record. The issue is whether the short-term capital loss arising on transfer of the assessee's partnership interest in Silverstreet LLP is allowable under the provisions of the Act. At the outset, we find that there is no dispute regarding the basic factual position that the assessee had contributed capital aggregating to Rs. 263.74 crores in Silve....
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....hri Dilip Sanghvi is a director and promoter shareholder, whereas Suraksha Buildwell LLP is an entity owned by Smt. Raksha Valia, wife of Shri Sudhir Valia. Since the transaction was between two related entities, the question that arises for consideration is whether the assessee had made any efforts to get its interest in the LLP valued as on the date of transfer. As noted hereinabove, the Ld. Senior Counsel admitted that no valuation report was obtained. However, he strongly submitted that the Assessing Officer has also not applied any of the available or prescribed methods of valuation while rejecting the transaction. Therefore, it is noted that neither the department nor the assessee had followed proper valuation mechanisms in respect of transfer of interest of the said LLP to Suraksha Buildwell LLP. Valuation becomes more relevant in light of the fact that the transaction is allegedly between two related parties. The Ld. Senior Counsel, has brought on record critical fact that Suraksha Buildwell LLP is not a related party under provisions of Income Tax Act. However, said no specific finding dealing with such fact has been given by Assessing Officer in assessment order. It is al....
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....sions of the ITAT (in the case of erstwhile SPS) for AY 2010-11 and AY 2011-12, by the orders of the Ld. CIT(A) (in the case of erstwhile SPS) for AY 2010-11 to AY 2013-14, by the decisions of the Coordinate Bench of the Tribunal in the assessee's own case for AY 2013-14 to AY 2015-16, and by the orders of the Ld. CIT(A) in the appellant's own case for AY 2013-14 and AY 2016-17. The Ld. CIT(A), while granting relief, has merely followed the aforesaid binding decisions and no distinguishing facts or change in law have been brought to our notice by the Revenue. Respectfully following the earlier orders in the assessee's own case, we find no infirmity in the order of the Ld. CIT(A). Accordingly, the same is upheld and the Ground of Appeal raised by the Revenue is dismissed. 14. Ground No. 2 raised by the Revenue relates to disallowance of deduction under section 80-IB/80-IE in respect of interest income on overdue bills, staff advances and statutory/bank deposit amounting to Rs. 54,25,44,720/-. 14.1 We have heard the rival submissions and perused the material available on record. We find that the issue involved in the present ground stands covered by the order of the....
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....stands covered by the ITAT Order for AY 2015-16. The Ld. CIT(A) has followed the consistent view taken in the preceding years and no material has been brought before us to justify a different view. Respectfully following the earlier orders in the assessee's own case, we uphold the order of the Ld. CIT(A). Accordingly, the Ground of Appeal raised by the Revenue is dismissed. 18. Ground No. 6 raised by the Revenue relates to disallowance of software upgradation and maintenance expenses amounting to Rs. 6,65,02,398/-. 18.1 We have heard the rival submissions and perused the material available on record. We find that the issue involved in the present ground stands covered by the ITAT Order for AY 2015-16. The Ld. CIT(A) has followed the consistent view taken in the preceding years and no material has been brought before us to justify a different view. Respectfully following the earlier orders in the assessee's own case, we uphold the order of the Ld. CIT(A). Accordingly, the Ground of Appeal raised by the Revenue is dismissed. 19. Ground No. 7 raised by the Revenue relates to disallowance of consultancy fees paid to Mckinsey & Co. amounting to Rs. 1,40,17,503/-. 19.....
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.... Redemption Reserve represented a provision created towards an ascertained statutory liability and not a reserve in the true sense. The Ld. CIT(A) further recorded a categorical finding that the amount had in fact been appropriated out of the profits of the relevant year by way of debit to the Profit & Loss Account and that the disallowance had arisen primarily because of the manner in which the computation was reflected in the ITR utility. Relying, inter alia, upon the decisions of the Hon'ble Supreme Court in National Rayon Corporation Ltd. (227 ITR 764) and the Hon'ble Bombay High Court in Raymond Ltd. (21 taxmann.com 60), as well as the decision of the Coordinate Bench of Ahmedabad Tribunal in Genus Electrotech Ltd. (161 ITD 644), the Ld. CIT(A) held that the Debenture Redemption Reserve represented an ascertained liability and was therefore eligible for deduction while computing book profit under section 115JB. He accordingly directed the Assessing Officer to delete the addition. 21.3 Aggrieved by the aforesaid findings of the Ld. CIT(A), the Revenue is in appeal before us. 21.4 The Ld. CIT-DR relied upon the assessment order and submitted that since the amount w....
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....ear. The Revenue has not brought any material before us/to controvert this factual finding 21.7 We further find that the controversy is no longer res integra. The Hon'ble Supreme Court in National Rayon Corporation Ltd. v. CIT (supra) has authoritatively held that the liability towards redemption of debentures is a known and existing liability and that any amount set apart for meeting such liability cannot be regarded as a reserve. Following the aforesaid decision, the Hon'ble Bombay High Court in CIT v. Raymond Ltd. (supra), while dealing with the provisions of section 115JA, held that a Debenture Redemption Reserve is not a reserve within the meaning of the Explanation to the MAT provisions since it merely represents an amount retained for meeting a known and ascertained liability. The same principle has thereafter been followed by the Coordinate Bench of the Ahmedabad Tribunal in ACIT v. Genus Electrotech Ltd. (supra) while interpreting section 115JB of the Act. Respectfully following the aforesaid binding precedents, we are of the considered view that the amount transferred to Debenture Redemption Reserve represents a provision for an ascertained liability and cannot....
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....urn of income and, relying upon the decision of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT (284 ITR 323), declined to entertain the claim. 22.3 In appeal, the Ld. CIT(A), after considering the provisions of Explanation 1 to section 115JB(2), the submissions made by the assessee and the judicial precedents relied upon, held that the interest income earned from tax-free bonds was admittedly exempt under section 10(15) of the Act and was therefore specifically required to be reduced while computing book profit under section 115JB. The Ld. CIT(A) observed that the Assessing Officer had not disputed the exempt nature of the income and had rejected the claim only on the procedural ground that it had not been made in the return of income. Relying upon the judgment of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. (349 ITR 336), after considering the decision of the Hon'ble Supreme Court in Goetze (India) Ltd., the Ld. CIT(A) held that while the Assessing Officer may not entertain a fresh claim otherwise than through a revised return, the appellate authorities are fully empowered to admit and allow a lawful claim arising from th....
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....dvertent omission in the return. He accordingly prayed that the order passed by the Ld. CIT(A) deserved to be upheld. 22.7 We have heard the rival submissions and perused the material available on record. We find no infirmity in the order passed by the Ld. CIT(A). The undisputed factual position emerging from the record is that the assessee had earned interest income of Rs. 2,98,76,675/- from tax-free bonds, which was exempt under section 10(15) of the Act. The Assessing Officer himself has accepted the exempt character of the said income while computing the income under the normal provisions as well as while making disallowance under section 14A. The only reason assigned for denying the reduction while computing book profit under section 115JB is that the assessee had failed to claim the same in the original or revised return of income. 22.8 We find that clause (ii) of Explanation 1 to section 115JB(2) specifically provides that income to which section 10 applies (other than section 10(38)) shall be reduced while computing the book profit, provided such income has been credited to the Profit & Loss Account. Once the exempt nature of the income is undisputed and the statutory....