Income Tax Appellate Tribunal - Ahmedabad
Gujarat Gas Company Ltd., Ahmedabad vs The Jt.Cit.,Circle-4,, Ahmedabad on 31 October, 2023
आयकर अपीलीय अधिकरण, अहमदाबाद नयायपीी IN THE INCOME TAX APPELLATE TRIBUNAL, ''D'' BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER Sr. Asstt. Name of Name of ITA No(s).
No. Year Appellant Respondent
Gujarat Gas
Company Ltd.,
2, Shantisadan
Society,
2006-07 Joint Commissioner
ITA No.123- Near Parimal
& of Income-tax,
1-2. 124/Ahd/2012 Garden Ellisbridge,
2007-08 Circle-4,
Ahmedabad.
Ahmedabad.
PAN:
AAACG5600M
Gujarat Gas
Company Ltd.,
2, Shantisadan
Society,
A.C.I.T.,
Near Parimal
ITA Nos.350- 2006-07 Circle-4,
3-4. Garden Ellisbridge,
351/Ahd/2012 2007-08 Ahmedabad.
Ahmedabad.
PAN:
AAACG5600M
Gujarat Gas
Company Ltd.,
2, Shantisadan
Society,
Near Parimal J.C.I.T,
5. ITA No.1414/Ahd/2013 2008-09 Garden Ellisbridge, Circle-4,
Ahmedabad. Ahmedabad.
PAN:
AAACG5600M
Gujarat Gas
Company Ltd.,
2, Shantisadan
Society,
Near Parimal D.C.I.T., Circle-4,
6. ITA No.2458/Ahd/2014 2009-10 Garden Ellisbridge, Ahmedabad.
Ahmedabad.
PAN:
AAACG5600M
ITA No.123/Ahd/2012 and others
A.Y. 2006-07
2
Gujarat Gas
Company Ltd.,
(Amalgamated with
Gujarat Gas
Limited)
2, Shantisadan
D.C.I.T,
Society,
7. ITA No.2338/Ahd/2015 2010-11 Circle-4,
Near Parimal
Ahmedabad
Garden Ellisbridge,
Ahmedabad.
PAN:
AAECG8093Q
Gujarat Gas
Company Ltd.,
2, Shantisadan
Society,
Near Parimal D.C.I.T,
8. ITA No.3450/Ahd/2015 2011-12 Garden Ellisbridge, Circle-2(1)(1),
Ahmedabad. Ahmedabad.
PAN:
AAACG5600M
Gujarat Gas
Company Ltd.,
(Amalgamated with
Gujarat Gas
Limited)
2, Shantisadan
D. C.I.T,
Society,
9. ITA No.2005/Ahd/2017 2012-13 Gandhinagar Circle,
Near Parimal
Gandhinagar
Garden Ellisbridge,
Ahmedabad.
PAN:
AAECG8093Q
(Applicant) (Responent)
Assessee by : Shri S.N. Soparkar, Sr. Advocate with
Shri Parin Shah, A.R
Revenue by : Shri Ashok Kumar Suthar, Sr. D.R
सुनवाई की तारीख/Date of Hearing : 12 /10/2023
घोषणा की तारीख /Date of Pronouncement: 31 /10 /2023
ITA No.123/Ahd/2012 and others
A.Y. 2006-07
3
आदेश/O R D E R
PER BENCH:
The above captioned appeals have been filed by the assessee and the Revenue against the separate orders of the ld. Commissioner of Income-Tax (Appeals) arising in the matter of assessment order passed under section 143(3) of the Income tax Act 1961 (in short, the 'Act') involving respective Assessment Years.
First, we take up ITA No. 123/Ahd/2012, an appeal by the assessee for the AY 2006-07.
2. The assessee has raised the following grounds of appeal:
Your appellant being aggrieved by the order passed dated 30/11/2011 us. 250 of the Income Tax Act. 1961 (hereinafter referred to as the "Act") by the learned Commissioner of Income-tax (Appeals)-VIIL Ahmedabad (hereinafter referred to as the "CIT(A)") presents this appeal against the same on the following grounds which are without prejudice to each other..
1. The order passed by the learned CTT(A) is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so held now.
2. The learned CIT(A) erred in law and on facts in confirming disallowance out of administrative expense to the extent of Rs. 20,50,655 as against Rs. 7,00,000 disallowed by the assessee u's 14A of the Act. It is submitted that disallowance made by the appellant u's 14A of Rs. 7,00,000 is fair and reasonable in the facts and circumstance of the case and hence no further disallowance should have been confirmed by CIT(A).
3. The learned CIT(A) erred in law and facts in confirming the disallowance of inventory written off of Rs 40,01,606. In the facts of the case, appellant submits that the inventory was lying with it for past so many years, which was written off on account of technical obsolescence & on ground of customer safety and hence it should be allowed as deduction to the appellant. It is submitted that it be so held now.
4. The learned CIT(A) has erred in law and facts in confirming the disallowance of Rs.62,24,370 being the amount of irrecoverable deposits written off.
5. The learned CIT(A) has erred in law in not restricting the Dividend Distribution Tax with respect to dividend paid to BG Asia Pacific Pte. Limited (a Singapore based company holding, 65.12% in the appellant company) u/s 115-0 to 10% as per Article 10(2) of ITA No.123/Ahd/2012 and others A.Y. 2006-07 4 Double Tax Avoidance Agreement between India & Singapore and also erred in not granting refund of excess DDT paid Rs. 33,61,358 alongwith interest.
Your appellant prays for leave to add, to alter and/or to amend all or any of the grounds before the final hearing of appeal.
2.1 The assessee vide letter dated Nil has also raised the additional grounds of appeal which are reproduced as under:
The Appellant has filed an appeal on 17-01-12. In regard to the captioned appeal, the following additional ground is taken hereunder.
1. DEDUCTION OF EDUCATION CESS 1.1. The appellant submits that "Education Cess" of Rs. 68,17,991/- paid by the appellant should be allowed as deduction under section 37 of the Income-tax Act, 1961 ("the Act').
1.2. The appellant had not claimed "Education Cess" (collectively referred to as 'Cess') Rs. 68,17,991/- paid for F.Y. 2005-06, in the return of income filed for A.Y. 2006-07. 1.3. It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act.
1.4. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards.
1.5 Relying on CBDT circular and judicial precedents, it is submitted that Cess is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y. 2006-07.
2. The appellant craves leave to add, amend, after, substitute, delete and/or modify in any manner whatsoever this ground on or before the hearing of appeal.
3. The first issue raised by the assessee vide ground No. 2 is that the Ld. CIT(A), erred in confirming the disallowance of administrative expenses to the extent of Rs. 13,50,655/- under the provisions of section 14A r.w. rule 8D of Income-tax Rules.
4. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of Distribution of Natural Gas and Bottling and Marketing of the LPG. The assessee in the year under consideration has shown exempted income of Rs. 8,20,26,223/- against which the assessee has ITA No.123/Ahd/2012 and others A.Y. 2006-07 5 made dis-allowance of Rs. 7,00,000/- only based on the estimated time spent by the managerial and other supporting staff in managing the investments. However, the AO was of the view that the disallowance was to be made as per the provision of section 14A r.w. Rule 8D of Income-tax Rules. Thus, the AO made disallowance against exempted income as detailed below:
Sr. No. Details Amount in Rs.
1. Interest Expenses 1,22,76,119.00
2. Administrative Expenses 80,16,268.00
Total 2,02,02,387.00
Less Amt. already disallowed. 7,00,000.00
Balance to be added. 1,95,92,387.00
5. The AO in view of the above made the disallowance of Rs. 1,95,92,387/-
and added to the total income of assessee.
6. Aggrieved assessee preferred an appeal to the Ld. CIT(A) who deleted the disallowance relating to the interest expense of Rs. 1,22,76,119/- on the reasoning that there was sufficient interest free fund available with the assessee in making the investment. The Ld. CIT(A), in support of his decision has relied on the judgement of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Limited reported in 133 ITR 340.
7. The Ld. CIT(A) further observed that the provision of Rule 8D of Income- tax Rules are not applicable in the year under consideration. However, the Ld. CIT(A) found that his predecessor in the AY 2005-06 has made the disallowance @ 2% of exempted income towards the administrative expenses. Thus, Ld. CIT(A), was of the view that the disallowance of administrative expense should be made on reasonable basis. The Ld. CIT(A) considering the higher amount of exempted income found reasonable disallowance of Rs. 20,50,655.00 being 2.5% of ITA No.123/Ahd/2012 and others A.Y. 2006-07 6 exempted income of Rs. 8,20,26,223/-. Thus, the Ld. CIT(A), after adjusting the amount already disallowed by the assessee i.e. Rs. 7,00,000/- confirmed the balance amount of Rs. 13,50,655/- under the provisions of section 14A of the Act.
8. Being aggrieved by the order of the Ld. CIT(A), both the assessee and revenue are in appeal before us. The assessee is in appeal against the enhancement of disallowance of administrative expenses by Rs. 13,50,655/- whereas revenue is in appeal in ITA bearing No. 350/Ahd/2012 for A.Y 2006- 07 against the deletion of the addition made by the AO for Rs. 1,82,41,732/- only. The relevant ground of appeal of the revenue is reproduced as under:
The Ld. CIT(A), has erred in law and on facts in restricting the disallowance to 13,50,655/- and thereby deleting the addition of Rs.1,82,41,732/- out of total addition of Rs.1,95,92,387/- without appreciating the fact that the assessee could not establish that no other fund except funds from internal accruals and accumulated profits have been employed for deriving tax free investment income.
