ACIT, NEW DELHI V. M/S JUBILANT ENPRO PVT. LTD., NEW DELHI

ITA 3615/DEL/2011

AI Insights

The case involves a series of appeals by Jubilant Enpro Private Limited and the Commissioner of Income Tax against various orders related to income tax assessments for the years 2007-08, 2008-09, and 2009-10. The primary issues revolved around the disallowance of education expenses for the director's children, the treatment of duty credit scripts, and the application of Section 14A concerning the disallowance of expenses related to exempt income. The Tribunal's decision addressed the legality and interpretation of these issues under the Income Tax Act, 1961, and involved a detailed examination of the facts, legal provisions, and precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 38670 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Other Referred Cases: Kostub Investment Ltd. vs. CIT, CIT vs. Ras Information Technologies (P) Ltd., CIT vs. Excel Industries, CIT vs. BSES Rajdhani Power Ltd., CIT vs. Birala Soft Ltd., ACB India Ltd. vs ACIT, Cargo Motors (P) Ltd. vs. DCIT, Joint investment (P) Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: SHASHVAT DHAMIJA
• Keywords: Set aside; Revenue expenditure; Business expenditure; Question of law; Bad and doubtful debts; Depreciation; Tax effect; Capital expenditure; Earning of tax free income; Rule 8D
• Section: 142(1); 154; 143(1); 22; 13; 37; 28; 14A; 37(1); 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘C’: NEW DELHI) BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA Nos:- 3197 and 3198/Del/2011 (Assessment Years- 2007-08 and 2008-09) Jubilant Enpro Private Limited, Plot No. 1A, Sector 16A, Institutional Area, Noida, 201301, U.P. Vs. Commissioner of Income Tax Circle 4(1), New Delhi. PAN No: AAACE0653L APPELLANT RESPONDENT ITA Nos:- 3408, 3615/Del/2011 (Assessment Years- 2007-08, 2008-09) Asst. Commissioner of Income Tax, Circle 5(1)(1), Noida. Vs. JE Energy Ventures Private Limited, (Formerly Known as Jubilant Enpro Pvt. Ltd.), Plot No. 1A, Sector-16A, Industrial Area, Noida, Uttar Pradesh-201301. PAN No: AAACE0653L APPELLANT RESPONDENT ITA No:- 1414/Del/2013 (Assessment Year- 2009-10) Jubilant Enpro Private Limited, Plot No. 1A, Sector 16A, Institutional Area, Noida, Vs. Commissioner of Income Tax Circle 4(1), New Delhi. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 2 of 32 201301, U.P. PAN No: AAACE0653L APPELLANT RESPONDENT Assessee by : Shri Shashvat Dhamija, Adv. Revenue by : Shri Dayainder Singh Sidhu, CIT(DR) Date of Hearing : 30.12.2024 Date of Pronouncement : 28.02.2025 ORDER PER SUDHIR PAREEK, JM These bunches of five appeals are by the assessee and revenue. Since the issues involved in these appeals are interconnected, they are being disposed of by this consolidated order for the sake of convenience and brevity. The assessee and Revenue have raised the following grounds of appeal: ITA No.- 3197/Del/2011 “1. That on the facts and circumstances of the case and in law the Learned CIT(A) erred in confirming disallowance of Rs 40,59,060/- on account sponsoring of education expenses for persons specified under section 40A(2)(b) of the Income-tax Act, 1961. 2. That on the facts and circumstances of the case and in law the Learned CIT(A) erred in confirming disallowance of Rs 5,66,812/- on account write-off of advances for purpose of leasehold improvements. The appellant craves leave to add, alter, amend, or vary the above grounds of appeal at or before the time of hearing.” ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 3 of 32 ITA No.-3408/De/2011 1. The order of the learned CIT(APPEALS) is erroneous & contrary to facts & law 2. On the facts and in the circumstances of the case and in law, the Ld. CTT (Appeals) has erred in restricting the Addition under section 14A to Rs.2,55,46,255/- as against Rs.4,43,57,450/- made by the AO. 2.1. The Ld. CIT (A) has ignored the finding recorded by the AO and the fact that the addition was correctly made by the AO in accordance with the provisions of Rule ID of LT. Rules. 1962. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting the addition of Rs.17,263/- made by disallowing the excess depreciation of computer peripherals. 3.1. The Ld. CIT (A) ignored the finding recorded by the AO and the fact that the depreciation computer peripherals is allowed @ 15% and not @ 60%. 4. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in deleting the addition of Rs.56,29,884/- made on account of duty credit scripts received but not utilized. 4.1. The Ld. CIT (A) ignored the finding recorded by the AO and the fact that the duty credit was offered for taxation by the assessee. 5. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing. ITA no.- 3198/Del/2011 “1. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming disallowance of Rs. 6,96,25,920/- under Section 14A of the IT, Act. 2. Without prejudice to ground no. 1, Ld. CIT(A) erred on facts and circumstances of the case in confirming a further disallowance of a sum of Rs. 6,96,25,920/- by adopting rule 8D instead of turnover method applied consistently till the preceding previous year without assigning any reason whatsoever or arriving at any satisfaction when the disallowance of Rs. 1,98,89,751/- offered in the in the returned income ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 4 of 32 was more than the amount of disallowance of Rs. 1,85,75,964/- as per turnover method. 3. Without prejudice to ground no. 1 & 2, the Ld. CIT(A) erred on facts and circumstances of the case in confirming disallowance of interest even on average value of investment foreign securities and average value of investments in unlisted securities for apportioning interest in the manner stipulated in as per provisions of clause (ii) of sun-rule(2) of Rule 8D. 4. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming disallowance of Rs. 30,26,877/- on account of sponsoring of education expenses for persons specified u/s 40A(2)(b). “ ITA No.