Gujarat Gas Company Ltd., Ahmedabad V. The Jt.CIT.,Circle-4, Ahmedabad

ITA 123/AHD/2012

AI Insights

The case involves multiple appeals by Gujarat Gas Company Ltd. against the orders of the Commissioner of Income-tax (Appeals) concerning various disallowances and tax treatments for different assessment years. The primary issues revolved around the disallowance of administrative expenses related to exempt income under Section 14A, the treatment of Dividend Distribution Tax, and the deductibility of education cess. The tribunal examined each issue in light of previous rulings and applicable tax laws, ultimately deciding to partly allow the assessee's appeals and dismiss the Revenue's appeals based on established precedents and the specifics of each assessment year.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135991 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 11-10-2023
• Assessment Year: 2006-2007
• Appeal Filed On: 16-01-2012
• Other Referred Cases: Reliance Utilities and Power Limited, Godrej Boyce Manufacturing Company Ltd. vs. DCIT, Maxopp Investment Ltd. vs. CIT, Abdul Razak & Co vs. CIT, Navnitial C. Jhaveri vs. K.K. Sen, A.A.C. of Income Tax, Ellerman Lines Limited vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIASHOKKUMARSUTHAR; FORTHEASSESSEESUBMITTEDTHATTHEASSESSEE; FORTHEASSESSEEBEFOREUSFAIRLYAGREEDWITH; FORTHEASSESSEE.THEREFORE; THESAMEIS; FORTHEASSESSEEBEFOREUSDID
• Assessee Lawyers: SHRIS.N.SOPARKAR; THESPECIALBENCH
• Keywords: Depreciation

Judgement Text

आयकरअपीलीयअधिकरण,अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’D’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And MsMADHUMITAROY,JUDICIALMEMBER Sr. No. ITANo(s). Asstt. Year Nameof Appellant Nameof Respondent 1-2. ITANo.123- 124/Ahd/2012 2006-07 & 2007-08 GujaratGas CompanyLtd., 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAACG5600M JointCommissioner ofIncome-tax, Circle-4, Ahmedabad. 3-4. ITANos.350- 351/Ahd/2012 2006-07 2007-08 A.C.I.T., Circle-4, Ahmedabad. GujaratGas CompanyLtd., 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAACG5600M 5.ITANo.1414/Ahd/20132008-09 GujaratGas CompanyLtd., 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAACG5600M J.C.I.T, Circle-4, Ahmedabad. 6.ITANo.2458/Ahd/20142009-10 GujaratGas CompanyLtd., 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAACG5600M D.C.I.T.,Circle-4, Ahmedabad. ITANo.123/Ahd/2012andothers A.Y.2006-07 2 7.ITANo.2338/Ahd/20152010-11 GujaratGas CompanyLtd., (Amalgamatedwith GujaratGas Limited) 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAECG8093Q D.C.I.T, Circle-4, Ahmedabad 8.ITANo.3450/Ahd/20152011-12 GujaratGas CompanyLtd., 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAACG5600M D.C.I.T, Circle-2(1)(1), Ahmedabad. 9.ITANo.2005/Ahd/20172012-13 GujaratGas CompanyLtd., (Amalgamatedwith GujaratGas Limited) 2,Shantisadan Society, NearParimal GardenEllisbridge, Ahmedabad. PAN: AAECG8093Q D.C.I.T, GandhinagarCircle, Gandhinagar (Applicant)(Responent) Assesseeby:ShriS.N.Soparkar,Sr.Advocatewith ShriParinShah,A.R Revenueby:ShriAshokKumarSuthar,Sr.D.R सुनवाईकीतारीख/DateofHearing:12/10/2023 घोषणाकीतारीख/DateofPronouncement:31/10/2023 ITANo.123/Ahd/2012andothers A.Y.2006-07 3 आदेश/ORDER PERBENCH: Theabovecaptionedappealshavebeenfiledbytheassesseeandthe Revenueagainsttheseparateordersoftheld.CommissionerofIncome-Tax (Appeals)arisinginthematterofassessmentorderpassedundersection143(3) oftheIncometaxAct1961(inshort,the‘Act’)involvingrespectiveAssessment Years. First,wetakeupITANo.123/Ahd/2012,anappealbytheassesseefor theAY2006-07. 2.Theassesseehasraisedthefollowinggroundsofappeal: Yourappellantbeingaggrievedbytheorderpasseddated30/11/2011us.250ofthe IncomeTaxAct.1961(hereinafterreferredtoasthe"Act")bythelearnedCommissioner ofIncome-tax(Appeals)-VIILAhmedabad(hereinafterreferredtoasthe"CIT(A)") presentsthisappealagainstthesameonthefollowinggroundswhicharewithout prejudicetoeachother.. 1.TheorderpassedbythelearnedCTT(A)iserroneousandcontrarytotheprovisionsof lawandfactsandthereforerequirestobesuitablymodified.Itissubmittedthatitbeso heldnow. 2.ThelearnedCIT(A)erredinlawandonfactsinconfirmingdisallowanceoutof administrativeexpensetotheextentofRs.20,50,655asagainstRs.7,00,000disallowed bytheassesseeu's14AoftheAct.Itissubmittedthatdisallowancemadebytheappellant u's14AofRs.7,00,000isfairandreasonableinthefactsandcircumstanceofthecase andhencenofurtherdisallowanceshouldhavebeenconfirmedbyCIT(A). 3.ThelearnedCIT(A)erredinlawandfactsinconfirmingthedisallowanceofinventory writtenoffofRs40,01,606.Inthefactsofthecase,appellantsubmitsthattheinventory waslyingwithitforpastsomanyyears,whichwaswrittenoffonaccountoftechnical obsolescence&ongroundofcustomersafetyandhenceitshouldbeallowedasdeduction totheappellant.Itissubmittedthatitbesoheldnow. 4.ThelearnedCIT(A)haserredinlawandfactsinconfirmingthedisallowanceof Rs.62,24,370beingtheamountofirrecoverabledepositswrittenoff. 5.ThelearnedCIT(A)haserredinlawinnotrestrictingtheDividendDistributionTaxwith respecttodividendpaidtoBGAsiaPacificPte.Limited(aSingaporebasedcompany holding,65.12%intheappellantcompany)u/s115-0to10%asperArticle10(2)of ITANo.123/Ahd/2012andothers A.Y.2006-07 4 DoubleTaxAvoidanceAgreementbetweenIndia&Singaporeandalsoerredinnot grantingrefundofexcessDDTpaidRs.33,61,358alongwithinterest. Yourappellantpraysforleavetoadd,toalterand/ortoamendalloranyofthegrounds beforethefinalhearingofappeal. 2.1TheassesseevideletterdatedNilhasalsoraisedtheadditionalgroundsof appealwhicharereproducedasunder: TheAppellanthasfiledanappealon17-01-12.Inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 1.DEDUCTIONOFEDUCATIONCESS 1.1.Theappellantsubmitsthat"EducationCess"ofRs.68,17,991/-paidbytheappellant shouldbeallowedasdeductionundersection37oftheIncome-taxAct,1961("theAct'). 1.2.Theappellanthadnotclaimed"EducationCess"(collectivelyreferredtoas'Cess')Rs. 68,17,991/-paidforF.Y.2005-06,inthereturnofincomefiledforA.Y.2006-07. 1.3.ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct. 1.4.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarified thattheeffectoftheomissionoftheword'cess'fromSec.40(a)(ii)oftheActisthatonly taxespaidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5RelyingonCBDTcircularandjudicialprecedents,itissubmittedthatCessis deductibleexpenseundersection37oftheActandhencethesamebeallowedasa deductionincomputationoftaxableincomeforA.Y.2006-07. 2.Theappellantcravesleavetoadd,amend,after,substitute,deleteand/ormodify inanymannerwhatsoeverthisgroundonorbeforethehearingofappeal. 3.ThefirstissueraisedbytheassesseevidegroundNo.2isthattheLd. CIT(A),erredinconfirmingthedisallowanceofadministrativeexpensestothe extentofRs.13,50,655/-undertheprovisionsofsection14Ar.w.rule8Dof Income-taxRules. 4.Thefactsinbriefarethattheassesseeinthepresentcaseisalimited companyandengagedinthebusinessofDistributionofNaturalGasandBottling andMarketingoftheLPG.Theassesseeintheyearunderconsiderationhas shownexemptedincomeofRs.8,20,26,223/-againstwhichtheassesseehas ITANo.123/Ahd/2012andothers A.Y.2006-07 5 madedis-allowanceofRs.7,00,000/-onlybasedontheestimatedtimespentby themanagerialandothersupportingstaffinmanagingtheinvestments.However, theAOwasoftheviewthatthedisallowancewastobemadeaspertheprovision ofsection14Ar.w.Rule8DofIncome-taxRules.Thus,theAOmadedisallowance againstexemptedincomeasdetailedbelow: Sr.No.DetailsAmountinRs. 1.InterestExpenses1,22,76,119.00 2.AdministrativeExpenses80,16,268.00 Total2,02,02,387.00 LessAmt.alreadydisallowed.7,00,000.00 Balancetobeadded.1,95,92,387.00 5.TheAOinviewoftheabovemadethedisallowanceofRs.1,95,92,387/- andaddedtothetotalincomeofassessee. 6.AggrievedassesseepreferredanappealtotheLd.CIT(A)whodeletedthe disallowancerelatingtotheinterestexpenseofRs.1,22,76,119/-onthe reasoningthattherewassufficientinterestfreefundavailablewiththeassessee inmakingtheinvestment.TheLd.CIT(A),insupportofhisdecisionhasreliedon thejudgementofHon’bleBombayHighCourtinthecaseofRelianceUtilitiesand PowerLimitedreportedin133ITR340. 7.TheLd.CIT(A)furtherobservedthattheprovisionofRule8DofIncome- taxRulesarenotapplicableintheyearunderconsideration.However,theLd. CIT(A)foundthathispredecessorintheAY2005-06hasmadethedisallowance @2%ofexemptedincometowardstheadministrativeexpenses.Thus,Ld.CIT(A), wasoftheviewthatthedisallowanceofadministrativeexpenseshouldbemade onreasonablebasis.TheLd.CIT(A)consideringthehigheramountofexempted incomefoundreasonabledisallowanceofRs.20,50,655.00being2.5%of ITANo.123/Ahd/2012andothers A.Y.2006-07 6 exemptedincomeofRs.8,20,26,223/-.Thus,theLd.CIT(A),afteradjustingthe amountalreadydisallowedbytheassesseei.e.Rs.7,00,000/-confirmedthe balanceamountofRs.13,50,655/-undertheprovisionsofsection14AoftheAct. 8.BeingaggrievedbytheorderoftheLd.CIT(A),boththeassesseeand revenueareinappealbeforeus.Theassesseeisinappealagainstthe enhancementofdisallowanceofadministrativeexpensesbyRs.13,50,655/- whereasrevenueisinappealinITAbearingNo.350/Ahd/2012forA.Y2006- 07againstthedeletionoftheadditionmadebytheAOforRs.1,82,41,732/-only. Therelevantgroundofappealoftherevenueisreproducedasunder: TheLd.CIT(A),haserredinlawandonfactsinrestrictingthedisallowanceto 13,50,655/-andtherebydeletingtheadditionofRs.1,82,41,732/-outoftotaladditionof Rs.1,95,92,387/-withoutappreciatingthefactthattheassesseecouldnotestablishthat nootherfundexceptfundsfrominternalaccrualsandaccumulatedprofitshavebeen employedforderivingtaxfreeinvestmentincome. 9.TheLd.ARbeforeuscontendedthattheITATinidenticalfactsand circumstanceshasdecidedtheissueinfavouroftheassesseeinITA No.1950/Ahd/2011andtheCONo.228/Ahd/2011fortheA.Y2005-06.Thus,the ARsubmittedthattherecannotbeanydisallowanceundertheprovisionsof section14AoftheActoverandabovethesuo-mottodisallowancemadebythe assessee. 10.Ontheotherhand,theLd.DRsubmittedthattheassesseehasnot furnishedthebasisofmakingthedisallowanceofRs.7lacs.Therefore,the disallowancehastobemadeaspertheprovisionof14Ar.w.Rule8DofIncome- taxRules. 11.BoththeLd.ARandtheLd.DRbeforeusvehementlysupportedtheorder oftheauthoritiesbelowtotheextentasfavourabletothem. ITANo.123/Ahd/2012andothers A.Y.2006-07 7 12.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuehas beendecidedbytheITATintheowncaseoftheassesseeagainsttherevenue andinfavouroftheassesseeinITANo.1950/Ahd/2011withCONo. 228/Ahd/2011,videorderdated17/05/2016.Therelevantextractoftheorderis reproducedasunder: 24.Wehaveheardtherivalcontentionsandperusedthematerialonrecord.Throughthis groundRevenueisaggrievedbytheorderofld.CIT(A)deletingthedisallowancemadeby theAOonaccountofproportionateinterestandadministrativeexpensesofRs.25,41,310/-. 