9. The Ld. AR before us contended that the ITAT in identical facts and circumstances has decided the issue in favour of the assessee in ITA No.1950/Ahd/2011 and the CO No. 228/Ahd/2011 for the A.Y 2005-06. Thus, the AR submitted that there cannot be any disallowance under the provisions of section 14A of the Act over and above the suo-motto disallowance made by the assessee.
10. On the other hand, the Ld. DR submitted that the assessee has not furnished the basis of making the disallowance of Rs. 7 lacs. Therefore, the disallowance has to be made as per the provision of 14A r.w. Rule 8D of Income-
tax Rules.
11. Both the Ld. AR and the Ld. DR before us vehemently supported the order of the authorities below to the extent as favourable to them.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 7
12. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the identical issue has been decided by the ITAT in the own case of the assessee against the revenue and in favour of the assessee in ITA No. 1950/Ahd/2011 with CO No. 228/Ahd/2011, vide order dated 17/05/2016. The relevant extract of the order is reproduced as under:
24. We have heard the rival contentions and perused the material on record. Through this ground Revenue is aggrieved by the order of ld. CIT(A) deleting the disallowance made by the AO on account of proportionate interest and administrative expenses of Rs.25,41,310/-.
25. We observe that during the year under appeal assessee has claimed Rs.16,40,000/- as interest paid during the year and shown exempt income of Rs.52716647/-. Total investments held by the assessee as on 31.3.2005 stood at Rs.167.35 crores. In the return of income filed, assessee suo moto made the disallowance of Rs.6,00,000/- on an estimate basis considering the expenditure incurred in relation to earning the dividend income u/s 14A of the Act. However, ld. Assessing Officer while finalizing the assessment u/s 143(3) of the Act, calculated the disallowance at Rs.25,41,310/- but forgot to give credit to the expenditure disallowed by assessee itself at Rs.6 lacs while filing the return of income.
Further when the assessee went appeal before ld. CIT(A), disallowance under section 14A was restricted to Rs.10,54,333/- after deleting proportionate disallowance of interest expenditure at Rs.8,84,372/- and sustained disallowance of administrative expenses to Rs.10,54,333/- as against Rs.16,56,938/- made by ld. Assessing Officer; ld. CIT(A) further gave credit to Rs.6,00,000/- admitted by assessee in its return of income and finally remaining disallowance sustained by ld. CIT(A) was Rs.454333/- (1054333 - 600000)..
26. We further observe that issue relating to disallowance u/s 14A of the Act was taken up before the co-ordinate bench by the assessee for Asst. Year 2004-05 in ITA No.4488/Ahd/2007 and the issue was decided in favour of assessee vide its order dated 8.2.2013 wherein co-ordinate bench held as under :-
"6. Before us, ld. A.R. submitted that the assessee on its own had worked out the disallowance u/s 14A at Rs.6 lacs on account of administrative expenses for managing the portfolio etc. The disallowance was worked out on the basis of fair and reasonable deployment of man-power and related operational expenses. He further submitted that all the investments were in the demat form and the dividend was also electronically credited to its bank account and therefore, assessee was not required to incur any expenditure to realize the dividend. Ld. A.R. therefore, submitted that since assessee has not incurred any expenditure for earning tax free income, no ad-hoc disallowance be made on estimate basis.
7. Ld. D.R., on the other hand, relied on the order of A.O. and submitted that considering the dividend income earned by the assessee the A.O. was quite ITA No.4488/Ahd/ 2007 reasonable and fair in estimating the disallowance. He therefore, submitted that the disallowance made by the A.O. be upheld.
8. We have heard the rival submissions and perused the material on record. It is undisputed fact that the assessee has earned dividend in excess of Rs.5 crores during the year. It is also an undisputed fact that the assessee, on the basis of its own estimate has worked out the disallowance of administrative expenses incurred for managing the portfolio u/s 14A. It is also an admitted fact that all the investments of the assessee are in Demat form and dividends were credited to its account electronically. The A.O. while disallowing the expenditure could not ITA No.123/Ahd/2012 and others A.Y. 2006-07 8 controvert or find any fault in the working of disallowance of administrative expenses made by the assessee. The A.O. has not given a finding that the assessee has incurred expenditure in excess which has been suo motu disallowed by the assessee while computing its income. In the case of Godrej Boyce Manufacturing Company Ltd. vs. DCIT 328 ITR 81(Bom), Hon'ble High Court has held that Rule 8D is applicable from assessment year 2008-09 and the disallowance for earlier periods has to be determined on reasonable basis. Since the year under appeal in the present case is 2002-03 and therefore, in the case before us the provision of Rule 8D are not applicable in view of the aforesaid decision of Hon'ble Bombay High Court.
9. In the case of Maxopp Investment Ltd. v. CIT (2012) 347 ITR 272 (Delhi) Hon'ble Delhi High Court has held as under:-
"The expressing "in relation to" does not have any embedded object. It simply means "in connection with" or "pertains to". If the expenditure in question has a relation or connection with or pertains to exempt income it cannot be allowed as a deduction even if it qualifies under other provisions of the Act. The actual expenditure that is in contemplation under section 14A(1) of the Act is the "actual" expenditure in relation to or in connection with or pertaining to exempt income. The corollary to this is that if no expenditure is incurred in ITA No.4488/Ahd/ 2007 relation to the exempt income, no disallowance can be made under section 14A of the Act. Sub-sections (2) and (3) were inserted by the Finance Act, 2006, with effect from April 1, 2007. However, the expression "such method as may be prescribed" got meaning only by the introduction of rule 8D of the Income-tax Rules, 1962.
Sub-section (2) of section 14A of the Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. The requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure.
Sub-section (3) is nothing but an offshoot of sub-section (2) of section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the Act. In other words, sub- section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in accordance with any prescribed method, as mentioned in sub-section (2) of section 14A of the Act. It is only if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in both cases, that the Assessing Officer gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the prescribed method. The prescribed method is the method ITA No.123/Ahd/2012 and others A.Y. 2006-07 9 stipulated in rule 8D of the Rules. While rejecting the claim of the assessee with regard to the expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same. It is, therefore, clear that determination of the amount of expenditure in relation to exempt income under rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard."
10. Considering the facts of the present case in the light of the ratio laid down by the aforesaid decision of Hon'ble Delhi High Court, the A.O., while rejecting the claim of assessee with regard to disallowance u/s 14A, has not given any cogent reasons for rejecting the claim of assessee. Secondly the operation of Rule 8D is applicable prospectively w.e.f. A.Y. 2007-08 and thirdly the assessee suo motu had made the disallowance of administrative expenses, thus considering the totality of the facts and relying on the aforesaid decision of Hon'ble High Courts, we are of the view that in the present case the A.O. was not justified in enhancing the disallowance u/s 14A made by the assessee. We thus upheld the ground of the assessee."
27. Respectfully following the above decision of the co-ordinate bench, we are of the view that calculation of disallowance u/s 14A as per Rule 8D of the IT Rules, is applicable w.e.f. Asst. Year 2007-08 and we are dealing with appeal for Asst. Year 2005-06 and accordingly the decision of the co-ordinate bench squarely applies on this ground taken up by Revenue and therefore, in the given circumstances, when there is no satisfaction placed on record by Assessing Officer during assessment proceedings nor any specific defect has been pointed out, disallowance made by assessee at its own Rs.6 lacs. should have been accepted by the Assessing Officer and no further disallowance was called for. Accordingly this ground of Revenue is dismissed.
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64. We have heard the rival contentions and perused the material on record. We observe that while dealing with ground no.2 of revenue's appeal we have already dealt this issue in ITA No.1950/Ahd/2011 for asst. year 2005-06, and dismissed the ground and have held that disallowance u/s 14A of the Act, should be sustained at Rs.6,00,000/- only which has been suo moto accepted by the assessee as disallowance u/s 14A of the Act while furnishing of income tax return. As the ground of revenue has already been dismissed, the Cross Objection raised by the assessee has become infractuous and is dismissed accordingly.
12.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the Tribunal as discussed above has been set aside/stayed or overruled by the Higher Judicial Authorities. Before us, no material was placed on record pointing out any distinguishing feature in the facts of the case of immediate previous AY and the year under consideration. Thus, respectfully following the order of the tribunal in the own case of the assessee as discussed above, we do not find any reason to interfere in the finding of the ITA No.123/Ahd/2012 and others A.Y. 2006-07 10 learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed whereas the ground of appeal of the assessee is allowed.
13. The Second issue raised by the assessee in ground No. 3 is that the Ld. CIT(A) erred in confirming the order of the AO by deleting the inventory written off for Rs. 40,01,606/- only.
14. The assessee in the year under consideration has written off the inventory amounting to Rs. 40,01,606/- only. As per the assessee, the impugned inventory was non-moving which was originally purchased for the purpose of installation in domestic /Industrial connections in the normal course of business activity which were not utilised due to technical obsolesce and customer safety purpose. Furthermore, non-moving inventory was internally certified by the engineering department. The assessee also claimed to have recorded the sale proceeds from the non-moving inventory as income under head miscellaneous income. Thus, the assessee claim that the inventory was written off under normal course of business activity and therefore the same should be allowed as deduction. However, the AO dis-agreed with submission of the assessee on the reasoning that there was no proof submitted by the assessee to establish that such written off inventory had no market value. Thus, the AO disallowed the same and added to the total income of the assessee.
15. Aggrieved assessee preferred an appeal before the Ld. CIT(A) who upheld the disallowance made by the AO by observing that his predecessor in the earlier AY 2005-06, has confirmed the disallowance of the assessee's claim against the written off the inventory. Thus, the Ld. CIT(A), following the order of his predecessor confirmed the order of AO.
16. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appal before us.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 11
17. The Ld. AR before us contended that the ITAT in the appeal filed for A.Y. 2005-06 in ITA No 1921/Ahd/2011, vide order dated 17/05/2016, has restored the issue to the file of the AO for fresh adjudication. It was further pointed out by the Ld. AR that the AO in the set-aside proceedings has accepted the claim of the assessee and allowed the deduction on account of written off inventory. Thus, the AR prayed before us that the assessee should be allowed as deduction on account of written off inventories.
18. On the other hand, the Ld. DR contended that the ITAT on earlier occasion in the own case of the assessee has set aside the issue to the file of the AO so as to verify whether the assessee has shown any income against the written off inventory. Thereafter, the AO in the set aside proceeding after carrying out the necessary verification reached to the conclusion that the assessee deserve deduction for the written off inventory. As per the Ld. DR, the issue regarding written off inventory in the year under consideration should again set-aside to the file of the AO for necessary verification. The Ld. DR vehemently supported the order of the authorities below.
19. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the issue raised by the assessee before us is identical to the issue raised by the assessee in the earlier assessment year in ITA No. 1921/Ahd/2011 wherein the ITAT has observed as under:
10. We have heard the rival contentions and perused the material on record. Through this ground assessee is aggrieved with the order of ld. CIT(A) for disallowance of inventory written off of Rs.12,80,536/- We observe that at pages 180 to 186 of the paper book shows approval note for write off of non-moving items occurred due to project surplus items, discontinued use due to change in specification/abandoned activities, incomplete assemblies, purchase of higher quantity for contingency, obsolete due to technical upgradation and the technical-cum-approval note is duly signed by Vice President, MS, Director-Technical, Director Finance and other management people. We also observe that item-wise details with proper specification along with year since which these items are lying in the inventory, are placed before us. However, when specific question was raised to the ld. AR that what amount of scrap value has the company been able to realize by selling these obsolete and slow moving stock of Rs.12,80,536/-, ld. AR replied that certainly these slow moving items should have fetched some scrap value but the same has been ITA No.123/Ahd/2012 and others A.Y. 2006-07 12 accounted for in the books of account in the following years as and when they have been sold.
11. We further observe from the orders of lower authorities that the only basis taken for processing the addition as well as confirming the same for not allowing the claim of inventory written off at Rs.12,80,536/- rested upon the fact that no scrap value was reported by the assessee to have been received while writing off of these slow moving items. In these circumstances, we are of the view that it will be just and proper to set aside this issue to the file of Assessing Officer for verification to the limited extent and the assessee shall put before him necessary details which can prove that some process has been followed for selling such scrap items and specific scrap value of the inventory written off has been accounted for as an income in the books of account. Ld. AR agreed to the same and no objection was raised by the ld. DR to this fact and accordingly, we set aside this issue to the file of Assessing Officer as discussed and needless to say that proper opportunity of being heard to the assessee would be given by Assessing Officer. This ground is allowed for statistical purposes 19.1 From the above finding of the ITAT, we note that the assessee was to furnish certain details about the sale proceed against the inventory written off in the books of accounts. However, in the case before us, the Ld. AR has not submitted any details suggesting that the assessee has received any sale receipt against the written off inventory. Therefore, following the order of the ITAT pertaining to the earlier year discussed above, we set aside the issue to the file of the AO for fresh adjudication as per the provision of law after considering the findings of the ITAT of the earlier order. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.
20. The next issue raised by the assessee is that the Ld. CIT(A), erred in confirming the disallowance of Rs. 62,24,370/- made by the AO representing written off irrecoverable deposit.
21. The assessee in the year under consideration submitted that it has deposited certain amount with the Govt. organization so as to carry out pipeline activities on Municipal/Govt. land but later on such deposit slips were misplaced and therefore the assessee could not claim the refund of such deposits. Thus, the assessee has written off such deposits as irrecoverable and claimed deduction in profit and loss accounts. However, the AO disagreed with the contention of the assessee on the reasoning that the assessee has not furnished the details about the work in connection with which such large deposits were made. Furthermore, ITA No.123/Ahd/2012 and others A.Y. 2006-07 13 there was no detail furnished by the assessee about the effort put in by it for the recovery of such deposits. Accordingly, the AO was of the view that the assessee has not discharged the onus by furnishing the necessary details. Thus, the AO disallowed the same and added to the total income of the assessee.
22. Aggrieved assessee carried the matter before the Ld. CIT(A), who confirmed the addition made by the AO by observing as under:
6.3 It is to be noted that in assessment the AO has observed that -''the assessee has not given further details like where the laying work was done, with authorities the deposits are outstanding, what efforts have been made to recover this amount. A loss can be considered as business loss when there is a relative degree of certainly that there no chance of recovery. Hence, the deposits written off are disallowed." The situation regarding the finer details to be submitted remains to be the same. The assessee has not furnished complete details and has not discharged its onus to fully writing off of this amount. The case of Abdul Razak & Co 136 ITR 825 is not applicable in the case of the assessee as it is related to the issue of bad debts and the assessee Abdul has incurred the losses in the normal course of trading. In the case of appellant there no loss and it has chosen to write off the deposits in anticipation without assigning any concrete reason. It is also to be noted that the deposits were in the nature of capital assets. I have carefully considered the submissions placed on record and considering the business of the appellant I am of the view that such incidences are not routine in loss is not business loss and therefore, I confirm the additions made by the AO and this ground of the appellant is not allowed.
23. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
24. The Ld. AR before us contended that the deposits were made in the course of the business, which eventually became irrecoverable. Therefore, these were written off in the books of accounts. Accordingly, the same should be allowed as deduction in view of the Judgment of Hon'ble Gujarat High Court in the case of Abdul Razak reported in 136 ITR 825.
25. On the other hand, the Ld. DR vehemently supported the order of the authorities below.
26. We have heard the rival contentions and perused the materials available on record. The revenue has not doubted the fact that the deposits shown by the ITA No.123/Ahd/2012 and others A.Y. 2006-07 14 assessee were made in the normal course of business of the assessee. Therefore, the same should be allowed as deduction u/s 37 of the Act. We are also conscious of the fact that that the deposits cannot be treated as capital in nature merely on the reasoning that assessee has written off such deposit in anticipation and without assigning any concrete reason. It is the decision of the assessee to decide the affairs of its business in the manner in which he desires in the interest of the business. The Hon'ble Gujarat High Court in the case of Abdul Razak reported in 136 ITR 825 has allowed business losses as deduction. The relevant head note of the order reads as under:
Section 28(i) of the Income-tax act, 1961 [as it stood at the relevant time]--Business loss/deduction--Assesses-firm carried on business as commission agents and dealers in grocery articles--Claimed as bad debt amount of Rs. 78,824 standing in its books as debit balance against its principal firm--MPM--Said debit balance had arisen mainly because of payment made by assessee to third party at MPM's request to liquidate latter's debt to said party--Whether tribunal justified in holding that impugned advance was not made in ordinary course of assessee's business but was merely incidental to it--Held, on facts, no-- Whether tribunal right in allowing impugned loss as deduction under section 28(i)--Held, on facts, yes 26.1 Furthermore, we find that there is no asset coming into existence out of such writing off deposits. Therefore, the same cannot be treated as capital in nature. In view of the above, we set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.
27. The next issue raised by the assessee is that the Ld. CIT(A) erred in not restricting the dividend distribution tax with respect to dividend paid to Singapore based company which was holding 65.12 % shares in assessee company to the extent specified under DTAA.
28. At the outset, the Ld. Counsel for the assessee before us fairly agreed with the impugned issue has been decided against the assessee by the Special Bench of ITAT in the case of DCIT vs Total Oil India (P) Ltd. reported in 149 taxmann.com 332. In view of the above we do not find any reason to interfere in ITA No.123/Ahd/2012 and others A.Y. 2006-07 15 the finding of the authorities below. Hence, the ground of appeal of the assessee is hereby dismissed.
29. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowance of "Education Cess". In this regard, we note that the additional ground of appeal raised by the assessee has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
30. In the result, the appeal of the assessee is hereby partly allowed for statistical purposes.
Coming to ITA No. 350/Ahd/2012 an appeal by the Revenue for A.Y. 2006-07
31. The only issue raised by the Revenue is that the learned CIT(A) erred in reducing the amounts of disallowances made under section 14A of the Act.
32. At the outset, we note that the issue raised by the revenue has been adjudicated along with issue raised by the assessee in ITA No. 123/Ahd/2012 wherein we have decided the issue vide paragraph No. 12 of this order against the Revenue. Hence, the ground of appeal raised by the revenue is hereby dismissed.
33. In the result the appeal of the revenue is hereby dismissed.
Coming to ITA No. 124/Ahd/2012, an appeal by the assessee for A.Y. 2007-08
34. The assessee has raised following grounds of appeal:
Your appellant being aggrieved by the order passed dated 30/11/2011 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the "Act") by the learned Commissioner of Income-tax (Appeals)-VIII, Ahmedabad (hereinafter referred to as the "CIT(A)") ITA No.123/Ahd/2012 and others A.Y. 2006-07 16 presents this appeal against the same on the following grounds which are without prejudice to each other:.
1. The order passed by the learned CIT(A) is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so held now.
2. The learned CIT(A) erred in law and on facts in confirming disallowance out of administrative expense to the extent of Rs.49,96,875 as against Rs. 7,00,000 disallowed by the assessee u/s 14A of the Act. It is submitted that disallowance made by the appellant u/s 14A of Rs. 7,00,000 is fair and reasonable in the facts and circumstance of the case and hence no further disallowance should have been confirmed by CIT(A).
