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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
The above appeals were pronounced vide separate orders for each assessment year i.e. A.Y. 2006-07, 2009-10 & 2010-11 on 28.02.2023 and upon forwarding files and orders to the order section by the Senior Private Secretary on 08.03.2023, we observe certain mistake apparent on record, we are rectifying those mistake by passing this corrigendum suo motto as under: -
Page AY Remarks No. 2006-07 Additional ground on 43B liability not adjudicated. 2009-10 103 Para. No 94 - Provision for leave encashment allowed based on 115JB reference. Wrongly quoted order for AY 2004-05 instead of A.Y.2008- 09 order and it's relevant reference. 2010-11 106-108 Para No. 95 & 96 - Ground no. 7 of Assessee's appeal related to education cess which was not pressed by Assessee, however wrongly adjudicated and partly allowed. 119 Para. No 113 - Ground no 12 of Assessee's appeal related disallowance u/s 14A adjudicated by giving reference of exclusion of amount transfer to debenture redemption reserve. (A.Y: 2006-07)
Assessee has raised additional ground for the A.Y.2006-07 which was not adjudicated on oversight, accordingly, we proceed to dispose of this ground by way of this corrigendum. In the additional ground the assessee has raised ground that outstanding BIS Marking fees of ₹.477,161/-, which was disallowed u/s 43B in A.Y.2005-06, it was prayed that this payment was made subsequently in the current assessment year and the assessee failed to claim the same in the return of Income. It was submitted that the assessee is entitled to raise the genuine and legal issue
(A.Y: 2006-07) (A.Y: 2009-10) ITA NO.3137/MUM/2019 (A.Y: 2010-11) M/s. ACC Limited before the appellate authorities in additional ground by relying on the decision of Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers and Shareholders P Ltd [349 ITR 336]. On the other hand, Ld DR objected for the above proposition and the assessee could claim the same in the return of income and also not claimed by filing the revised return of income.
Considered the rival submissions and material placed on record. It was submitted that the assessee made the payment to BIS Marking in the current assessment year and the same is eligible to claim as business expenditure. After considering the submissions, we are inclined to remit this issue back to the file of Assessing Officer to verify the claim of the assessee and allow the same on the payment basis as per law. Therefore, this additional ground raised by the assessee is allowed for statistical purpose.
ITA NO.3135/MUM/2019 (A.Y: 2009-10)
At Para No. 94, we dealt with the issue of Leave Encashment allowance u/s 115JB, we observe that the similar issue was considered by us in the A.Y.2008-09 in Ground No 13 and instead of reproducing the decision, we have wrongly reproduced the findings given in the A.Y.2005- 06. The more relevant facts for this ground is from Ground No.13 of A.Y. 2008-09. Therefore, we are hereby reproducing the above in the corrigendum for this Assessment Year as under:
“94. Similar issue was considered by us in the assessee appeal Ground No 13 in AY 2008-09 and held as under: -
(A.Y: 2006-07) (A.Y: 2009-10) ITA NO.3137/MUM/2019 (A.Y: 2010-11) M/s. ACC Limited 67. Considered the rival submissions and material placed on record. On perusal of relevant facts on record, it is observed that Hon'ble supreme court in the case of UOI v. Exide Industries Ltd. [425 ITR 1] has upheld constitutional validity of provision of section 43B(f) for provision for leave encashment liability and considering binding decision of Hon'ble Supreme Court claim cannot be allowed. However, if payment of such provision towards leave encashment is made in subsequent year, deduction may be allowed to assessee in such years if not allowed till date. Therefore, Assessing Officer is directed to verify and the same and allow the same as per our above directions. This ground of appeal is partly allowed.
95. Respectfully following the above decision, we partly allow the ground raised by the assessee.”
ITA NO.3137/MUM/2019 (A.Y: 2010-11)
At Para Nos. 94, 95 & 96 we have adjudicated the ground raised by the assessee with regard to disallowance of education cess in Ground No.7 and partly allowed the ground raised by the assessee. However, on a perusal of the note sheet and chart submitted by the assessee, we observed that this ground was not pressed by the assessee. The same deserves to be dismissed. Accordingly, we are modifying the decision in the Para No. 96 in fact we are modifying the Para 95 and 96 as under:
“95 & 96. During the course of appellate proceedings, Ld.AR has not pressed this ground of appeal hence same is dismissed as not pressed.”
6. At Para No. 112, 113 & 114 we have adjudicated the ground raised by the assessee with regard to disallowance u/s. 14A, however, inadvertently reliance was incorporated relating to Debenture redemption reserve issue, which is the mistake apparent in the Tribunal order. As there is mistake with respect to reference and extraction, we modify Para No. 113 & 114 of the Tribunal order in A.Y.2010-11 as under: - (A.Y: 2006-07) (A.Y: 2009-10) ITA NO.3137/MUM/2019 (A.Y: 2010-11) M/s. ACC Limited “113. Similar issue was considered by us in the Assessee’s Appeal in Ground No 1 in AY 2008-09 and held as under: - “10. Considered the rival submissions and material placed on record. So far as proportionate interest disallowance u/s 14A is concerned, it is observed that Assessee has sufficient own funds in the form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court in the case of South Indian Bank Ltd [2021] 130 taxmann.com 178 has held as under: “Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assessee- scheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 11. Hon’ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji & Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: “6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had deleted the addition made by the assessing officer under section 14-A of the Act by observing that the interest-free fund available with the respondent - assessee was far in excess of the advance given. Tribunal further noted that the Revenue does not dispute the said finding and relying on the decision of this Court in CIT v. Reliance Utilities & Power Ltd. [2009] 178 Taxman 135/313 ITR 340, affirmed the deletion made by the first appellate authority.