- 3615/Del/2011 1. The order of the learned CIT(APPEALS) is erroneous & contrary to facts & law. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in restricting the Addition under section 14A to Rs.6,96,25,921/- as against Rs.9,03,01,996/- made by the AO. 2.1. The Ld. CIT (A) has ignored the finding recorded by the AO and the fact that the addition was correctly made by the AO in accordance with the provisions of Rule SD of L.T. Rules, 1962. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) has been in deleting the addition of Rs. 4,00,432/- made on account of bad debts and sundry creditors. 3.1. The Ld. CIT (A) ignored the finding recorded by the AO and the fact that the assessee did not file the necessary evidence to substantiate its claim during the assessment proceedings. 4. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has been in deleting the addition of Rs.54,72,357/- made on account of duty credit received. 4.1. The Ld. CIT (A) ignored the finding recorded by the AO and the fact that the assessee did not offer the sum in question for taxation and was not credited in the P & L account. 5. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 5 of 32 ITA No.-1414/Del/2013 “4. That on the facts and circumstances of the case and in law the Learned CIT(A) erred in confirming disallowance of Rs 14,92,34,526/- /- under section 14A of the IT, Act. 5. Without prejudice to ground No. 1 Learned CIT(A) erred on facts and circumstances of the case in confirming disallowance of interest even on average value of investments in unlisted and listed securities for apportioning interest in the manner stipulated in as per provisions of clause (ii) of sub-rule (2) of Rule 8D, without appreciating that such investments were capable of generating taxable income. 6. That on the facts and circumstances of the case and in law the Learned CIT(A) erred in confirming disallowance of Rs 10,25,179/- on account of sponsoring of education expenses for persons specified U/S 40A(2)(b). The Appellant craves leave to add, alter, amend, or vary the above grounds of appeal at or before the time of hearing. 3. Facts of the case may be summarized as that return of income was filed on 02.04.2008 declaring total income of Rs. 8,77,05,840/-, which was processed u/s 143(1) on 26.03.2009. Thereafter, case was selected for scrutiny and in persuasion thereof statutory notice u/s 143(2) and 142(1) of the Act was served and after completing the assessment proceedings, the Ld. Assessing Officer (in short ‘Ld. AO’) computed total income as Rs. 29,15,00,876/- by making addition in different heads vide order dated 23.12.2010. Aggrieving with the aforementioned order, the assessee / appellant preferred appeal, ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 6 of 32 which partly allowed by the Ld. CIT(A) vide impugned order. The Ld. CIT(A) while deciding the appeal filed by assessee, disallowance u/s 14A of the Act, was reduced to Rs. 4,43,57,450/- from Rs. 4,61,62,113/- and depreciation on UPS as integral part of computer at the rate of 60% allowed to assessee whereas disallowance by the Ld. AO of the education expenses of Rs. 40,59,060/- on account of the expenditure incurred towards sponsoring education expenses of Mr. Arjun Bhartia & Ms. Aashti Bhartia at foreign university was upheld, and confirmed disallowance of Rs. 5,66,812/- on account of write off advances for the purpose of lease hold improvements. 4. Aggrieved by the impugned order, both assessee and Revenue before us by preferring instant appeals, for adjudication of both appeals, we shall first take up appeal of assessee. ITA No. 3197/Del/2011 and ITA No. 1414/Del/2013 Ground No. 1 Ground no. 1 5. The Ld. AR submitted that the Ld. CIT(A) erroneously confirmed disallowance of Rs. 40,59,060/- (for assessment year 2007-08) and Rs. 14,92,34,526/- (for assessment Year 2009-10) on account of ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 7 of 32 sponsoring of education expenses for the person specified u/s 40(2)(b) of the Act. 5.1 In this regards, the Ld. AO observed that the amount incurred towards education of son and daughter of the Director of the assessee company was not incurred wholly and exclusive for the purpose of business and there was no any nexus between foreign education incurred on behalf of the children of the Director of the assessee company and the business of the company and disallowed u/s 37 of the Act. 5.2 The Ld. CIT(A) observed while deciding this issue, of which relevant para 5.2 to 5.3 is hereby reproduced as under: “5.2 On facts, the expenditure on foreign education of Mr. Arjun Bhartia and Ms. Ashti Bharita who are son and daughter of Shri H.S. Bhartia, the director of the appellant company is held to be not laid out and expended wholly and exclusively for the purposes of business or profession of the assessee. The decisive test in a situation like this is to ask a question whether an assessee will incur expenditure of the type being claimed in case of appellant as business expenditure in case of any employee. If this test is applied, it would be clear that huge expenditure on foreign education is incurred because they are son and daughter of Shri H.S.Bhartia, the Director of the appellant company and such expenditure has no business connection. It is further notable that Mr Arjun Bhartia and Ms Ashti Bhartia took up graduation education in Liberal Arts and sending of such person abroad is for non-business purpose. It is thus apparent that only consideration for incurring Rs. 40,59,060/- on Mr Arjun Bhartia and Ms Ashti Bhartia is because, they being son and and daughter of one of the directors of the appellant-company. Thus, the only logical conclusion which could be drawn on these facts of the case is that ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 8 of 32 there is no nexus in between education expenses incurred abroad for Mr Arjun Bhartia and Ms Ashti Bhartua and the business of the appellant-company. In any case, such expenditure on facts cannot be said to be laid out or expended wholly and exclusively for the purpose of business. 