DCIT, Gandhinagar Circle, Gandhinagar V. M/s. Gujarat Gas Limited , Ahmedabad

ITA 379/AHD/2019

AI Insights

The case involves multiple appeals by Gujarat Gas Company Ltd. and the Department of Income Tax concerning various disallowances and tax credits for the assessment years 2013-14 to 2016-17. Key issues included the disallowance of additional depreciation on concealed GI Wall replacements, non-granting of refunds for excess dividend distribution tax, and the application of Section 14A r.w.r. 8D concerning expenses related to earning exempt income. The Tribunal's decision referenced previous rulings and statutory provisions, leading to a mixed outcome where some issues were resolved in favor of the assessee while others were remanded for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125636 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 07-03-2019
• Other Referred Cases: Gujarat Gas Company Ltd. vs. DCIT, Nirma Chemical Works Ltd. vs. DCIT, Sherno Ltd. vs. ACIT, Voltas Limited vs. ACIT, MUFG Bank Ltd vs. ACIT, Alembic Ltd. vs. CIT, Gujarat State Fertilizers & Chemicals Ltd. vs. CIT, Essar Teleholdings Ltd. vs. DCIT, Gujarat Fluro Chemicals Ltd. vs. DCIT, Apollo Tyres Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Question of law; Initiation of penalty proceedings; TDS; Rule 8D; Set aside; Liquidation
• Section: 32; 271(1)(c); 14A; 115JB; 250; 80IA; 48; 194A; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o . 1 6 5/ A h d /2 0 21 ( A s s es s m en t Ye ar s : 2 0 1 3- 14 ) G uj a r a t G as C o m pa n y Li m i te d, ( A ma l ga ma te d w i th G uj a r a t G a s Ltd . ) , 2 , Sh a n ti S a d an S o c ie t y, Op p. Pa r i ma l G a r de n, N r . E ll is B r i dg e , A h m e d a ba d - 3 8 0 00 6 V s .De pu t y C o m mi s s io ne r o f I nc o me Ta x , Ga nd hin a g a r C ir c le , Ga nd hin a g a r - 3 82 0 1 1 [ P A N N o . AA EC G 8 09 3Q ] (Appellant) .. (Respondent) I .T .A . N o . 1 7 3/ A h d /2 0 21 ( A ss es s me n t Y e a r : 20 1 3 - 1 4) D e p ut y C o m m i ss io ne r o f I nc o m e Ta x , G a n d hin ag a r C irc le , G a n d hin ag a r Vs .M/ s . Gu j ar at G a s C o mp a n y L td . ( A m al g a m a te d w i th G uj a r a t Ga s L td .) , 2, Sh an ti s a da n So c i et y, Nr . Par i m al G ar d e n, El lis b r i d g e, Ah me da bad - 3 82 01 1 [ P A N N o . AA A C G5 60 0 M ] (Appellant) .. (Respondent) I .T .A . N o . 1 8 7/ A h d /2 0 19 ( A ss es s me n t Y e a r : 20 1 4 - 1 5) G uj a r a t G as C irc le ( F or m er l y k no w n a s G S PC D i str ib ut io n Ne tw o r ks L td .) , 2, Sh a n ti S a d an S o c ie t y, N r . P ar i m al G ar d en , E llis br id ge, A h m e da ba d-3 8 0 00 6 V s .De put y C o m mi s s io ne r o f In c o me Ta x , Ga nd h in a g ar C ir c le , Ga nd h in a g ar [P A N N o .AA EC G 8 09 3Q] (Appellant) .. (Respondent) ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 2 - I .T .A . N o . 3 7 9/ A h d /2 0 1 9 ( A ss es s me n t Y e a r : 20 1 4 - 1 5) D e p ut y C o m m i ss io ne r o f I nc o m e Ta x , G a n d hin ag a r C irc le , G a n d hin ag a r Vs .M/ s . Gu j ar at G a s L t d . 2, Sh an ti s a da n So c i et y, Nr . Par i m al G ar d e n, El lis b r i d g e, Ah me da bad - 3 82 01 1 [ P A N N o . AA EC G 8 09 3Q ] (Appellant) .. (Respondent) I .T .A . N o . 