GREAVES COTTON LTD,MUMBAI vs. ASST CIT CIR 6(3), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER; 1. These two appeals by assessee under section 253 of the Income-tax Act (‘the

Act’) are directed against the assessment order passed under section 143(3) r.w.s. 144C passed in pursuance of direction of ld. Dispute Resolution Panel- 1 (ld. DRP), Mumbai for Assessment Year 2006-07 & 2007-08. In both the appeals, the assessee has raised certain identical grounds of appeal, therefore, both the appeals were clubbed, heard and are decided by common order for

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

the sake of brevity and convenience. With the consent of parties, appeal for

Assessment Year 2006-07 in ITA No. 7424/Mum/2010 was treated as lead

case. In ITA No. 7424/Mum/2010, the assessee has raised the following

grounds of appeal:

Ground A: DISALLOWANCE U/S 36(1)(iii) - Rs.10,11,216/-. 1. In the facts and circumstances of the case, the Assessing Officer, in the order passed in pursuance of directions of the Dispute Resolution Panel (DRP) erred in disallowing proportionate interest of Rs.10,1l,216/- on business advances of Rs. 2,13,55,159/- given to M/s Dee Greaves Limited, a ultimate subsidiary of the Appellant without appreciating the fact that the Appellant is sole sale concessionaires of the subsidiary company, which is financially weak and the advances given to the subsidiary were for commercial consideration to meet their working capital requirement, and the advances were utilized by them for the said purpose and also the fact that the subsidiary company is under constant managerial, financial and administrative control of the Appellant company since its incorporation in the year August, 1960. 2. The Assessing Officer erred in deciding that since there was no business with the subsidiary company in the year under consideration, the advances given in earlier years are not in connection with business. Ground B DISALLOWANCE U/S 14A r.w.r. 8D - Rs. 1,19,20,701/- 3. In the facts and circumstances of the case, the Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in applying retrospectively the methodology prescribed in Rule 8D, which was inserted by the I.T. (Fifth Amdt.) Rules, 2008 w.e.f. 24.3.2008 and disallowed a sum of Rs. 1,19,20,701/-, being expenditure for earning dividend and income from mutual funds of Rs.61,68,033/- for the Assessment Year 2006-2007. 4. Since Rule 8D inserted by the inserted by the LT. (Fifth Arndt.) Rules, 2008 w.e.f. 24.3.2008 is not retrospective in nature, for the Assessment year 2006- 2007 the Assessing Officer should have applied the reasonable disallowance of 0.4% of gross exempt income, as expenditure relatable to income which does 2

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not form part of the total income, as decided by the Hon. Income tax Appellate Tribunal, Mumbai, in Appellant's own case for earlier years. 5. The Assessing Officer should not have considered expenditure worked out as per the methodology prescribed under rule 8D, for the purposes of working out book-profit u/s 115JB since there is no mention of mention of such methodology in Explanation 1 to section 115JB of the Income tax Act, 1961 and also the said rule cannot be applied for Assessment Year 2006-2007. Ground C POOJA EXPENSES - Rs. 7,05,806/- 6. The Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in disallowing pooja expenses of Rs. 7,05,806/- being non business expenses without appreciating the fact that expenditure incurred on poojas performed during Diwali and Dassera festivals helps the Appellant company to foster amity and good relation amongst the employees and workers. Ground D CLUB EXPENSE - Rs.79,170/- 7. The Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in not allowing business expenditure incurred by senior marketing executives of the Appellant business meetings held in prestigious clubs, which is common meeting place of business community and at clubs top executives of leading companies give scope for canvassing and promoting business contacts. Ground E DISALLOWANCE U/S 40A(9) - Rs. 94,470/- 8. The Assessing Officer, in the order passed in pursuance of directions of the DRP, should have allowed contributions made by the Appellant towards various employee's welfare funds in compliance with the agreement entered into by the Appellant with the Employee's Union which are covered under the Industrial Dispute Act, 1947 and hence allowable under proviso to section 40A(9) of the Act. 9. Without Prejudice to above, the Assessing Officer should not have added the disallowance of Rs. 94,470/- in the assessed total income since the Appellant had themself added it in returned income and hence further addition results in double taxation. Ground F 3

