Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 5297 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
26-01-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2015-2016
Appeal Filed On
21-12-2020
Judgement Text
आयकर अपील य अ धकरण, अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, AHMEDABAD (THROUGH VIRTUAL COURT) BEFORESHRI WASEEM AHMED, ACCOUNTANT MEMBER And MS. MADHUMITA ROY, JUDICIAL MEMBER Sl. No(s) ITA No(s) & C.O. No(s) Asset. Year(s) Appeal(s) by Appellant vs. Respondent Appellant Respondent 1. 1966/Ahd/2018 2015-16 DCIT Circle-1(1)(1), Ahmedabad Astral Poly Technik Ltd. 207/1 Astral House, B/h Rajpath Club, Off. S. G. Highway, Ahmedabad- 380059 PAN No. AABCA2951N 2. 85/Ahd/2020 2015-16 Astral Poly Technik Ltd. 207/1 Astral House, B/h Rajpath Club, Off. S. G. Highway, Ahmedabad-380059 PAN No. AABCA2951N DCIT Circle-1(1)(1), Ahmedabad Revenue by : Shri S. S. Shukla,Sr. DR. Assessee by : Shri Vartik Chokshi, A.R. & Shri Biren Shah, A.R. स ु नवाई क तार ख/ D a t e o f H e a r i n g : 0 3 . 0 1 . 2 0 2 2 घोषणा क तार ख / D a t e o f P r o n o u n c e m e n t : 2 7 . 0 1 . 2 0 2 2 आदेश/O R D E R PER MADHUMITA ROY, JUDICIAL MEMBER: 1. This is an appeal filed by Revenue against the order of CIT(A)-1, Ahmedabad passed u/s 250 of Income-tax Act, 1961 on 24/07/2018 for Assessment Year 2015-16. 2. The Assessee has filed Cross-Objection No. 85/Ahd/ 2020 which is accepted and also being disposed of herein. ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 2 3. Shri S.S. Shukla, Ld. D/R appeared for the Revenue and Shri Vartik Chokshi and Shri Biren Shah, Ld. A/Rs appeared for the Assessee. Both of the Ld. Counsels have submitted Paper-Books as also made strong submissions and rival contentions to support their respective claims. We have heard them at length and considered their submissions. 4. Precisely stated the facts are such that the assessee is a company engaged in the business of manufacturing of CPVC / PVC pipes. The assessee submitted return declaring a total income of Rs. 62,00,63,460/-. The Ld. AO completed assessment at a total income of Rs. 70,37,33,950/- after making various additions. Against the order of AO, the assessee filed appeal to Ld. CIT(A) who allowed part- relief. Against the order of Ld. CIT(A), the Revenue has filed this appeal before us. The assessee has also filed cross-objection. Now the parties are before us. 5. The Grounds in Revenue’s Appeal are altogether different and independent from the Grounds in Assessee’s Cross-Objection. We first deal with the Appeal and thereafter Cross-Objection. Revenue’s Appeal : 6. The Revenue has raised following grounds: “(1) That the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,15,04,044/- made on account of disallowance u/s 14A of the I.T. Act 1961 read with Rule 8D. (2) That the Ld. CIT(A) has erred in not considering the decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. 402 ITR 640. (3) The appellant craves, to leave, to amend and /or to alter any ground or add a new ground which may be necessary.” 7. Ground No. 1– Disallowance of Rs. 2,15,04,044/- u/s 14A r/w Rule 8D : 7.1 In this Ground, the Revenue has claimed that the CIT(A) was not justified to delete the addition of Rs. 2,15,04,044/- made by AO on account of disallowance u/s 14A of the I.T. Act 1961 read with Rule 8D. ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 3 7.2 The Assessee is a company engaged in the business of manufacturing of CPVC / PVC pipes. It filed return of income supported by audited financial statements. The assessee claimed deduction of various expenses as debited in its Profit & Loss A/c for the year ended 31.03.2015 related to the Previous Year 2014- 15, Assessment Year 2015-16 under consideration. During scrutiny proceedings, the Ld. AO found that the assessee has made following investments which were appearing in its Balance-Sheet as on 31.03.2015 and 31.03.2014: Investments Relation to the assessee % Holding Investment as on 31.03.2015 Investment as on 31.03.2014 1 Astral Biochem Private Ltd. Subsidiary 100% 5,00,000 5,00,000 2 Advance Adhesives Limited Subsidiary 85% 4,25,000 4,25,000 3 Seal IT Services Pvt. Ltd. Subsidiary 80% 45,05,2000 Nil 4 Resinova Chemie Ltd. Subsidiary 76% 2,14,64,62,000 Nil 5 Astral Pipes Limited Joint Venture - 10,57,70,000 10,57,70,000 6 Indogreen Plastic Technologies Partnershi p Firm - 1,11,39,000 Nil Total 2,71,47,98,000 10,66,95,000 ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 4 The Ld. AO has thus observed that during the relevant year, the total investment had increased to Rs. 2,71,47,98,000/-from Rs. 10,66,95,000/-. He further observed that these investments generate exempt-income in the form of dividend or share in profit from firm. He further observed that the assessee has claimed deduction of interest, administration cost and other expenses while computing taxable income, yet no disallowance has been made with regard to making and managing such investments which generate exempt-income. Accordingly, the Ld. AO invoked section 14A read with Rule 8D and computed the amount of disallowance at Rs. 2,71,47,98,000/-. 7.3 Before Ld. AO, the assessee filed a reply dated 09.11.2017 in which detailed submissions were made to prove that no disallowance is called for. Broadly the assessee has made following submissions in support of his stand: (i) The investment is sourced from assessee’s own fund i.e. from its reserve and surplus. The assessee had sufficient interest-free reserves available with it. The secured loans had been taken for specific purposes and have been utilized for those purposes only and not utilized for the purpose of making investments. Hence interest expenditure is not incurred for impugned investments. (ii) The investments appearing in above Table at S.No. 1 to 4 were made in the shares of subsidiaries, at S.No. 5 was made in a Joint Venture and at S.No. 6 was made in a partnership firm. These all investments were made principally for strategic objectives of the appellant and not for earning exempt-income. (iii) During the previous year, no dividend was earned from investment in shares. As far as investment in partnership firm is concerned, the assessee got a share in loss amounting to Rs. 15,60,947/-. Thus, there was no exempt- income actually earned during the year from the impugned investments. (iv) Administrative cost and other expenses were incurred for the business of assessee and not for those investments. No disallowance can be made only ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 5 on estimation that some expenditure must have been incurred for the purpose of earning exempt-income. The assessee also placed reliance on following decisions: (i) Hon’ble Gujrat High Court in CIT Vs. Gujrat Power Corporation Ltd. order dated 28/03/2011 (ii) ITAT Ahmedabad in Net Square Solution Pvt. Ltd. Vs. Department of Income-tax – ITA No. 3145 & 3146 / Ahd / 2010 (iii) ITAT Delhi in ITO Vs. Pioneer Radio Training Services (P) Ltd. (v) ITAT Chennai in EIH Associates Hotels Ltd. Vs. DCIT (vi) Hon’ble Madras High Court in CIT Vs. RPG Transmission Ltd. (2014) 48 taxmann.com 57 (vii) Hon’ble Bombay High Court in CIT Vs. Reliance Utilities and Power Ltd. 313 ITR 340 (viii) Hon’ble Gujrat High Court in CIT Vs. UTI Bank Ltd. 32 Taxman.com 370 (2013) (ix) Hon’ble Gujrat High Court in CIT Vs. Suzlon Energy Limited 215 Taxman 272(2013). (x) ITAT Delhi in Wimco Seedlings Vs. DCIT 109 TTJ 462 (xi) ITAT Mumbai in Daga Global Chemicals Pvt. Ltd. Vs. ACIT 7.4 But the Ld. AO was not satisfied and made addition. He relied upon following decisions: (i) Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (ii) Hon’ble Rajasthan High Court in Rajasthan State Warehousing Corp. Ltd. Vs. CIT 242 ITR 450 (iii) Maruti Udhyog Ltd. Vs. Dep. Comm. (Delhi) 92 TTJ 987 ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 6 (iv) Wipro Information Technology Vs. DCIT (Bang) 88 TTJ 378 (v) DCIT vs. Shree Synthetics Ltd. (Indore) 88 TTJ 717 (vi) Harish K. Bhatt Vs. ITO 85 TTJ 872 7.5 Before Ltd. CIT(A), the assessee repeated the same submissions. The Ld. CIT(A) deleted the disallowance. The conclusion arrived at by Ld. CIT(A) is reproduced below: “Considering the fact discussed herein above it is observed that Appellant has not earned any exempt income hence disallowance under Section 14A cannot be made. It is a/so observed that Appellant has sufficient interest-free funds in form of share capital and reserves & surplus, which is in excess of investments made by Appellant The Appellant has also demonstrated that increase in share capital, security premium and profit for the year under consideration is substantially higher than incremental effect in investments made by Appellant. Even on this ground no proportionate interest disallowance under Section 14A can be made in view of binding decision of Hon'ble Gujarat High Court in the case of PCIT v/s Sintex Industries Limited 82 taxmann.com 171, Hon'ble Gujarat High Court in the case of PCIT v/s Galaxy Real Estate Developers Pvt. Ltd., Tax Appeal No. 340 of 2017, dated 13th June, 2017 and PCIT v/s GMM Fauider Limited in Tax Appeal No. 506 of 2017, dated 31st July, 2017, no proportionate interest disallowance under Rule 8D(2)(ii) can be made. Thus, on holistic consideration of entire facts, as Appellant has not earned any exempt income in current year, disallowance under Section 14A made by AO for Rs.2,15,04,044/-is deleted. This ground of appeal is allowed.” 