25.WeobservethatduringtheyearunderappealassesseehasclaimedRs.16,40,000/-as interestpaidduringtheyearandshownexemptincomeofRs.52716647/-.Total investmentsheldbytheassesseeason31.3.2005stoodatRs.167.35crores.Inthereturn ofincomefiled,assesseesuomotomadethedisallowanceofRs.6,00,000/-onanestimate basisconsideringtheexpenditureincurredinrelationtoearningthedividendincomeu/s 14AoftheAct.However,ld.AssessingOfficerwhilefinalizingtheassessmentu/s143(3)of theAct,calculatedthedisallowanceatRs.25,41,310/-butforgottogivecredittothe expendituredisallowedbyassesseeitselfatRs.6lacswhilefilingthereturnofincome. Furtherwhentheassesseewentappealbeforeld.CIT(A),disallowanceundersection14A wasrestrictedtoRs.10,54,333/-afterdeletingproportionatedisallowanceofinterest expenditureatRs.8,84,372/-andsustaineddisallowanceofadministrativeexpensesto Rs.10,54,333/-asagainstRs.16,56,938/-madebyld.AssessingOfficer;ld.CIT(A)further gavecredittoRs.6,00,000/-admittedbyassesseeinitsreturnofincomeandfinally remainingdisallowancesustainedbyld.CIT(A)wasRs.454333/-(1054333–600000).. 26.Wefurtherobservethatissuerelatingtodisallowanceu/s14AoftheActwastakenup beforetheco-ordinatebenchbytheassesseeforAsst.Year2004-05inITA No.4488/Ahd/2007andtheissuewasdecidedinfavourofassesseevideitsorderdated 8.2.2013whereinco-ordinatebenchheldasunder:- “6.Beforeus,ld.A.R.submittedthattheassesseeonitsownhadworkedoutthe disallowanceu/s14AatRs.6lacsonaccountofadministrativeexpensesfor managingtheportfolioetc.Thedisallowancewasworkedoutonthebasisoffair andreasonabledeploymentofman-powerandrelatedoperationalexpenses.He furthersubmittedthatalltheinvestmentswereinthedematformandthe dividendwasalsoelectronicallycreditedtoitsbankaccountandtherefore, assesseewasnotrequiredtoincuranyexpendituretorealizethedividend.Ld.A.R. therefore,submittedthatsinceassesseehasnotincurredanyexpenditurefor earningtaxfreeincome,noad-hocdisallowancebemadeonestimatebasis. 7.Ld.D.R.,ontheotherhand,reliedontheorderofA.O.andsubmittedthat consideringthedividendincomeearnedbytheassesseetheA.O.wasquiteITA No.4488/Ahd/2007reasonableandfairinestimatingthedisallowance.He therefore,submittedthatthedisallowancemadebytheA.O.beupheld. 8.Wehaveheardtherivalsubmissionsandperusedthematerialonrecord.Itis undisputedfactthattheassesseehasearneddividendinexcessofRs.5crores duringtheyear.Itisalsoanundisputedfactthattheassessee,onthebasisofits ownestimatehasworkedoutthedisallowanceofadministrativeexpensesincurred formanagingtheportfoliou/s14A.Itisalsoanadmittedfactthatallthe investmentsoftheassesseeareinDematformanddividendswerecreditedtoits accountelectronically.TheA.O.whiledisallowingtheexpenditurecouldnot ITANo.123/Ahd/2012andothers A.Y.2006-07 8 controvertorfindanyfaultintheworkingofdisallowanceofadministrative expensesmadebytheassessee.TheA.O.hasnotgivenafindingthatthe assesseehasincurredexpenditureinexcesswhichhasbeensuomotudisallowed bytheassesseewhilecomputingitsincome.InthecaseofGodrejBoyce ManufacturingCompanyLtd.vs.DCIT328ITR81(Bom),Hon'bleHighCourthas heldthatRule8Disapplicablefromassessmentyear2008-09andthe disallowanceforearlierperiodshastobedeterminedonreasonablebasis.Since theyearunderappealinthepresentcaseis2002-03andtherefore,inthecase beforeustheprovisionofRule8Darenotapplicableinviewoftheaforesaid decisionofHon'bleBombayHighCourt. 9.InthecaseofMaxoppInvestmentLtd.v.CIT(2012)347ITR272(Delhi) Hon'bleDelhiHighCourthasheldasunder:- "Theexpressing"inrelationto"doesnothaveanyembeddedobject.It simplymeans"inconnectionwith"or"pertainsto".Iftheexpenditurein questionhasarelationorconnectionwithorpertainstoexemptincomeit cannotbeallowedasadeductionevenifitqualifiesunderotherprovisions oftheAct.Theactualexpenditurethatisincontemplationundersection 14A(1)oftheActisthe"actual"expenditureinrelationtoorinconnection withorpertainingtoexemptincome.Thecorollarytothisisthatifno expenditureisincurredinITANo.4488/Ahd/2007relationtotheexempt income,nodisallowancecanbemadeundersection14AoftheAct. Sub-sections(2)and(3)wereinsertedbytheFinanceAct,2006,with effectfromApril1,2007.However,theexpression"suchmethodasmay beprescribed"gotmeaningonlybytheintroductionofrule8Dofthe Income-taxRules,1962. Sub-section(2)ofsection14AoftheActprovidesthemannerinwhichthe AssessingOfficeristodeterminetheamountofexpenditureincurredin relationtoincomewhichdoesnotformpartofthetotalincome.The requirementoftheAssessingOfficerembarkinguponadeterminationof theamountofexpenditureincurredinrelationtoexemptincomewouldbe triggeredonlyiftheAssessingOfficerreturnsafindingthatheisnot satisfiedwiththecorrectnessoftheclaimoftheassesseeinrespectof suchexpenditure.Therefore,theconditionprecedentfortheAssessing Officerenteringuponadeterminationoftheamountoftheexpenditure incurredinrelationtoexemptincomeisthattheAssessingOfficermust recordthatheisnotsatisfiedwiththecorrectnessoftheclaimofthe assesseeinrespectofsuchexpenditure. Sub-section(3)isnothingbutanoffshootofsub-section(2)ofsection 14A.Sub-section(3)appliestocaseswheretheassesseeclaimsthatno expenditurehasbeenincurredinrelationtoincomewhichdoesnotform partofthetotalincomeundertheAct.Inotherwords,sub-section(2) dealswithcaseswheretheassesseespecifiesapositiveamountof expenditureinrelationtoincomewhichdoesnotformpartofthetotal incomeundertheActandsub-section(3)appliestocaseswherethe assesseeassertsthatnoexpenditurehadbeenincurredinrelationto exemptincome.Inbothcases,theAssessingOfficer,ifsatisfiedwiththe correctnessoftheclaimoftheassesseeinrespectofsuchexpenditureor noexpenditure,asthecasemaybe,cannotembarkuponadetermination oftheamountofexpenditureinaccordancewithanyprescribedmethod, asmentionedinsub-section(2)ofsection14AoftheAct.Itisonlyifthe AssessingOfficerisnotsatisfiedwiththecorrectnessoftheclaimofthe assessee,inbothcases,thattheAssessingOfficergetsjurisdictionto determinetheamountofexpenditureincurredinrelationtosuchincome whichdoesnotformpartofthetotalincomeundertheActinaccordance withtheprescribedmethod.Theprescribedmethodisthemethod ITANo.123/Ahd/2012andothers A.Y.2006-07 9 stipulatedinrule8DoftheRules.Whilerejectingtheclaimoftheassessee withregardtotheexpenditure,asthecasemaybe,inrelationtoexempt income,theAssessingOfficerwouldhavetoindicatecogentreasonsfor thesame.Itis,therefore,clearthatdeterminationoftheamountof expenditureinrelationtoexemptincomeunderrule8Dwouldonlycome intoplaywhentheAssessingOfficerrejectstheclaimoftheassesseein thisregard." 10.Consideringthefactsofthepresentcaseinthelightoftheratiolaiddownby theaforesaiddecisionofHon'bleDelhiHighCourt,theA.O.,whilerejectingthe claimofassesseewithregardtodisallowanceu/s14A,hasnotgivenanycogent reasonsforrejectingtheclaimofassessee.SecondlytheoperationofRule8Dis applicableprospectivelyw.e.f.A.Y.2007-08andthirdlytheassesseesuomotuhad madethedisallowanceofadministrativeexpenses,thusconsideringthetotalityof thefactsandrelyingontheaforesaiddecisionofHon'bleHighCourts,weareof theviewthatinthepresentcasetheA.O.wasnotjustifiedinenhancingthe disallowanceu/s14Amadebytheassessee.Wethusupheldthegroundofthe assessee.” 27.Respectfullyfollowingtheabovedecisionoftheco-ordinatebench,weareoftheview thatcalculationofdisallowanceu/s14AasperRule8DoftheITRules,isapplicablew.e.f. Asst.Year2007-08andwearedealingwithappealforAsst.Year2005-06andaccordingly thedecisionoftheco-ordinatebenchsquarelyappliesonthisgroundtakenupbyRevenue andtherefore,inthegivencircumstances,whenthereisnosatisfactionplacedonrecord byAssessingOfficerduringassessmentproceedingsnoranyspecificdefecthasbeen pointedout,disallowancemadebyassesseeatitsownRs.6lacs.shouldhavebeen acceptedbytheAssessingOfficerandnofurtherdisallowancewascalledfor.Accordingly thisgroundofRevenueisdismissed. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 64.Wehaveheardtherivalcontentionsandperusedthematerialonrecord.Weobserve thatwhiledealingwithgroundno.2ofrevenue’sappealwehavealreadydealtthisissuein ITANo.1950/Ahd/2011forasst.year2005-06,anddismissedthegroundandhaveheld thatdisallowanceu/s14AoftheAct,shouldbesustainedatRs.6,00,000/-onlywhichhas beensuomotoacceptedbytheassesseeasdisallowanceu/s14AoftheActwhile furnishingofincometaxreturn.Asthegroundofrevenuehasalreadybeendismissed,the CrossObjectionraisedbytheassesseehasbecomeinfractuousandisdismissed accordingly. 12.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,nomaterial wasplacedonrecordpointingoutanydistinguishingfeatureinthefactsofthe caseofimmediatepreviousAYandtheyearunderconsideration.Thus, respectfullyfollowingtheorderofthetribunalintheowncaseoftheassesseeas discussedabove,wedonotfindanyreasontointerfereinthefindingofthe ITANo.123/Ahd/2012andothers A.Y.2006-07 10 learnedCIT(A).Thus,thegroundofappealraisedbytheRevenueishereby dismissedwhereasthegroundofappealoftheassesseeisallowed. 13.TheSecondissueraisedbytheassesseeingroundNo.3isthattheLd. CIT(A)erredinconfirmingtheorderoftheAObydeletingtheinventorywritten offforRs.40,01,606/-only. 14.Theassesseeintheyearunderconsiderationhaswrittenofftheinventory amountingtoRs.40,01,606/-only.Aspertheassessee,theimpugnedinventory wasnon-movingwhichwasoriginallypurchasedforthepurposeofinstallationin domestic/Industrialconnectionsinthenormalcourseofbusinessactivitywhich werenotutilisedduetotechnicalobsolesceandcustomersafetypurpose. Furthermore,non-movinginventorywasinternallycertifiedbytheengineering department.Theassesseealsoclaimedtohaverecordedthesaleproceedsfrom thenon-movinginventoryasincomeunderheadmiscellaneousincome.Thus,the assesseeclaimthattheinventorywaswrittenoffundernormalcourseofbusiness activityandthereforethesameshouldbeallowedasdeduction.However,theAO dis-agreedwithsubmissionoftheassesseeonthereasoningthattherewasno proofsubmittedbytheassesseetoestablishthatsuchwrittenoffinventoryhad nomarketvalue.Thus,theAOdisallowedthesameandaddedtothetotalincome oftheassessee. 15.AggrievedassesseepreferredanappealbeforetheLd.CIT(A)whoupheld thedisallowancemadebytheAObyobservingthathispredecessorintheearlier AY2005-06,hasconfirmedthedisallowanceoftheassessee’sclaimagainstthe writtenofftheinventory.Thus,theLd.CIT(A),followingtheorderofhis predecessorconfirmedtheorderofAO. 16.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappal beforeus. ITANo.123/Ahd/2012andothers A.Y.2006-07 11 17.TheLd.ARbeforeuscontendedthattheITATintheappealfiledforA.Y. 2005-06inITANo1921/Ahd/2011,videorderdated17/05/2016,hasrestoredthe issuetothefileoftheAOforfreshadjudication.Itwasfurtherpointedoutbythe Ld.ARthattheAOintheset-asideproceedingshasacceptedtheclaimofthe assesseeandallowedthedeductiononaccountofwrittenoffinventory.Thus,the ARprayedbeforeusthattheassesseeshouldbeallowedasdeductiononaccount ofwrittenoffinventories. 