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UNUTILISED CENVAT CREDIT - Rs. 2,91,87,584/- 10. The Assessing Officer, in the order passed in pursuance of directions of the DRP, erred in adding the unutilized cenvat credit of Rs.2,91,87,584/- to the total income of the Appellant as the Appellant valued the inventory as per method of accounts regularly employed and the Auditors have also certified that deviation from valuation method prescribed under sec. 145A has no impact on the profit of the Appellant. Moreover, addition of amount of unutilized cenvat credit will distort the real profit since consistency in valuation of inventory is disturbed. Ground G DISALLOWANCE V/S 40(a) (ia) - Rs. 2,58,19,665/-. 11. The Assessing Officer; in the order passed in pursuance of directions of the DRP, erred in not allowing the claim of the Appellant to allow deduction of amount of addition made u/s 40(a) (ia) in assessment year 2005-06 since the Appellant reversed those excess expenses' provision and credited the same in respective expenditure accounts in the assessment year 2006-07. 12. The Assessing Officer also failed to appreciate that the order u/s 143 (3) making disallowance u/ s 40 (a) (ia) was passed on 26/12/2008 after the time limit prescribed u/s 139(5) i.e. on 31.3.2008 and hence the Appellant could not make their claim in revised return. 13. The Assessing Officer failed to appreciate that non allowance of deduction of reversal of expenditure would result in double taxation, firstly at the time of disallowance u/s 40(a) (ia) in A.Y. 2005-06 and secondly including it as taxable income in the Asst. year 2006-07. 14. The Assessing Officer also failed to appreciate that the order u/s 143(3) making disallowance u/s 40(a) (ia) was passed on 26/12/2008 after the time limit prescribed u/s 139(5) i.e. on 31.3.2008 and hence the Appellant could not make their claim in revised return. Ground H INTEREST U/S 234C - Rs.l,13,850/- 15. As decided by the Bombay High Court in the case of Snocem India Ltd., Vs. Dy. CIT (2009) 313 ITR 170, the Assessing Officer should not have levied interest u/s 234C in respect of shall fall of advance tax payable as per working u/s 115JB of the Income tax Act, 1961. Ground I 4

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General 16. The Assistant Commissioner of Income Tax, Circle 6(3), Mumbai's order, in pursuance of directions of the DRP, being contrary to law, evidence and facts of the case should be amended or modified in light of the grounds deduced above. 2. In ITA No. 8533/Mum/2011, the assessee has raised the following grounds of

appeal:

GROUND: A: DISALLOWANCE U/S 36(1)(III) - Rs. 5,55,451/- On the facts and in the circumstances of the case, the Assessing Officer and the Dispute Resolution Panel (DRP) should not have disallowed interest of Rs.5,55,451/- on interest free loans and advances given to subsidiary companies. GROUND: B: DISALLOWANCE U/S 14A - Rs. 70,43,316/- (i) On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed Rs.70,43,316/- u/s 14A of the Income tax Act, 1961 since no expenditure was incurred by the Appellant for earning dividend (exempt income) of Rs. 1,80,38,016/-. (ii) Without prejudice to above, on the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed a sum of Rs. 70,43,316/- as being reasonable expenditure relatable to dividend received of Rs. 1,80,38,016/- , by directly or indirectly following Rule 8D of the Income tax Rules, 1962 for the Assessment Year 2007-08 and ignoring the decision of the Bombay High Court for the Asst. Year 2001-02 and the reasonable expenses determined in earlier assessment years in Appellant's own case. GROUND: C: POOJA EXPENSES - Rs. 11,84,378/- On the facts and in the circumstances of the case, the Assessing Officer and the Dispute Resolution Panel should not have disallowed pooja expenses of Rs.11,84,378/- treating it as non-business expenditure. GROUND: D: DISALLOWANCE U/S 40A(9) - Rs. 49,649/- On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have disallowed contributions to various Employees' Welfare funds being statutory payments that are not covered under section 40A(9) of the Income tax Act, 1961. 5