3. The learned CIT(A) has erred in law in not restricting the Dividend Distribution Tax with respect to dividend paid to BG Asia Pacific Pte. Limited (a Singapore based company holding, 65.12% in the appellant company) u/s 115-0 to 10% as per Article 10(2) of Double Tax Avoidance Agreement between India & Singapore and also erred in not granting refund of excess DDT paid Rs. 33,61,358 alongwith interest.
Your appellant prays for leave to add, to alter and/or to amend all or any of the grounds before the final hearing of appeal.
34.1 The assessee vide letter dated NIL has also raised the additional grounds of appeal which are reproduced as under:
The Appellant has filed an appeal on 17-01-12. In regard to the captioned appeal, the following additional ground is taken hereunder.
1. DEDUCTION OF EDUCATION CESS 1.1. The appellant submits that "Education Cess" of Rs. 79,37,948/- paid by the appellant should be allowed as deduction under section 37 of the Income-tax Act, 1961 ('the Act').
1.2. The appellant had not claimed "Education Cess" (collectively referred to as 'Cess') Rs.
79,37,948/-paid for F.Y. 2006-07, in the return of income filed for A.Y. 2007-08.
1.3. It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act.
1.4. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards.
1.5 Relying on CBDT circular and judicial precedents, it is submitted that Cess is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y 2007-08.
35. The first issue raised by the assessee vide ground No. 2 is that the Ld. CIT(A), erred in confirming the disallowance of administrative expenses to the ITA No.123/Ahd/2012 and others A.Y. 2006-07 17 extent of Rs. 42,96,875/- under the provision of section 14A r.w. rule 8D of Income-tax Rules.
36. At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2007-08 is identical to the issue raised by the assessee in ITA No. 123/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 123/AHD/2012 shall also be applicable for the assessment years 2007-
08. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 12 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006- 07 shall also be applied for the assessment years 2007-08. Hence, the ground of appeal filed by the assessee is hereby allowed.
37. The next issue raised by the assessee is that the Ld. CIT(A) erred in not restricting the dividend distribution tax with respect to dividend paid to Singapore based company which was holding 65.12 % shares in assessee company.
38. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2007-08 is identical to the issue raised by the assessee in ITA No. 123/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 123/AHD/2012 shall also be applicable for the assessment years 2007-
08. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 28 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2007-08. Hence, the ground of appeal filed by the assessee is hereby dismissed.
39. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowances of "Education Cess". In this regard, we note that the additional ground of appeal raised by the assessee has ITA No.123/Ahd/2012 and others A.Y. 2006-07 18 not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
40. In the result appeal of the assessee is hereby partly allowed.
Coming to ITA No. 351/Ahd/2012 an appeal by the Revenue for A.Y. 2007-08
41. The only issue raised by the Revenue is that the learned CIT(A) erred in reducing the amounts of disallowances made under section 14A of the Act.
42. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the AY 2007-08 is identical to the issue raised by the Revenue in ITA No. 350/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 350/AHD/2012 shall also be applicable for the assessment years 2007-
08. The appeal of the Revenue for the A.Y. 2006-07 has been decided by us vide paragraph No. 32 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2007-08. Hence, the ground of appeal filed by the revenue is hereby dismissed.
43. In the result, the appeal of the revenue is hereby dismissed.
Coming to ITA No. 2458/Ahd/2014 an appeal of the assessee for A.Y. 2009-10
44. The assessee has raised following grounds of appeal:
ITEM NO. 1: Disallowance of Expenses U/s, 14A of the Act Rs. 1.56.10.209/ 1.1 The Learned CIT(A) has grossly erred in law and facts in partly upholding the decision of the learned A.O. regarding disallowance of expenses U/s. 14A of the Act Rs.
1,56,10,209/-.
1.2 The learned CIT(A) has grossly erred in stating that "the appellant has not made the disallowance of expenditure for the purpose of section 14A on an actual basis but has ITA No.123/Ahd/2012 and others A.Y. 2006-07 19 made the disallowance on an estimate which is not supported by any documentary evidence or actual data to show the disallowance made was correct. Therefore, in these circumstances also having regard to the accounts of the appellant, I am not satisfied with the correctness of the claim of the appellant in respect of the administrative expenditure".
1.3 The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic basis Rs.8,14,667 as the amount inadmissible u/s 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income.
1.4 The learned CIT(A) has grossly erred in upholding the decision of the learned A.O. by applying Rule 8D for the purpose of making disallowance U/s. 14A. The learned CIT(A) has failed to appreciate that provisions of Rule 80 is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has further erred in not appreciating the fact that the learned AO. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant in relation to expenses incurred by the appellant for earning exempt income and hence Rule 80 should not be applied.
1.5 The learned CIT(A) has further failed to appreciate that appellant has share capital and reserve & surplus of Rs. 734.69 crores at year end and total investment in mutual fund was Rs. 357.69 Crores. Further net increase in the investment during the year was Rs. 103.19 crores as against internal accruals of Rs. 191.07 Crores (Profit after tax + depreciation). Thus, learned CIT(A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made in view of decision of Hon'ble Gujarat High Court in the case of Gujarat Power Corporation Limited in Tax appeal No. 1587 of 2009 for A.Y. 2002-03.
1.6 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case for A.Y. 04-05 wherein the Hon'ble ITAT has deleted the aforesaid disallowance.
1.7 The appellant further respectfully states that the impugned disallowance U/s. 14A as confirmed by the learned CIT(A) being contrary to law may kindly be deleted.
ITEM NO. II: Not considering Corporate Social Responsibility Expenses of Rs. 2,93,775/- as allowable Expenses U/s. 37 of the Act 2.1 The learned CIT(A) has erred in law by not considering expenses of Rs. 2,93,775/- in respect of contribution for Corporate Social Responsibility as allowable expenses U/s. 37 of the Act.
2.2 The learned CIT(A) has failed to appreciate that expenses were in the nature of contribution incurred as a part of corporate social responsibility and hence appellant has rightly claimed the same as allowable expenses U/s. 37 of the Act.
2.3 The appellant humbly request your honor that the expenses of Rs. 2,93,775/- be allowed as corporate social responsibility expenses.
ITEM NO.11: Non Granting of refund of Dividend Distribution Tax of Rs. 95,17,931/-
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 20 3.1 The learned CIT(A) has grossly erred in law by not allowing to grant refund of Rs. 95,17,931/- in respect of excess Dividend Distribution Tax paid.
3.2 The learned CIT(A) has grossly erred in stating that "Accordingly, it is clear from the above Article that the agreement shall only be applicable in respect of the "income tax including any surcharge thereon. The dividend distribution tax is an additional income tax that is charged by virtue of the provisions of section 115-0. This tax has been defined as tax on distributed profits. It is not in the nature of income tax which may warrant a different treatment other than what is defined in the Act. It may be noted that in the agreement the word "income tax" has been used which does not include the dividend distribution tax. The definition of "tax" given in the section 2(43) also does not include dividend distribution tax."
3.3 The learned CIT(A) has grossly erred in interpreting the definition of "Tax" as defined U/s.2(43) of the Act and by considering Dividend Distribution Tax-DDT as a separate tax from Income Tax. The definition of tax is reproduced as under:
[(43) "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date (and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA):1 3.4 The learned CIT(A) has grossly erred in law by simply putting DDT out of the purview of Income Tax Act at all and not considering the same as a tax chargeable under the provisions of Income Tax Act, 1961. Accordingly the learned CIT(A) has grossly erred in law by excluding DDT from the definition of "Tax" as defined U/s.2(43) of the Act.
3.5 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that DDT is tax within the meaning of the term Indian Tax as defined in clause 1 (a) of Article 2 of the DTAA between India-Singapore Tax Treaty.
3.6 The learned CIT(A) has grossly erred in law by not extending the benefit of provisions of DTAA between India-Singapore Tax Treaty to the Appellant.
3.7 The learned A.O. has failed to appreciate the contention of the appellant that dividend income of BG Asia Pacific Pte. Ltd. is liable to tax at 10% as per the provisions of Article 10 of DTAA between India - Singapore Tax Treaty and not at 16.995% as per section 115-0 of the Act.
3.8 The learned A.0. grossly erred in law in ignoring the provisions of Section 90 of the Act, wherein it is mentioned that the provisions of the tax treaty will prevail over the provision of the Act, unless the provisions of the Act are more beneficial to the payee. The same is also well explained by CBDT Circular No.333 date02-04-1982.
3.9 The learned CIT(A) has failed to appreciate that from the combine reading of Section 115-0, Article - 10. Section 90 (2) (including CBDT Circular No. 333 dated 2-4-1982) and section 2(43) it is understood that Dividend distribution tax is nothing but additional income tax charged on the profits distributed by the company and Article 10 of DTAA specifies that tax on dividend for resident company paying the dividend to be restricted to 10%. The learned CIT(A) has further failed to appreciate that Specific provisions of DTAA will prevail over general provisions of Income Tax Act and also as per the provisions of 90 (2) the provisions of the Act will apply to the extent they are more beneficial to the appellant. Further section 237 entitles any person to claim refund of tax paid in excess of ITA No.123/Ahd/2012 and others A.Y. 2006-07 21 the amount with which is properly chargeable under the Income Tax Act, 1961. Hence, appellant is entitled to claim refund of excess dividend distribution tax paid.
3.10 The appellant humbly requests your honour that Refund of Excess Dividend Distribution Tax paid of Rs. 95,17,931/- may kindly be granted along with interest.