5.3 In view of the foregoing discussion and for the reasons given by the AO, I am of the considered view that the expenditure on education of Mr Arjun Bhartia and Ms Ashti Bhartia is in nature of personal expenditure of Shri H.S.Bhartia, the Diretor of the appellant company, which cannot be stated to be laid out or expended wholly and exclusively for the purposes of business of the appellant company. As such, these expenses cannot be considered as allowable expenses under section 37(1) of the Act. Therefore, disallowance of the AO of the education expenses of Rs. 40,59,060/- on account of the expenditure incurred towards sponsoring education expenses of Mr. Arjun Bhartia and Ms. Ashti Bhartia at foreign universities is hereby upheld.” 5.3 The Ld. AR further submitted that Mr. Arjun Bhartia had secured admission in one of the reputed universities viz Brown University, province, USA form which it can be gauged that he was scholarly, hardworking and would have been a valuable asset for the assessee company upon completing his studies and education course undertaken, viz Liberal Arts (Major in Economics) had intimate connection with the business of assessee company which is related with oil exploration and production of crude oil, trading of goods, shares and debentures etc. In this regard, the Ld. AR emphasized article published by Barry Camson, Bentley University of which relevant extract as under: ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 9 of 32 “An integrated liberal arts and business education produces thoughtful and well-informed civic leaders. It cultivates individual freedom through reflection and self-awareness. It leads individuals to think for themselves. It creates an understanding of the larger context of business issues and the role of business in society, history, culture and ideology. It leads to more creative, innovative and entrepreneurial thinking as a result of the cross-fertilization of ideas and the constantly fresh perspective that this produces.” 5.4 The Ld. AR further submitted that education expenses were sponsored by the assessee / appellant company pursuant to Board Resolution dated 23.06.2024 by which resolved to the approved sponsoring education expenses, including boarding, lodging and tuition fees of Mr. Arjun Bhartia to study liberal, arts, in order to be well equipped to get education from reputed universities helpful in future growth and development of the assessee / appellant company, at Brown University, province US and S.S. Bhatia and H.S. Bhartia was authorized severally to settle terms and conditions on which assessee company will employ him after came back on completion of education abroad. Extract of abovesaid resolution dated 23.06.2004 is furnished as under: “The Chairman informed that Mr. Arjun Bhartia, son of Co- Chairman & Director, Mr H.S. Bhartia, had been admitted for 4 years' Graduation in Liberal Arts from Brown University. Providence, U.S.A. and thereafter Mr Arjun Bhartia has desired to work for the company for at least two years. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 10 of 32 The Board discussed the matter of sponsoring Mr. Arjun Bhartia for Academic study from one Internationally reputed Institute because with the opening of Indian economy the business is becoming more competitive and calls for long term economic and strategic planning on global scale. To enter into new business today as well as in future & to prepare ourselves for this competition and to counter the threat of competition the company needs to equip itself with knowledge end systems used by international players. Towards this, it was proposed that Mr. Arjun Bhartia was well equipped to get this education and exposure which would be helpful in future growth and development of the company. A formal proposal to sponsor Mr. Arjun Bhartia for 4 years for undergoing Graduation at Brown University, Providence, U.S.A. subject to the statutory approvals and compliances required, if any, was considered and the following resolution was passed. \"RESOLVED THAT subject to the Statutory compliances and approvals required, if any, the consent of the Board be and is hereby accorded for sponsoring Mr. Arjun Bhartia to study Liberal Arts at Brown University, Providence, U.S.A. and Mr. S.S. Bhartia, Chairman and Director and Mr. H.S. Bhartia, Co-Chairman and Director of the Company be and are hereby severally authorised to enter into such agreement as may be necessary to sponsor Mr Arjun Bhartia for undertaking 4 years for graduating in Liberal Arts from Brown University, Providence, U.S.A. for study at Company's cost and expenses. RESOLVED FURTHER THAT for sponsoring Arjun Bhartia, the consent of the Board be and is hereby accorded for payment of all boarding, lodging and tuition fees etc., during the tenure of his course at Brown University, U.S.A and that the payment be made from our EEFC and Current account with ABN Amro Bank, New Delhi. RESOLVED FURTHER THAT Shri S.S. Bhartia and Shri H.S. Bhartia, Directors of the Company be and are hereby authorised severally to settle terms and conditions on which the Company will employ him after he comes back to India on completion of his education.\" 5.5 It was also submitted that since 18.02.2010, both Mr. Arjun Bhartia and Ms. Ashti Bhartia served as Director of the assessee company and contributed immensely to its growth and profitably and ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 11 of 32 did not receive any remuneration from the assessee / appellant company for two years till 31.03.2012 and with effect from 01.04.2012 remuneration was paid to Mr. Arjun Bhartia and the said remuneration expenses in the books of the assessee company was accepted and allowed by the AO during assessment proceedings. 