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GROUND: E: UNUTILISED CENVAT CREDIT - (Rs. 2,95,78,424/- (-) Rs.l,49,82,050) Rs.l,45,96,374/- (i) On the facts and in the circumstances of the case, the Assessing Officer and the DRP should not have added unutilized Cenvat Credit to the total income of the Appellant. (ii) Without Prejudice to above, on the facts and in the circumstance of the case, the Assessing Officer and the DRP should not have reduced the incorrect amount of unutilized cenvat credit as on 31/3/2006 of Rs. 1,49,82,050/- instead of reducing the correct amount of Rs.2,91,87,584/- and thereby enhancing the net addition of unutilized cenvat credit for the assessment year 2007-08 from Rs. 3,90,840/- (as assessed by the Assessing Officer in draft assessment order u/s 144C} to net addition of Rs.1,45,96,374/-. GROUND: F: BOOK-PROFIT - Rs. 70,43,316/- On the facts and in the circumstances of the case the Assessing Officer and the DRP should not have added Rs. 70,43,316/- under section 14A r.w.r. 8D of the Income tax Rules, 1962 being expenditure relatable to dividend received. GROUND: G : MAT CREDIT U/S 115JAA On the facts and in the circumstances of the case the Assessing Officer should have allowed MAT credit before deducting TDS and Advance Tax as per the provisions of Section 115JAA of the Income tax Act for the assessment year 2007-08 and allowed interest u/s 244(1A) of the Income tax Act, 1961. GROUND: H : INTEREST U/S 234B - Rs. 2,05,99,228/- On the facts and in the circumstances of the case the Assessing Officer should not have charged interest under section 234B of the Act, since the net tax payable by the Appellant would result into refund after giving credit for taxes u/s 115JAA. GROUND: I: INTERSET U/S 234C - Rs. 14,97,216/- On the facts and in the circumstances of the case the Assessing Officer should not have charged interest under section 234C of the Act, since the net tax payable by the Appellant would result into refund after giving credit for taxes u/s 115JAA. J. GROUND: J: General

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

manufacturing of marine and industrial gear boxes, diesel engines, generating

sets etc. For the assessment year under consideration the assessee filed its

return of income declaring Nill income. In the return the assessee claimed

international transactions with its associated enterprises, therefore, the

assessing officer made a reference to Transfer Pricing Officer (TPO) for

computation of Arms Length Price. The TPO passed its order under section

92CA(3) on 15.05.2009. After receipt of order of TPO, the Assessing Officer

passed draft assessment order under section 143(3) read wit section 144C (1)

dated 3.11.2009. The assessee was served with the copy of the draft

assessment. In the draft assessment order, the Assessing Officer made

addition/disallowances consisting of disallowance under section 36(1)(ii),

disallowance under section 14A r.w.r 8D, disallowance of Pooja Expenses,

Club Expenses, disallowance under section 40A(9) , addition on account of

Cenvat credit, disallowance under section 40(a)(ia). The assessee exercised

its option for filing objection before the ld. DRP. The DRP after hearing the

assessee granted partial relief on disallowance under section 36(1)(iii) and on

addition of Cenvat credit in its direction dated 15.07.2010, however, the other

remaining additions / disallowances were sustained. On receipt of direction

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

from ld. DRP, the Assessing Officer passed the final assessment order under

section 143(3) r.w.s 144C(13) dated 24.09.2010. Aggrieved by the various

additions/ disallowances made in pursuance of direction of ld. DRP, the

assessee has filed present appeal before this Tribunal. 4. WE have heard the submission of ld. AR of the assessee and ld. DR for the