1 8 8/ A h d /2 0 1 9 ( A ss es s me n t Y e a r : 20 1 5 - 1 6) G uj a r a t G as C irc le ( F or m er l y k no w n a s G S PC D i str ib ut io n Ne tw o r ks L td .) , 2, Sh a n ti S a d an S o c ie t y, N r . P ar i m al G ar d en , E llis br id ge, A h m e da ba d - 3 8 0 00 6 V s .De put y C o m mi s s io ne r o f In c o me Ta x , Ga nd h in a g ar C ir c le , Ga nd h in a g ar [P A N N o .AA EC G 8 09 3Q] (Appellant) .. (Respondent) I .T .A . N o . 3 8 0/ A h d /2 0 1 9 ( A ss es s me n t Y e a r : 20 1 5 - 1 6) D e p ut y C o m m i ss io ne r o f I nc o m e Ta x , G a n d hin ag a r C irc le , G a n d hin ag a r Vs .M/ s . Gu j ar at G a s L t d . 2, Sh an ti s a da n So c i et y, Nr . Par i m al G ar d e n, El lis b r i d g e, Ah me da bad-3 82 01 1 [ P A N N o . AA EC G 8 09 3Q ] (Appellant) .. (Respondent) I .T .A . N o . 14 50 /A h d /2 01 9 ( A ss es s me n t Y e a r : 20 1 6 - 1 7) G uj a r a t G as C irc le ( F or m er l y k no w n a s G S PC D i str ib ut io n Ne tw o r k Lt d. ) , 2, Sh a n ti S a d an S o c ie t y, N r . P ar i m al G ar d en , E llis br id ge, A h m e da ba d - 3 8 0 00 6 V s .De put y C o m mi s s io ne r o f In c o me Ta x , Ga nd h in a g ar C ir c le , Ga nd h in a g ar [ P A N N o . AA EC G 8 09 3Q ] (Appellant) .. (Respondent) ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 3 - Appellant by : Shri S. N. Soparkar, Sr. Advocate & Shri Parin Shah, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. D.R. D at e of H ea r i ng 29.08.2023 D at e of P r o no u n ce me nt 11.10.2023 O R D E R PER SIDDHARTHA NAUTIYAL, JM: These cross appeals have been filed by the Assessee and the Revenue against the orders passed by the Ld. Commissioner of Income Tax (Appeals) -13 and Ld. Commissioner of Income Tax (Appeals) - Gandhinagar Circle, Gandhinagar (in short “Ld. CIT(A)”), Ahmedabad vide separate orders dated 23.04.2021, 21.12.2018, 14.12.2018 & 08.08.2019 passed for the Assessment Years 2013-14 to 2016-17. Since common facts and issues for consideration are involved for all the years under consideration, all the appeals are being disposed of together. We shall first take up Assessee’s appeal for A.Y. 2013-14 2. The assessee has raised the following grounds of appeal:- “ITEM NO. I: Disallowance of Additional Depreciation on concealed GI Wall Rs. 7,85,670/- 1.1 The learned CIT(A) has grossly erred in law and in facts by disallowing additional depreciation of Rs. 7,85,670/- claimed on Concealed Gl Wall Replacement. 1.2 The learned CIT(A) has disallowed the additional depreciation of Rs. 7,85,670/- claimed on Concealed GI Wall Replacement on the ground that M/s Gujarat Gas Company Limited is not engaged in a business of manufacture or production of any article or thing which is other necessary condition laid U/s .32(1)(iia) of the Act. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 4 - 1.3 The learned CIT(A) has failed to consider that the appellant company is engaged in processing and distribution of decontaminated, odorized and optimally pressurized gas. The claim of the appellant related to manufacture or production of natural gas, has also been allowed / accepted at all three levels namely H'ble CIT (Appeals), H'ble ITAT and H'ble High Court of Gujarat in earlier years wherein it has been accepted that the appellant company is an industrial undertaking. 1.4 The learned CIT(A) has failed to appreciate that Hon'ble CIT(A) has allowed deduction u/s. 80IA by considering the appellant as industrial undertaking for A.Y. 1997-98, 1.5 The learned CIT(A) has failed to appreciate that Hon'ble ITAT has allowed deduction u/s. 80IA by considering the appellant as industrial undertaking for A.Y. 1992-93, 1993-94, A.Y. 1994-95, A.Y. 1995-96, A.Y. 1996-97, A.Y. 1997-98, A.Y. 1998-99, A.Y. 1999-00, A.Y. 2000-01 & A.Y. 2001-02. 