5.6 The Ld. AR also contended that it is established principle of law that although the fact that employee whose education was sponsored was son of the Director of the assessee company could not be ignored, however, while judging the allowability of such expenditure, would be wholly irrelevant for the court to consider as to whether the assessee could have similarly assisted another employee unrelated to its management. He referred judgment passed by Hon’ble Delhi High Court in 365 ITR 436 (Del) Kostub Investment Ltd. vs. CIT, of which relevant paras 8 to 10, reproduced as below: “8. This Court has considered the materials on record. There can be no doubt that the burden of showing that expenditure would be wholly and exclusively for the purpose of business under Section 37(1) is upon the assessee and that personal expenditure cannot be claimed as business expenditure. The question is whether these twin requirements are said to have been satisfied in the circumstances of this case. The first is what are the materials on record? The assessee furnished its resolution authorizing disbursement of the expenses to fund Dushyant Poddar's MBA. It secured a bond from him, by which he undertook to work for five years after return within a salary band and he had in fact worked after graduating from the University for about a year before starting his MBA ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 12 of 32 course. In Natco Exports (P.) Ltd. (supra), the student had applied directly when she was pursuing her graduation. There was a seamless transition as it were between the chosen subject of her undergraduate course and that which she chose to pursue abroad. In the present case, the facts are different. Dushyant Poddar was a commerce graduate. The assessee's business is in investments and securities. He wished to pursue an MBA after serving for an year with the company and committed himself to work for a further five years after finishing his MBA. There is nothing on record to suggest that such a transaction is not honest. Furthermore, the observation in Natco Exports (P.) Ltd. (supra) with respect to a policy appears to have been made in the given context of the facts. The Court was considerably swayed by the fact that the Director's daughter pursued higher studies in respect of a course completely unconnected with the business of the assessee. Such is not the case here. Dushyant Poddar not only worked but - as stated earlier - his chosen subject of study would aid and assist the company and is aimed at adding value to its business. 9. Whilst there may be some grain of truth that there might be a tendency in business concerns to claim deductions under Section 37, and foist personal expenditure, such a tendency its concerns to claim unspoken bias against claims for funding higher education abroad of the employees of the concert. As to whether the as this could have similarly assisted another employee unrelated to its management is not a question which this Court has to consider. But that it has chosen to fund the higher education of one of its Director's sons in a field intimately connected with its business is a crucial factor that the Court cannot ignore. It would be unwise for the Court to require all assessees and business concerns to frame a policy with respect to how educational funding of its employees generally and a class thereof, i.e. children of its management or Directors would be done. Nor would it be wise to universalize or rationalize that in the absence of such a policy, funding of employees of one class - unrelated to the management -would qualify for deduction under Section 37(1). We do not see any such intent in the statute which prescribes that only expenditure strictly for business can be considered for deduction. Necessarily, the decision to deduct is to be case-dependent.” 10. In view of the above discussion, having regard to the circumstances of the case, this Court is of the opinion that the expenditure claimed by the assessee to fund the higher education of its employee to the tune of Rs. 23,16,942/- had an intimate and direct connection with its business, i.e. dealing in security and investments. It was, therefore, appropriately deductible under Section 37(1).” ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 13 of 32 5.7 The Ld. AR also relied upon judgment passed by the Hon’ble Karnataka High Court in the case of CIT vs. Ras Information Technologies (P) Ltd. 238 CTR 76 (Kar.), in which held that once the expenses incurred is not a capital expenditure or an expenditure incurred for personal expenses of the assessee or the said expenditure is for which is not an offence or is not prohibited by law and was not spent in adventuring in any souvenir, brochure, tract, pamphlet or like published by a political party, the assessee is entitled to the benefit of deduction u/s 37 of the Act. In other words, the money spent by an assessee either in sponsoring a student or towards educational expenses of a student, in a discipline, in which the assessee is carrying on its business, is a valid expenditure and is entitled to deduction. Relevant para no. 9, as under: “9. In the instant case, the son of the Managing Director is an Engineering Graduate. Assessee is a consulting agency in manufacturing and engineering Industry. They have sponsored the candidature of Sri Arun Srinivasan, to pursue his post-graduation course in engineering. In that regard, they have entered into a written contract. While pursuing the studies, the student has rendered services, which is acknowledged by the assessee. Merely because in the agreement there was a clause that in default of his rendering services, he would return the sponsored money with interest, the genuineness of the agreement cannot be doubted. On the contrary, it only shows that the assessee had taken precaution to see that the interest of the assessee was protected by imposing such a condition on