revenue and perused the material available on record. Ground No.1 relates to

disallowance under section 36(1)(iii). The ld. AR of the assessee submits that

during the assessment, the Assessing Officer issued show cause for

disallowance of proportionate interest in respect of interest free advances

given by assessee to its subsidiary. The assessee filed its reply. In the reply,

the assessee stated that they have advanced money to their 100% subsidiary

i.e. Dee Greaves Ltd. & Greaves Leasing Finance Ltd. in Assessment Year

1998-99. The assessee had sufficient interest free funds and that advance was

not given from any borrowed money. The assessee has sufficient interest free

funds available with them. The assessee also relied on the decisions of

Hon’ble Supreme Court in S.A. Builders vs. CIT [158 Taxman 74 (SC)] and

Munjal Sales Corporation vs. CIT, on the ratio that notional interest on

advances to subsidiary should not be disallowed. The assessee also brought

on record that the interest free funds available with the assessee was much

more than the interest free advances given by assessee. The ld. AR further

relied upon the decision of jurisdictional High Court in Reliance Utility &

Power Ltd. [313 ITR 340]. The ld. AR of the assessee further submits that the 8

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

assessee advanced to its subsidiary in 1998-99 and the revenue never made

addition under section 36(1)(iii) prior to the Assessment Year under

consideration. 5. On the other hand, the ld. Departmental Representative (DR) for the revenue

supported the order of Assessing Officer. 6. We have considered the rival submission of the parties and have gone

through the orders of authorities below. During the assessment, the Assessing

Officer noted that the assessee has claimed interest expenses of Rs. 6.57

Crore. The assessee was asked to justify for interest paid on borrowed capital

and to prove the nexus between the own funds and the interest free advance

made to sister concern of Rs. 4.73 Crore. The assessee filed its reply and

stated that the interest debited in Profit & Loss was paid in respect of capital

borrowed for the purpose of business. The advance paid to subsidiary was on

account of business expediencies. The contention of assessee was not

accepted by Assessing Officer. The Assessing Officer worked out the

disallowance of Rs. 22,42,759/- under section 36(1)(iii). The ld. DRP granted

the partial relief to the assessee on the loan and advances given to Greaves

Leasing Company holding that the advances were given to supply of

equipment, therefore, it was in normal business operation and the Assessing

Officer was directed to modify the assessment order accordingly. We have

noted that the assessee’s own fund consisting of share capital and reserve and

surplus was Rs. 175.11 Crore. The assessee has given loans and advance to is 9

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

subsidiaries i.e. Dee Greaves of Rs. 2,13,55,159/- only. The Hon’ble Bombay

High Court in Reliance Utility & Power Ltd. (supra) held that if the assessee

have funds available both, interest-free and overdraft and/or loans are taken,

then a presumption would arise that investments would be out of the interest-

free fund generated or available with the company, if the interest-free funds

are sufficient to meet the investments. Therefore, in view of the decision of

jurisdiction High Court as referred above, we are of the view that the assessee

has sufficient interest free fund available with the assessee and therefore, no

interest disallowance under section 36(1)(iii) was justified. Hence, the ground

A (1&2) of appeal raised by assessee is allowed. . 7. Ground No. B (3) to (4) relates to disallowance under section 14A r.w. Rule

8D. The ld. AR of the assessee submits that during the relevant period under

consideration, the assessee earned exempt income of Rs. 61,68,033/-. The

Assessing Officer made disallowance under section 14A of Rs. 1,19,20,701/-

by invoking the provision of Rule 8D. The ld. AR of the assessee submits

that it is now settled law that the provisions of Rule 8D were not applicable

for the year under consideration prior to AY 2008-09. The ld. AR of the

assessee further submits that this ground of appeal is covered in favour of

assessee in assessee’s own case for Assessment Year 2005-06 in ITA No.

2482/Mum/2015 dated 15.03.2019 wherein the disallowance under section

14A was restricted to 2% of the dividend income earned by assessee for

relevant period. 10

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

authorities. 9. We have considered the submission of both the parties and have gone

through the orders of authorities below. We have noted that during the period

under consideration, the assessee has shown the exempt income of Rs.