ITEM NO. IV: LEVY OF INTEREST U/s. 234D OF THE ACT:
4.1 The learned CIT (A) has grossly erred in law and on facts in partly upholding the decision of the learned A.O. to levy interest U/s. 234D of the Act.
4.2 The appellant states that levy of interest is wholly unjustified and the same may kindly be deleted.
4.3 That the interest U/S 234D on the facts and circumstances is not automatic or consequential.
44.1 The assessee vide letter dated NIL has also raised the additional grounds of appeal which are reproduced as under:
ADDITIONAL GROUND The Appellant has filed an appeal on 05-09-14. In regard to the captioned appeal, the following additional ground is taken hereunder.
2. DEDUCTION OF EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS 1.1. The appellant submits that "Education cess, including secondary and higher education cess" of Rs. 1,71,03,721/-paid by the appellant should be allowed as deduction under section 37 of the Income- tax Act, 1961 (the Act).
1.2 The appellant had not claimed "Education cess, including secondary and higher education cess (collectively referred to as 'Cess") Rs 1,71,03,721/-paid for F.Y. 2008-09, in the return of income filed for A.Y. 2009-10.
1.3. It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act 1.4. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(i) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards.
1.5 relying on CBDT circular and judicial precedents, it is submitted that Cess is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y. 2009-10.ITA No.123/Ahd/2012 and others
A.Y. 2006-07 22
45. The first issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the AO for Rs. 1,56,10,209/- under the provisions of section 14A of the Act, r.w. Rule 8D of Income Tax Rules.
46. The assessee in the year under consideration has shown an exempted income amounting to Rs. 22,00,18,395/- u/s 10(34) of the Act. The assessee against such exempted income has made suo-motto disallowance of Rs. 8,14,667/- only under the provisions of section 14A of the Act of the Act in respect of the expenditure of salary, wages, and other administrative expenses. However, the AO was not satisfied with the contention of the assessee. Therefore, the AO invoked the provisions of section 14A r.w.r. 8D of Income Tax Rules and made the disallowance as under:
Sr. No. Direct Expenses Amount in (Rs.)
1. Direct Expenses Nil
2. Interest Expenses 4,18,611.00
3. Administrative Expenses 1,60,06,265.00
Total Expenses 1,64,24,872.00
46.1 Thus, the AO made the disallowance of Rs. 1,56,10,209.00 after reducing the amount already disallowed by the assessee.
47. Aggrieved assessee preferred an appeal before the Ld. CIT(A) who confirmed the order of the AO.
48. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
49. The Ld. AR before us submitted that the ITAT in the own case of the assessee in ITA No. 165/Ahd/2021 for AY 2013-14 has set aside the issue to the file of the AO for fresh adjudication. Accordingly, the Ld. AR prayed that the issue on hand should also be set aside to the file of the AO for fresh adjudication as per the provisions of law.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 23
50. On the other hand, the Ld. DR could not controvert the argument advanced by the Ld. AR for the assessee.
51. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the identical issue has been decided by the ITAT in the own case of the assessee for A.Y. 2013-14 in ITA No. 165/Ahd/2021, vide order dated 11-10-2023, where in the issue has been set aside to the file of the AO for fresh adjudication. The relevant extract of the order is reproduced as under:
20. We have heard the rival contention and perused the material on record.
21. Looking into the instant facts, we observe that it is not a case where the Assessing Officer has not considered the method of disallowance of Rs. 11,27,938/- which was suo moto disallowed by the assessee. The Assessing Officer has considered the computation of disallowance made by the assessee and rejected the same on the ground that the method of disallowance is not in consonance with the method prescribed under Rule 8D of the Income Tax Rules. Accordingly, looking into the facts of the case, in the interest of justice, the matter is being restored to the file of the Assessing Officer to (a) firstly analyze whether the assessee is having sufficient interest free funds at it's disposal for making the investment in instruments yielding interest free income and in case the interest free funds available with the assessee were sufficient to cover the investments made by the assessee amounting to Rs. 20.34 crores, then no disallowance is called for with respect to interest expenses, and (b) with respect to administrative expenses, the Assessing Officer may consider the issue afresh (we are of the view the Ld. AO did make a specific observation on why he rejected the suo moto disallowance made by AO since such disallowance was no in accordance with Rule 8D) and the Ld. AO is directed to pass appropriate order in accordance with law and make disallowance only if there is any infirmity found in the suo moto disallowance made by the assessee.
22. In the result, Ground No. 1 of the Department's appeal is allowed for statistical purposes.
51.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the Tribunal as discussed above has been set aside/stayed or overruled by the Higher Judicial Authorities. Before us, no material was placed on record pointing out any distinguishing feature in the facts of the case of AY 2013-14 and the year under consideration. Thus, respectfully following the order of the tribunal in the own case of the assessee as discussed above, we set aside the issue to the file of the AO for fresh adjudication as per the provision of law after considering the findings of the ITAT as discussed above. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.ITA No.123/Ahd/2012 and others
A.Y. 2006-07 24
52. The next issue raised by the assessee is that the Ld. CIT(A), erred in confirming the disallowance for the expenses of Rs. 2,93,775.00 representing corporate social responsibility.
53. At the outset, the Ld. Counsel for the assessee submitted that the assessee has made additional claim during the assessment proceedings for Rs. 2,93,775/- on account of expenses incurred by the assessee in connection with the corporate social responsibility but the AO without giving any findings rejected the claim of the assessee. On appeal the Ld. CIT(A), also rejected the claim of the assessee on the reasoning that the claim was not made by the assessee in the return of income. As per the Ld. CIT(A), the assessee should have revised the income tax return to claim the deduction on account of expenses representing corporate social responsibility.
54. Nevertheless, the Ld. AR before us prayed that the assessee cannot be denied the benefit even claimed during the assessment proceedings. The Ld. AR in support of his contention has relied on the judgement of Hon'ble Gujarat High Court in the case of CIT vs. Mitesh Impex reported in 270 CTR 66.
54.1 However, it was prayed by the Ld. AR that as none of the authority below has given findings on merit of the case, therefore it was requested to set aside the issue to the file of the AO for fresh adjudication.
55. On the contrary the Ld. DR did not raise any objection if the matter is set- aside to the file of the AO for fresh adjudication as per the provisions of law.
56. We have heard the rival contention of both the parties and perused the material available on record. In view of the fact that the authority below has not given any findings on the merit of the case about the additional claim made by the assessee, we are inclined to set aside the issue to the file of the AO for fresh ITA No.123/Ahd/2012 and others A.Y. 2006-07 25 adjudication in the light of the principles laid down by Hon'ble Gujarat High Court in the case of Mitesh Impact (supra) and as per the provision of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.
57. The next issue raised by the assessee is that the learned CIT(A) erred in not allowing the refund of the excess payment of dividend distribution tax for Rs. 95,17,931/- only.
58. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2009-10 is identical to the issue raised by the assessee in ITA No. 123/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 123/AHD/2012 shall also be applicable for the assessment years 2009-
10. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 28 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2009-10. Hence, the ground of appeal filed by the assessee is hereby dismissed.
59. The next issue raised by the assessee vide ground no. 4 & 5 are either consequential or general in nature, not requiring separation adjudication. Hence, we hereby dismiss the same as infructuous.
60. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowances of "Education Cess", In this regard, we note that the additional ground of appeal raised by the assessee has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
61. In the result the appeal of the assessee is hereby partly allowed for statistical purposes.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 26 Coming to ITA No. 1414/Ahd/2013 an appeal of the assessee for A.Y. 2008-09
62. The assessee has raised following grounds of appeal:
Your appellant being aggrieved by the order passed dated 20/03/2013 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the "Act") by the learned Commissioner of Income-tax (Appeals)-VIII, Ahmedabad (hereinafter referred to as the "CIT(A)") presents this appeal against the same on the following grounds which are without prejudice to each other.
1. The order passed by the learned CIT(A) is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so held now.
2. The learned CIT(A) erred in law and on facts in confirming disallowance of expense to the extent of Rs. 97,78,937/- on account of proportionate administrative expenditure related to exempt income computed by the Assessing Officer as per Rule 8D as against Rs.
7,34,326/- disallowed by the appellant under Section 14A of the Act. It is submitted that disallowance made by the appellant under Section 14A of Rs.7,34,326/- is fair and reasonable in the facts and circumstance of the case and hence no further disallowance should have been confirmed by CIT(A).
2.1. The learned CIT(A) has erred in law and on facts in confirming application of Rule 8D, while making disallowance under Section 14A, where the Assessing Officer / CIT(A) have not brought on record any dissatisfaction in respect of the appellant's claim of expenditure incurred for earning tax free income.
2.2. Without prejudice to the above, your appellant submits that in any event, the addition made is very excessive and the same should be restricted to Rs.7,34,326/- as disallowed by the appellant in its return of income and since the same is already disallowed in the computation of total income, no further disallowance be made.
3. The learned CIT(A) has erred in law and facts in confirming the disallowance of Rs. 21,23,457/-being the amount of non moving inventory written off in the books of accounts. It is submitted that it be so held now and deduction be granted for the same by deleting the disallowance, particularly when necessary evidences relating to the entire procedure for such write off etc. were filed before both learned Assessing Officer & CIT(A).
4. The learned CIT(A) has erred in law in not restricting the Dividend Distribution Tax with respect to dividend paid to BG Asia Pacific Pte. Limited (a Singapore based company holding. 65.12% in the appellant company) under Section 1150 to 10% as per Article 10(2) of Double Tax Avoidance Agreement between India & Singapore and also thus erred in not granting refund of excess Dividend Distribution Tax paid Rs. 77,74,164 /- alongwith interest.