the student. Even otherwise, when the assessee is running an Engineering and Consulting Services, earning profits and. in pursuance of its business or profession, it laid out certain monies for education of a student in the ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 14 of 32 very same field, such an expenditure cannot be held to be unlawful or prohibited by law. Having regard to the quantum of amount spent it cannot also be said that it is a devise to avoid payment of tax or to reduce the tax by such a device of sponsoring a student's studies abroad. In the facts and circumstances of the case, keeping in mind the amount extended towards the educational expenses and the nature of the education and also other attending circumstances, we are satisfied that the amount expended by the assessee is not a devise to avoid payment of tax or reduce payment of tax and this expenditure is a bona fide one in that view of the matter, we do not find any merit in these appeals.” 5.8 On the basis of foregoing discussion and established principle of law, this ground deserves to be allowed in the favour of assessee and addition in question is hereby deleted. Ground no. 2 6. The Ld. AR submitted that the Ld. CIT(A) erroneously confirmed disallowance of Rs. 5,66,812/- on account of write-off of advances for the purpose of lease hold improvements. 6.1 The Ld. AO observed in this regards that only a trading debt will be debt allowable as it should be revenue in nature but the assessee company claiming an amount of Rs. 5,66,812/- as bad debts on payments / advances made towards lease hold improvements and since these payment / advances are in the nature of capital expenditure, can’t be claimed as a revenue expenditure. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 15 of 32 6.2 The Ld. CIT(A) confirmed the observation of the Ld. AO and sustained disallowance as mentioned hereinbefore and stated in para no. 6.1 of the impugned order as under: “6.1…. However, in respect of the impugned amount of Rs. 5,66,812/- the twin conditions of allowability of bad debts written off are not fulfilled. It is further observed that the above amounts has been paid towards capital outlay i.e. renovation of leased premises, the non- recovery of which would, in the facts of the present case, amounts to a capital loss and cannot be allowed as a business or revenue loss. In this context, reliance is place on the decision of the jurisdictional High Court of Delhi in the case of CIL vs. R.G. Scientific Enterprises (P.) Ltd (2008) 311 ITR 401(Delhi). Accordingly, the disallowance of Rs. 5,66,812/- is hereby confirmed.” 6.3 In this regard, the Ld. AR vehemently submitted that the details are well placed at page 5-6 of the PB, of which perusal establishes the amount written off related to advances given in the case of business which became irrecoverable and incidental loss arising from business transaction is allowable on trading loss u/s 28 of the Act. He also referred on similar facts, said issue already been decided in the favour of assessee in assessee / appellant’s case for the AY 2004-05 in ITA No. 5154/Del/2010 dated 24.03.2017 of which relevant paras 38 and 39 reproduced as under: “38. On perusal of order passed by Ld. CIT (A), it is observed that Ld. CIT(A) has deleted addition by observing as under: ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 16 of 32 \"I have carefully considered the submissions made on behalf of the appellant, the findings of the Assessing Officer in the assessment order and the facts and circumstances of the case. The position in law is well. settled as far as the provisions of section 36(1)(vii) read with section 36(2) of the Act is concerned. After 1/4/1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrevocable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee, subject to the provisions of section 36(2) that such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year. As regards the amount of Rs. 64,318/-, 1 agree with the contention of the appellant. However, in respect of the balance amount of Rs. 1,45,205/- the twin conditions of allowability of bad debts written off are not fulfilled. It is further observed that the amounts of Rs. 32,903/- and Rs. 6,396/- have been paid towards capital outley, non recovery of which could in the facts of the present case, amounts to a capital loss and cannot allowed as a business or revenue loss. In this context, reliance is placed on the decision of the jurisdictional High Court of Delhi in the case of CIT u. R.G. Scientific Enterprises (P) Ltd (2008) 311 ITR 401 (Delhi). Accordingly, disallowance of Rs. 1,45,205/- is hereby confirmed. In view of the aforesaid, out of total disallowance of Rs. 2,09,523/-, is directed to be deleted. As a result, the Grounds of Appeal No. 11 & 12 raised by the appellant are accordingly partly allowed.\" 39. Ld. Counsel has also placed his reliance upon circular No. 12/2016 issued by CBDT dated 13.05.2016 which supports view taken by Hon'ble Supreme Court in case of TRF Ltd (supra). Respectfully following same, we are inclined to confirm decision of Ld. CIT(A) and delete this ground of appeal raised by Revenue.” 6.4 In conclusion by following the previous order passed by Co- ordinate Bench in assessee’s own case. This ground deserves to be allowed and in the result addition in question is deleted. Ground no. 2 and 2.1 (ITA No. 3615/Del/2011) Revenue’s appeal Ground no. 1 & 2 (ITA No. 1414/Del/2011) Assessee’s appeal Ground no. 3 (ITA No.- 3197/Del/2011) Assessee’s appeal Ground no. 2 and 2.1 (ITA No. 3408/Del/2011) Revenue’s appeal ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 17 of 32 Ground no. 1, 2 and 3 (ITA No. 3198/Del/2011) Assessee’s appeal 7. As ground no. 3 of the assessee’s appeal and ground no. 2 and 2.1 of Revenue’s appeal as mentioned above, similar issues are involved, which may be disposed of here for the sake of convenience. 