61,43,033/-. The Assessing Officer invoked the provisions of Rule 8D and

disallowed Rs. 1,19,20,701/-. We have further noted that similar

disallowance was made by revenue in Assessment Year 2005-06 and on

appeal before the Tribunal; the disallowance was restricted to 2% of the

dividend income. Considering the facts of the year under consideration and

respectfully following the decision of co-ordinate bench in assessee’s own

case for Assessment Year 2005-06, the disallowance for the Assessment Year

in the present appeal is restricted to 2% of the dividend income. The

Assessing Officer is directed accordingly. 10. In the result, ground no. B (3 &4) are partly allowed. 11. Ground No. B (5) relates to adjustment of book profit under section 115JB of

disallowance of Rule 14A. The ld. AR of the assessee submits that this

ground of appeal is also covered by the decision of Special Bench of Delhi

Tribunal in ACIT Vs Vireet Investment (P) Ltd, (82 taxmann.com 415)

(Delhi-Trb SB), wherein it was held by special bench that computation under

clause (f) of Explanation 1 to section 115JB(2), is to be made without

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

resorting to computation as contemplated under section 14A read with rule

8D. 12. On the other hand, the ld. DR for the revenue supported the order of lower

authorities. 13. We have considered the submission of both the parties and have gone

through the orders of authorities below. We have noted that this ground of

appeal is covered in favour of assessee by the decision of Special Bench in

Vireet Investment (P) Ltd. (supra), wherein Special Bench of Delhi Tribunal

that the computation under clause (f) of Explanation 1 to section 115JB (2), is

to be made without resorting to computation as contemplated under section

14A read with rule 8D. Therefore, respectfully following the decision of

Special Bench, we direct the Assessing Officer to follow the decision of

Vireet Investment Ltd. (supra) and pass the order for adjustment under

section 115Jb of the Act accordingly. 14. In the result, this ground of appeal is also allowed for statistical purpose. 15. Ground no. C-(6) relates to Pooja Expenses. The ld. AR of the assessee

submits that this ground of appeal is covered in favour of assessee by the

decision of Hon’ble Bombay High Court in assessee’s own case for

Assessment Year 1998-99 wherein the assessee was allowed relief by

Tribunal and on appeal before the Hon’ble High Court, the department filed

appeal, further, the same was withdrawn with the permission of the Hon’ble

High Court. The ld. AR of the assessee submits that the Tribunal has allowed 12

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

the similar relief in Diayton Greaves Ltd. in ITa No. 5889/Mum/1992 dated

15.03.2001. 16. On the other hand, the ld. DR for the revenue relied on the order of Assessing

Officer. 17. We have considered the submission of the parties and have gone through the

orders of authorities below. We have noted that the assessee has claimed

Pooja Expenses of Rs. 7,05,806/-. The Assessing Officer disallowed the

expenses by following the decision of earlier years. The ld. DRP confirmed

the action of Assessing Officer holding that the assessee has not established

that expenses were incurred wholly and exclusively for the purpose of

business. We have noted that the assessing office disallowed Pooja expenses

of Rs. 8,41,279/- in AY 1998-99, on appeal before ld CIT(A) the deleted the

said disallowances allowed vide order dated 31.03.2003. The Tribunal

conformed the order of ld CIT(A) vide ITA No. 7123/M/2003 vide order

dated 15.04.2008. The revenue filed appeal before Hon’ble Bombay High

Court for challenging the order of the Tribunal in ITA No. 50 of 2010. However, the revenue has withdrawn the said appeal vide order dated 29th

November 2010. The copy of the Hon’ble High Court order is available on

record. Therefore, we are of the view that this ground of appeal is covered in

favor of the assessee. Hence, the AO is directed to delete the Pooja expenses.

In the result this ground of appeal is also allowed.

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

that this ground of appeal is also covered in favour of the assessee by the

decision of Tribunal in assessee’s own case for AY 1982-83 & 1990-91. The

ld AR for the assessee also relied on the decision of Bombay High Court in

Otis Elevator Company (India) Ltd Vs CIT (ITA No. 479 of 1991. 19. On the other hand the ld AR for the assessee relied on the orders of the lower

authorities. 20. We have considered the submission of the parties and have gone through the

orders of authorities below. We have noted that the assessee has claimed club

Expenses of Rs. 79,170/-. The assessee claimed club expenses of Rs.

7,07,477/-. The Assessing Officer disallowed the expenses by following the

decision of earlier years. The ld. DRP directed the Assessing Officer to allow

the club membership fees only. The club membership fees was only Rs.