Your appellant prays for leave to add, to alter and/or to amend all or any of the grounds before the final hearing of appeal.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 27 62.1 The assessee vide letter dated NIL has also raised the additional grounds of appeal which are reproduced as under:
ADDITIONAL GROUND The Appellant has filed an appeal on 13-05-13. In regard to the captioned appeal, the following additional ground is taken hereunder.
1. DEDUCTION OF EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS 1.1. The appellant submits that "Education cess, including secondary and higher education cess" of Rs. 2,22,44,730/- paid by the appellant should be allowed as deduction under section 37 of the Income-tax Act, 1961 ('the Act').
1.2. The appellant had not claimed "Education cess, including secondary and higher education cess" (collectively referred to as 'Cess') Rs. 2,22,44,730/- paid for F.Y. 2007-08, in the return of income filed for A.Y. 2008-09.
1.3. It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act.
1.4. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards.
1.5 Relying on CBDT circular and judicial precedents, it is submitted that Cess is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y. 2008-09.
63. The first issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the AO for Rs. 97,78,937/- under the provisions of section 14A of the Act, r.w. Rule 8D of Income Tax Rules.
64. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2008-09 is identical to the issue raised by the assessee in ITA No. 2458/AHD/2014 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2458/AHD/2014 shall also be applicable for the assessment year 2008-09. The appeal of the assessee for the A.Y. 2009-10 has been decided by us vide paragraph No. 51 wherein we have set aside the issue to file of the AO. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment years 2008-09.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 28 Hence, the ground of appeal filed by the assessee is hereby allowed for statistical purposes.
65. The next issue raised by the assessee is that the Ld. CIT(A) erred in not restricting the dividend distribution tax with respect to dividend paid to Singapore based company which was holding 65.12 % shares in assessee company.
66. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2008-09 is identical to the issue raised by the assessee in ITA No. 123/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 123/AHD/2012 shall also be applicable for the assessment years 2007-
08. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 28 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2008-09. Hence, the ground of appeal filed by the assessee is hereby dismissed.
67. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowances of "Education Cess", in this regard, we note that the additional ground of appeal raised by the assessee has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
68. In the result the appeal of the assessee is hereby partly allowed for statistical purposes Coming to ITA No. 2338/Ahd/2015 an appeal of the assessee for A.Y. 2010-11
69. The assessee has raised following grounds of appeal:
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 29 ITEM NO. 1: Disallowance of Expenses U/s. 14A of the Act Rs.1.98.47.435/- (Disallowance as per Assessment Order Rs 2.04,30,845/- Less relief granted by CIT(A) order Rs.5,83,410/-) 1.1 The Learned CIT(A) has grossly erred in law and facts in partly upholding the decision of the learned AO. regarding disallowance of expenses U/s 14A of the Act Rs 1,98,47,435/-
(Disallowance as per Assessment Order Rs.2,04,30,845/-Less relief granted by CIT(A) order Rs.5,83,410/-).
1.2 The learned CIT(A) has grossly erred in stating that " the appellant has not made the disallowance of expenditure for the purpose of section 14A on an actual basis but has made the disallowance on an estimate which is not supported by any documentary evidence or actual data to show that the disallowance made was correct. Therefore, in these circumstances also having regard to the accounts of the appellant, I am not satisfied with the correctness of the claim of the appellant in respect of the administrative expenditure in relation to income which does not form part of the total income".
1.3 The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic base Rs.9,42,140/- as the amount inadmissible u/s 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income.
1.4 The learned CIT(A) has grossly erred in upholding the decision of the learned A.O. by applying Rule 8D for the purpose of making disallowance U/s. 14A. The learned CIT(A) has failed to appreciate that provisions of Rule 8D is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has further erred in not appreciating the fact that the learned A.O. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant in relation to expenses incurred by the appellant for earning exempt income and hence Rule 8D should not be applied.
1.5 The learned CIT(A) has further failed to appreciate that appellant has share capital and reserve & surplus of Rs. 817.26 crores at year end and total investment in mutual fund was Rs. 466.88 Crores. Further net increase in the investment during the year was Rs. 109.19 crores as against internal accruals of Rs. 249.47 Crores (Profit after tax+ depreciation). Thus, learned CIT(A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made in view of decision of Hon'ble Gujarat High Court in the case of Gujarat Power Corporation Limited in Tax appeal No. 1587 of 2009 for A.Y. 2002-03.
1.6 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case for A.Y. 04-05 wherein it had deleted the aforesaid.
The appellant further respectfully states that the impugned disallowance U/s. 14A Rs.1.98.47.435/- (Disallowance as per Assessment Order Rs 2,04,30,845/- Less relief granted by CIT(A) order Rs.5,83,410/-)as made by the learned CIT(A) being contrary to law may kindly be deleted.
ITEM NO.II: Non Granting of refund of Dividend Distribution Tax of Rs. 95.18.664/-
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 30 2.1 The learned CIT(A) has grossly erred in law by not allowing to grant refund of Rs. 95,18,664/-in respect of excess Dividend Distribution Tax paid.
2.2 The learned CIT(A) has grossly erred in stating that "It is further observed from the Grounds of appeal filed by the appellant that it had filed as separate application under section 154 requesting the refund of dividend distribution tax paid by it. Since, the issue is not arising out of the order possed by the AO under section 143(3) against which the present appeal has been filed by the appellant, the issue can not be decided in the present appeal. The appellant is advised to file a separate appeal against the order under section 154 passed by the AO rejecting the request. At present the ground of appeal is dismissed as being non-maintainable."
2.3 The learned CIT(A) has grossly erred in not appreciating that by not considering the appellant's request made through filing of application U/s 154 to grant refund of dividend distribution tax is itself a rejection of request for which no order under section 154 is required. The learned CIT(A) ought to have decided the issue on merit of the case instead of dismissing the same.
2.4 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that Dividend Distribution Tax-DDT is tax within the meaning of the term Indian Tax as defined in clause 1 (a) of Article-2 of the DTAA between India-Singapore Tax Treaty.
2.5 The learned CIT(A) has grossly erred in law by not extending the benefit of provisions of DTAA between India Singapore Tax Treaty to the Appellant.
2.6 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that dividend income of BG Asia Pacific Pte. Ltd. is liable to tax at 10% as per the provisions of Article 10 of DTAA between India-Singapore Tax Treaty and not at 16.995% as per section 1150 of the Act.
2.7 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that as per the provisions of Section 90 of the Act, it is mentioned that the provisions of the tax treaty will prevail over the provision of the Act, unless the provisions of the Act are more beneficial to the payee. The same is also well explained by CBDT Circular No. 333 date 02-04-1982 reproduced in (1982) 137 ITR (St.) 1 and by Hon'ble Supreme Court in the case of Navnitial C. Jhaveri V. K.K.Sen, A.A.C of Income Tax (1965) 56 ITR 198 and Ellerman Lines Limited V. CIT (1971) 82 ITR 913.
2.8 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that from the combine reading of Section 115-0, Article -10, Section 90 (2) (including CBDT Circular No. 333 dated 2-4-1982) and section 2(43) it is understood that Dividend distribution tax is nothing but additional income tax charged on the profits distributed by the company and Article 10 of DTAA specifies that tax on dividend for resident company paying the dividend to be restricted to 10%. The learned CIT(A) has further failed to appreciate that Specific provisions of DTAA will prevail over general provisions of Income Tax Act and also as per the provisions of 90 (2) the provisions of the Act will apply to the extent they are more beneficial to the appellant. Further section 237 entitles any person to claim refund of tax paid in excess of the amount with which is properly chargeable under the Income Tax Act, 1961. Hence, appellant is entitled to claim refund of excess dividend distribution tax paid.
2.9 The appellant further respectfully states that the Refund of Excess Dividend Distribution Tax paid of Rs. 95,18,664/- may kindly be granted along with interest.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 31 ITEM NO. III: LEVY OF INTEREST U/s. 234D OF THE ACT:
3.1 The learned CIT(A) has grossly erred in law and on facts in partly upholding the decision of the learned A.O. to levy interest U/s. 234D of the Act.
3.2 The appellant states that levy of interest is wholly unjustified and the same may kindly be deleted.
ITEM NO. IV: Initiation of penalty proceedings u/s. 271(1)(c) of the Act 4.1 The learned CIT(A) has grossly erred in law and on facts in initiating penalty proceedings under Section 271(1)(c) of the Act.
4.2 The appellant states that initiation of penalty proceedings is clearly contrary to law and the same may kindly be quashed.
V. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.
69.1 The assessee vide letter dated NIL has also raised the additional ground of appeal which is reproduced as under:
ADDITIONAL GROUND The Appellant has filed an appeal on 06-08-15. In regard to the captioned appeal, the following additional ground is taken hereunder.
1. DEDUCTION OF EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS 1.1. The appellant submits that education cess and secondary and higher education cess of Rs. 2,58,81,260/-paid by the appellant should be allowed as deduction under section 37 of the Income- tax Act, 1961 ('the Act').
1.2. The appellant had not claimed education cess and secondary and higher education cess (collectively referred to as 'Cess') Rs. 2,58,81,260/- paid for F.Y. 2009-10, in the return of income filed for A.Y. 2010-11.
1.3. It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act.
1.4. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards.
1.5 Relying on CBDT and judicial precedent, it is submitted that Cess is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y. 2010-11.ITA No.123/Ahd/2012 and others
A.Y. 2006-07 32
70. The first issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the AO for Rs. 1,98,47,435/- under the provisions of section 14A of the Act, r.w. Rule 8D of Income Tax Rules.
71. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2010-11 is identical to the issue raised by the assessee in ITA No. 2458/AHD/2014 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2458/AHD/2014 shall also be applicable for the assessment years 2010-11. The appeal of the assessee for the A.Y. 2009-10 has been decided by us vide paragraph No. 51 wherein we have set aside the issue to file of the AO. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment years 2010-11. Hence, the ground of appeal filed by the assessee is hereby allowed for statistical purposes.
72. The next issue raised by the assessee is that the Ld. CIT(A) erred in not granting the refund of excess dividend distribution tax paid with respect to dividend paid to Singapore based company which was holding 65.12 % shares in assessee company.
73. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2010-11 is identical to the issue raised by the assessee in ITA No. 123/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 123/AHD/2012 shall also be applicable for the assessment years 2010-
11. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 28 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2010-11. Hence, the ground of appeal filed by the assessee is hereby dismissed.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 33
74. The next issue raised by the assessee vide ground no. 3 to 5 are either consequential or premature or general in nature, not requiring separate adjudication. Hence, we hereby dismiss the same as infructuous.
75. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowances of "Education Cess", in this regard, we note that the additional ground of appeal raised by the assessee has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
76. In the result the appeal of the assessee is partly allowed for statistical purposes Coming to ITA No. 3450/Ahd/2015 an appeal of the assessee for A.Y. 2011-12
77. The assessee has raised following grounds of appeal:
ITEM No.I Disallowance of Expenses U/s.14A r.w.r 8D of the Act Rs.2,57,44,621/- (Disallowance as per Assessment Order Rs.2,74,33,009/- less relief granted by CIT(A) order Rs.16,88,388/-) 1.1 The learned CIT(A) has grossly erred in law and facts in partly upholding the decision of the learned A.O regarding disallowance of expense U/s.14A of the Act Rs.2,57,44,621/-
1.2 The learned CIT(A) has grossly erred in stating that "the appellant has not made the disallowance of expenditure for the purpose of section 14A on an actual basis but has made the disallowance on an estimate which is not supported by any documentary evidence or actual data to show that the disallowance made was correct. Therefore, in these circumstances also having regard to the accounts of the appellant, I am not satisfied with the correctness of the claim of the appellant in respect of the administrative expenditure in relation to income which does not form part of the total income".
1.3 The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic base Rs. 10,13,479/- as the amount inadmissible u/s 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income.
1.4 The learned CIT(A) has grossly erred in upholding the decision of the learned A.O. by applying Rule 8D for the purpose of making disallowance U/s. 14A. The learned CIT(A) has failed to appreciate that provisions of Rule 8D is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has further erred in not appreciating the fact that the learned A.O. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant ITA No.123/Ahd/2012 and others A.Y. 2006-07 34 in relation to expenses incurred by the appellant for earning exempt income and hence Rule 8D should not be applied.
1.5The learned CIT(A) has further failed to appreciate that appellant has share capital and reserve & surplus of Rs. 9,077.92 million at year end and total investment in mutual fund was Rs. 5,820.01 million. Further net increase in the investment during the year was Rs.
1,116.12 million as against internal accruals of Rs. 3,234.21 million (Profit after tax + depreciation). Thus, learned CIT(A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made in view of decision of Hon'ble Gujarat High Court in the case of Gujarat Power Corporation Limited in Tax appeal No. 1587 of 2009 for A.Y. 2002-03.
1.6 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case for A.Y. 04-05 wherein hon'ble ITAT had deleted the aforesaid disallowance.
1.7 The appellant further respectfully states that the impugned disallowance U/s. 14A Rs.2,57,44,621/- (Disallowance as per Assessment Order Rs. 2,74,33,009/- less relief granted by CIT(A) order Rs. 16,88,388/-) as made by the learned CIT(A) being contrary to law may kindly be deleted.
ITEM NO.II: Non Granting of refund of Dividend Distribution Tax of Rs. 4,48,66,407/-
1.1 The learned CIT(A) has grossly erred in law by not allowing to grant refund of Rs. 4,48,66,470/- in respect of excess Dividend Distribution Tax paid.
2.2 The learned CIT(A) has grossly erred in stating that it is further observed from the Grounds of appeal filed by the appellant that it had filed as separate application under section 154 requesting the refund of dividend distribution tax paid by it. Since, the issue is not arising out of the order passed by the AO under section 143/3) against which the present appeal has been filed by the appellant, the issue can not be decided in the present appeal. The appellant is advised to file a separate appeal against the order under section 154 passed by the AD rejecting the request. At present the ground of appeal is dismissed as being non-maintainable."
2.3 The learned CIT(A) has grossly erred in not appreciating that by not considering the appellant's request made through filling of application U/s. 154 to grant refund of dividend distribution tax is itself a rejection of request for which no order under section 154 is required. The learned CIT(A) ought to have decided the issue on merit of the case instead of dismissing the same.
2.4 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that Dividend Distribution Tax-DDT is tax within the meaning of the term Indian Tax as defined in clause 1 (a) of Article-2 of the DTAA between India-Singapore Tax Treaty.
2.5 The learned CIT(A) has grossly erred in law by not extending the benefit of provisions of DTAA between India-Singapore Tax Treaty to the Appellant.
2.6 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that dividend income of BG Asia Pacific Pte. Ltd. is liable to tax at 10% as per the provisions of Article 10 of DTAA between India-Singapore Tax Treaty and not at 16.609% as per section 1150 of the Act.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 35 2.7 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that as per the provisions of Section 90 of the Act, it is mentioned that the provisions of the tax treaty will prevail over the provision of the Act, unless the provisions of the Act are more beneficial to the payee. The same is also well explained by CBDT Circular No. 333 date 02-04-1982 reproduced in (1982) 137 ITR (St.) 1 and by Hon'ble Supreme Court in the case of Navnitial C. Jhaveri V. K.K.Sen, A.A.C of Income Tax (1965) 56 ITR 198 and Ellerman Lines Limited V. CIT (1971) 82 ITR 913.
2.8 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that from the combine reading of Section 115-0, Article - 10, Section 90 (2) (including CBDT Circular No. 333 dated 2-4-1982) and section 2(43) it is understood that Dividend distribution tax is nothing but additional income tax charged on the profits distributed by the company and Article 10 of DTAA specifies that tax on dividend for resident company paying the dividend to be restricted to 10%. The learned CIT(A) has further failed to appreciate that Specific provisions of DTAA will prevail over general provisions of Income Tax Act and also as per the provisions of 90 (2) the provisions of the Act will apply to the extent they are more beneficial to the appellant. Further section 237 entitles any person to claim refund of tax paid in excess of the amount with which is properly chargeable under the Income Tax Act, 1961. Hence, appellant is entitled to claim refund of excess dividend distribution tax paid.
2.9 The appellant further respectfully states that the Refund of Excess Dividend Distribution Tax paid of Rs.4,48,66,407/- may kindly be granted along with interest.
ITEM NO. III: LEVY OF INTEREST U/s. 234C OF THE ACT:
3.1 The learned CIT(A) has grossly erred in law and on facts in partly upholding the decision of the learned A.O. to levy interest U/s. 234C of the Act.
3.2 The appellant states that levy of interest is wholly unjustified and the same may kindly be deleted.
ITEM NO. IV: Initiation of penalty proceedings u/s. 271(1)(c) of the Act 4.1 The learned CIT(A) has grossly erred in law and on facts in initiating penalty proceedings under Section 271(1)(c) of the Act.
4.2 The appellant states that initiation of penalty proceedings is clearly contrary to law and the same may kindly be quashed.
V. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.
77.1 The assessee vide letter dated NIL has also raised the additional grounds of appeal which are reproduced as under:
ADDITIONAL GROUND The Appellant has filed an appeal on 10-12-15. In regard to the captioned appeal, the following additional ground is taken hereunder.
1. DEDUCTION OF EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS ITA No.123/Ahd/2012 and others A.Y. 2006-07 36 1.1. The appellant submits that "Education cess, including secondary and higher education cess" of Rs. 3,36,09,107/-paid by the appellant should be allowed as deduction under section 37 of the Income- tax Act, 1961 (the Act).
1.2. The appellant had not claimed "Education cess, including secondary and higher education cess" (collectively referred to as 'Cess') Rs. 3,36,09,107/- paid for F.Y. 2010-11, in the return of income filed for A.Y. 2011-12.
1.3. It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act.
1.4. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards. 1.5 Relying on CBDT circular and judicial precedents, it is submitted that Cess is deducting expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y 2011-12.
78. The first issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the AO for Rs. 2,57,44,621/- under the provisions of section 14A of the Act, r.w. Rule 8D of Income Tax Rules.
79. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2011-12 is identical to the issue raised by the assessee in ITA No. 2458/AHD/2014 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2458/AHD/2014 shall also be applicable for the assessment years 2011-12. The appeal of the assessee for the A.Y. 2009-10 has been decided by us vide paragraph No. 51 wherein we have set aside the issue to file of the AO. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment years 2011-12. Hence, the ground of appeal filed by the assessee is hereby allowed for statistical purposes.
80. The next issue raised by the assessee is that the Ld. CIT(A) erred in not granting the refund of excess dividend distribution tax paid with respect to dividend paid to Singapore based company which was holding 65.12 % shares in assessee company.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 37
81. At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2011-12 is identical to the issue raised by the assessee in ITA No. 123/AHD/2012 for the assessment year 2006-07. Therefore, the findings given in ITA No. 123/AHD/2012 shall also be applicable for the assessment years 2011-
12. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 28 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2011-12. Hence, the ground of appeal filed by the assessee is hereby dismissed.