7.1 Reiterating the ground raised by the assessee /appellant, the Ld. AR expressed grievances that the Ld. CIT(A) erroneously confirmed the disallowance u/s 14A of the Act without appreciating substantial investments held by the assessee, as if the end of relevant year, were in group concerns/ subsidiary companies which were made to acquire controlling interest or to serve business interest of the appellant. 8. Per contra, in this regard, the Ld. DR contended the restricting action of the Ld. CIT(A) u/s 14A to Rs. 2,55,46,255/- against Rs. 4,43,57,450/- made by the Ld. AO. 9. In this context, the Ld. AO observed that the interest expenses Rs. 11,15,45,405/- are not directly attributable to any particulars income or receipt and that for maintaining such investments and other investment related activities, administrative expenses are ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 18 of 32 attributable to them and the Ld. AO by stating so, disallowed made u/s 14A of the Act, r/w Rule 8 D of Rs. 4,61,62,113/-. The Ld. CIT(A) vide impugned order restricted the proportionable disallowance u/s 14A of the Act upto Rs. 2,55,46,261/-. 10. The Ld. AR relied upon the judgment passed by the Hon’ble Apex Court in the case of CIT vs. Essar Teleholdings Ltd. 401 ITR 445 (SC) in which held that the Rule 8D of the Income Tax Rules, 1962, is prospective in operation and could not have been applied to any AY prior to AY 2008-09, and also further submitted that previously in appeal for AY 2004-05, the Ld. CIT(A) applied the proportionate method which was accepted by the Revenue as no any appeal preferred and in AY 2005-06 as well, the Ld. AO computed disallowance u/s 14A as per the same proportionate method. It is also submitted that thereafter in the AY 2006-07, the Ld. AO computed disallowance u/s 14A applying Rule 8D of the Rules, the Ld. CIT(A) rejected the same and recomputed disallowance applying proportionate method was submitted back to the Ld. AO for re- computation of disallowance with a direction to not to apply Rule 8D and in compliance thereof, the Ld. AO vide order dated 26.10.2018 ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 19 of 32 recomputed the disallowance as per the proportionate method and on the grounds of consistency, the proportionate method should be accepted as the correct method for computation of disallowance u/s 14A of the Act. ITA No. 3198/Del/2011 11. Ld. AR for the assessee submitted that during the relevant previous year, the Appellant company earned dividend income of Rs.3,25,32,763 The Appellant company also incurred administrative expenses of Rs.30,69,65,765 personnel expenses of off Rs.16,52,20,735 and finance charges of Rs.21,63,98,894/-.Further, in the return of income filed for the relevant year, the Appellant made suo motu disallowance of Rs.1,98,89,751 under section 14A of the Income-tax Act, 1961 (\"the Act) read with provisions of Rule 8D of the Income-tax Rules, 1962 (\"the Rules\"). Further, while computing \"the average value of investments\" for the purposes of Rule 8D(2)(ii) and (iii) of the Rules, the Appellant company only considered those investments on which exempt income was received during the relevant previous year The investment-wise details of exempt dividend income received by the Appellant company during the relevant ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 20 of 32 previous year, along with the respective opening and closing balances of investments. Further, he has submitted that In the assessment order, out of the total administrative, finance and personnel expenses, aggregating to Rs.68,85,85,394/- incurred by the Appellant during the previous year, the assessing officer made disallowance of Rs.11,01,91,747/-, under section 14A of the Act read with Rule 8D of the Rules. 11.1 Furthermore, The difference in the computation of the Appellant and the assessing officer arose, inter alia, on account of the fact that while making disallowance under Rule 8D(2)(ii) and (iii) of the Rules, the assessing officer considered all investments as per the balance sheet, in \"the average value of investments\", irrespective of whether dividend income was received on them or not, while on the other hand, the Appellant had considered only those investments on which exempt income had been received, in line with the decisions of the Hon'ble Delhi High Court. Further, the assessing officer included interest expenses incurred towards acquisition of aircraft while computing disallowance under Rule 8D(2)(ii), which ought to have been excluded. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 21 of 32 11.3 Consequent to assessment order being passed, the Appellant filed application dated 25.01.2011 under section 154 of the Act for rectification of mistakes, as sum of Rs.1,98,89,750/- suo motu disallowed by the Appellant under section 14A of the Act read with Rule 8D of the Rules was not taken into cognizance by the AO, leading to double disallowance. The AO allowed the rectification application and recomputed disallowance under Rule 8D at Rs.9,03,01,996/-, after excluding the aforesaid sum of Rs.1,98,89,751/- already disallowed by the Appellant in its return of income. Vide order dated 06.05.2011, the CIT(A) upheld the computation of AO but granted partial relief by excluding interest expenditure of Rs.4,98,33,047/- exclusively incurred by the Appellant on loans, which were specifically availed for acquisition of aircraft on which taxable income was earned and accordingly, restricted the disallowance to Rs.8,95,15,671/-. ITA No.- 1414/Del/2013 Ground no. 1 & 2 13. The Ld. AR submitted that in the relevant previous year, the assessee / appellant company earned dividend income of Rs. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 22 of 32 5,00,62,107/- and in the return of income filed for the previous year, the assessee made suo moto disallowance of Rs. 2,86,49,788/- u/s 14A of the Act on the basis of turnover method, which was consistently adopted in previous year. The Ld. AO enhanced the disallowance u/s 14A of the Act r/w rule 8D of the Income Tax Rules, 1962 to Rs. 17,78,84,314/- which was thereafter restricted to Rs. 14,92,34,526/- looking to the suo moto disallowance of Rs. 2,86,49,788/- by the assessee / appellant company and CIT(A) vide impugned order dated 28.12.2012 upheld the disallowance by stating that facts of case are similar to that for AY 2008-09 wherein similar disallowance was considered and upheld. 14. It is also submitted that disallowance u/s 14A u/s rule 8D should have been computed by taking into account only such investments on which dividend was received in the ‘Average Value of Investment” while invoking Rule 8D (ii) and (iii) and referred the judgement passed by jurisdictional Delhi High Court in PCIT vs. Caraf Builders & Constructions Pvt. Ltd. 414 ITR 122 (Del), in which relevant para 26 as under: “26. There is another error made by the Assessing Officer in computing the disallowance under clauses (ii) of Rule 8D (2) with reference to the ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 23 of 32 formula prescribed. Numerical B in clause (ii) refers to average value of the investment, income from which does not form part or shall not form part of the total income. The Assessing Officer for numerical B in clause (ii) had taken the total value of the investment and not the investment that had yielded exempt income. The Delhi High Court in ITA No. 615/2014, ACB India Ltd. v. Asstt. CIT [2015 62 taxmann.com 71/235 Taxman 22 has held that only average value of the entire investment that does no form part of the total income is the factor which could be covered by the numerical B for computing disallowance under clause (ii) of Rule 8D(2) of the Rules.” 14.1 The Ld. AR further submitted the Revenue assails the above order by way of special leave petition before Hon’ble Supreme Court, which was dismissed. Hon’ble Delhi High Court in the case of Caraf Builders (supra) held that disallowance u/s 14A cannot exceed exempt income of relevant year. 14.2 The Ld. AR also relied upon the judgment passed by the Hon’ble Delhi High Court in ACB India Ltd. vs ACIT (2015) 82 taxman.com 71 (Delhi) in which held that for the purpose of section 14A, instead of taking into account total investment, investment attributable to dividend was required to be adopted and thereafter disallowance to be arrived and in this case, matter was remitted back to work out the tax effect to the Ld. AO who shall do so after giving due notice to party. Relevant para 8 and 9, are reproduced as under: ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 24 of 32 “8. The Assessing Officer, instead of adopting the average value of investment of which income is not part of the total income, 1.e., the value of tax exempt investment, chose to factor in the total investment itself. Even though the Commissioner of Income-tax (Appeals) noticed the exact value of the investment which yielded taxable income he did not correct the error but chose to apply his own equity. Given the record that had to be done so to substitute the figure of Rs. 38,61,09,287 with the figure of Rs. 3,53,26,800 and, thereafter, arrive at the exact disallowance of .05 per cent. 9. In view of the above reasoning, the findings of the Income-tax Appellate Tribunal and the lower authorities are hereby set aside. The appeal is allowed and the matter is remitted to work out the tax effect to the Assessing Officer who shall do so after giving due notice to the party.” 14.3 The Ld. AR also referred judgment of Hon’ble Delhi High Court passed in Cargo Motors (P) Ltd. vs. DCIT (2022) 145 taxmann.com 641 (Delhi) in which held that for the purpose of making disallowance of expenses u/s 14A r/w Rule 8 D, only those investments were to be considered for computing average value of investments which yielded exempt income during relevant year. 14.4 In the case of Joint investment (P) Ltd. vs. CIT (2015) 59 taxmann.com 295 (Delhi), the Hon’ble Delhi High Court held that where assessee declared tax exempt income and voluntarily disallowance certain expenditure u/s 14A, in absence of reason why assessee’s claim for disallowance u/s 14A had to be rejected, the Ld. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 25 of 32 AO was not justified in recomputing disallowance and this case, matter was remitted back to the AO for fresh consideration. Relevant para 9 and 10 are as under: “9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs. 2.97,440 as a disallowance under s. 14A had to be rejected. Taikisha Engg. India Ltd. (supra) says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO-an aspect which is is completely unnoticed by the CIT(A) and the Tribunal. The third, and in the opinion of this Court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90.000, the disallowance ultimately directed works out to nearly 110 per cent of that sum, i.e.. Rs. 52,56,197. By no stretch of imagination can s. 14A or r. 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in s. 14A. and is only to the extent of disallowing expenditure \"incurred by the assessee in relation to the tax exempt income\". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. 10. For the above reasons, the impugned order of the Tribunal is set aside. The question of law is answered in favour of the assessee. Consequently, order of the AO is set aside. The initiation of penalty proceedings also is set aside. The matter is remitted to the AO for fresh consideration in accordance with the above directions. The appeal is partly allowed.” 