THE DY. COMMR. OF INCOME TAX, CIR.-1(1), RAJKOT-GUJARAT vs. M/S ATUL AUTO LIMITED,, SHAPAR.VERAVAL

The Ld. Counsel for the assessee at the outset informed that he is not pressing the ground in ITA No. 214/Rjt/2016. The sole ground raised by the assessee is disallowance of unpaid leave salary of Rs. 26,62,000/- and thereby permitted to withdraw the appeal filed by the assessee. Recording the above statement, the appeal filed by the assessee is hereby dismissed.

The grounds of appeal raised by the Revenue in ITA No. 251/Rjt/2016 is as follows: “1. The Hon’ble CIT(A)-1, Rajkot has erred in law and on facts of the case in deleting the addition made by the AO on account of disallowance of education and secondary and higher secondary cess of Rs. 21,25,000/- u/s. 40(a)(ii). 2. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of disallowance of claim of deduction/s. 80IA being profit from power generating unit of Rs. 86,04,245/-. 3. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition of Rs. 48,18,503/- made by the AO on account of disallowance of claim of deduction u/s. 80JJA. 4. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of interest of income tax refund of Rs. 15,32,971/-. 5. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of disallowance of interest expenses of Rs. 5,68,926/- as per computation enumerated in section 14A r.w.s. 8d.

Brief facts of the case is that the assessee is a company engaged in the manufacturing of three wheelers (passenger and loading) and its spare parts under the brand name of “Atul Shakti”. The assessee is also engaged in the generation of Electricity with turbine generator at village Soda Mada, Rajasthan and at village Gandhavi, Gujarat. The assessee filed its original return of income on 18.09.2012 showing a total income of Rs. 25,28,59,330/-. Thereafter, on 30.03.2014 the assessee filed a revised return of income and claimed deduction of cess paid, deduction of unpaid leave salary, deduction under Section 80IA for windmill, deduction under Section 80JJA and declared the total income of Rs. 23,46,49,520/-. The assessment under Section 143(3) was completed on 23.03.2015, wherein the total income of the assessee was assessed at Rs. 25,46,25,110/- wherein the deduction claimed by the assessee in the Revised return are denied by the Ld. AO.

Aggrieved against the same, the assessee filed an appeal before the Ld. CIT(A)-1, Rajkot. Now, we will address the ground wise issue raised by the Revenue.

Ground No.1:- Ground No. 1 related to disallowance of education and secondary and higher secondary cess of Rs. 21,25,000/- under Sectio 40(a)(ii) claimed by the assessee.

The Ld. D.R. appearing for the Revenue has fairly conceded that this issue is being squarely covered by CBDT Circular No. 91/58/66 – ITJ(19) dated May 18, 1967 operative w.e.f. 1962-63 wherein it is categorically held that “when the matter came up before the Select Committee, it was decided to omit the word “cess” from the clause. The effect of the omission of the word “cess” is that only taxes paid are to be disallowed in the assessments for the years 1962-63 onwards”. Following the above submission of the Ld. D.R. Ground No. 1 is hereby dismissed.

Ground No. 2:- Ground No. 2 raised by the Revenue is that disallowance of claim of deduction under Section 80IA being profit from power generating unit of Rs. 86,04,245/-.

This claim was rejected by the Ld. AO on the ground that 80IA claim was not been made in the original return filed by the assessee, but only in the revised return filed by the assessee, therefore, invoking Section 80AC of the Act, the AO denied the benefit to the assessee. The Ld. CIT(A) in this impugned order allowed the claim of the assessee is as follows:- “During the year consideration, the appellant has claimed deduction amounting to Rs. 86,04,245/- u/s. 80-IA in the revised return of income with respect to profits and gains derived from sale of electricity generated by the two windmills. Copy of Audit Report in form 10CCB, balance sheet & profit and loss account of the windmill undertakings along with working of deduction claimed u/s 80IA was furnished before the Assessing Officer and also before me during appellate proceedings in the paper book. Regarding, the first reason provided by the AO that, the windmill undertaking of the appellant is not a separate undertaking from the automobile division of the appellant and the second reason that no approval from state government authorities have been taken, it is pertinent to note that based on the same set of facts the AO has accepted the claim of the appellant u/s. 80-IA for subsequent assessment year i.e. A.Y. 2013-14 and has

The Ld. D.R. appearing for the Revenue supported the order passed by the Ld. AO and pleaded that the assessee has not made the