18.Ontheotherhand,theLd.DRcontendedthattheITATonearlieroccasion intheowncaseoftheassesseehassetasidetheissuetothefileoftheAOsoas toverifywhethertheassesseehasshownanyincomeagainstthewrittenoff inventory.Thereafter,theAOinthesetasideproceedingaftercarryingoutthe necessaryverificationreachedtotheconclusionthattheassesseedeserve deductionforthewrittenoffinventory.AspertheLd.DR,theissueregarding writtenoffinventoryintheyearunderconsiderationshouldagainset-asidetothe fileoftheAOfornecessaryverification.TheLd.DRvehementlysupportedthe orderoftheauthoritiesbelow. 19.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheissueraisedbythe assesseebeforeusisidenticaltotheissueraisedbytheassesseeintheearlier assessmentyearinITANo.1921/Ahd/2011whereintheITAThasobservedas under: 10.Wehaveheardtherivalcontentionsandperusedthematerialonrecord.Throughthis groundassesseeisaggrievedwiththeorderofld.CIT(A)fordisallowanceofinventory writtenoffofRs.12,80,536/-Weobservethatatpages180to186ofthepaperbook showsapprovalnoteforwriteoffofnon-movingitemsoccurredduetoprojectsurplus items,discontinueduseduetochangeinspecification/abandonedactivities,incomplete assemblies,purchaseofhigherquantityforcontingency,obsoleteduetotechnical upgradationandthetechnical-cum-approvalnoteisdulysignedbyVicePresident,MS, Director-Technical,DirectorFinanceandothermanagementpeople.Wealsoobservethat item-wisedetailswithproperspecificationalongwithyearsincewhichtheseitemsare lyingintheinventory,areplacedbeforeus.However,whenspecificquestionwasraisedto theld.ARthatwhatamountofscrapvaluehasthecompanybeenabletorealizebyselling theseobsoleteandslowmovingstockofRs.12,80,536/-,ld.ARrepliedthatcertainlythese slowmovingitemsshouldhavefetchedsomescrapvaluebutthesamehasbeen ITANo.123/Ahd/2012andothers A.Y.2006-07 12 accountedforinthebooksofaccountinthefollowingyearsasandwhentheyhavebeen sold. 11.Wefurtherobservefromtheordersoflowerauthoritiesthattheonlybasistakenfor processingtheadditionaswellasconfirmingthesamefornotallowingtheclaimof inventorywrittenoffatRs.12,80,536/-resteduponthefactthatnoscrapvaluewas reportedbytheassesseetohavebeenreceivedwhilewritingoffoftheseslowmoving items.Inthesecircumstances,weareoftheviewthatitwillbejustandpropertoset asidethisissuetothefileofAssessingOfficerforverificationtothelimitedextentandthe assesseeshallputbeforehimnecessarydetailswhichcanprovethatsomeprocesshas beenfollowedforsellingsuchscrapitemsandspecificscrapvalueoftheinventorywritten offhasbeenaccountedforasanincomeinthebooksofaccount.Ld.ARagreedtothe sameandnoobjectionwasraisedbytheld.DRtothisfactandaccordingly,wesetaside thisissuetothefileofAssessingOfficerasdiscussedandneedlesstosaythatproper opportunityofbeingheardtotheassesseewouldbegivenbyAssessingOfficer.This groundisallowedforstatisticalpurposes 19.1FromtheabovefindingoftheITAT,wenotethattheassesseewasto furnishcertaindetailsaboutthesaleproceedagainsttheinventorywrittenoffin thebooksofaccounts.However,inthecasebeforeus,theLd.ARhasnot submittedanydetailssuggestingthattheassesseehasreceivedanysalereceipt againstthewrittenoffinventory.Therefore,followingtheorderoftheITAT pertainingtotheearlieryeardiscussedabove,wesetasidetheissuetothefileof theAOforfreshadjudicationaspertheprovisionoflawafterconsideringthe findingsoftheITAToftheearlierorder.Hence,thegroundofappealofthe assesseeisallowedforthestatisticalpurposes. 20.ThenextissueraisedbytheassesseeisthattheLd.CIT(A),erredin confirmingthedisallowanceofRs.62,24,370/-madebytheAOrepresenting writtenoffirrecoverabledeposit. 21.Theassesseeintheyearunderconsiderationsubmittedthatithas depositedcertainamountwiththeGovt.organizationsoastocarryoutpipeline activitiesonMunicipal/Govt.landbutlateronsuchdepositslipsweremisplaced andthereforetheassesseecouldnotclaimtherefundofsuchdeposits.Thus,the assesseehaswrittenoffsuchdepositsasirrecoverableandclaimeddeductionin profitandlossaccounts.However,theAOdisagreedwiththecontentionofthe assesseeonthereasoningthattheassesseehasnotfurnishedthedetailsabout theworkinconnectionwithwhichsuchlargedepositsweremade.Furthermore, ITANo.123/Ahd/2012andothers A.Y.2006-07 13 therewasnodetailfurnishedbytheassesseeabouttheeffortputinbyitforthe recoveryofsuchdeposits.Accordingly,theAOwasoftheviewthattheassessee hasnotdischargedtheonusbyfurnishingthenecessarydetails.Thus,theAO disallowedthesameandaddedtothetotalincomeoftheassessee. 22.AggrievedassesseecarriedthematterbeforetheLd.CIT(A),who confirmedtheadditionmadebytheAObyobservingasunder: 6.3ItistobenotedthatinassessmenttheAOhasobservedthat-’’theassesseehas notgivenfurtherdetailslikewherethelayingworkwasdone,withauthoritiesthedeposits areoutstanding,whateffortshavebeenmadetorecoverthisamount.Alosscanbe consideredasbusinesslosswhenthereisarelativedegreeofcertainlythatthereno chanceofrecovery.Hence,thedepositswrittenoffaredisallowed.”Thesituation regardingthefinerdetailstobesubmittedremainstobethesame.Theassesseehasnot furnishedcompletedetailsandhasnotdischargeditsonustofullywritingoffofthis amount.ThecaseofAbdulRazak&Co136ITR825isnotapplicableinthecaseofthe assesseeasitisrelatedtotheissueofbaddebtsandtheassesseeAbdulhasincurredthe lossesinthenormalcourseoftrading.Inthecaseofappellanttherenolossandithas chosentowriteoffthedepositsinanticipationwithoutassigninganyconcretereason.Itis alsotobenotedthatthedepositswereinthenatureofcapitalassets.Ihavecarefully consideredthesubmissionsplacedonrecordandconsideringthebusinessoftheappellant Iamoftheviewthatsuchincidencesarenotroutineinlossisnotbusinesslossand therefore,IconfirmtheadditionsmadebytheAOandthisgroundoftheappellantisnot allowed. 23.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 24.TheLd.ARbeforeuscontendedthatthedepositsweremadeinthecourse ofthebusiness,whicheventuallybecameirrecoverable.Therefore,thesewere writtenoffinthebooksofaccounts.Accordingly,thesameshouldbeallowedas deductioninviewoftheJudgmentofHon’bleGujaratHighCourtinthecaseof AbdulRazakreportedin136ITR825. 25.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 26.Wehaveheardtherivalcontentionsandperusedthematerialsavailableon record.Therevenuehasnotdoubtedthefactthatthedepositsshownbythe ITANo.123/Ahd/2012andothers A.Y.2006-07 14 assesseeweremadeinthenormalcourseofbusinessoftheassessee.Therefore, thesameshouldbeallowedasdeductionu/s37oftheAct.Wearealsoconscious ofthefactthatthatthedepositscannotbetreatedascapitalinnaturemerelyon thereasoningthatassesseehaswrittenoffsuchdepositinanticipationand withoutassigninganyconcretereason.Itisthedecisionoftheassesseetodecide theaffairsofitsbusinessinthemannerinwhichhedesiresintheinterestofthe business.TheHon’bleGujaratHighCourtinthecaseofAbdulRazakreportedin 136ITR825hasallowedbusinesslossesasdeduction.Therelevantheadnoteof theorderreadsasunder: Section28(i)oftheIncome-taxact,1961[asitstoodattherelevanttime]—Business loss/deduction—Assesses-firmcarriedonbusinessascommissionagentsanddealersin groceryarticles—ClaimedasbaddebtamountofRs.78,824standinginitsbooksasdebit balanceagainstitsprincipalfirm—MPM—Saiddebitbalancehadarisenmainlybecauseof paymentmadebyassesseetothirdpartyatMPM'srequesttoliquidatelatter'sdebttosaid party—Whethertribunaljustifiedinholdingthatimpugnedadvancewasnotmadein ordinarycourseofassessee'sbusinessbutwasmerelyincidentaltoit—Held,onfacts,no— Whethertribunalrightinallowingimpugnedlossasdeductionundersection28(i)—Held, onfacts,yes 26.1Furthermore,wefindthatthereisnoassetcomingintoexistenceoutof suchwritingoffdeposits.Therefore,thesamecannotbetreatedascapitalin nature.Inviewoftheabove,wesetasidethefindingoftheLd.CIT(A)anddirect theAOtodeletetheadditionmadebyhim.Hence,thegroundofappealofthe assesseeisallowed. 27.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredinnot restrictingthedividenddistributiontaxwithrespecttodividendpaidtoSingapore basedcompanywhichwasholding65.12%sharesinassesseecompanytothe extentspecifiedunderDTAA. 28.Attheoutset,theLd.Counselfortheassesseebeforeusfairlyagreedwith theimpugnedissuehasbeendecidedagainsttheassesseebytheSpecialBench ofITATinthecaseofDCITvsTotalOilIndia(P)Ltd.reportedin149 taxmann.com332.Inviewoftheabovewedonotfindanyreasontointerferein ITANo.123/Ahd/2012andothers A.Y.2006-07 15 thefindingoftheauthoritiesbelow.Hence,thegroundofappealoftheassessee isherebydismissed. 29.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowanceof“EducationCess”.Inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 30.Intheresult,theappealoftheassesseeisherebypartlyallowedfor statisticalpurposes. ComingtoITANo.350/Ahd/2012anappealbytheRevenueforA.Y. 2006-07 31.TheonlyissueraisedbytheRevenueisthatthelearnedCIT(A)erredin reducingtheamountsofdisallowancesmadeundersection14AoftheAct. 32.Attheoutset,wenotethattheissueraisedbytherevenuehasbeen adjudicatedalongwithissueraisedbytheassesseeinITANo.123/Ahd/2012 whereinwehavedecidedtheissuevideparagraphNo.12ofthisorderagainstthe Revenue.Hence,thegroundofappealraisedbytherevenueisherebydismissed. 33.Intheresulttheappealoftherevenueisherebydismissed. ComingtoITANo.124/Ahd/2012,anappealbytheassesseeforA.Y. 2007-08 34.Theassesseehasraisedfollowinggroundsofappeal: Yourappellantbeingaggrievedbytheorderpasseddated30/11/2011u/s.250ofthe IncomeTaxAct,1961(hereinafterreferredtoasthe"Act")bythelearnedCommissioner ofIncome-tax(Appeals)-VIII,Ahmedabad(hereinafterreferredtoasthe"CIT(A)") ITANo.123/Ahd/2012andothers A.Y.2006-07 16 presentsthisappealagainstthesameonthefollowinggroundswhicharewithout prejudicetoeachother:. 1.TheorderpassedbythelearnedCIT(A)iserroneousandcontrarytotheprovisionsof lawandfactsandthereforerequirestobesuitablymodified.Itissubmittedthatitbeso heldnow. 2.ThelearnedCIT(A)erredinlawandonfactsinconfirmingdisallowanceoutof administrativeexpensetotheextentofRs.49,96,875asagainstRs.7,00,000disallowedby theassesseeu/s14AoftheAct.Itissubmittedthatdisallowancemadebytheappellant u/s14AofRs.7,00,000isfairandreasonableinthefactsandcircumstanceofthecase andhencenofurtherdisallowanceshouldhavebeenconfirmedbyCIT(A). 3.ThelearnedCIT(A)haserredinlawinnotrestrictingtheDividendDistributionTaxwith respecttodividendpaidtoBGAsiaPacificPte.Limited(aSingaporebasedcompany holding,65.12%intheappellantcompany)u/s115-0to10%asperArticle10(2)of DoubleTaxAvoidanceAgreementbetweenIndia&Singaporeandalsoerredinnot grantingrefundofexcessDDTpaidRs.33,61,358alongwithinterest. Yourappellantpraysforleavetoadd,toalterand/ortoamendalloranyofthegrounds beforethefinalhearingofappeal. 34.1TheassesseevideletterdatedNILhasalsoraisedtheadditionalgroundsof appealwhicharereproducedasunder: TheAppellanthasfiledanappealon17-01-12.Inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 1.DEDUCTIONOFEDUCATIONCESS 1.1.Theappellantsubmitsthat"EducationCess"ofRs.79,37,948/-paidbytheappellant shouldbeallowedasdeductionundersection37oftheIncome-taxAct,1961('theAct'). 1.2.Theappellanthadnotclaimed"EducationCess"(collectivelyreferredtoas'Cess')Rs. 79,37,948/-paidforF.Y.2006-07,inthereturnofincomefiledforA.Y.2007-08. 