14.5 Following above submission and in established principle of law, the Ld. AR contended that the disallowance u/s 14A r/w rule 8D is required to be recomputed by taking into account in the “Average Value of investments and submitted and tabulated details of ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 26 of 32 investment on which exempt income aggregating to Rs. 5,00,62,107/- was received during the relevant previous years, as under: S. No. Investment Dividend received Opening balance Closing balance 1. Jubilant Organosys Ltd. 2,74,60,830 14,09,71,276 14,49,58,367 2. Indusind Bank 6,60,060 1,55,25,000 1,55,25,000 3. Geo Enpro Petroleum Ltd. 1,11,80,000 55,89,300 55,89,300 4. Mutual Funds 1,07,61,217 31,70,25,413 1,88,67,304 Total 5,00,62,107 47,91,10,989 18,49,39,971 14.6 It is also submitted that disallowance should have been restricted to amount of dividend income earned during the relevant previous year. 14.7 Fact situation mentioned hereinbefore and by following abovecited binding judicial precedents in order to resolve dispute in proper perspective remitting this issue back in the file of the Ld.AO for the consideration afresh in accordance with the prevailing laws and passed order as per law after providing effective opportunity of being heard to the assessee. ITA No. 3408/Del/2011 Ground no. 3 and 3.1 ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 27 of 32 15. The Ld. Dr submitted that the Ld. CIT(A) erroneously deleted the addition of Rs. 17,263/- made by disallowing the excess depreciation of computer peripherals by ignoring that the depreciation computer peripherals allowed to @ 15% and not @ 60%. Per contra, the Ld. Ar contended that the assessee claimed depreciation computer peripherals @ 60% available in respect of computers, on the ground that UPS constitutes integral part of computer but the Ld. AO erroneously held that the UPS is not integral part of the computer. The Ld. AR relied upon the judgment passed by the Hon’ble Delhi High Court in the case of CIT vs. BSES Rajdhani Power Ltd. (Delhi High Court), in ITA No. 1266/2010, dated 31.08.2010 of which relevant para 4 is reproduced as under: “4. We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60%.” 16. It is pertinent to mention here that thereafter Hon’ble High Court while deciding appeal preferred by Revenue in the case of CIT vs. Birala Soft Ltd. ITA No. 1284/2011, observed that the question ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 28 of 32 raised in the present appeal is whether the computer peripherals like CD writer, Printer, Network, Cable, Switches, Isolators etc. has decided against Revenue and in favour of the assessee in view of the decision in CIT vs. BSES Rajdhani Powever Ltd., ITA No. 1266/2010, Revenue assails above order before Hon’ble Apex Court by way of Special Leave to appeal, which came to be dismissed vide order dated 14.02.2014. On the basis of fact situation, mentioned hereinbefore that UPS is integaral part of computer and so entitled to depreciation @ 60% and we do not see any infirmity in the order of the Ld. CIT(A) on this issued and hence ground rasied by Revenue is liable to be dismissed. Ground no. 4 and 4.1 (ITA No. 3408/Del/2011) Ground no. 4 and 4.1 (ITA No. 3615/Del/2011) 17. Revenue raise this ground by stating that the Ld. |CIT(A) deleted the addition of Rs. 56,29,884/- which was made on account of duty credit scripts but not utilized ignoring the material fact that the duty credit was offered for taxation by the assessee. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 29 of 32 18. The Ld. CIT(A) vide impugned order observed that the duty credit scripts do not came within the ambit of clauses (iiia), (iiib) and (iiic) of section 28 of the Act and nothing has been brought on record by the Ld. AO to show that duty credit scripts have been utilized by the appellant during the year under consideration. 19. The Ld. AR submitted that this issue squarely covered by judgment of Hon’ble Supreme Court in the case of CIT vs. Excel Industries 358 ITR 295 (SC), of which relevant para 28 as follow: “27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic. 28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences under the duty entitlement pass book do not represent the real income of the assessee. Consequently, or there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue.” 20. It has been brought in our notice that the said issue also been decided by Co-ordinate Bench vide order dated 24.03.2017, ITA No. ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 30 of 32 4032/Del/2011, A.Y. 2006-07. Fact situation emerged from above discussion leads us to conclude that ground raised by Revenue is liable to dismissed as no anything contrary brought on record by Revenue to deviate from the observation and findings expressed by the Ld. CIT(A) and hence we inclined to dismiss this ground. 21. In the result, the appeals of the Assessee and Revenue are in ITA No.3197/Del/2011 (Assessee) is allowed, ITA No.-3198/Del/2011(Assessee) is allowed, ITA No.-1414/Del/2013 (Assessee), allowed for statistical purpose, ITA No.- 3408/Del/2011 (Revenue) is dismissed ITA No.- 3615/Del/2011 (Revenue) is dismissed. Order pronounced in the Open Court on 28.02 2025. Sd/- Sd/- (S. RIFAUR RAHMAN) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 28/02/2025 Pooja, Sr. PS ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 31 of 32 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No.-3197/Del/2011 and others Jubilant Enpro Pvt. Ltd. Page 32 of 32 1. Date of dictation of Tribunal order 16.01.25, 27.02.25 2. Date on which the typed draft Tribunal Order is placed before the Dictating Member 16.01.25, 27.02.25 3. Date on which the typed draft Tribunal order is placed before the other Member 4. Date on which the approved draft Tribunal order comes to the Sr. PS/PS 5. Date on which the fair Tribunal order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr.PS/PS 7. Date on which the final Tribunal order is uploaded by the Sr.PS/PS on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal order 9 Date of killing off the disposed of files on the judisis Portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes to the Assistant Registrar for endorsement of the order 12. Date of Dispatch of the order "