Per contra, the Ld. A.R. appearing for the assessee has brought to our notice that the Coordinate Bench judgment of the Tribunal in the case of Parameshwar Cold Storage Pvt. Ltd. vs. ACIT, reported in (2011) 16 taxmann.com 88 (Ahd.), where it has been held as follows: “8. We have heard the rival submissions and perused material on record. The undisputed facts are that the assessee has filed a return of income on December 27, 2006 which is within the time as the Central Board of Direct Taxes had extended the time for filing of return up to December 31, 2006, as per the circular referred to above. Even this, is so, the revised return filed by the assessee on December 15, 2008 could not be stated to be within the time allowed under section 139(5). The revised return is to be filed within one year of end of the relevant assessment year, i.e., revised return should be filed by March 31, 2008, therefore, it cannot be stated that the claim has been made through a valid return. Further the provisions of section 80AC for the sake of convenience is reproduced below : "80AC. Deduction not to be allowed unless return furnished. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80- IAB or section 80-IB or section 80-IC, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139." 9. This section does not require that the claim under section 80-IBshould be made only through the original return in time. It only prescribes the condition that the original return filed should be in time for enabling the assessee to make a claim. In other words, it is not a requirement to make the claim in the original return itself, which is to be filed within the time. We may further explain that for claiming deduction under section 80-IB, the only condition is that the original return should be filed in time, but the claim need not necessarily be made in the original return, it can be made subsequent thereto also. In Goetze (India) Ltd.'s case (supra), the hon'ble Supreme Court has only considered for claiming deduction before the Assessing Officer, such claim should be made only through the return. But this condition would not be applicable before the appellate

We do not find any infirmity in the order passed by the Ld. CIT(A). In fact, the Ld. CIT(A) has observed that the claim of deduction under Section 80IA was allowed by the AO for the subsequent A.Y. 2013-14 and copy of the said assessment order was placed before the Ld. CIT(A), wherein the AO has not disputed the deduction of claim under Section 80IA of the Act. Even assuming the major claim has been made only during the revised return of income that issue is also answered in favour of the assessee by the Coordinate Bench of this Tribunal in the case of Parameshwar Cold Storage Pvt. Ltd. (cited supra). In the above circumstances we have no hesitation in confirming the order passed by the Ld. CIT(A) and the ground raised by the Revenue is hereby rejected.

Ground No.3:- Ground No. 3 raised by the Revenue relates to deleting the addition of Rs. 48,18,503/- made by the AO on account of disallowance of claim of deduction under Section 80JJA here also the AO hold that the claim of deduction under Section 80JJA was not made in the original return of income, but only in the revised return of income, therefore, denying the benefit of the deduction under 80JJA. The Ld. CIT(A) allowed the deduction as follows: “Appellant being a manufacturing concern is entitled for deduction @ 30% of additional wages paid to new regular workmen employed in the factory for three assessment year including assessment year relevant to previous year in which such employment is provided and deduction u/s, 80JJA of the Act amounting to Rs.48,18,503/- was claimed in the revised return of income filed u/s 139(5). It is pertinent to note that the AO has not disputed the genuineness of claim of deduction made by the appellant, his only reason for disallowance of was that the said deduction was claimed in revised return of income filled by the appellant and not in the original return of income filed u/s. 139(1) of the Act and hence, he was of the view that as condition stipulated u/s. 80A(5) of the Act is not fulfilled the claim is not allowable. It is important here to note the provision of section 80A(5) of the Act which states that "Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C,—Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder”. The wordings of section 80A(5) clearly mentions that claim should be made in return of income. The word return of income includes return of income filed u/s. 139 of the Act. Return of Income includes revised return of income filed u/s. 139(5) of the Act. Nowhere in section 80A (5) it has been mentioned that claim shall be allowed only it has been claimed in original return of income furnished u/s 139(1) of the Act. All the decisions cited before me for claim of deduction u/s 80 IA made in ground no 3 on claim of profit on windmill also squarely applies here. Hence, return of income u/s. 80A(5) also includes revised return of income filled u/s. 139(5) of the Act. Therefore, disallowance of deduction u/s. 80JJA of Rs. 48,18,503.30/- on account of failure to make claim of deduction in original return of income is hereby deleted. Hence, Ground No. 4 of the appeal is allowed.”