6,04,00/-, accordingly, the Assessing Officer disallowed the balance amount

(Rs. 7,07,477 – 6,04,000). We have noted that in assessee’s own case for A.Y. 1982-83 similar disallowances was allowed vide order dated 21st

January 1992 in R.A No. 2569(Bom.)/1991 in ITA No. 6154/Bom/1987.

Similar relief was granted to the assessee in appeal for A.Y. 1990-91 in ITA

No. 7619/Bom/1993 dated 13.02.2002. We have further noted that after the

decision of Hon’ble Bombay High Court in Otis Elevator Co. Ltd. (supra),

this issue is no more res-integra wherein the Hon’ble High Court while

considering the question of law about the allowance of club fees 14

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

incurred/paid to employees, allowed the question in favour of assessee.

Therefore, respectfully following the decision of Hon’ble Bombay High

Court in Otis Elevator Co. Ltd. (supra) and decision of Tribunal in assessee’s

own case for A.Y. 1982-83 and 1990-91, this ground of appeal is also

allowed in favour of assessee. 21. Ground No. E (8 & 9) relates to disallowance under section 40A(9) of Rs.

94,740/-. The ld. AR of the assessee fairly conceded that these grounds of

appeal are against the assessee by the decision of Tribunal in assessee’s own

case for A.Y. 2004-05 in ITA No. 7356/Mum/2011 dated 13.10.2015. The ld.

AR submits that this ground of appeal may be dismissed by following the

decision of Tribunal dated 13.10.2015. The ld. DR for the revenue stated that

these grounds of appeal may be dismissed. 22. We have considered the submission of both the parties. The Assessing

Officer made disallowance under section 40A(9) by following the earlier

years. The ld. DRP also upheld the action of Assessing Officer by following

their order for earlier years. Considering the submission of ld. AR of the

assessee that these grounds of appeal are against the assessee by the decision

of Tribunal in assessee’s own case for A.Y. 2004-05 in ITA No.

7356/Mum/2011 dated 13.10.2015. Therefore, considering her submission,

these grounds of appeal are dismissed. 23. Ground No. F (10) relates to addition of unutilized Cenvat credit of Rs. 2.91

Crore. The ld. AR of the assessee submits that the assessee has been 15

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following exclusive method for accounting for accounting Cenvat credit. The

ld. AR further that there will be no impact on profit, even if inclusive method

is followed, i.e. even if Cenvat amount is included in the opening stock,

purchase, sales and closing stock as per the provision of section 145A, there

would be no impact on the profit. The ld. AR prayed for deleting the

impugned addition. The ld. AR submits that the auditor certified that

deviation from valuation from method prescribed under section 144A has no

impact on the profit of the assessee. The ld. AR submits that certificate of

Auditor is filed at page no. 250 to 252 of Paper Book. 24. On the other hand, the ld. DR for the revenue relied upon the order of lower

authority. 25. We have considered the submission of both the parties and perused the

material available on record. The Assessing Officer made addition by

following the order of earlier Assessment Years and made addition of Rs.

2.91 Crore. The ld. DRP also followed their order for earlier years. We have

noted that the co-ordinate bench of Tribunal in assessee’s appeal for A.Y.

2005-06 in its order dated 15.03.2019 in ITA No. 2482/Mum/2015 set-aside

the order to the file of Assessing Officer for examination of figures furnished

by assessee for reconciliation of statements. Therefore, considering the order

of Tribunal for A.Y. 2005-06, the ground of appeal is also restored to the file

of Assessing Officer to examine the issue afresh and pass the order by

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

following the order of Tribunal dated 15.03.2019. In the result, this ground of

appeal is allowed for statistical purpose. 26. Ground No. G (11 to 14) relates to disallowance under section 40(a)(ia) of

Rs. 2,58,19,665/-. The ld. AR of the assessee submits that and amount of Rs.

2,58,19,665/- was disallowed under section 40(a)(ia). During the course of

hearing, the assessee furnished certificate of C.A. that disallowance for A.Y.

2005-06 was Nil. The Assessing Officer made the disallowance of Rs.

