Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 8401 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 6 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-08-2021
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2014-2015
Appeal Filed On
28-01-2019
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , . , % BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.205/CHNY/2019 ( / ASSESSMENT YEAR: 2014-15) M/S. NORTHERN ARC CAPITAL LTD. [FORMERLY KNOWN AS IFMR CAPITAL FINANCE PVT.LTD.] 10 TH FLOOR, PHASE-I. IIT MADRAS RESEARCH PARK, KANAGAM VILLAGE, TARAMANI, CHENNAI-600 113. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-4(2) CHENNAI. PAN: AACCI 0979B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.P.CHIDAMBARAM, C.A /RESPONDENT BY : MR. SURESH PERIASAMY,JCIT /DATE OF HEARING : 02.08.2021 /DATE OF PRONOUNCEMENT : 18.08.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LEARNED CIT(A)-6, CHENNAI DATED 31.10.2018 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF NON-BANKING FINANCE COMP ANY, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-1 5 ON 26.11.2014 DECLARING TOTAL INCOME OF RS.6,95,10,790 /-. THE ASSESSMENT HAS BEEN COMPLETED U/S.143(3) OF THE ACT , ON 26.12.2016 AND DETERMINED TOTAL INCOME AT RS.19,64, 17,350/- 2 ITA NO. 205/CHNY/2019 BY MAKING ADDITIONS TOWARDS DISALLOWANCE OF DEPRECI ATION CLAIMED ON IMPROVEMENT TO LEASEHOLD BUILDING, DISAL LOWANCE OF INTEREST ON TDS AND DISALLOWANCE U/S.14A R.W. RULE 8D OF INCOME TAX RULES, 1962 . THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE L EARNED CIT(A) FOR THE REASONS STATED IN HIS APPELLATE ORDER DATED 31.10.2018 PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE, WHERE HE HAS CONFIRMED ADDITIONS MADE BY THE ASSESSING OFFICER T OWARDS DISALLOWANCE OF DEPRECIATION ON IMPROVEMENTS TO LE ASEHOLD BUILDING, DISALLOWANCE OF EXPENDITURE IN RELATION T O EXEMPT INCOME U/S.14A R.W. RULE 8D, HOWEVER, RESTRICTED DI SALLOWANCES TO THE EXTENT OF NET DISALLOWANCES AFTER REDUCING S UO MOTU DISALLOWANCES MADE BY THE ASSESSEE AT RS.5,52,12,11 6/-. AGGRIEVED BY THE LEARNED CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.2 OF ASSESSEE APPEAL IS DISALLOWANCES U/S .14A OF THE ACT R.W.R 8D OF INCOME TAX RULES, 1962. THE FACTS WITH REGARD TO IMPUGNED DISPUTE ARE THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE HUGE INVESTMENTS IN SHARES AND SECURITIES WHICH 3 ITA NO. 205/CHNY/2019 GENERATE EXEMPT INCOME. THEREFORE, CALLED UPON THE ASSESSEE TO FURNISH COMPLETE DETAILS OF INVESTMENTS AND BI FURCATION OF EXPENSES INCLUDING INTEREST EXPENSES RELATABLE TO E XEMPT INCOME, AS PER PROVISIONS OF SECTION 14A OF THE ACT . IN RESPONSE, THE ASSESSEE HAS FURNISHED WORKING OF DIS ALLOWANCE U/S.14A, THEREBY ARRIVED AT DISALLOWANCE OF RS.5,52 ,12,116/- AND CLAIMED THAT IT HAS MADE SUO MOTU DISALLOWANCE IN THE STATEMENT OF TOTAL INCOME. THE ASSESSING OFFICER, H OWEVER, WAS NOT CONVINCED WITH WORKING OF DISALLOWANCE FILED BY THE ASSESSEE AND ACCORDING TO HIM, ALTHOUGH PROVISIONS OF RULE 8D OF INCOME TAX RULES, 1962 IS APPLICABLE FOR THE IMP UGNED ASSESSMENT YEAR, THE ASSESSEE HAS MADE AD-HOC DISAL LOWANCE OF CERTAIN EXPENSES, INCLUDING INTEREST EXPENSES, WHICH IS NOT IN ACCORDANCE WITH PRESCRIBED METHOD PROVIDED FOR DISALLOWANCE OF EXPENSES AND HENCE, OPINED THAT DIS ALLOWANCE OF EXPENSES COMPUTED BY THE ASSESSEE TOWARDS EXPENS ES INCURRED IN RELATION TO EXEMPT INCOME IS NOT IN ACC ORDANCE WITH LAW AND HENCE, INVOKED PROVISIONS OF RUE 8D OF INCO ME TAX RULES, 1962, AND DETERMINED TOTAL DISALLOWANCE AT RS.12,60,92,495/-. 4 ITA NO. 205/CHNY/2019 4. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L EARNED CIT(A) HAS ERRED IN UPHOLDING APPLICABILITY OF RULE 8D OF INCOME TAX RULES, 1962, WHILE COMPUTING DISALLOWANCE U/S. 14A OF THE ACT, THEREBY CONFIRMED DISALLOWANCE TO THE EXTENT O F RS.7,08,80,379/-, WITHOUT APPRECIATING FACT THAT TH E ASSESSEE HAD ALREADY IDENTIFIED AND DISALLOWED AN AMOUNT OF RS.5,52,12,116/- INCURRED TOWARDS EARNING EXEMPT IN COME. THE AR FOR THE ASSESSEE FURTHER SUBMITTED THAT THE LEAR NED CIT(A) OUGHT TO HAVE APPRECIATED THAT PROVISIONS OF RULE 8 D OF INCOME TAX RULES, 1962 IS NOT MANDATORY WHILE COMPUTING DISALLOWANCE U/S.14A, UNLESS THE ASSESSING OFFICER RECORDS SATISFACTION AS REQUIRED U/S.14A(2) THAT HAVING RE GARD TO BOOKS OF ACCOUNT OF THE ASSESSEE SUO MOTU DISALLOWANCES C OMPUTED BY THE ASSESSEE IS NOT CORRECT. IN THIS REGARD, HE RELIED UPON FOLLOWING JUDICIAL PRECEDENTS:- 1. MARG LTD. VS.CIT (2020) 120 TAXMANN.COM 84(MAD) 2.CIT VS.SOCIEDADE DE FOEMNTO (2021) 123 TAXMANN.C OM 38 (BOM) 3. PR.CIT VS.BAJAJ FINANCE LTD, (2019) 110 TAXMANN .COM 303 (BOM) 4. PR.CIT VS. UK PAINTS INDIA LTD. (2016) 76 TAXMA NN.COM 348 (DEL) 5 ITA NO. 205/CHNY/2019 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTING OR DER OF THE LEARNED CIT(A), SUBMITTED THAT FROM ASSESSMENT YEAR 2008- 09 ONWARDS DISALLOWANCE U/S.14A SHALL BE COMPUTED I N ACCORDANCE WITH RULE 8D, AS PER WHICH THERE IS A PR ESCRIBED METHOD FOR DISALLOWANCE OF DIRECT EXPENSES, INTERES T EXPENSES AND OTHER EXPENSES. HENCE, THERE IS NO MERIT IN THE ARGUMENTS TAKEN BY THE LD. AR FOR THE ASSESSEE THAT RULE 8D I S NOT MANDATORY WHILE COMPUTING DISALLOWANCE U/S.14 OF TH E ACT. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL S AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THE AR FOR THE ASSESSEE HAS MADE THREE FOLD ARGUMENTS TOWARDS DISALLOWANCES U/S.14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. THE FIRST AN D FOREMOST ARGUMENT OF THE LD.AR FOR THE ASSESSEE IS THAT THER E IS NO SATISFACTION FROM THE ASSESSING OFFICER AS REQUIRE D U/S.14A(2) OF THE ACT HAVING REGARD TO BOOKS OF ACCOUNT OF THE ASSESSEE THAT SUO MOTU DISALLOWANCE MADE IS NOT CORRECT. WE HAVE GONE THROUGH ARGUMENTS ADVANCED BY THE LEARNED A.R. FOR THE ASSESSEE IN LIGHT OF REASONS GIVEN BY THE ASSESSING OFFICER FOR INVOKING RULE 8D TO COMPUTE DISALLOWANCE U/S.14A OF THE ACT 6 ITA NO. 205/CHNY/2019 AND VARIOUS CASE LAWS CITED BY THE LEARNED A.R. FO R THE ASSESSEE. ADMITTEDLY, VARIOUS HIGH COURTS, INCLUDIN G THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S. MARG LTD. VS.CIT REPORTED IN (2020) 114 TAXMANN.COM 84 (MAD) HAS HELD THAT UNLESS THE ASSESSING OFFICER RECORDS SA TISFACTION HAVING REGARD TO BOOKS OF ACCOUNT OF THE ASSESSEE T HAT SUO MOTU DISALLOWANCE COMPUTED BY THE ASSESSEE IS NOT CORRECT, HE CANNOT PROCEED TO COMPUTE DISALLOWANCES BY INVOK ING RULE 8D OF THE INCOME TAX RULES, 1962. THIS PRINCIPLE IS FURTHER STRENGTHENED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS.CIT (402 ITR 640), WHERE THE HONBLE SUPREME COURT MADE IT VERY CLEAR THAT WHEN THE ASSESSEE HAS MADE SUO MOTU DISALLOWANCES, THE A SSESSING OFFICER SHALL RECORD SATISFACTION U/S.14A(2) OF THE ACT HAVING REGARD TO BOOKS OF ACCOUNT OF THE ASSESSEE THAT SU O MOTU DISALLOWANCE COMPUTED BY THE ASSESSEE IS NOT CORREC T. 7. KEEPING IN VIEW THE DECISION OF HONBLE SUPREME COURT AND THE HONBLE MADRAS HIGH COURT IN THE CASES DISC USSED HEREINABOVE, WE HAVE GONE THROUGH REASONS GIVEN BY THE ASSESSING OFFICER TO REJECT SUO MOTU DISALLOWANCE M ADE BY THE 7 ITA NO. 205/CHNY/2019 ASSESSEE AND WE, OURSELVES DO NOT SUBSCRIBE TO ARGU MENTS ADVANCED BY THE LEARNED A.R FOR THE ASSESSEE REGAR DING SATISFACTION REQUIRED TO BE RECORDED BY THE ASSESSI NG OFFICER U/S.14A(2) OF THE ACT, BECAUSE SATISFACTION AS REQU IRED U/S.14A(2) IS SUBJECTIVE SATISFACTION, WHICH CAN B E ARRIVED AT BY THE ASSESSING OFFICER HAVING CONSIDERED FACTS AND CIRCUMSTANCES OF EACH CASE. FURTHER, THE LAW DOES N OT PROVIDE FOR RECORDING SATISFACTION EITHER IN WRITING OR IN A PARTICULAR MANNER, BUT WHAT THE LAW REQUIRES IS TO RECORD SATI SFACTION HAVING REGARD TO THE BOOKS OF ACCOUNT OF THE ASSESS EE. IN THIS CASE, THE ASSESSING OFFICER HAS RECORDED HIS FINDIN G IN PARA 6.3 & 6.4 OF THE ASSESSMENT ORDER THAT DESPITE THE ASS ESSEE WAS CALLED FOR DETAILS OF EXPENDITURE INCURRED RELATING TO EXEMPT INCOME, THE ASSESSEE HAS FILED SUO MOTU DISALLOWANC E, WHICH WAS NOT IN ACCORDANCE WITH PRESCRIBED PROCEDURE PRO VIDED UNDER RULE 8D OF INCOME TAX RULES, 1962. THE ASSESS ING OFFICER HAVING REGARD TO BOOKS OF ACCOUNT OF THE AS SESSEE AND ALSO CONSIDERING SUO MOTU DISALLOWANCE COMPUTED BY THE ASSESSEE, WHICH IS NOT ON THE BASIS OF PRESCRIBED M ETHOD, BUT ON AD-HOC BASIS, CAME TO THE CONCLUSION THAT