1.3.ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct. 1.4.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarified thattheeffectoftheomissionoftheword'cess'fromSec.40(a)(ii)oftheActisthatonly taxespaidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5RelyingonCBDTcircularandjudicialprecedents,itissubmittedthatCessis deductibleexpenseundersection37oftheActandhencethesamebeallowedasa deductionincomputationoftaxableincomeforA.Y2007-08. 35.ThefirstissueraisedbytheassesseevidegroundNo.2isthattheLd. CIT(A),erredinconfirmingthedisallowanceofadministrativeexpensestothe ITANo.123/Ahd/2012andothers A.Y.2006-07 17 extentofRs.42,96,875/-undertheprovisionofsection14Ar.w.rule8Dof Income-taxRules. 36.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2007-08isidenticaltotheissueraisedbytheassesseeinITA No.123/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.123/AHD/2012shallalsobeapplicablefortheassessmentyears2007- 08.TheappealoftheassesseefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.12ofthisorderinfavouroftheassessee.ThelearnedARandthe DRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006- 07shallalsobeappliedfortheassessmentyears2007-08.Hence,thegroundof appealfiledbytheassesseeisherebyallowed. 37.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredinnot restrictingthedividenddistributiontaxwithrespecttodividendpaidtoSingapore basedcompanywhichwasholding65.12%sharesinassesseecompany. 38.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2007-08isidenticaltotheissueraisedbytheassesseeinITA No.123/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.123/AHD/2012shallalsobeapplicablefortheassessmentyears2007- 08.TheappealoftheassesseefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.28ofthisorderagainsttheassessee.ThelearnedARandtheDR alsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006-07 shallalsobeappliedfortheassessmentyears2007-08.Hence,thegroundof appealfiledbytheassesseeisherebydismissed. 39.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowancesof“EducationCess”.Inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas ITANo.123/Ahd/2012andothers A.Y.2006-07 18 notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 40.Intheresultappealoftheassesseeisherebypartlyallowed. ComingtoITANo.351/Ahd/2012anappealbytheRevenueforA.Y. 2007-08 41.TheonlyissueraisedbytheRevenueisthatthelearnedCIT(A)erredin reducingtheamountsofdisallowancesmadeundersection14AoftheAct. 42.Attheoutset,wenotethattheissuesraisedbytheRevenueinitsgrounds ofappealfortheAY2007-08isidenticaltotheissueraisedbytheRevenueinITA No.350/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.350/AHD/2012shallalsobeapplicablefortheassessmentyears2007- 08.TheappealoftheRevenuefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.32ofthisorderagainsttheRevenue.ThelearnedARandtheDR alsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006-07 shallalsobeappliedfortheassessmentyears2007-08.Hence,thegroundof appealfiledbytherevenueisherebydismissed. 43.Intheresult,theappealoftherevenueisherebydismissed. ComingtoITANo.2458/Ahd/2014anappealoftheassesseeforA.Y. 2009-10 44.Theassesseehasraisedfollowinggroundsofappeal: ITEMNO.1:DisallowanceofExpensesU/s,14AoftheActRs.1.56.10.209/ 1.1TheLearnedCIT(A)hasgrosslyerredinlawandfactsinpartlyupholdingthedecision ofthelearnedA.O.regardingdisallowanceofexpensesU/s.14AoftheActRs. 1,56,10,209/-. 1.2ThelearnedCIT(A)hasgrosslyerredinstatingthat"theappellanthasnotmadethe disallowanceofexpenditureforthepurposeofsection14Aonanactualbasisbuthas ITANo.123/Ahd/2012andothers A.Y.2006-07 19 madethedisallowanceonanestimatewhichisnotsupportedbyanydocumentary evidenceoractualdatatoshowthedisallowancemadewascorrect.Therefore,inthese circumstancesalsohavingregardtotheaccountsoftheappellant,Iamnotsatisfiedwith thecorrectnessoftheclaimoftheappellantinrespectoftheadministrativeexpenditure". 1.3ThelearnedCIT(A)hasfailedtoappreciatethatappellanthasidentifiedonscientific andsystematicbasisRs.8,14,667astheamountinadmissibleu/s14Ainrespectof expenditureofsalary,wagesandotheradministrativeexpenses(whichincludesstationery expenses,communicationexpensesandotheroverheads)incurredinrelationtoincome whichdoesnotformpartoftotalincome. 1.4ThelearnedCIT(A)hasgrosslyerredinupholdingthedecisionofthelearnedA.O.by applyingRule8DforthepurposeofmakingdisallowanceU/s.14A.ThelearnedCIT(A)has failedtoappreciatethatprovisionsofRule80isonlyapplicablewherethelearnedA.O.is notsatisfiedwiththecorrectnessoftheclaimoftheappellant.ThelearnedCIT(A)has furthererredinnotappreciatingthefactthatthelearnedAO.hasnowhereinthebodyof theassessmentorderhasrecordedhisdissatisfactionregardingtheclaimoftheappellant inrelationtoexpensesincurredbytheappellantforearningexemptincomeandhence Rule80shouldnotbeapplied. 1.5ThelearnedCIT(A)hasfurtherfailedtoappreciatethatappellanthassharecapitaland reserve&surplusofRs.734.69croresatyearendandtotalinvestmentinmutualfund wasRs.357.69Crores.FurthernetincreaseintheinvestmentduringtheyearwasRs. 103.19croresasagainstinternalaccrualsofRs.191.07Crores(Profitaftertax+ depreciation).Thus,learnedCIT(A)hasnotappreciatedthatappellanthadmade investmentsinsecuritiesyieldingtaxfreeincomefromitsownsurplusfundsduringthe yearunderconsiderationanditdidnotborrowanyinterestbearingfundstomake investmentshencetherewerenoexpensesincurredinrelationtotheexemptincomeand inturnnodisallowancecanbemadeinviewofdecisionofHon'bleGujaratHighCourtin thecaseofGujaratPowerCorporationLimitedinTaxappealNo.1587of2009forA.Y. 2002-03. 1.6ThelearnedCIT(A)hasfailedtoappreciatethefindingsoftheHon'bleITAT, Ahmedabadintheappellant'sowncaseforA.Y.04-05whereintheHon'bleITAThas deletedtheaforesaiddisallowance. 1.7TheappellantfurtherrespectfullystatesthattheimpugneddisallowanceU/s.14Aas confirmedbythelearnedCIT(A)beingcontrarytolawmaykindlybedeleted. ITEMNO.II:NotconsideringCorporateSocialResponsibilityExpensesofRs.2,93,775/-as allowableExpensesU/s.37oftheAct 2.1ThelearnedCIT(A)haserredinlawbynotconsideringexpensesofRs.2,93,775/-in respectofcontributionforCorporateSocialResponsibilityasallowableexpensesU/s.37of theAct. 2.2ThelearnedCIT(A)hasfailedtoappreciatethatexpenseswereinthenatureof contributionincurredasapartofcorporatesocialresponsibilityandhenceappellanthas rightlyclaimedthesameasallowableexpensesU/s.37oftheAct. 2.3TheappellanthumblyrequestyourhonorthattheexpensesofRs.2,93,775/-be allowedascorporatesocialresponsibilityexpenses. ITEMNO.11:NonGrantingofrefundofDividendDistributionTaxofRs.95,17,931/- ITANo.123/Ahd/2012andothers A.Y.2006-07 20 3.1ThelearnedCIT(A)hasgrosslyerredinlawbynotallowingtograntrefundofRs. 95,17,931/-inrespectofexcessDividendDistributionTaxpaid. 3.2ThelearnedCIT(A)hasgrosslyerredinstatingthat"Accordingly,itisclearfromthe aboveArticlethattheagreementshallonlybeapplicableinrespectofthe"incometax includinganysurchargethereon.Thedividenddistributiontaxisanadditionalincometax thatischargedbyvirtueoftheprovisionsofsection115-0.Thistaxhasbeendefinedas taxondistributedprofits.Itisnotinthenatureofincometaxwhichmaywarranta differenttreatmentotherthanwhatisdefinedintheAct.Itmaybenotedthatinthe agreementtheword"incometax"hasbeenusedwhichdoesnotincludethedividend distributiontax.Thedefinitionof"tax"giveninthesection2(43)alsodoesnotinclude dividenddistributiontax." 3.3ThelearnedCIT(A)hasgrosslyerredininterpretingthedefinitionof"Tax"asdefined U/s.2(43)oftheActandbyconsideringDividendDistributionTax-DDTasaseparatetax fromIncomeTax.Thedefinitionoftaxisreproducedasunder: [(43)"tax"inrelationtotheassessmentyearcommencingonthe1stdayofApril,1965, andanysubsequentassessmentyearmeansincome-taxchargeableundertheprovisions ofthisAct,andinrelationtoanyotherassessmentyearincome-taxandsuper-tax chargeableundertheprovisionsofthisActpriortotheaforesaiddate(andinrelationto theassessmentyearcommencingonthe1stdayofApril,2006,andanysubsequent assessmentyearincludesthefringebenefittaxpayableundersection115WA):1 3.4ThelearnedCIT(A)hasgrosslyerredinlawbysimplyputtingDDToutofthepurview ofIncomeTaxActatallandnotconsideringthesameasataxchargeableunderthe provisionsofIncomeTaxAct,1961.AccordinglythelearnedCIT(A)hasgrosslyerredin lawbyexcludingDDTfromthedefinitionof"Tax"asdefinedU/s.2(43)oftheAct. 3.5ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatDDTistaxwithinthemeaningofthetermIndianTaxasdefinedinclause1(a)of Article2oftheDTAAbetweenIndia-SingaporeTaxTreaty. 3.6ThelearnedCIT(A)hasgrosslyerredinlawbynotextendingthebenefitofprovisions ofDTAAbetweenIndia-SingaporeTaxTreatytotheAppellant. 3.7ThelearnedA.O.hasfailedtoappreciatethecontentionoftheappellantthatdividend incomeofBGAsiaPacificPte.Ltd.isliabletotaxat10%aspertheprovisionsofArticle10 ofDTAAbetweenIndia-SingaporeTaxTreatyandnotat16.995%aspersection115-0 oftheAct. 3.8ThelearnedA.0.grosslyerredinlawinignoringtheprovisionsofSection90oftheAct, whereinitismentionedthattheprovisionsofthetaxtreatywillprevailovertheprovision oftheAct,unlesstheprovisionsoftheActaremorebeneficialtothepayee.Thesameis alsowellexplainedbyCBDTCircularNo.333date02-04-1982. 3.9ThelearnedCIT(A)hasfailedtoappreciatethatfromthecombinereadingofSection 115-0,Article-10.Section90(2)(includingCBDTCircularNo.333dated2-4-1982)and section2(43)itisunderstoodthatDividenddistributiontaxisnothingbutadditional incometaxchargedontheprofitsdistributedbythecompanyandArticle10ofDTAA specifiesthattaxondividendforresidentcompanypayingthedividendtoberestrictedto 10%.ThelearnedCIT(A)hasfurtherfailedtoappreciatethatSpecificprovisionsofDTAA willprevailovergeneralprovisionsofIncomeTaxActandalsoaspertheprovisionsof90 (2)theprovisionsoftheActwillapplytotheextenttheyaremorebeneficialtothe appellant.Furthersection237entitlesanypersontoclaimrefundoftaxpaidinexcessof ITANo.123/Ahd/2012andothers A.Y.2006-07 21 theamountwithwhichisproperlychargeableundertheIncomeTaxAct,1961.Hence, appellantisentitledtoclaimrefundofexcessdividenddistributiontaxpaid. 3.10TheappellanthumblyrequestsyourhonourthatRefundofExcessDividend DistributionTaxpaidofRs.95,17,931/-maykindlybegrantedalongwithinterest. ITEMNO.IV:LEVYOFINTERESTU/s.234DOFTHEACT: 4.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsinpartlyupholdingthe decisionofthelearnedA.O.tolevyinterestU/s.234DoftheAct. 4.2Theappellantstatesthatlevyofinterestiswhollyunjustifiedandthesamemaykindly bedeleted. 4.3ThattheinterestU/S234Donthefactsandcircumstancesisnotautomaticor consequential. 44.1TheassesseevideletterdatedNILhasalsoraisedtheadditionalgroundsof appealwhicharereproducedasunder: ADDITIONALGROUND TheAppellanthasfiledanappealon05-09-14.Inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 2.DEDUCTIONOFEDUCATIONCESSANDSECONDARYANDHIGHEREDUCATIONCESS 1.1.Theappellantsubmitsthat"Educationcess,includingsecondaryandhighereducation cess"ofRs.1,71,03,721/-paidbytheappellantshouldbeallowedasdeductionunder section37oftheIncome-taxAct,1961(theAct). 