2,58,19,665/- in A.Y. 2005-06. The said provision was reversed in A.Y.

2006-07. The ld. AR submits that the assessee has accepted the disallowance

in A.Y. 2005-06 and no further appeal was filed, therefore, the similar

disallowance would be a double disallowance. The ld. AR prayed for deleting

the entire addition. 27. On the other hand, the ld. DR for the revenue submits that these facts can be

verified by the Assessing Officer. 28. We have considered the submission of both the parties and perused the

material available on record. We have noted that during the assessment the

assessee made similar submissions to the assessing officer that amount of Rs.

2,58,19,665/- was disallowed under section 40(a)(ia) in AY 2005-06. During

the course of hearing, the assessee also furnished certificate of C.A. that

disallowance for A.Y. 2005-06 was Nil. The Assessing Officer made the

disallowance of Rs. 2,58,19,665/- in A.Y. 2005-06. The assessee also raised

additional claim for allowance of such amount which was already disallowed 17

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in earlier year. However, the claim of assessee was not allowed by Assessing

Officer on the ground that assessee has not filed revised return of income.

The ld. DRP also noted accepted the objection of assessee holding that the

assessee has merely reversed the entry and not paid TDS thereon, the

disallowance made in A.Y. 2005-06 cannot be corrected in the year under

consideration. 29. We have noted that there is no dispute that the similar disallowance was

made by Assessing Officer in A.Y. 2005-06, from the order of Tribunal for

A.Y. 2005-06 we have noted that no such addition was challenged by

assessee. Considering the fact that making addition of the same amount in the

year under consideration is double disallowance of the same amount.

Therefore, considering the fact and circumstances of the case, we are in

agreement with the submission of ld. AR of the assessee that there cannot be

a double disallowance of the same amount. Therefore, we direct the

Assessing Officer to verify the fact and delete the addition of Rs.

2,58,19,665/-. In the result, this ground of appeal is allowed. 30. Ground No. H (15) relates to interest under section 234C of the Act.

Charging of interest under section 234C is consequential. Therefore, the

Assessing Officer is directed to work out the interest accordingly. 31. In the result the appeal of the assessee is partly allowed.

ITA No. 8533/Mum/2011 for A.Y. 2007-08

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

that this ground of appeal is identical to the ground no. A of appeal for A.Y.

2006-07, which we have allowed. No variations of facts are brought to our

notice, therefore, following the principle of consistency, this ground of

appeal is allowed with similar observation. In the result, this ground of appeal

is allowed. 33. Ground No. B relates to disallowance under section 14A. We have noted that

this ground of appeal is identical to the ground no. B of appeal for A.Y.

2006-07, which we have allowed. There is no much variation on facts for the

year under consideration. Therefore, following the principle of consistency,

this ground of appeal is allowed with similar direction. The Assessing Officer

is directed to restrict the disallowance under section 14A to the extent of 2%

of exempt income earned by assessee during the relevant period under

consideration. In the result, this ground of appeal is partly allowed. 34. Ground No. C relates to Pooja Expenses. We have noted that this ground of

appeal is identical to the ground no. C of appeal for A.Y. 2006-07, which we

have allowed. Therefore, following the principle of consistency, this ground

of appeal is allowed with similar observation. In the result, this ground of

appeal is allowed. 35. Ground No. D relates to disallowance under section 40A(9). We have noted

that this ground of appeal is identical to the ground no. G of appeal for A.Y.

2006-07, which we have dismissed by following the order for A.Y. 2004-05, 19

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

therefore, following the principle of consistency, this ground of appeal is

dismissed with similar observation. In the result, this ground of appeal is

dismissed. 36. Ground No. E relates to unutilized Cenvat credit. We have noted that this

ground of appeal is identical to the ground no. F of appeal for A.Y. 2006-07,

which we have restored to the file of Assessing Officer, therefore, following

the principle of consistency, this ground of appeal is also restored to the file

of Assessing Officer with similar direction. In the result, this ground of

appeal is allowed. 37. Ground No. F relates to book profit under section 14A. We have noted that