SUO MO TU DISALLOWANCE COMPUTED BY THE ASSESSEE FOR EXPENDITU RE 8 ITA NO. 205/CHNY/2019 RELATABLE TO EXEMPT INCOME IS NOT IN ACCORDANCE WI TH LAW. THEREFORE, IN OUR CONSIDERED VIEW, SAID FACTUAL FIN DING OF THE ASSESSING OFFICER SATISFIES THE PROVISIONS OF SECTI ON 14A(2) OF THE ACT, REGARDING SATISFACTION AS REQUIRED UNDER L AW HAVING REGARD TO BOOKS OF ACCOUNT OF THE ASSESSEE, HENCE, ARGUMENTS TAKEN BY THE ASSESSEE HAS BEEN REJECTED. INSOFAR A S CASE LAWS RELIED UPON BY THE ASSESSEE INCLUDING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT OF MADRAS IN THE CASE OF MARG LTD. VS. CIT (SUPRA), WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO RATIO LAID DOWN BY VARIOUS HIGH COURTS, INCLUDING HON'BLE SUPREME COURT, REGARDING SATISFACTION. BUT, AS WE HAVE ALRE ADY STATED THAT SATISFACTION IS SUBJECTIVE SATISFACTION, BUT N OT OBJECTIVE AND IT VARIES FROM CASE TO CASE. IN THIS CASE, THE ASSE SSING OFFICER HAS RECORDED SATISFACTION HAVING REGARD TO BOOKS OF ACCOUNT OF THE ASSESSEE AND THUS, WE ARE OF THE CONSIDERED VIE W THAT CASE LAWS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 8. HAVING SAID SO, LET US EXAMINE COMPUTATION OF DISALLOWANCE U/S.14A OF THE ACT R.W.R 8D OF INCOME TAX RULES, 1962. IT IS AN ADMITTED FACT THAT FROM ASSESSMENT Y EAR 2008-09 ONWARDS DISALLOWANCE U/S.14A SHALL BE COMPUTED IN 9 ITA NO. 205/CHNY/2019 ACCORDANCE WITH RULE 8D OF INCOME TAX RULES, 1962 . IN THIS CASE, THE ASSESSEE HAS COMPUTED SUO MOTU DISALLOWAN CE AND SUCH DISALLOWANCE IS NOT IN ACCORDANCE WITH RULE 8 D OF I.T.RULES, 1962. FURTHER, THE ASSESSEE HAS NOT FILE D ANY DETAILS AND BASIS FOR COMPUTATION OF DISALLOWANCE OF RS.5,5 2,12,116/-. ON THE OTHER HAND, THE ASSESSING OFFICER HAS COMPUT ED DISALLOWANCE BY INVOKING RULE 8D. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER WAS RIGH T IN COMPUTATION OF DISALLOWANCE U/S.14A OF THE ACT BY I NVOKING RULE 8D OF I.T. RULES, 1962. HOWEVER, THE ONLY ERRO R COMMITTED BY THE ASSESSING OFFICER IS NOT ALLOWING DEDUCTION TOWARDS SUO MOTU DISALLOWANCE COMPUTED BY THE ASSESSEE. HOWEVER , THE LEARNED CIT(A) HAS RECTIFIED SAID MISTAKE AND ALLOW ED DEDUCTION TOWARDS SUO MOTU DISALLOWANCE COMPUTED BY THE ASSES SEE AND CONFIRMED OF NET DISALLOWANCE OF RS.7,08,80,379/-. HENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF THE LEARNED CIT( A) AND REJECT GROUND TAKEN BY THE ASSESSEE. 