1.2Theappellanthadnotclaimed"Educationcess,includingsecondaryandhigher educationcess(collectivelyreferredtoas'Cess")Rs1,71,03,721/-paidforF.Y.2008-09,in thereturnofincomefiledforA.Y.2009-10. 1.3.ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct 1.4.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarified thattheeffectoftheomissionoftheword'cess'fromSec.40(a)(i)oftheActisthatonly taxespaidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5relyingonCBDTcircularandjudicialprecedents,itissubmittedthatCessisdeductible expenseundersection37oftheActandhencethesamebeallowedasadeductionin computationoftaxableincomeforA.Y.2009-10. ITANo.123/Ahd/2012andothers A.Y.2006-07 22 45.ThefirstissueraisedbytheassesseeisthattheLd.CIT(A)erredin confirmingthedisallowancemadebytheAOforRs.1,56,10,209/-underthe provisionsofsection14AoftheAct,r.w.Rule8DofIncomeTaxRules. 46.Theassesseeintheyearunderconsiderationhasshownanexempted incomeamountingtoRs.22,00,18,395/-u/s10(34)oftheAct.Theassessee againstsuchexemptedincomehasmadesuo-mottodisallowanceofRs. 8,14,667/-onlyundertheprovisionsofsection14AoftheActoftheActinrespect oftheexpenditureofsalary,wages,andotheradministrativeexpenses.However, theAOwasnotsatisfiedwiththecontentionoftheassessee.Therefore,theAO invokedtheprovisionsofsection14Ar.w.r.8DofIncomeTaxRulesandmadethe disallowanceasunder: Sr.No.DirectExpensesAmountin(Rs.) 1.DirectExpensesNil 2.InterestExpenses4,18,611.00 3.AdministrativeExpenses1,60,06,265.00 TotalExpenses1,64,24,872.00 46.1Thus,theAOmadethedisallowanceofRs.1,56,10,209.00afterreducing theamountalreadydisallowedbytheassessee. 47.AggrievedassesseepreferredanappealbeforetheLd.CIT(A)who confirmedtheorderoftheAO. 48.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 49.TheLd.ARbeforeussubmittedthattheITATintheowncaseofthe assesseeinITANo.165/Ahd/2021forAY2013-14hassetasidetheissuetothe fileoftheAOforfreshadjudication.Accordingly,theLd.ARprayedthattheissue onhandshouldalsobesetasidetothefileoftheAOforfreshadjudicationasper theprovisionsoflaw. ITANo.123/Ahd/2012andothers A.Y.2006-07 23 50.Ontheotherhand,theLd.DRcouldnotcontroverttheargumentadvanced bytheLd.ARfortheassessee. 51.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuehas beendecidedbytheITATintheowncaseoftheassesseeforA.Y.2013-14inITA No.165/Ahd/2021,videorderdated11-10-2023,whereintheissuehasbeenset asidetothefileoftheAOforfreshadjudication.Therelevantextractoftheorder isreproducedasunder: 20.Wehaveheardtherivalcontentionandperusedthematerialonrecord. 21.Lookingintotheinstantfacts,weobservethatitisnotacasewheretheAssessing OfficerhasnotconsideredthemethodofdisallowanceofRs.11,27,938/-whichwassuo motodisallowedbytheassessee.TheAssessingOfficerhasconsideredthecomputationof disallowancemadebytheassesseeandrejectedthesameonthegroundthatthemethod ofdisallowanceisnotinconsonancewiththemethodprescribedunderRule8Dofthe IncomeTaxRules.Accordingly,lookingintothefactsofthecase,intheinterestofjustice, thematterisbeingrestoredtothefileoftheAssessingOfficerto(a)firstlyanalyze whethertheassesseeishavingsufficientinterestfreefundsatit’sdisposalformakingthe investmentininstrumentsyieldinginterestfreeincomeandincasetheinterestfreefunds availablewiththeassesseeweresufficienttocovertheinvestmentsmadebytheassessee amountingtoRs.20.34crores,thennodisallowanceiscalledforwithrespecttointerest expenses,and(b)withrespecttoadministrativeexpenses,theAssessingOfficermay considertheissueafresh(weareoftheviewtheLd.AOdidmakeaspecificobservation onwhyherejectedthesuomotodisallowancemadebyAOsincesuchdisallowancewas noinaccordancewithRule8D)andtheLd.AOisdirectedtopassappropriateorderin accordancewithlawandmakedisallowanceonlyifthereisanyinfirmityfoundinthesuo motodisallowancemadebytheassessee. 22.Intheresult,GroundNo.1oftheDepartment’sappealisallowedforstatistical purposes. 51.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,nomaterial wasplacedonrecordpointingoutanydistinguishingfeatureinthefactsofthe caseofAY2013-14andtheyearunderconsideration.Thus,respectfullyfollowing theorderofthetribunalintheowncaseoftheassesseeasdiscussedabove,we setasidetheissuetothefileoftheAOforfreshadjudicationaspertheprovision oflawafterconsideringthefindingsoftheITATasdiscussedabove.Hence,the groundofappealoftheassesseeisallowedforthestatisticalpurposes. ITANo.123/Ahd/2012andothers A.Y.2006-07 24 52.ThenextissueraisedbytheassesseeisthattheLd.CIT(A),erredin confirmingthedisallowancefortheexpensesofRs.2,93,775.00representing corporatesocialresponsibility. 53.Attheoutset,theLd.Counselfortheassesseesubmittedthattheassessee hasmadeadditionalclaimduringtheassessmentproceedingsforRs.2,93,775/- onaccountofexpensesincurredbytheassesseeinconnectionwiththecorporate socialresponsibilitybuttheAOwithoutgivinganyfindingsrejectedtheclaimof theassessee.OnappealtheLd.CIT(A),alsorejectedtheclaimoftheassesseeon thereasoningthattheclaimwasnotmadebytheassesseeinthereturnof income.AspertheLd.CIT(A),theassesseeshouldhaverevisedtheincometax returntoclaimthedeductiononaccountofexpensesrepresentingcorporate socialresponsibility. 54.Nevertheless,theLd.ARbeforeusprayedthattheassesseecannotbe deniedthebenefitevenclaimedduringtheassessmentproceedings.TheLd.ARin supportofhiscontentionhasreliedonthejudgementofHon’bleGujaratHigh CourtinthecaseofCITvs.MiteshImpexreportedin270CTR66. 54.1However,itwasprayedbytheLd.ARthatasnoneoftheauthoritybelow hasgivenfindingsonmeritofthecase,thereforeitwasrequestedtosetasidethe issuetothefileoftheAOforfreshadjudication. 55.OnthecontrarytheLd.DRdidnotraiseanyobjectionifthematterisset- asidetothefileoftheAOforfreshadjudicationaspertheprovisionsoflaw. 56.Wehaveheardtherivalcontentionofboththepartiesandperusedthe materialavailableonrecord.Inviewofthefactthattheauthoritybelowhasnot givenanyfindingsonthemeritofthecaseabouttheadditionalclaimmadebythe assessee,weareinclinedtosetasidetheissuetothefileoftheAOforfresh ITANo.123/Ahd/2012andothers A.Y.2006-07 25 adjudicationinthelightoftheprincipleslaiddownbyHon’bleGujaratHighCourt inthecaseofMiteshImpact(supra)andaspertheprovisionoflaw.Hence,the groundofappealoftheassesseeisallowedforthestatisticalpurposes. 57.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin notallowingtherefundoftheexcesspaymentofdividenddistributiontaxforRs. 95,17,931/-only. 58.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2009-10isidenticaltotheissueraisedbytheassesseeinITA No.123/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.123/AHD/2012shallalsobeapplicablefortheassessmentyears2009- 10.TheappealoftheassesseefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.28ofthisorderagainsttheassessee.ThelearnedARandtheDR alsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006-07 shallalsobeappliedfortheassessmentyears2009-10.Hence,thegroundof appealfiledbytheassesseeisherebydismissed. 59.Thenextissueraisedbytheassesseevidegroundno.4&5areeither consequentialorgeneralinnature,notrequiringseparationadjudication.Hence, weherebydismissthesameasinfructuous. 60.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowancesof“EducationCess”,Inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 61.Intheresulttheappealoftheassesseeisherebypartlyallowedfor statisticalpurposes. ITANo.123/Ahd/2012andothers A.Y.2006-07 26 ComingtoITANo.1414/Ahd/2013anappealoftheassesseeforA.Y. 2008-09 62.Theassesseehasraisedfollowinggroundsofappeal: Yourappellantbeingaggrievedbytheorderpasseddated20/03/2013underSection250 oftheIncomeTaxAct,1961(hereinafterreferredtoasthe"Act")bythelearned CommissionerofIncome-tax(Appeals)-VIII,Ahmedabad(hereinafterreferredtoasthe "CIT(A)")presentsthisappealagainstthesameonthefollowinggroundswhichare withoutprejudicetoeachother. 1.TheorderpassedbythelearnedCIT(A)iserroneousandcontrarytotheprovisionsof lawandfactsandthereforerequirestobesuitablymodified.Itissubmittedthatitbeso heldnow. 2.ThelearnedCIT(A)erredinlawandonfactsinconfirmingdisallowanceofexpenseto theextentofRs.97,78,937/-onaccountofproportionateadministrativeexpenditure relatedtoexemptincomecomputedbytheAssessingOfficerasperRule8DasagainstRs. 7,34,326/-disallowedbytheappellantunderSection14AoftheAct.Itissubmittedthat disallowancemadebytheappellantunderSection14AofRs.7,34,326/-isfairand reasonableinthefactsandcircumstanceofthecaseandhencenofurtherdisallowance shouldhavebeenconfirmedbyCIT(A). 2.1.ThelearnedCIT(A)haserredinlawandonfactsinconfirmingapplicationofRule8D, whilemakingdisallowanceunderSection14A,wheretheAssessingOfficer/CIT(A)have notbroughtonrecordanydissatisfactioninrespectoftheappellant'sclaimofexpenditure incurredforearningtaxfreeincome. 2.2.Withoutprejudicetotheabove,yourappellantsubmitsthatinanyevent,theaddition madeisveryexcessiveandthesameshouldberestrictedtoRs.7,34,326/-asdisallowed bytheappellantinitsreturnofincomeandsincethesameisalreadydisallowedinthe computationoftotalincome,nofurtherdisallowancebemade. 3.ThelearnedCIT(A)haserredinlawandfactsinconfirmingthedisallowanceofRs. 21,23,457/-beingtheamountofnonmovinginventorywrittenoffinthebooksofaccounts. Itissubmittedthatitbesoheldnowanddeductionbegrantedforthesamebydeleting thedisallowance,particularlywhennecessaryevidencesrelatingtotheentireprocedure forsuchwriteoffetc.werefiledbeforebothlearnedAssessingOfficer&CIT(A). 4.ThelearnedCIT(A)haserredinlawinnotrestrictingtheDividendDistributionTaxwith respecttodividendpaidtoBGAsiaPacificPte.Limited(aSingaporebasedcompany holding.65.12%intheappellantcompany)underSection1150to10%asperArticle10(2) ofDoubleTaxAvoidanceAgreementbetweenIndia&Singaporeandalsothuserredinnot grantingrefundofexcessDividendDistributionTaxpaidRs.77,74,164/-alongwith interest. Yourappellantpraysforleavetoadd,toalterand/ortoamendalloranyofthegrounds beforethefinalhearingofappeal. ITANo.123/Ahd/2012andothers A.Y.2006-07 27 62.1TheassesseevideletterdatedNILhasalsoraisedtheadditionalgroundsof appealwhicharereproducedasunder: ADDITIONALGROUND TheAppellanthasfiledanappealon13-05-13.Inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 1.DEDUCTIONOFEDUCATIONCESSANDSECONDARYANDHIGHEREDUCATIONCESS 1.1.Theappellantsubmitsthat"Educationcess,includingsecondaryandhighereducation cess"ofRs.2,22,44,730/-paidbytheappellantshouldbeallowedasdeductionunder section37oftheIncome-taxAct,1961('theAct'). 1.2.Theappellanthadnotclaimed"Educationcess,includingsecondaryandhigher educationcess"(collectivelyreferredtoas'Cess')Rs.2,22,44,730/-paidforF.Y.2007-08, inthereturnofincomefiledforA.Y.2008-09. 1.3.ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct. 1.4.