The Ld. D.R. again supported the order of the AO and relying upon Section 80A(C). The assessee failed claim the deduction in the

Per contra, the Ld. A.R. appearing for the assessee supported the order of the CIT(A) and also submitted that the Revised return were been filed within the prescribed time limit and also before completion of the regular assessment. Therefore, the assessee is eligible for deduction under 80JJA. We do not find any infirmity in the order passed by the Ld. CIT(A) and this issues also like the 80IA claim made by the assessee in the revised return, which will be squarely applicable to this deduction made under Section 80JJA. Thus, we reject the ground raised by the Revenue and hence, dismissed.

Ground No.4:- This ground raised by the Revenue is that the CIT(A) erred in deleting the addition made by the AO on account of interest income tax refund of Rs. 15,32,971/-.

The AO hold that the assessee received interest of Rs. 15,32,971/- during the Financial Year, however, the same was not offered as income by the assessee. Therefore, the same is added to the total income of the assessee. Whereas the assessee submitted that it has not received any interest from the Income Tax Department, on verification of Form 26AS in the column of interest, no amount is shown in that column. In the absence of receipt of any interest, the same is not offered by the assessee in the return of income and also stated that appeals are pending at higher forums and none of the assessments have attained finality. Therefore, the AO is not correct in

The Ld. D.R. appearing for the Revenue fairly accepted that the CIT(A) has not deleted the interest amount, however, directions are being given to verify the refund status of the assessee. We do not find any infirmity in the direction given by the Ld. CIT(A). Thus, the ground no. 4 raised by the Revenue is hereby dismissed.

Ground No.5:- Ground No. 5 raised by the Revenue is disallowance of interest expenses of Rs. 5,68,926/- as per computation under Section 14A r.w.r. 8D of the Act.

During the Financial Year 2011-12 the assessee has earned tax free income of Rs. 55,32,792/- being dividend income from investment in Mutual Funds. The assessee on its own made a disallowance of Rs. 3,35,877/- being expenditure incurred to earn exempt income. Though, there were no expenditure incurred to earn exempt income. The A.O. invoking Rule 8D determined the disallowance as Rs. 5,68,926/-.

On appeal before the Ld. CIT(A), the CIT(A) confined the disallowance to Rs. 3,35,877/- made by the assessee in its return of income and deleted the balance disallowance as follows: “During the year assessee Company has earned tax free income of Rs.55,32,792/- being dividend income from investment in mutual funds. For the purposes of disallowance u/s 14A the company has made a working as tabulated above in submission and suo-moto disallowed Rs.3,35,877/- being expenditure incurred to earn exempt income. Appellant has stated that no expenditure was incurred to earn exempt income and further, with respect to interest cost incurred of Rs.54,15,347/- the appellant stated that these interest cost are incurred for business purpose or and they do not have any direct nexus with earning of exempt income. Rule 8D lays down method for determining amount of expenditure in relation to income not includible total income Rule 8D(2)(i) stipulates that any amount of expenditure directly relating to exempt income should be disallowed whereas Rule8D(2)(ii) broadens the scopes and disallows proportion of interest expenditure incurred which is not directly attributable to any particular income and receipts. As far as Rule 8D(2)(i) is concerned on perusal statement of profit and loss account of the company along with its notes for F.Y. 2011-12 submitted before Id, AO on page no.80 and 89-90 of paper book respectively no such expenditure has been stated by Id. AO which can be said to have been incurred solely towards earning dividend income and also the A.O. has not doubted the said fact. However, where interest cost stipulated in Rule 8D(2)(ii) is concerned it is important to note that out of total interest cost incurred of Rs.54,15,347/- the appellant has considered interest cost of Rs. 14,43,019/- while computing suo-moto disallowance u/s. 14A. However, the A.O brought remaining interest cost Rs.39,72,329/- also in the net of Rule 8D(2)(ii) and re-computed the disallowance. The interest cost of Rs.39,72,329/- includes Rs.38,43,753/-towards interest on term loan and Rs. 1,28,575/- toward interest on statutory dues. With respect to inclusion of the above interest cost of Rs.39,72,329/- the AR of the appellant stated that 'Interest cost incurred towards statutory liabilities such as VAT, Service Tax, TDS and

We do not labour our self in adjudicating the issue, since the same has been settled by Hon’ble Supreme Court of India in the case of Maxop Investment Ltd. vs. CIT, reported in 402 ITR 640(SC) and PCIT vs. State Bank of Patiala, reported in (2018) 99 taxmann.com 286 (SC). This ground raised by the Revenue is hereby dismissed.

In the combined result, the appeals preferred by the assessee and Revenue are dismissed. Order pronounced in the Court on 23rd May, 2022 at Ahmedabad.