7.6 Now before us, both parties have stressed their original submissions. The Ld. D/R has supported the action of AO and requested that the disallowance ought to be sustained. As against this, the Ld. A/R supported the action of CIT(A) and submitted that the disallowance is totally wrong and the same was perfectly deleted. 7.7 We have given a careful thought to the material available as also the rival contentions and submissions made by both sides. 7.8 Before proceeding further, it would be better to reproduce section 14A and Rule 8D, as it stood at the relevant time: Section 14A: “Expenditure incurred in relation to income not includible in total income. ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 7 14A. (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act:” Rule 8D: “Method for determining amount of expenditure in relation to income not includible in total income. 8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with— (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:— (i) the amount of expenditure directly relating to income which does not form part of total income; and (ii) an amount equal to one per cent of the annual average of the monthly average of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income : ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 8 Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assesseee.” 7.9 It is fairly accepted by both parties that the assessee has not earned any dividend income during the previous year and there was only a share in loss from the partnership firm. Thus both parties have accepted the factum of no exempt income being earned during the year and there is no quarrel on this aspect. Being so, we would straightway proceed to interpret section 14A r/w Rule 8D in order to ascertain whether the disallowance is attracted even when the underlying investment has not yielded any exempt-income during the relevant previous year? 7.10 For this wehave the benefit of a deep analysis given by Hon’ble ITAT, Delhi in DCIT Vs. New Delhi Vs. M/s Raglan Infrastructure Ltd. ITA No. 4720 / Del / 2014 order dated 01/09/2017, wherein the Hon’ble Bench has concluded thus: “14. In the Explanatory Memorandum to the Finance Act 2001, by which Section 14A was inserted with effect from 1st April 1962, it was clarified that "expenses incurred can be allowed only to the extent they are relatable to the earned income of taxable income". The object behind Section 14A was to provide that "no deduction shall be made in respect of any expenditure incurred by the Assessee in relation to income which does not form part of the total income under the Income Tax Act". 15. What is taxable under Section 5 of the Act is the "total income" which is neither notional nor speculative. It has to be 'real income'. The subsequent amendment to Section 14A does not particularly clarify whether the disallowance of the expenditure would apply even where no exempt income is earned in the AY in question from investments made, not in that AY, but earlier AYs. 16. Rule 8D (1) of the Rules is helpful, to some extent, in understanding the above issue. It reads as under: "8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with-- (a) the correctness of the claim of expenditure made by the assessee; or ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 9 (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2)." 17. The words "in relation to income which does not form part of the total income under the Act for such previous year" in the above Rule 8D(1) indicates a correlation between the exempt income earned in the AY and the expenditure incurred to earn it. In other words, the expenditure as claimed by the Assessee has to be in relation to the income earned in 'such previous year'. This implies that if there is no exempt income earned in the AY in question, the question of disallowance of the expenditure incurred to earn exempt income in terms of Section 14A read with Rule 8D would not arise. 