We have perused the decision of this Court in Reliance Utilities & Power Ltd. (supra) wherein it has been held that if there are funds available with the assessee, both, interest-free and overdraft and/ or loans taken, then a presumption would arise that investments would be out of the interest- free funds generated or available with the assessee if the interest-free funds were sufficient to meet the investments. In the facts of that case, it was noted that the said presumption was established considering the finding of fact returned by the first appellate authority as affirmed by the Tribunal which is identical in the present case. 7.1 We also note that the said decision of this Court has been affirmed by the Supreme Court in CIT v. Reliance Industries Ltd. [2019] 102 taxmann.com 52/261 Taxman 165/410 ITR 466.”
(A.Y: 2006-07) (A.Y: 2009-10) ITA NO.3137/MUM/2019 (A.Y: 2010-11) M/s. ACC Limited 12. Respectfully following the binding decision of Hon'ble Supreme Court and Hon'ble Jurisdictional High Court referred supra, disallowance u/s 14A made by Assessing Officer in connection with proportionate interest disallowance deleted by the Ld.CIT(A) is sustained. 13 So far as disallowance of other administrative expenditure is considered, it is observed that Hon'ble Delhi ITAT in the case of Vireet Investment Pvt. Ltd. [165 ITD 27] has held as under: “Section 14A of the Income-tax Act, 1961 read with rule 8D of the Income- tax Rules, 1962 - Expenditure incurred in relation to exempt income not includible in total income - Assessment year 2008-09 - Whether only those investments are to be considered for computing average value of investment which yielded exempt income during year - Held, yes [Para 11.16][Matter remanded]”
The above referred decision has been followed by co-ordinate Bench in the case of DCIT v. Shree Global Tradef in Ltd. in ITA No. 1374/Mum/2022 dated 22nd December, 2022 has held as under: “11. Having heard the rival submissions and perused the materials available on record. It is observed that the assessee has made a suo moto disallowance of Rs.1,263/- for which the assessee contends that the A.O. ought not to have applied Rule 8D on the ground that suo moto disallowance has been made by the assessee. The assessee further contends that without prejudice, the disallowance should be restricted only to the investments which have yielded an exempt income for the assessee during the impugned year. It is also pertinent to point out that since the assessee had not borrowed funds during the relevant year, no disallowance as per Rule 8D(2)(i) of the Income Tax Rules was warranted. It is also observed that the A.O. has recorded his satisfaction that the correctness of the assessee's claim of expenses of disallowance was not to the satisfaction of the A.O., thereby entitling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd. (supra) holds good in the present case. We are also of the considered opinion that the ld. CIT(A) has rightly held that the assessee has not made bifurcation of the expenses claimed under 'other expenses' and in case of which the A.O. had to invoke Rule 8D of the Income Tax Rules. The suo moto disallowance of the assessee does not disentitle the A.O. from invoking the said provision. In this regard, we find justification in the order of the ld. CIT(A) in upholding the A.O.'s action in invoking the provision of Rule 8D(2)(ii) by rejecting the assessee's contention that suo moto disallowance by the assessee warrants no further disallowances. The assessee's alternate claim is that the disallowance u/s. 14A read with Rule 8D(2)(iii) should be restricted only to those investments on which exempt income was earned by the assessee during the impugned year, by placing reliance on the decision of Vireet Investments Pvt. Ltd. (supra). We also find justification in the order of the ld. CIT(A) in holding that the disallowance u/s. 14A read with Rule 8D(2)(iii) of the Act should be invoked for calculation of disallowance pertaining to only investment from which exempt income is earned by the assessee by placing reliance on the decision of the Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd. (supra). We find no infirmity in the order of the ld. CIT(A).
(A.Y: 2006-07) (A.Y: 2009-10) ITA NO.3137/MUM/2019 (A.Y: 2010-11) M/s. ACC Limited 12. By respectfully following the above mentioned decisions, we uphold the order of the ld. CIT(A) in directing the A.O. to recompute the disallowance only to the investments which have yielded exempt income during the impugned year.”
Considering the finding given by Coordinate Bench, the Assessing Officer is directed to re-work disallowance u/s.14A under rule 8D(2)(iii) on investment which has yielded exempt income and consider only those investments which yielded the exempt income. The assessee gets the relief accordingly. This ground of appeal is partly allowed.”
114. Respectfully following the above decision, we partly allow the ground raised by the assessee.”
7. The above corrigendum be read as part of the order dated 28.02.2022.
Corrigendum issued on 16th March, 2023.