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarified thattheeffectoftheomissionoftheword'cess'fromSec.40(a)(ii)oftheActisthatonly taxespaidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5RelyingonCBDTcircularandjudicialprecedents,itissubmittedthatCessis deductibleexpenseundersection37oftheActandhencethesamebeallowedasa deductionincomputationoftaxableincomeforA.Y.2008-09. 63.ThefirstissueraisedbytheassesseeisthattheLd.CIT(A)erredin confirmingthedisallowancemadebytheAOforRs.97,78,937/-underthe provisionsofsection14AoftheAct,r.w.Rule8DofIncomeTaxRules. 64.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2008-09isidenticaltotheissueraisedbytheassesseeinITA No.2458/AHD/2014fortheassessmentyear2009-10.Therefore,thefindings giveninITANo.2458/AHD/2014shallalsobeapplicablefortheassessmentyear 2008-09.TheappealoftheassesseefortheA.Y.2009-10hasbeendecidedbyus videparagraphNo.51whereinwehavesetasidetheissuetofileoftheAO.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2009-10shallalsobeappliedfortheassessmentyears2008-09. ITANo.123/Ahd/2012andothers A.Y.2006-07 28 Hence,thegroundofappealfiledbytheassesseeisherebyallowedforstatistical purposes. 65.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredinnot restrictingthedividenddistributiontaxwithrespecttodividendpaidtoSingapore basedcompanywhichwasholding65.12%sharesinassesseecompany. 66.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2008-09isidenticaltotheissueraisedbytheassesseeinITA No.123/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.123/AHD/2012shallalsobeapplicablefortheassessmentyears2007- 08.TheappealoftheassesseefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.28ofthisorderagainsttheassessee.ThelearnedARandtheDR alsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006-07 shallalsobeappliedfortheassessmentyears2008-09.Hence,thegroundof appealfiledbytheassesseeisherebydismissed. 67.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowancesof“EducationCess”,inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 68.Intheresulttheappealoftheassesseeisherebypartlyallowedfor statisticalpurposes ComingtoITANo.2338/Ahd/2015anappealoftheassesseeforA.Y. 2010-11 69.Theassesseehasraisedfollowinggroundsofappeal: ITANo.123/Ahd/2012andothers A.Y.2006-07 29 ITEMNO.1:DisallowanceofExpensesU/s.14AoftheActRs.1.98.47.435/-(Disallowance asperAssessmentOrderRs2.04,30,845/-LessreliefgrantedbyCIT(A)order Rs.5,83,410/-) 1.1TheLearnedCIT(A)hasgrosslyerredinlawandfactsinpartlyupholdingthedecision ofthelearnedAO.regardingdisallowanceofexpensesU/s14AoftheActRs1,98,47,435/- (DisallowanceasperAssessmentOrderRs.2,04,30,845/-LessreliefgrantedbyCIT(A) orderRs.5,83,410/-). 1.2ThelearnedCIT(A)hasgrosslyerredinstatingthat"theappellanthasnotmadethe disallowanceofexpenditureforthepurposeofsection14Aonanactualbasisbuthas madethedisallowanceonanestimatewhichisnotsupportedbyanydocumentary evidenceoractualdatatoshowthatthedisallowancemadewascorrect.Therefore,in thesecircumstancesalsohavingregardtotheaccountsoftheappellant,Iamnotsatisfied withthecorrectnessoftheclaimoftheappellantinrespectoftheadministrative expenditureinrelationtoincomewhichdoesnotformpartofthetotalincome". 1.3ThelearnedCIT(A)hasfailedtoappreciatethatappellanthasidentifiedonscientific andsystematicbaseRs.9,42,140/-astheamountinadmissibleu/s14Ainrespectof expenditureofsalary,wagesandotheradministrativeexpenses(whichincludesstationery expenses,communicationexpensesandotheroverheads)incurredinrelationtoincome whichdoesnotformpartoftotalincome. 1.4ThelearnedCIT(A)hasgrosslyerredinupholdingthedecisionofthelearnedA.O. byapplyingRule8DforthepurposeofmakingdisallowanceU/s.14A.ThelearnedCIT(A) hasfailedtoappreciatethatprovisionsofRule8DisonlyapplicablewherethelearnedA.O. isnotsatisfiedwiththecorrectnessoftheclaimoftheappellant.ThelearnedCIT(A)has furthererredinnotappreciatingthefactthatthelearnedA.O.hasnowhereinthebodyof theassessmentorderhasrecordedhisdissatisfactionregardingtheclaimoftheappellant inrelationtoexpensesincurredbytheappellantforearningexemptincomeandhence Rule8Dshouldnotbeapplied. 1.5ThelearnedCIT(A)hasfurtherfailedtoappreciatethatappellanthassharecapital andreserve&surplusofRs.817.26croresatyearendandtotalinvestmentinmutualfund wasRs.466.88Crores.FurthernetincreaseintheinvestmentduringtheyearwasRs. 109.19croresasagainstinternalaccrualsofRs.249.47Crores(Profitaftertax+ depreciation).Thus,learnedCIT(A)hasnotappreciatedthatappellanthadmade investmentsinsecuritiesyieldingtaxfreeincomefromitsownsurplusfundsduringthe yearunderconsiderationanditdidnotborrowanyinterestbearingfundstomake investmentshencetherewerenoexpensesincurredinrelationtotheexemptincomeand inturnnodisallowancecanbemadeinviewofdecisionofHon'bleGujaratHighCourtin thecaseofGujaratPowerCorporationLimitedinTaxappealNo.1587of2009forA.Y. 2002-03. 1.6ThelearnedCIT(A)hasfailedtoappreciatethefindingsoftheHon'bleITAT, Ahmedabadintheappellant'sowncaseforA.Y.04-05whereinithaddeletedtheaforesaid. TheappellantfurtherrespectfullystatesthattheimpugneddisallowanceU/s.14A Rs.1.98.47.435/-(DisallowanceasperAssessmentOrderRs2,04,30,845/-Lessrelief grantedbyCIT(A)orderRs.5,83,410/-)asmadebythelearnedCIT(A)beingcontraryto lawmaykindlybedeleted. ITEMNO.II:NonGrantingofrefundofDividendDistributionTaxofRs.95.18.664/- ITANo.123/Ahd/2012andothers A.Y.2006-07 30 2.1ThelearnedCIT(A)hasgrosslyerredinlawbynotallowingtograntrefundofRs. 95,18,664/-inrespectofexcessDividendDistributionTaxpaid. 2.2ThelearnedCIT(A)hasgrosslyerredinstatingthat"Itisfurtherobservedfrom theGroundsofappealfiledbytheappellantthatithadfiledasseparateapplicationunder section154requestingtherefundofdividenddistributiontaxpaidbyit.Since,theissueis notarisingoutoftheorderpossedbytheAOundersection143(3)againstwhichthe presentappealhasbeenfiledbytheappellant,theissuecannotbedecidedinthepresent appeal.Theappellantisadvisedtofileaseparateappealagainsttheorderundersection 154passedbytheAOrejectingtherequest.Atpresentthegroundofappealisdismissed asbeingnon-maintainable." 2.3ThelearnedCIT(A)hasgrosslyerredinnotappreciatingthatbynotconsidering theappellant'srequestmadethroughfilingofapplicationU/s154tograntrefundof dividenddistributiontaxisitselfarejectionofrequestforwhichnoorderundersection 154isrequired.ThelearnedCIT(A)oughttohavedecidedtheissueonmeritofthecase insteadofdismissingthesame. 2.4ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant's contentionthatDividendDistributionTax-DDTistaxwithinthemeaningofthetermIndian Taxasdefinedinclause1(a)ofArticle-2oftheDTAAbetweenIndia-SingaporeTax Treaty. 2.5ThelearnedCIT(A)hasgrosslyerredinlawbynotextendingthebenefitof provisionsofDTAAbetweenIndiaSingaporeTaxTreatytotheAppellant. 2.6ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant's contentionthatdividendincomeofBGAsiaPacificPte.Ltd.isliabletotaxat10%asper theprovisionsofArticle10ofDTAAbetweenIndia-SingaporeTaxTreatyandnotat 16.995%aspersection1150oftheAct. 2.7ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant's contentionthataspertheprovisionsofSection90oftheAct,itismentionedthatthe provisionsofthetaxtreatywillprevailovertheprovisionoftheAct,unlesstheprovisions oftheActaremorebeneficialtothepayee.ThesameisalsowellexplainedbyCBDT CircularNo.333date02-04-1982reproducedin(1982)137ITR(St.)1andbyHon'ble SupremeCourtinthecaseofNavnitialC.JhaveriV.K.K.Sen,A.A.CofIncomeTax(1965) 56ITR198andEllermanLinesLimitedV.CIT(1971)82ITR913. 2.8ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatfromthecombinereadingofSection115-0,Article-10,Section90(2)(including CBDTCircularNo.333dated2-4-1982)andsection2(43)itisunderstoodthatDividend distributiontaxisnothingbutadditionalincometaxchargedontheprofitsdistributedby thecompanyandArticle10ofDTAAspecifiesthattaxondividendforresidentcompany payingthedividendtoberestrictedto10%.ThelearnedCIT(A)hasfurtherfailedto appreciatethatSpecificprovisionsofDTAAwillprevailovergeneralprovisionsofIncome TaxActandalsoaspertheprovisionsof90(2)theprovisionsoftheActwillapplytothe extenttheyaremorebeneficialtotheappellant.Furthersection237entitlesanypersonto claimrefundoftaxpaidinexcessoftheamountwithwhichisproperlychargeableunder theIncomeTaxAct,1961.Hence,appellantisentitledtoclaimrefundofexcessdividend distributiontaxpaid. 2.9TheappellantfurtherrespectfullystatesthattheRefundofExcessDividend DistributionTaxpaidofRs.95,18,664/-maykindlybegrantedalongwithinterest. ITANo.123/Ahd/2012andothers A.Y.2006-07 31 ITEMNO.III:LEVYOFINTERESTU/s.234DOFTHEACT: 3.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsinpartlyupholdingthe decisionofthelearnedA.O.tolevyinterestU/s.234DoftheAct. 3.2Theappellantstatesthatlevyofinterestiswhollyunjustifiedandthesamemaykindly bedeleted. ITEMNO.IV:Initiationofpenaltyproceedingsu/s.271(1)(c)oftheAct 4.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsininitiatingpenalty proceedingsunderSection271(1)(c)oftheAct. 4.2Theappellantstatesthatinitiationofpenaltyproceedingsisclearlycontrarytolawand thesamemaykindlybequashed. V.Theappellantreservesitsrighttoadd,amend,alter,substituteormodifyalloranyof thegroundsstatedhereinaboveasthefactsandcircumstancesofthecasemayjustify. 69.1TheassesseevideletterdatedNILhasalsoraisedtheadditionalgroundof appealwhichisreproducedasunder: ADDITIONALGROUND TheAppellanthasfiledanappealon06-08-15.Inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 1.DEDUCTIONOFEDUCATIONCESSANDSECONDARYANDHIGHEREDUCATIONCESS 1.1.Theappellantsubmitsthateducationcessandsecondaryandhighereducationcessof Rs.2,58,81,260/-paidbytheappellantshouldbeallowedasdeductionundersection37of theIncome-taxAct,1961('theAct'). 1.2.Theappellanthadnotclaimededucationcessandsecondaryandhighereducation cess(collectivelyreferredtoas'Cess')Rs.2,58,81,260/-paidforF.Y.2009-10,inthe returnofincomefiledforA.Y.2010-11. 1.3.ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct. 1.4.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarified thattheeffectoftheomissionoftheword'cess'fromSec.40(a)(ii)oftheActisthatonly taxespaidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5RelyingonCBDTandjudicialprecedent,itissubmittedthatCessisdeductible expenseundersection37oftheActandhencethesamebeallowedasadeductionin computationoftaxableincomeforA.Y.2010-11. ITANo.123/Ahd/2012andothers A.Y.2006-07 32 70.ThefirstissueraisedbytheassesseeisthattheLd.CIT(A)erredin confirmingthedisallowancemadebytheAOforRs.1,98,47,435/-underthe provisionsofsection14AoftheAct,r.w.Rule8DofIncomeTaxRules. 71.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2010-11isidenticaltotheissueraisedbytheassesseeinITA No.2458/AHD/2014fortheassessmentyear2009-10.Therefore,thefindings giveninITANo.2458/AHD/2014shallalsobeapplicablefortheassessmentyears 2010-11.TheappealoftheassesseefortheA.Y.2009-10hasbeendecidedbyus videparagraphNo.51whereinwehavesetasidetheissuetofileoftheAO.