82. The next issue raised by the assessee vide ground no. 3 to 5 are either consequential or premature or general in nature, not requiring separate adjudication. Hence, we hereby dismiss the same as infructuous.
83. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowances of "Education Cess", in this regard, we note that the additional ground of appeal raised by the assessee has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
84. In the result the appeal of the assessee is partly allowed for statistical purposes Coming to ITA No. 2005/Ahd/2017 an appeal of the assessee for A.Y. 2012-13
85. The assessee has raised following grounds of appeal:
ITEM NO.1: Disallowance of Expenses U/s. 14A r.w.r 8D of the Act Rs. 2,63,39,012/- (Disallowance as per Assessment Order Rs. 2,73,43,592/- less already disallowed in the return Rs. 10,04,580/-) 1.1 The Learned CIT(A) has grossly erred in law and facts in partly upholding the decision of the learned A.O. regarding disallowance of expenses U/s. 14A of the Act Rs.
2,63,39,012/-.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 38 1.2 The learned CIT(A) has grossly erred in stating that "I observe that Appellant has made investment and earned dividend income which is claimed exempt. Appellant has not established any nexus between utilization of interest-free funds and such investment hence argument of Appellant that it had not incurred any interest expenses cannot be accepted in view of Rule 8D brought to Statute by Assessment Year 2008-09. The decisions relied upon by Appellant in support of this contention are related to assessment years in which Rule 8D was not on Statute hence ratio of these decisions connot be made applicable in current year. Further it is observed that as Appellant has earned exempt dividend income, AO was correct in making disallowance under Section 14A. It is also noted that CIT(A)-4 in the case of the appellant for AY 2011-12 had rejected the contentions of the appellant and addition made by the AO has been confirmed. Thus, disallowance under Section 14A read with Rule SD of Rs. 2,63,39,012/- is confirmed. This ground of appeal is dismissed." 1.3 The learned CIT(A) has grossly erred in not appreciating that provisions of Rule 8D is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic base Rs. 10,04,580/- as the amount inadmissible u/s 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income. The learned CIT(A) has further erred in not appreciating the fact that the learned A.O. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant in relation to expenses incurred by the appellant for earning exempt income and hence Rule 8D should not be applied. The learned CIT(A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made.
1.5 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case for A.Y. 04-05 wherein Hon'ble ITAT has deleted the aforesaid disallowance.
1.6 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case for A.Y. 05-06 wherein Hon'ble ITAT has restricted the amount of disallowance at Rs. 6 Lakhs i.e. disallowance U/s. 14A already made by the appellant on its own.
1.7 The appellant further respectfully states that the impugned disallowance U/s. 14A Rs. 2,63,39,012/- as made by the learned CIT(A) being contrary to law may kindly be deleted.
ITEM NO.11: Non Granting of refund of Dividend Distribution Tax of Rs. 11,49,95,440/-
2.1 The learned CIT(A) has at point No. 6 stated that "This issue requires to be verified by the AO at his end and therefore, the AD is hereby directed to verify the same and grant refund as per law". The learned CIT(A) has grossly erred in not considering the appellant's request to grant refund of dividend distribution tax. The learned CIT(A) ought to have decided the issue on merit of the case instead of directing the learned AO to verify the same.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 39 2.2 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that Dividend Distribution Tax-DDT is tax within the meaning of the term Indian Tax as defined in clause 1 (a) of Article-2 of the DTAA between India - Singapore Tax Treaty.
2.3 The learned CIT(A) has grossly erred in law by not extending the benefit of provisions of DTAA between India-Singapore Tax Treaty to the Appellant.
2.4 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that dividend income of BG Asia Pacific Pte. Ltd. is liable to tax at 10% as per the provisions of Article 10 of DTAA between India-Singapore Tax Treaty and not at 16.995% U/s. 1150 of the Act.
2.5 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that as per the provisions of Section 90 of the Act, it is mentioned that the provisions of the tax treaty will prevail over the provision of the Act, unless the provisions of the Act are more beneficial to the payee. The same is also well explained by CBDT Circular No. 333 date 02-04-1982.
2.6 The learned CIT(A) has grossly erred in law by not considering Appellant's contention that from the combine reading of Section 115-0, Article 10, Section 90 (2) (including CBDT Circular No. 333 - dated 2-4-1982) and section 2(43) it is understood that Dividend distribution tax is nothing but additional income tax charged on the profits distributed by the company and Article 10 of DTAA specifies that tax on dividend for resident company paying the dividend to be restricted to 10%. The learned CIT(A) has further failed to appreciate that Specific provisions of DTAA will prevail over general provisions of Income Tax Act and also as per the provisions of 90 (2) the provisions of the Act will apply to the extent they are more beneficial to the appellant. Further section 237 entitles any person to claim refund of tax paid in excess of the amount with which is properly chargeable under the Income Tax Act, 1961. Hence, appellant is entitled to claim refund of excess dividend distribution tax paid.
2.7 The appellant further respectfully states that the Refund of Excess Dividend Distribution Tax paid of Rs. 11,49,95,440/- may kindly be granted along with interest. ITEM NO. III: Levy of Interest U/s. 234C of the Act:
3.1 The learned CIT(A) has grossly erred in law and on facts in partly upholding the decision of the learned AO. to levy interest U/s. 234C of the Act.
3.2 The appellant states that levy of interest is wholly unjustified and the same may kindly be deleted.
ITEM NO. IV: Initiation of penalty proceedings u/s. 271(1)(c) of the Act:
4.1 The learned CIT(A) has grossly erred in law and on facts in initiating penalty proceedings under Section 271(1)(c) of the Act.
4.2 The appellant states that initiation of penalty proceedings is clearly contrary to law and the same may kindly be quashed.
V. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.
85.1 The assessee vide letter dated NIL has also raised the additional grounds of appeal which are reproduced as under:
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 40 ADDITIONAL GROUND The Appellant has filed an appeal on 06-09-2017, in regard to the captioned appeal, the following additional ground is taken hereunder.
1. DEDUCTION OF EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS 11 The appellant submits that "Education cess, including secondary and higher education cess" of Rs. 2,85,59,416/-paid by the appellant should be allowed as deduction under section 37 of the Income- tax Act, 1961 (the Act).
1.2. The appellant had not claimed "Education cess, including secondary and higher education cess" (collectively referred to as 'Cess') Rs. 2,85,59,416/-paid for F.Y. 2011-12, in the return of income filed for AY. 2012-13.
1.3 It is respectfully submitted that Cess is allowable as a deduction while computing taxable income. This is because it is different from and not forming part of income-tax and hence does not fall under the purview of section 40(a)(ii) of the Act.
14. CBDT vide Circular No. 91/58/66-ITJ (19) dated 18-05-1967 has expressly clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed in the assessment for the years 1962-63 onwards.
1.5 Relying on CBDT circular and judicial precedents, it is submitted that Cess is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation of taxable income for A.Y. 2012-13.
86. The first issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the AO for Rs. 2,63,39,012/- under the provisions of section 14A of the Act, r.w. Rule 8D of Income Tax Rules.
87. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2012-13 is identical to the issue raised by the assessee in ITA No. 2458/AHD/2014 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2458/AHD/2014 shall also be applicable for the assessment years 2012-13. The appeal of the assessee for the A.Y. 2009-10 has been decided by us vide paragraph No. 51 wherein we have set aside the issue to file of the AO. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment years 2012-13. Hence, the ground of appeal filed by the assessee is hereby allowed for statistical purposes.
ITA No.123/Ahd/2012 and othersA.Y. 2006-07 41
88. The next issue raised by the assessee is that the Ld. CIT(A) erred in not granting the refund of excess dividend distribution tax paid with respect to dividend paid to Singapore based company which was holding 65.12 % shares in assessee company.
89. At the outset, we note that the learned AR for the assessee before us did not press the issue raised in the captioned ground of appeal. Hence, we hereby dismiss the same as not pressed.
90. The next issue raised by the assessee vide ground no. 3 to 5 are either consequential or premature or general in nature, not requiring separate adjudication. Hence, we hereby dismiss the same as infructuous.
91. Coming to the issue raised by the assessee in the additional ground of appeal vide letter dated NIL regarding the allowances of "Education Cess", in this regard, we note that the additional ground of appeal raised by the assessee has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed.
92. In the result, the appeal of the assessee is partly allowed for statistical purposes
93. In the combined results, the outcome of the appeals of the assessee and Revenue are as follows:
Sr. Asstt.
ITA No. Appeal filed by Result
No. Year
Partly allowed for
1 123/Ahd/2012 2006-07 Assessee
statistical purposes
2 350/Ahd/2012 2006-07 Department Dismissed
3 124/Ahd/2012 2007-08 Assessee Partly Allowed
4 351/Ahd/2012 2007-08 Department Dismissed
Partly allowed for
5 1414/Ahd/2013 2008-09 Assessee
statistical purposes
ITA No.123/Ahd/2012 and others
A.Y. 2006-07
42
Partly allowed for
6 2458/ahd/2014 2009-10 Assessee
statistical purposes
Partly allowed for
7 2338/Ahd/2015 2010-11 Assessee
statistical purposes
Partly allowed for
8 3450/Ahd/2015 2011-12 Assessee
statistical purposes
Partly allowed for
9 2005/Ahd/2017 2012-13 Assessee
statistical purposes
Order pronounced in the Court on 31/10/2023 at Ahmedabad.
/- Sd/- Sd/-
Sd/- Sd/-
(MADHUMITA ROY) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
(True Copy)
Ahmedabad, Dated 31/10/2023
Manish