18. The CBDT Circular upon which extensive reliance is placed by Mr. Hossain does not refer to Rule 8D (1) of the Rules at all but only refers to the word "includible" occurring in the title to Rule 8D as well as the title to Section 14A. The Circular concludes that it is not necessary that exempt income should necessarily be included in a particular year's income for the disallowance to be triggered. 19. In the considered view of the Court, this will be a truncated reading of Section 14 A and Rule 8D particularly when Rule 8D (1) uses the expression 'such previous year'. Further, it does not account for the concept of 'real income'. It does not note that under Section 5 of the Act, the question of taxation of 'notional income' does not arise. As explained in Commissioner of Income Tax v. Walfort Share and Stock Brokers Pvt. Ltd [2010] 326 ITR 1 (SC), the mandate of Section 14A of the Act is to curb the practice of claiming deduction of expenses incurred in relation to exempt income being taxable income and at the same time avail of the tax incentives by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. Consequently, the Court is not persuaded that in view of the Circular of the CBDT dated 11th May 2014, the decision of this Court in Cheminvest Ltd. (supra) requires reconsideration. 20. In M/s. Redington (India) Ltd. v. The Additional Commissioner of Income Tax, Company Range -V, Chennai (order dated 23rd December, 2016 of the High Court of Madras in TCA No. 520 of 2016), a similar contention of the Revenue was negated. The Court there declined to apply the CBDT Circular by explaining that Section 14A is "clearly relatable to the earning of the actual income and not ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 10 notional income or anticipated income." It was further explained that, "The computation of total income in terms of Rule 8D is by way of a determination involving direct as well as indirect attribution. Thus, accepting the submission of the Revenue would result in the imposition of an artificial method of computation on notional and assumed income. We believe thus would be carrying the artifice too far." We are consciously aware of CBDT Circular No.5 / 2014wherein it has been clarified that the disallowance u/s 14A r/w Rule 8D would be attracted even if there is no exempt-income actually earned during the previous year. But this Circular does not find support from the clear provision of section 5, section 14A and Rule 8D, as categorically concluded in Para No.18 to 20 of M/s Raglan Infrastructure Ltd. (supra). Hence we do not hesitate in concluding that the CBDT Circular cannot help us in arriving at a correct interpretation. 7.11 Hon’ble Jurisdictional High Court of Gujarat in the case of Corrtech Energy Pvt. Ltd., reported in 45 taxman.com 116 on identical disallowance under Section 14A when no dividend income is earned by Assessee, has held as under: “"4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-section(l) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under : “7. We do not find any merit in this, submission. The judgement of this court in Abhishek Industries ltd. (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application”” ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 11 7.12 This Hon’ble Bench of in case of Shah Alloys Ltd. [2315/Ahd/2010], dated 27/03/2015 following the decision of Corrtech Energy Pvt. Ltd. held as under: “"The Authorized Representative of the assessee has relied on the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Corrtech Energy (P) Ltd, reported in (2014) 272 CTR 262 (Guj.)(HC), wherein It has been held that where the assessee has not made any claim for exemption of any income from payment of tax, no disallowance could be made u/s 14A of the Act. The Departmental Representative has not disputed the submission of the assessee that during the assessment years under consideration the assessee has not claimed any income as exempt from tax in its Return of Income filed. Therefore, respectfully following the decision of Hon'ble Gujarat High Court in the case of Corrtech Energy (P) Ltd (supra), we delete the disallowance of expenditure made u/s 14A read with Rule 8D of Rs. 1,60,45,775/- in the Assessment Year 2007-08 and Rs. 2,04,30,869/- in