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2009-10shallalsobeappliedfortheassessmentyears2010-11. Hence,thegroundofappealfiledbytheassesseeisherebyallowedforstatistical purposes. 72.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredinnot grantingtherefundofexcessdividenddistributiontaxpaidwithrespectto dividendpaidtoSingaporebasedcompanywhichwasholding65.12%sharesin assesseecompany. 73.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2010-11isidenticaltotheissueraisedbytheassesseeinITA No.123/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.123/AHD/2012shallalsobeapplicablefortheassessmentyears2010- 11.TheappealoftheassesseefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.28ofthisorderagainsttheassessee.ThelearnedARandtheDR alsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006-07 shallalsobeappliedfortheassessmentyears2010-11.Hence,thegroundof appealfiledbytheassesseeisherebydismissed. ITANo.123/Ahd/2012andothers A.Y.2006-07 33 74.Thenextissueraisedbytheassesseevidegroundno.3to5areeither consequentialorprematureorgeneralinnature,notrequiringseparate adjudication.Hence,weherebydismissthesameasinfructuous. 75.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowancesof“EducationCess”,inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 76.Intheresulttheappealoftheassesseeispartlyallowedforstatistical purposes ComingtoITANo.3450/Ahd/2015anappealoftheassesseeforA.Y. 2011-12 77.Theassesseehasraisedfollowinggroundsofappeal: ITEMNo.IDisallowanceofExpensesU/s.14Ar.w.r8DoftheActRs.2,57,44,621/- (DisallowanceasperAssessmentOrderRs.2,74,33,009/-lessreliefgrantedbyCIT(A) orderRs.16,88,388/-) 1.1ThelearnedCIT(A)hasgrosslyerredinlawandfactsinpartlyupholdingthedecision ofthelearnedA.OregardingdisallowanceofexpenseU/s.14AoftheActRs.2,57,44,621/- 1.2ThelearnedCIT(A)hasgrosslyerredinstatingthat"theappellanthasnotmadethe disallowanceofexpenditureforthepurposeofsection14Aonanactualbasisbuthas madethedisallowanceonanestimatewhichisnotsupportedbyanydocumentary evidenceoractualdatatoshowthatthedisallowancemadewascorrect.Therefore,in thesecircumstancesalsohavingregardtotheaccountsoftheappellant,Iamnotsatisfied withthecorrectnessoftheclaimoftheappellantinrespectoftheadministrative expenditureinrelationtoincomewhichdoesnotformpartofthetotalincome". 1.3ThelearnedCIT(A)hasfailedtoappreciatethatappellanthasidentifiedonscientific andsystematicbaseRs.10,13,479/-astheamountinadmissibleu/s14Ainrespectof expenditureofsalary,wagesandotheradministrativeexpenses(whichincludesstationery expenses,communicationexpensesandotheroverheads)incurredinrelationtoincome whichdoesnotformpartoftotalincome. 1.4ThelearnedCIT(A)hasgrosslyerredinupholdingthedecisionofthelearnedA.O.by applyingRule8DforthepurposeofmakingdisallowanceU/s.14A.ThelearnedCIT(A)has failedtoappreciatethatprovisionsofRule8DisonlyapplicablewherethelearnedA.O.is notsatisfiedwiththecorrectnessoftheclaimoftheappellant.ThelearnedCIT(A)has furthererredinnotappreciatingthefactthatthelearnedA.O.hasnowhereinthebodyof theassessmentorderhasrecordedhisdissatisfactionregardingtheclaimoftheappellant ITANo.123/Ahd/2012andothers A.Y.2006-07 34 inrelationtoexpensesincurredbytheappellantforearningexemptincomeandhence Rule8Dshouldnotbeapplied. 1.5ThelearnedCIT(A)hasfurtherfailedtoappreciatethatappellanthassharecapitaland reserve&surplusofRs.9,077.92millionatyearendandtotalinvestmentinmutualfund wasRs.5,820.01million.FurthernetincreaseintheinvestmentduringtheyearwasRs. 1,116.12millionasagainstinternalaccrualsofRs.3,234.21million(Profitaftertax+ depreciation).Thus,learnedCIT(A)hasnotappreciatedthatappellanthadmade investmentsinsecuritiesyieldingtaxfreeincomefromitsownsurplusfundsduringthe yearunderconsiderationanditdidnotborrowanyinterestbearingfundstomake investmentshencetherewerenoexpensesincurredinrelationtotheexemptincomeand inturnnodisallowancecanbemadeinviewofdecisionofHon'bleGujaratHighCourtin thecaseofGujaratPowerCorporationLimitedinTaxappealNo.1587of2009forA.Y. 2002-03. 1.6ThelearnedCIT(A)hasfailedtoappreciatethefindingsoftheHon'bleITAT, Ahmedabadintheappellant'sowncaseforA.Y.04-05whereinhon'bleITAThaddeleted theaforesaiddisallowance. 1.7TheappellantfurtherrespectfullystatesthattheimpugneddisallowanceU/s.14A Rs.2,57,44,621/-(DisallowanceasperAssessmentOrderRs.2,74,33,009/-lessrelief grantedbyCIT(A)orderRs.16,88,388/-)asmadebythelearnedCIT(A)beingcontraryto lawmaykindlybedeleted. ITEMNO.II:NonGrantingofrefundofDividendDistributionTaxofRs.4,48,66,407/- 1.1ThelearnedCIT(A)hasgrosslyerredinlawbynotallowingtograntrefundofRs. 4,48,66,470/-inrespectofexcessDividendDistributionTaxpaid. 2.2ThelearnedCIT(A)hasgrosslyerredinstatingthatitisfurtherobservedfromthe Groundsofappealfiledbytheappellantthatithadfiledasseparateapplicationunder section154requestingtherefundofdividenddistributiontaxpaidbyit.Since,theissueis notarisingoutoftheorderpassedbytheAOundersection143/3)againstwhichthe presentappealhasbeenfiledbytheappellant,theissuecannotbedecidedinthepresent appeal.Theappellantisadvisedtofileaseparateappealagainsttheorderundersection 154passedbytheADrejectingtherequest.Atpresentthegroundofappealisdismissed asbeingnon-maintainable." 2.3ThelearnedCIT(A)hasgrosslyerredinnotappreciatingthatbynotconsideringthe appellant'srequestmadethroughfillingofapplicationU/s.154tograntrefundofdividend distributiontaxisitselfarejectionofrequestforwhichnoorderundersection154is required.ThelearnedCIT(A)oughttohavedecidedtheissueonmeritofthecaseinstead ofdismissingthesame. 2.4ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatDividendDistributionTax-DDTistaxwithinthemeaningofthetermIndianTaxas definedinclause1(a)ofArticle-2oftheDTAAbetweenIndia-SingaporeTaxTreaty. 2.5ThelearnedCIT(A)hasgrosslyerredinlawbynotextendingthebenefitofprovisions ofDTAAbetweenIndia-SingaporeTaxTreatytotheAppellant. 2.6ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatdividendincomeofBGAsiaPacificPte.Ltd.isliabletotaxat10%asperthe provisionsofArticle10ofDTAAbetweenIndia-SingaporeTaxTreatyandnotat16.609% aspersection1150oftheAct. ITANo.123/Ahd/2012andothers A.Y.2006-07 35 2.7ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thataspertheprovisionsofSection90oftheAct,itismentionedthattheprovisionsof thetaxtreatywillprevailovertheprovisionoftheAct,unlesstheprovisionsoftheActare morebeneficialtothepayee.ThesameisalsowellexplainedbyCBDTCircularNo.333 date02-04-1982reproducedin(1982)137ITR(St.)1andbyHon'bleSupremeCourtin thecaseofNavnitialC.JhaveriV.K.K.Sen,A.A.CofIncomeTax(1965)56ITR198and EllermanLinesLimitedV.CIT(1971)82ITR913. 2.8ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatfromthecombinereadingofSection115-0,Article-10,Section90(2)(including CBDTCircularNo.333dated2-4-1982)andsection2(43)itisunderstoodthatDividend distributiontaxisnothingbutadditionalincometaxchargedontheprofitsdistributedby thecompanyandArticle10ofDTAAspecifiesthattaxondividendforresidentcompany payingthedividendtoberestrictedto10%.ThelearnedCIT(A)hasfurtherfailedto appreciatethatSpecificprovisionsofDTAAwillprevailovergeneralprovisionsofIncome TaxActandalsoaspertheprovisionsof90(2)theprovisionsoftheActwillapplytothe extenttheyaremorebeneficialtotheappellant.Furthersection237entitlesanypersonto claimrefundoftaxpaidinexcessoftheamountwithwhichisproperlychargeableunder theIncomeTaxAct,1961.Hence,appellantisentitledtoclaimrefundofexcessdividend distributiontaxpaid. 2.9TheappellantfurtherrespectfullystatesthattheRefundofExcessDividend DistributionTaxpaidofRs.4,48,66,407/-maykindlybegrantedalongwithinterest. ITEMNO.III:LEVYOFINTERESTU/s.234COFTHEACT: 3.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsinpartlyupholdingthe decisionofthelearnedA.O.tolevyinterestU/s.234CoftheAct. 3.2Theappellantstatesthatlevyofinterestiswhollyunjustifiedandthesamemaykindly bedeleted. ITEMNO.IV:Initiationofpenaltyproceedingsu/s.271(1)(c)oftheAct 4.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsininitiatingpenalty proceedingsunderSection271(1)(c)oftheAct. 4.2Theappellantstatesthatinitiationofpenaltyproceedingsisclearlycontrarytolawand thesamemaykindlybequashed. V.Theappellantreservesitsrighttoadd,amend,alter,substituteormodifyalloranyof thegroundsstatedhereinaboveasthefactsandcircumstancesofthecasemayjustify. 77.1TheassesseevideletterdatedNILhasalsoraisedtheadditionalgroundsof appealwhicharereproducedasunder: ADDITIONALGROUND TheAppellanthasfiledanappealon10-12-15.Inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 1.DEDUCTIONOFEDUCATIONCESSANDSECONDARYANDHIGHEREDUCATIONCESS ITANo.123/Ahd/2012andothers A.Y.2006-07 36 1.1.Theappellantsubmitsthat"Educationcess,includingsecondaryandhighereducation cess"ofRs.3,36,09,107/-paidbytheappellantshouldbeallowedasdeductionunder section37oftheIncome-taxAct,1961(theAct). 1.2.Theappellanthadnotclaimed"Educationcess,includingsecondaryandhigher educationcess"(collectivelyreferredtoas'Cess')Rs.3,36,09,107/-paidforF.Y.2010-11, inthereturnofincomefiledforA.Y.2011-12. 1.3.ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct. 1.4.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarified thattheeffectoftheomissionoftheword'cess'fromSec.40(a)(ii)oftheActisthatonly taxespaidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5RelyingonCBDTcircularandjudicialprecedents,itissubmittedthatCessisdeducting expenseundersection37oftheActandhencethesamebeallowedasadeductionin computationoftaxableincomeforA.Y2011-12. 78.ThefirstissueraisedbytheassesseeisthattheLd.CIT(A)erredin confirmingthedisallowancemadebytheAOforRs.2,57,44,621/-underthe provisionsofsection14AoftheAct,r.w.Rule8DofIncomeTaxRules. 79.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2011-12isidenticaltotheissueraisedbytheassesseeinITA No.2458/AHD/2014fortheassessmentyear2009-10.Therefore,thefindings giveninITANo.2458/AHD/2014shallalsobeapplicablefortheassessmentyears 2011-12.TheappealoftheassesseefortheA.Y.2009-10hasbeendecidedbyus videparagraphNo.51whereinwehavesetasidetheissuetofileoftheAO.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2009-10shallalsobeappliedfortheassessmentyears2011-12. Hence,thegroundofappealfiledbytheassesseeisherebyallowedforstatistical purposes. 80.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredinnot grantingtherefundofexcessdividenddistributiontaxpaidwithrespectto dividendpaidtoSingaporebasedcompanywhichwasholding65.12%sharesin assesseecompany. ITANo.123/Ahd/2012andothers A.Y.2006-07 37 81.