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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the Revenue against the order dated 10.08.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The Revenue has raised the following two grounds. “1. The order of the CIT(A) is opposed to law and facts of the case.
2. On the facts and the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of Rs. 19.91 crores u/s 10A, ignoring the fact that business done in the New STP unit was a continuation of the business done by Non STP unit and hence ineligible for deduction u/s IDA.
3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in restricting the disallowance made by the AO adopting method of calculation provided in Rule 8D thereby overlooking the crucial fact that this 2 M/s. Mahindra Engineering Services Ltd. method of calculation has been prescribed by the statute and held as a reasonable method by the Hon'ble Bombay High Court in Godrej & Boyce Mfg. CoLtd328ITR81(Bom).
The issue raised in ground No.1 is against the deletion of disallowance of Rs.19.91 crores under section 10A of the Act.
The facts in brief are that the assessee during the year has claimed deduction under section 10A of the Act amounting to Rs.19,91,16,470/- in respect of STPI unit situated at 128/A, Sanghvi, Movers Compound, Mumbai, Pune Road, Chinchwadi, Pune. The AO noted that the claim of the assessee under section 10A of the Act has been allowed in A.Y. 2007-08 and subsequent years, however rejected the claim of the assessee on the ground that Department has preferred appeal before ITAT in A.Y. 2007-08 and 2008-09.
At the outset, the Ld. Counsel of the assessee pointed out that issue has been decided in favour of the assessee by the co- ordinate bench of the Tribunal in A.Y. 2007-08 and therefore the ground raised by the Revenue should be dismissed by following the co-ordinate bench of the Tribunal order.
The Ld. D.R., on the other hand, relied on the grounds of appeal.
7. After hearing both the parties and perusing the material on record including the decision of the co-ordinate bench of the Tribunal in A.Y. 2007-08, we observe that the issue has been decided in favour of the assessee by 3 M/s. Mahindra Engineering Services Ltd. upholding the order of the AO and dismissing the ground raised
by the Revenue. The operative part of the order is as under:
12. The Ld. CIT(A) has pointed out that the AO has denied the deduction mainly on the ground that by setting up the STPI Unit, the appellant had not started a new business. The Ld. CIT(A) has further observed that findings of the AO are based on an inadequate premise as the AO has based his findings on the purchase order dated 15.10.2004 and the nature of services in the pre existing non STPI unit and the comparable rates of pre STPI and STPI jobs. We find that the observations of the Ld. CIT(A) are based on the evidence on record. As observed by the Ld. CIT(A) the purchase order dated 15.10.2004 was in connection with only a Pilot Project mounted to test the ability of the appellant company to do business on a magnitude and level compatible to the expectations of ITEC. The work given for the Pilot Project was initially for a sum of Rs. 9.3 crores, however, after signing the contract with International Truck and Engine Corporation (ITEC), the STPI unit earned revenue of Rs. 42.74 crore. As per para 2.3 of the Agreement, with the commencement of joint Venture, the purchase order dated stood terminated. Hence, in our considered opinion, the findings of the Ld. CIT (A) are based on the evidence on record and in accordance with the settled principles of law. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT (A). Accordingly, we uphold the findings of the Ld. CIT(A) and dismiss both the grounds of the revenue's appeal.”
8. We, therefore, respectfully following the decision of the co- ordinate bench of the Tribunal uphold the order of Ld. CIT(A) by dismissing the ground raised by the Revenue.
9. The issue raised in ground No.2 is against the order of Ld. CIT(A) restricting the disallowance made by the AO under rule 8D2(iii).
The facts in brief are that during the year assessee has derived income by way of dividend from mutual funds of Rs.49,34,637/- which was claimed under section 10(35) as exempt and made a suo-motto disallowance of Rs.7,71,055/-. According to the AO, the disallowance has to be computed under section 14A of the Act by applying rule 8D and he accordingly computed the disallowance at Rs.72,37,221/- and after allowing
In the appellate proceedings, the Ld. CIT(A) deleted the disallowance by holding that the assessee’s own share capital and reserves were Rs.81.89 crores whereas the investments were at Rs.21.31 cores. The Ld. CIT(A) by following the decision of the Hon’ble Bombay High Court in the case of “CIT vs. Reliance Utilities and Power Ltd.” (2009) 313 ITR 340 (Bom) and “CIT vs. HDFC Bank Ltd.” (2014) 366 ITR 505 (Bom) deleted the disallowance made under rule 8D2(ii), however, sustained the disallowance under rule 8D2(iii). The Ld. CIT(A) observed that since the suo-moto disallowance has been made by the assessee himself to the tune of Rs.7,71,055/- therefore no further disallowance is required to be made. Accordingly, deleted the entire addition made by the AO.
After hearing both the parties and perusing the material on record including the impugned order, we observe that the Ld. CIT(A) has correctly passed the order deleting the addition as made by the AO under rule 8D2(ii) and rule 8D2(iii). The addition under rule 8D2(ii) was deleted by following the decision of Hon’ble Bombay High Court in the case of CIT vs. “CIT vs. Reliance Utilities and Power Ltd.” (supra) and CIT vs. HDFC Bank Ltd. (supra) by holding that assessee’s own funds are far more than the investments in the investments yielding exempt income. So far as the disallowance under rule 8D2(iii) is concerned, the Ld. CIT(A) observed that no further disallowance is required as assessee has suo-moto made disallowance of Rs.7,71,055/- which is as per the Rule 8D2(iii) and thus deleted
5 M/s. Mahindra Engineering Services Ltd. the addition made by the AO under section 14A of the Act . We do not find any infirmity in the order of Ld. CIT(A) and same is hereby affirmed by dismissing the appeal of the Revenue.
Order pronounced in the open court on 28.06.2019.