the Assessment Year 2008-09. Thus, this ground of appeal of the assessee is allowed in both the years under appeal” 7.13 From above, it is very much clear that section 14A / Rule 8D is not applicable at all if there is no exempt-income earned during the previous year. Reverting back to the facts of the assessee, the parties have openly accepted that there was no exempt-income earned during the year from the underlying investments. Being so, in view of above analysis of legal provisions, we observe that the Ld. CIT(A) has committed no error in deleting the disallowance of Rs. 2,15,04,044/- made by Ld. AO u/s 14A read with Rule 8D. Therefore we dismiss the Ground No. 1 of Revenue. 8. Ground No.2 : 8.1 In this Ground, the Revenue has claimed that the Ld. CIT(A) has erred in not considering the decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. 402 ITR 640. 8.2 It may be noted that in Maxopp Investment (Supra), the Hon’ble Supreme Court has decided only one specific issue, of course which goes in favour of revenue and against the assessee. The Hon’ble Court had turned down the argument that section 14A and Rule 8D are not applicable where the investment in shares is made as a part of strategic objective. Even in the present matter, the Ld. CIT(A) has also considered this point on Page 48 of his order as under: ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 12 “On careful consideration of entire facts, it is observed that Appellant has emphatically argued that major investments are made in subsidiary companies / partnership firm hence no disallowance under section 14 should be made. However, this argument of Appellant cannot be accepted in view of decision of Hon’ble Supreme Court in the case of Maxopp Investments Limited Vs. CIT 91 taxmann.com 154 wherein it was held that dominant purpose for which investment into shares is made by Assessee is not relevant for the applicability of section 14A of the Act.” 8.3 Hence the Revenue is wrong in Ground No. 2 to urge that the Ld. CIT(A) has not considered the decision in Maxopp Investment (Supra). Therefore, this Ground No. 2 of the Revenue is dismissed. 8.4 As a matter of abundant caution, we may mention here that the Ld. CIT(A) has deleted the disallowance of Rs. 2,15,04,044/- and we have also agreed with this decision of Ld. CIT(A) while deciding Ground No. 1, not on the ground of dominant purpose of investment, but on the basis of the fact that there was no exempt-income earned during the previous year. 9. Ground No.3: This Ground is general and does not require any specific adjudication. Assessee’s Cross-Objection : 10. The Assessee has raised following grounds of cross-objection: “1. In law and in the facts and circumstances of the Respondent’s case, the learned Assessing Officer has grossly erred not allowing additional claim of deduction u/s 32AC of Rs. 40,30,472/-. The Ld. CIT(A) has erred in not allowing the claim of deduction u/s 32AC. 2. On the facts and in the circumstances of the Respondent’s case, in view of the decision of Rajasthan High Court in the case of Chambal Fertilizers and Chemicals wherein it was held that Cess is not disallowable u/s 40(a)(ii), the respondent would like to make a claim of cess on income taxes paid and DDT paid u/s 40(a)(iii) amounting to Rs. 63,48,052/-. 3. The respondent craves leave to add, alter, amend and / or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 13 11. Ground No.1 – Additional claim of deduction u/s 32AC - Rs. 40,30,472/: 11.1 In this Ground, the assessee claims that the Ld. AO / CIT(A) were not justified in not giving additional claim of deduction u/s 32AC of Rs. 40,30,472/-. 11.2 The assessee is a manufacturing company and entitled to deduction u/s 32AC @ 15% of qualifying assets. While filing Return of Income, the assessee claimed deduction of Rs. 4,15,17,787/- and the same had been allowed by the Ld. AO. As far as entitlement of deduction u/s 32AC is concerned, there is no doubt or dispute. The only issue is that the assessee claimed deduction of Rs. 4,15,17,787/- though the actual entitlement is stated to be Rs. 4,55,48,259/-. Thus, there was a short claim by Rs. 40,30,472/- despite there being entitlement. While the assessment-proceeding was going on, the assessee filed a letter to the Ld. AO requesting him to allow the remaining claim of Rs. 40,30,472/- while finalizing assessment-order. Alongwith that letter, the assessee also submitted complete