this ground of appeal is identical to the ground no. B (iv)/(5) of appeal for

A.Y. 2006-07, which we have restored to the file of Assessing Officer to

follow the decision of Special Bench in Vireet Investment Ltd. (supra) and

pass the order for adjustment under section 115JB of the Act accordingly,

therefore, this ground of appeal is also restored to the file of Assessing

Officer with similar direction. In the result, this ground of appeal is allowed. 38. Ground No. G relates to Mat credit under section 115JAA. The ld. AR of the

assessee submits that this ground of appeal is covered by the decision of

Hon’ble Apex Court in CIT vs. Tulsyan NEC Ltd. in C.A. No. 10677-79 of

2010 dated 16.12.2010. 39. On the other hand, the ld. DR for the revenue supported the order of lower

authorities. 20

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

of lower authorities. The Hon’ble Apex Court in CIT vs. Tulsyan NEC Ltd.

(supra) while considering the question of computation under section 115JAA

held as under:

The entire scheme of sections 115JA(1) and 115JAA shows that if an assessee is entitled to a tax credit as a consequence of the assessee making payment of tax under section 115JA(1) in the year one, then the set off of such tax credit follows as a matter of course once the conditions mentioned in section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the Assessing Officer save and except that the ultimate amount of tax credit to be allowed will be dependent upon the final determination of the total income for the first assessment year. There is no provision under section 115JAA which postpones the right of the assessee to claim set off to the determination of the total income by the Assessing Officer in the first assessment year. Entitlement/right to claim set off is different from the quantum/quantification of that right. Entitlement of MAT credit is not dependent upon any action taken by the department. However, quantum of tax credit will depend upon the assessment framed by the Assessing Officer. Thus, the right to set off arises as a result of the payment of tax under section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year. Further, an assessee has a right to take into account the set off even while estimating its liability to pay advance tax on the ‘current income’ in accordance with the provisions of Chapter XVII-C. Although section 209(1)(d) does not make any specific provision either before or after the amendments carried out by the Finance Act, 2006 to the effect that an assessee is entitled to set off the tax credit that would be available in terms of section 115JAA(1) while computing the quantum of advance tax that is to be paid, it must follow that an assessee would be entitled to do so; otherwise it would result in absurdity, viz., that an assessee pays advance tax on the footing that it is not entitled (when in fact it is so entitled) to the credit and thereafter claims a refund of such advance tax paid as a consequence of the set off. Moreover, when an Assessing Officer makes an intimation under section 143(1), he accepts the return filed by the assessee to which the Assessing Officer may make an adjustment and, consequently, makes a demand or refund. Section 143(1) provides that where a return is made under section 139 and any tax or interest is found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to provisions of sub-section (2), an intimation will be sent to the assessee specifying the amount so payable and such intimation shall be 21

ITA No. 7424 Mum 2010 & 8533 Mum 2011-Greaves Cotton Ltd.

deemed to be a notice of demand under section 156 and all the provisions of the Act shall apply thereto. This section itself makes it clear that whilst the Assessing Officer determines the tax payable, he has to give credit for all taxes paid either by way of deduction at source, advance tax, self assessment tax or tax paid otherwise which would include or which cannot exclude tax credit under section 115JAA(1). However, the question is of priority of adjustment for the MAT credit. In this connection, it is important to bear in mind that the credit allowed is the excess of the normal tax liability over MAT liability in the subsequent years. 41. Considering the decision of Hon’ble Apex Court in CIT vs. Tulsyan NEC Ltd

(supra) the AO is directed to re-compute the working of section 115JAA

afresh by following the aforesaid decision. In the result this ground of appeal

is allowed.

No. I relates to charging of interest under section 234C. We have noted that

these grounds of appeal are consequential; therefore, the Assessing Officer is

directed to re-compute the interest under section 234B and 234C in

accordance with law.

Order pronounced in the open court on 07/06/2019.

Sd/- Sd/- PRADIP KUMAR KEDIA, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 07.06.2019 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “G” Bench, ITAT, Mumbai 6. Guard File 22

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BY ORDER,

Dy./Asst. Registrar ITAT, Mumbai