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2011-12isidenticaltotheissueraisedbytheassesseeinITA No.123/AHD/2012fortheassessmentyear2006-07.Therefore,thefindingsgiven inITANo.123/AHD/2012shallalsobeapplicablefortheassessmentyears2011- 12.TheappealoftheassesseefortheA.Y.2006-07hasbeendecidedbyusvide paragraphNo.28ofthisorderagainsttheassessee.ThelearnedARandtheDR alsoagreedthatwhateverwillbethefindingsfortheassessmentyear2006-07 shallalsobeappliedfortheassessmentyears2011-12.Hence,thegroundof appealfiledbytheassesseeisherebydismissed. 82.Thenextissueraisedbytheassesseevidegroundno.3to5areeither consequentialorprematureorgeneralinnature,notrequiringseparate adjudication.Hence,weherebydismissthesameasinfructuous. 83.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowancesof“EducationCess”,inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 84.Intheresulttheappealoftheassesseeispartlyallowedforstatistical purposes ComingtoITANo.2005/Ahd/2017anappealoftheassesseeforA.Y. 2012-13 85.Theassesseehasraisedfollowinggroundsofappeal: ITEMNO.1:DisallowanceofExpensesU/s.14Ar.w.r8DoftheActRs.2,63,39,012/- (DisallowanceasperAssessmentOrderRs.2,73,43,592/-lessalreadydisallowedinthe returnRs.10,04,580/-) 1.1TheLearnedCIT(A)hasgrosslyerredinlawandfactsinpartlyupholdingthedecision ofthelearnedA.O.regardingdisallowanceofexpensesU/s.14AoftheActRs. 2,63,39,012/-. ITANo.123/Ahd/2012andothers A.Y.2006-07 38 1.2ThelearnedCIT(A)hasgrosslyerredinstatingthat"IobservethatAppellanthas madeinvestmentandearneddividendincomewhichisclaimedexempt.Appellanthasnot establishedanynexusbetweenutilizationofinterest-freefundsandsuchinvestment henceargumentofAppellantthatithadnotincurredanyinterestexpensescannotbe acceptedinviewofRule8DbroughttoStatutebyAssessmentYear2008-09.The decisionsrelieduponbyAppellantinsupportofthiscontentionarerelatedtoassessment yearsinwhichRule8DwasnotonStatutehenceratioofthesedecisionsconnotbemade applicableincurrentyear.FurtheritisobservedthatasAppellanthasearnedexempt dividendincome,AOwascorrectinmakingdisallowanceunderSection14A.Itisalso notedthatCIT(A)-4inthecaseoftheappellantforAY2011-12hadrejectedthe contentionsoftheappellantandadditionmadebytheAOhasbeenconfirmed.Thus, disallowanceunderSection14AreadwithRuleSDofRs.2,63,39,012/-isconfirmed.This groundofappealisdismissed."1.3 ThelearnedCIT(A)hasgrosslyerredinnotappreciatingthatprovisionsofRule8Disonly applicablewherethelearnedA.O.isnotsatisfiedwiththecorrectnessoftheclaimofthe appellant.ThelearnedCIT(A)hasfailedtoappreciatethatappellanthasidentifiedon scientificandsystematicbaseRs.10,04,580/-astheamountinadmissibleu/s14Ain respectofexpenditureofsalary,wagesandotheradministrativeexpenses(whichincludes stationeryexpenses,communicationexpensesandotheroverheads)incurredinrelationto incomewhichdoesnotformpartoftotalincome.ThelearnedCIT(A)hasfurthererredin notappreciatingthefactthatthelearnedA.O.hasnowhereinthebodyoftheassessment orderhasrecordedhisdissatisfactionregardingtheclaimoftheappellantinrelationto expensesincurredbytheappellantforearningexemptincomeandhence Rule8Dshouldnotbeapplied.ThelearnedCIT(A)hasnotappreciatedthatappellanthad madeinvestmentsinsecuritiesyieldingtaxfreeincomefromitsownsurplusfundsduring theyearunderconsiderationanditdidnotborrowanyinterestbearingfundstomake investmentshencetherewerenoexpensesincurredinrelationtotheexemptincomeand inturnnodisallowancecanbemade. 1.5ThelearnedCIT(A)hasfailedtoappreciatethefindingsoftheHon'bleITAT, Ahmedabadintheappellant'sowncaseforA.Y.04-05whereinHon'bleITAThasdeleted theaforesaiddisallowance. 1.6ThelearnedCIT(A)hasfailedtoappreciatethefindingsoftheHon'bleITAT, Ahmedabadintheappellant'sowncaseforA.Y.05-06whereinHon'bleITAThasrestricted theamountofdisallowanceatRs.6Lakhsi.e.disallowanceU/s.14Aalreadymadebythe appellantonitsown. 1.7TheappellantfurtherrespectfullystatesthattheimpugneddisallowanceU/s.14ARs. 2,63,39,012/-asmadebythelearnedCIT(A)beingcontrarytolawmaykindlybedeleted. ITEMNO.11:NonGrantingofrefundofDividendDistributionTaxofRs.11,49,95,440/- 2.1ThelearnedCIT(A)hasatpointNo.6statedthat"Thisissuerequirestobeverifiedby theAOathisendandtherefore,theADisherebydirectedtoverifythesameandgrant refundasperlaw".ThelearnedCIT(A)hasgrosslyerredinnotconsideringtheappellant's requesttograntrefundofdividenddistributiontax.ThelearnedCIT(A)oughttohave decidedtheissueonmeritofthecaseinsteadofdirectingthelearnedAOtoverifythe same. ITANo.123/Ahd/2012andothers A.Y.2006-07 39 2.2ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatDividendDistributionTax-DDTistaxwithinthemeaningofthetermIndianTaxas definedinclause1(a)ofArticle-2oftheDTAAbetweenIndia-SingaporeTaxTreaty. 2.3ThelearnedCIT(A)hasgrosslyerredinlawbynotextendingthebenefitofprovisions ofDTAAbetweenIndia-SingaporeTaxTreatytotheAppellant. 2.4ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatdividendincomeofBGAsiaPacificPte.Ltd.isliabletotaxat10%asperthe provisionsofArticle10ofDTAAbetweenIndia-SingaporeTaxTreatyandnotat16.995% U/s.1150oftheAct. 2.5ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thataspertheprovisionsofSection90oftheAct,itismentionedthattheprovisionsof thetaxtreatywillprevailovertheprovisionoftheAct,unlesstheprovisionsoftheActare morebeneficialtothepayee.ThesameisalsowellexplainedbyCBDTCircularNo.333 date02-04-1982. 2.6ThelearnedCIT(A)hasgrosslyerredinlawbynotconsideringAppellant'scontention thatfromthecombinereadingofSection115-0,Article10,Section90(2)(includingCBDT CircularNo.333-dated2-4-1982)andsection2(43)itisunderstoodthatDividend distributiontaxisnothingbutadditionalincometaxchargedontheprofitsdistributedby thecompanyandArticle10ofDTAAspecifiesthattaxondividendforresidentcompany payingthedividendtoberestrictedto10%.ThelearnedCIT(A)hasfurtherfailedto appreciatethatSpecificprovisionsofDTAAwillprevailovergeneralprovisionsofIncome TaxActandalsoaspertheprovisionsof90(2)theprovisionsoftheActwillapplytothe extenttheyaremorebeneficialtotheappellant.Furthersection237entitlesanypersonto claimrefundoftaxpaidinexcessoftheamountwithwhichisproperlychargeableunder theIncomeTaxAct,1961.Hence,appellantisentitledtoclaimrefundofexcessdividend distributiontaxpaid. 2.7TheappellantfurtherrespectfullystatesthattheRefundofExcessDividend DistributionTaxpaidofRs.11,49,95,440/-maykindlybegrantedalongwithinterest. ITEMNO.III:LevyofInterestU/s.234CoftheAct: 3.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsinpartlyupholdingthe decisionofthelearnedAO.tolevyinterestU/s.234CoftheAct. 3.2Theappellantstatesthatlevyofinterestiswhollyunjustifiedandthesamemaykindly bedeleted. ITEMNO.IV:Initiationofpenaltyproceedingsu/s.271(1)(c)oftheAct: 4.1ThelearnedCIT(A)hasgrosslyerredinlawandonfactsininitiatingpenalty proceedingsunderSection271(1)(c)oftheAct. 4.2Theappellantstatesthatinitiationofpenaltyproceedingsisclearlycontrarytolawand thesamemaykindlybequashed. V.Theappellantreservesitsrighttoadd,amend,alter,substituteormodifyalloranyof thegroundsstatedhereinaboveasthefactsandcircumstancesofthecasemayjustify. 85.1TheassesseevideletterdatedNILhasalsoraisedtheadditionalgroundsof appealwhicharereproducedasunder: ITANo.123/Ahd/2012andothers A.Y.2006-07 40 ADDITIONALGROUND TheAppellanthasfiledanappealon06-09-2017,inregardtothecaptionedappeal,the followingadditionalgroundistakenhereunder. 1.DEDUCTIONOFEDUCATIONCESSANDSECONDARYANDHIGHEREDUCATIONCESS 11Theappellantsubmitsthat"Educationcess,includingsecondaryandhighereducation cess"ofRs.2,85,59,416/-paidbytheappellantshouldbeallowedasdeductionunder section37oftheIncome-taxAct,1961(theAct). 1.2.Theappellanthadnotclaimed"Educationcess,includingsecondaryandhigher educationcess"(collectivelyreferredtoas'Cess')Rs.2,85,59,416/-paidforF.Y.2011-12, inthereturnofincomefiledforAY.2012-13. 1.3ItisrespectfullysubmittedthatCessisallowableasadeductionwhilecomputing taxableincome.Thisisbecauseitisdifferentfromandnotformingpartofincome-taxand hencedoesnotfallunderthepurviewofsection40(a)(ii)oftheAct. 14.CBDTvideCircularNo.91/58/66-ITJ(19)dated18-05-1967hasexpresslyclarifiedthat theeffectoftheomissionoftheword'cess'fromSec.40(a)(ii)oftheActisthatonlytaxes paidaretobedisallowedintheassessmentfortheyears1962-63onwards. 1.5RelyingonCBDTcircularandjudicialprecedents,itissubmittedthatCessisdeductible expenseundersection37oftheActandhencethesamebeallowedasadeductionin computationoftaxableincomeforA.Y.2012-13. 86.ThefirstissueraisedbytheassesseeisthattheLd.CIT(A)erredin confirmingthedisallowancemadebytheAOforRs.2,63,39,012/-underthe provisionsofsection14AoftheAct,r.w.Rule8DofIncomeTaxRules. 87.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2012-13isidenticaltotheissueraisedbytheassesseeinITA No.2458/AHD/2014fortheassessmentyear2009-10.Therefore,thefindings giveninITANo.2458/AHD/2014shallalsobeapplicablefortheassessmentyears 2012-13.TheappealoftheassesseefortheA.Y.2009-10hasbeendecidedbyus videparagraphNo.51whereinwehavesetasidetheissuetofileoftheAO.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2009-10shallalsobeappliedfortheassessmentyears2012-13. Hence,thegroundofappealfiledbytheassesseeisherebyallowedforstatistical purposes. ITANo.123/Ahd/2012andothers A.Y.2006-07 41 88.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredinnot grantingtherefundofexcessdividenddistributiontaxpaidwithrespectto dividendpaidtoSingaporebasedcompanywhichwasholding65.12%sharesin assesseecompany. 89.Attheoutset,wenotethatthelearnedARfortheassesseebeforeusdid notpresstheissueraisedinthecaptionedgroundofappeal.Hence,wehereby dismissthesameasnotpressed. 90.Thenextissueraisedbytheassesseevidegroundno.3to5areeither consequentialorprematureorgeneralinnature,notrequiringseparate adjudication.Hence,weherebydismissthesameasinfructuous. 91.Comingtotheissueraisedbytheassesseeintheadditionalgroundof appealvideletterdatedNILregardingtheallowancesof“EducationCess”,inthis regard,wenotethattheadditionalgroundofappealraisedbytheassesseehas notbeenpressedbythelearnedARfortheassessee.Therefore,thesameis dismissedasbeingnotpressed. 92.Intheresult,theappealoftheassesseeispartlyallowedforstatistical purposes 93.Inthecombinedresults,theoutcomeoftheappealsoftheassesseeand Revenueareasfollows: Sr. No. ITANo. Asstt. Year AppealfiledbyResult 1123/Ahd/20122006-07Assessee Partlyallowedfor statisticalpurposes 2350/Ahd/20122006-07DepartmentDismissed 3124/Ahd/20122007-08AssesseePartlyAllowed 4351/Ahd/20122007-08DepartmentDismissed 51414/Ahd/20132008-09Assessee Partlyallowedfor statisticalpurposes ITANo.123/Ahd/2012andothers A.Y.2006-07 42 62458/ahd/20142009-10Assessee Partlyallowedfor statisticalpurposes 72338/Ahd/20152010-11Assessee Partlyallowedfor statisticalpurposes 83450/Ahd/20152011-12Assessee Partlyallowedfor statisticalpurposes 92005/Ahd/20172012-13Assessee Partlyallowedfor statisticalpurposes OrderpronouncedintheCourton31/10/2023atAhmedabad. /-Sd/-Sd/- Sd/-Sd/- (MADHUMITAROY) JUDICIALMEMBER (WASEEMAHMED) ACCOUNTANTMEMBER (TrueCopy) Ahmedabad,Dated31/10/2023 Manish