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM GROUND NO.3 OF ASSESSEE APPEAL IS DISALLOWANCE OF D EPRECIATION ON LEASEHOLD IMPROVEMENTS UNDER NORMAL PROVISIONS O F THE ACT AND COMPUTATION OF BOOK PROFIT U/S.115JB OF THE IN COME TAX 10 ITA NO. 205/CHNY/2019 ACT, 1961. THE ASSESSING OFFICER HAS DISALLOWED EXPENDITURE INCURRED FOR IMPROVEMENTS TO LEASEHOLD BUILDING ON THE GROUND THAT SAID EXPENDITURE IS IN THE NATURE OF CAPITAL EXPENDITURE WHICH CANNOT BE ALLOWED AS DEDUCTION. HOWEVER, HE HAS ALLOWED DEPRECIATION @ 15% AS APPLICABLE TO FURNIT URE AND FITTINGS AND HAS MADE ADDITIONS TOWARDS DIFFERENCE AMOUNT OF RS.7,12,328/-. IT WAS THE CONTENTION OF THE ASSESSE E THAT ANY IMPROVEMENTS TO LEASEHOLD BUILDING IS ENTITLED FOR 100% DEPRECIATION AS PER ENTRY 4 IN PART A(1) TO NEW APPENDIX-I OF I.T. RULES, 1962. 10. HAVING HEARD BOTH SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS INCURRED VARI OUS EXPENDITURE FOR IMPROVEMENTS TO LEASEHOLD BUILDING, INCLUDING INTERIOR WORKS, AIR-CONDITIONER WORK AND AIR-CONDIT IONER INSTALLATION AND ARCHITECT FEE. ON GOING THROUGH N ATURE OF EXPENDITURE INCURRED BY THE ASSESSEE, WE FIND THAT ALL EXPENDITURE IS IN THE NATURE OF FURNITURE AND FITTI NGS, WHICH IS ELIGIBLE FOR DEPRECIATION. IT WAS CLAIM OF THE ASSE SSEE THAT IMPROVEMENTS TO LEASEHOLD BUILDING IS COVERED UNDER ENTRY 4 IN PART A(1) TO NEW APPENDIX-I OF I.T. RULES, 1962, A ND AS PER SAID ENTRY DEPRECIATION IS ALLOWABLE AT 100% ON TEM PORARY 11 ITA NO. 205/CHNY/2019 STRUCTURES. WE HAVE GONE THROUGH ARGUMENTS OF THE ASSESSEE IN LIGHT OF APPENDIX-I OF I.T. RULES, 1962, AND WE DO NOT OURSELVES SUBSCRIBE TO ARGUMENTS ADVANCED BY LEARNE D A.R FOR THE ASSESSEE FOR THE SIMPLE REASON THAT SAID ENTRY COVERS TO AN AMOUNT INCURRED FOR TEMPORARY STRUCTURES IN THE NAT URE OF BUILDING, WOODEN STRUCTURE ETC. IN THIS CASE, THE A SSESSEE HAS SPENT AMOUNT FOR INTERIOR WORKS, AIR-CONDITIONER WORK, AIR- CONDITIONER INSTALLATION AND ARCHITECT FEE. THE INT ERIOR WORK CARRIED OUT BY THE ASSESSEE IS FOR IMPROVEMENT TO STRUCTURE OF THE BUILDING OR FOR CREATION OF FURNITURE AND FITTI NGS IS NOT CLEAR. SIMILARLY, AMOUNTS SPENT FOR PURCHASE OF AIR-CONDIT IONER AND A/C INSTALLATION CANNOT BE AT ANY STRETCH OF IMAGINATI ON BE CONSIDERED AS TEMPORARY STRUCTURE WHICH COMES UNDE R ENTRY 4 IN PART A(1) TO NEW APPENDIX-I OF I.T. RULES, 1962 . THE FACTS ARE NOT CLEAR. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO GO BACK TO THE FILE OF ASSESSING OF FICER TO RECONSIDER THE ISSUE IN LIGHT OF CLAIM OF THE ASSES SEE THAT IT HAS SPENT FOR IMPROVEMENTS TO LEASEHOLD BUILDING, WHICH IS IN THE NATURE OF TEMPORARY STRUCTURES. THEREFORE, WE SET A SIDE THE ISSUE AND DIRECT THE ASSESSING OFFICER TO RE-EXAM INE THE ISSUE AND DECIDE IN ACCORDANCE WITH LAW. SIMILARLY, GROUN D TAKEN BY 12 ITA NO. 205/CHNY/2019 THE ASSESSEE CHALLENGING ADJUSTMENTS MADE BY THE AS SESSING OFFICER TOWARDS DISALLOWANCE OF DEPRECIATION ON LE ASEHOLD IMPROVEMENTS TO BOOK PROFIT COMPUTED U/S.115JB OF THE ACT IS ALSO SET ASIDE TO FILE OF THE ASSESSING OFFICER A ND DIRECT HIM TO RECONSIDER THE ISSUE IN LIGHT OF OUR OBSERVATIONS G IVEN HEREINABOVE. 11. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.5 OF ASSESSEE APPEAL IS DISALLOWANCE OF I NTEREST ON TDS U/S.40(A)(II) UNDER MAT PROVISIONS OF THE INCOM E TAX ACT, 1961. THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF COMPUTATION MADE BY THE ASSESSEE TOWARDS INTEREST O N TDS UNDER NORMAL PROVISIONS OF THE ACT AS WELL AS BOOK PROFIT COMPUTED U/S.115JB OF THE INCOME TAX ACT, 1961. TH E LEARNED CIT(A) HAS SET ASIDE THE ISSUE TO THE FILE OF ASSES SING OFFICER TOWARDS DISALLOWANCE MADE IN ACCORDANCE WITH NORMAL PROVISIONS OF THE I.T. ACT, 1961 ON THE GROUND THAT IT IS NOT CLEAR FROM THE ASSESSMENT ORDER AS TO WHETHER THE ASSESSE E HAD CLAIMED SAID INTEREST ON TDS IN THE PROFIT & LOSS ACCOUNT / BOOKS OF ACCOUNT OR NOT. HOWEVER, HAS NOT GIVEN A NY FINDING ON SAID DISALLOWANCE MADE UNDER MAT PROVISIONS OF T HE ACT. 13 ITA NO. 205/CHNY/2019 12. HAVING HEARD BOTH SIDES AND CONSIDERED MATERIAL S ON RECORD, WE FIND THAT THE LEARNED CIT(A) HAS SET A SIDE ISSUE OF DISALLOWANCE OF INTEREST ON TDS UNDER NORMAL PROVI SIONS OF THE ACT TO THE FILE OF ASSESSING OFFICER TO ASCERTAIN FACT WHETHER THE ASSESSEE HAS DEBITED SAID EXPENDITURE INTO PROF IT & LOSS ACCOUNT OR NOT IN LIGHT OF VARIOUS EVIDENCES FILED BY THE ASSESSEE, INCLUDING COPY OF TAX AUDIT REPORT AS WE LL AS FINANCIAL STATEMENTS, WHERE NO SUCH EXPENDITURE WAS DEBITED I NTO PROFIT & LOSS ACCOUNT. SINCE THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF ASSESSING OFFICER, ADDITIONS MADE TOWARDS SAID EXP ENDITURE UNDER MAT PROVISIONS ALSO NEEDS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER, BECAUSE ADDITIONS IF ANY, NEEDS TO BE MADE TO MAT PROVISIONS IS FULLY DEPENDS UPON ADDITIONS MADE TOWARDS SAID EXPENDITURE UNDER NORMAL PROVISIONS OF THE ACT. HENCE, WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO RECONSIDER THE ISSUE ALON G WITH DISALLOWANCES MADE UNDER NORMAL PROVISIONS OF THE I .T. ACT,1961. 13. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM ADDITIONAL GROUNDS OF APPEAL FILED BY THE ASSESSEE IS DEDUCTION 14 ITA NO. 205/CHNY/2019 TOWARDS EDUCATION CESS & SECONDARY AND HIGHER EDUC ATION CESS U/S.37(1) OF THE ACT. THE ASSESSEE HAS FILED A PETITION FOR ADMISSION OF ADDITIONAL GROUNDS VIDE ITS LETTER DAT ED 11 TH MARCH, 2021 AND CLAIMED THAT ISSUE OF DEDUCTION TOWARDS ED UCATION CESS & SECONDARY AND HIGHER EDUCATION CESS IS PURE LY LEGAL ISSUE FOR WHICH THE ASSESSING OFFICER IS NOT REQUI RED TO INVESTIGATE ANY ADDITIONAL FACTS. THEREFORE, HE ARG UED THAT ADDITIONAL GROUNDS FILED BY THE ASSESSEE MAY BE ADM ITTED. THE LEARNED DR, ON THE OTHER HAND, STRONGLY OPPOSED ADD ITIONAL GROUNDS FILED BY THE ASSESSEE. 14. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA L AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE ISSUE OF DEDUCTION TOWARDS EDUCATION CESS & SECONDARY AND HIGHER EDUCATION CESS U/S. 37 (1) OF THE ACT, IS PURELY LEGAL ISSUE FOR WHICH NO REQUIREMENT OF INVESTIGATION OF ANY ADDITIONAL FACTS. IT IS ALSO A N ADMITTED FACT THAT WHEN THE ASSESSEE HAS TAKEN LEGAL ISSUE WHICH CAN BE ADMITTED AT ANY STAGE INCLUDING AT SECOND APPELLATE STAGE AS HELD BY VARIOUS HIGH COURTS INCLUDING THE HON'BLE S UPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO.LT D. REPORTED 15 ITA NO. 205/CHNY/2019 IN 229 ITR 383 (SC). THEREFORE, WE DEEM IT APPROPR IATE TO ADMIT ADDITIONAL GROUNDS FILED BY THE ASSESSEE TO D ECIDE THE ISSUE IN ACCORDANCE WITH LAW. 15. THE LEARNED A.R FOR THE ASSESSEE SUBMITTED THA T THE ISSUE OF DEDUCTION TOWARDS EDUCATION CESS & SECONDA RY AND HIGHER EDUCATION CESS IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF SESA GOA LTD. VS JCIT (2020) 423 ITR 426, WHERE IT WAS HELD THAT CESS IS ALLOWABLE AS BUSINESS EXPENDITURE U/S. 37(1) OF THE ACT. 16. THE LEARNED DR, ON THE OTHER HAND, FAIRLY AGRE ED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SESA G OA LTD.(SUPRA). 17. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA L AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE BOMBAY HIGH COURT HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF SESA GOA LTD.(SUPRA) AND HELD THAT EDUCATION CESS & SECONDAR Y AND HIGHER EDUCATION CESS ARE LIABLE FOR DEDUCTION IN C OMPUTING 16 ITA NO. 205/CHNY/2019 INCOME CHARGEABLE UNDER HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILIZERS & CHEMICALS LTD. VS. JCIT 107 TAXMANN.COM 484 HAS TAKEN A SIMILAR VIEW AND HELD T HAT EDUCATION CESS IS NOT DISALLOWABLE EXPENDITURE UNDE R THE PROVISIONS OF SECTION 40(A)(II) OF THE ACT. THEREF ORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS MERIT IN THE ADDI TIONAL GROUNDS FILED BY THE ASSESSEE REQUESTING DEDUCTION FOR EDUC ATION CESS & SECONDARY AND HIGHER EDUCATION CESS, AS BUSINESS E XPENDITURE DEDUCTIBLE U/S.37(1) OF THE ACT. BUT, FACT REMAINS THAT ASSESSEE HAS TAKEN UP THIS ISSUE FOR THE FIRST TIME BY FILI NG ADDITIONAL GROUNDS AND THE ASSESSING OFFICER DID NOT HAVE AN Y OCCASION TO EXAMINE CLAIM OF THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ISSUE NEEDS TO GO BACK TO FILE OF THE ASSESSING OFFICER AND HENCE, WE SET ASIDE THIS ISS UE TO FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO RE-EXAMINE CLAIM OF THE ASSESSEE IN LIGHT OF OUR DISCUSSIONS GIVEN HEREIN A BOVE AND ALSO BY CONSIDERING RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT AND HONBLE RAJASTHAN HIGH COURT IN THE CASES CITED ABOVE. 17 ITA NO. 205/CHNY/2019 18. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA ) $ & / JUDICIAL MEMBER & / ACCOUNTANT MEMBER $ /CHENNAI, ) /DATED 18 TH AUGUST, 2021 DS +, -, /COPY TO: 1. APPELLANT 2. RESPONDENT 3. . () /CIT(A) 4. . /CIT 5. , 2 /DR 6. /GF .