details of assets eligible for deduction. However, the Ld. AO did not allow this request with an observation that a new claim is possible only through a return and not through a letter in view of decision of Hon’ble Supreme Court in Goetze (India) Ltd. Vs. CIT (TS-21-SC-2006-O). The Ld. CIT(A) agreed with the stand taken by Ld. AO. 11.3 In this regard, we consider following submission of the assessee: (i) The assessee has already claimed deduction u/s 32AC amounting to Rs. 4,15,17,787/- in the Return of Income. But the correct entitlement was Rs. 4,55,48,259/-. The claim of Rs. 40,30,472/- is merely a differential claim based on correct amount for which the assessee is eligible. This differential claim is not a new claim as perceived by Ld. AO / CIT(A). Had the assessee not claimed deduction u/s 32AC at all in the Return and made a fresh claim before the Ld. AO, it would certainly have been a new claim. But it is not so in present case. ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 14 (ii) It is well-settled that assessment proceeding is a pious proceeding to be conducted by AO. The CBDT has also clarified in Circular No. 14 (XL-35) dated 11.04.1955 as under: “"Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should (a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs."” (iii) Even otherwise it is judicially held that Goetze India (Supra) prohibits a new claim before the AO but it does not prevent the judicial authorities from admitting such claim. 11.4 We also observe that the deduction u/s 32AC is a statutory deduction. Further the purpose of deduction is to incentivize the establishment of new manufacturing industry. Hence it would be better to construe the provision in a holistic manner. 11.5 In view of above we accept this claim of assessee. However, since the details of qualifying assets are required to be verified, we send the matter back to the file of Ld. AO. The Ld. AO shall give an opportunity to the assessee, verify the details of qualifying assets and allow deduction. Therefore, this ground of assessee is allowed for statistical purposes. 12. Ground No.2 : 12.1 In this Ground, the assessee has claims deduction of the Cess on income- taxes paid and DDT paid amounting to Rs. 63,48,052/-. ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 15 12.2 It is noteworthy that this is a new claim by assessee. The claim has been made before us for the first time and not before AO. The assessee argues that the claim is based on judicial developments whereby it has been held that Cess is not disallowable u/s 40(a)(ii)/(iii) and therefore the same ought to be deducted in computing taxable income. 12.3 As stated earlier, a new legal claim can be entertained by judicial authorities and the decision of Goetze (India) Ltd. (supra) does not come in the way. It is for this reason that we admit this claim of assessee. However, since the details of claim is required to be verified, we send the matter back to the file of Ld. AO. The Ld. AO shall verify the claim having regard to the judicial developments to be placed by assessee before him and take an appropriate conclusion. Therefore, this ground of assessee is allowed for statistical purposes. 13. Ground No.3 : This Ground is general and does not require any specific adjudication. 14. In the result, we do not find any merit in the appeal of Revenue. Hence the Revenue’s appeal is dismissed. The cross-objection of assessee has merit as discussed above and therefore allowed for statistical purpose. This Order pronounced in Open Court on 27/01/2022 Sd/- Sd/- (WASEEM AHMED) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 27/01/2022 TANMAY TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. #यथ" / The Respondent. 3. संबं धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड- फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad ITA No. 1966/Ahd/2018 & C.O. No. 85/Ahd/2020 A.Y. 2015-16 16 1. Date of dictation 07.01.2022(The draft sent to me by mail) 2. Date on which the typed draft is placed before the Dictating Member 07.01.2022 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 27 .01.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement 27 .01.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S 27 .01.2022 7. Date on which the file goes to the Bench Clerk 27.01.2022 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Dispatch of the Order..........................................