1.6 The learned CIT(A) has also failed to appreciate that Hon'ble High Court of Gujarat has allowed deduction u/s. 80IA by considering the appellant is involved in manufacturing activity for A.Y. 1992-93, A.Y. 1994- 95, A.Y. 1995-96, A.Y. 1996-97, A.Y. 1998-99, A.Y. 1999-00, A.Y. 2000-01 and A.Y. 2001-02 and mentioned as under: "6.1 Taking into account the observations made by the Tribunal while allowing the claim of the assesse, that there is a process of altering gas for making it consumable for industrial or domestic purpose or making it more user friendly for the industrial undertaking. In that view of the matter, we are of the opinion that the Tribunal has rightly taken the view that the assesses carries out manufacturing activity. No interference is called for with the order of the Tribunal. Therefore, we answer the question in favour of the assessee and against the revenue." Further, as per available records, the department has not preferred further appeal before the Supreme Court. So, the issue has reached its finality. Therefore, the decision of Hon'ble Gujarat High Court is final and binding. Hence, it is well settled that the appellant company is carrying manufacturing activity. 1.7 The learned CIT(A) has failed to appreciate that sometimes, for providing gas supply to the customers, the pipeline passes through various walls in the premise of the customers. With the passage of time these GI pipes needs to be replaced to comply with safety norms It is submitted that each pipe is a separate plant and hence addition made for the same is eligible for ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 5 - additional depreciation in accordance with provisions of Section 32(1) (iia) of the act. 1.8 The learned CIT(A) has further failed to appreciate that Provisions of section 32 read with rules thereon does not distinguish "plant" or "machinery" for the purpose of normal depreciation and additional depreciation and hence once the addition to the block of asset has been considered as plant for normal depreciation perspective it is not possible to have different view while computing the additional depreciation. 1.9 The learned CIT(A) has failed to appreciate that Hon'ble CIT(A) has allowed claim of additional depreciation on "Gl Wall Replacements" for A.Y. 2010-11, A.Y. 2011-12, A.Y. 2012-13, A.Y. 2013-14, A.Y. 2014-15, A.Y. 2015- 16 & A.Y. 2016-17 wherein the then A.O. has disallowed claim of additional depreciation on "Concealed GI Wall replacement". Further, as per the available records with the assessee, the Department has not preferred further appeal on the above referred orders. 1.10 The appellant humbly prays to your honour that disallowance of additional depreciation of Rs. 7,85,670/- claimed on Concealed Gl Wall Replacement may kindly be deleted. ITEM No. II: Non-granting of refund of excess dividend distribution tax paid Rs. 9,94,11,382/- 2.1 The learned CIT(A) has grossly erred in law and on facts in not restricting the Dividend Distribution Tax with respect to dividend paid to BG Asia Pacific Pte. Limited (a Singapore based company holding, 65.12% in the Appellant company) u/s. 115-O of the Act to the extent of 10% in accordance with Article 10 of Double Tax Avoidance Agreement between India & Singapore and erred in not granting refund of excess DOT paid Rs. 9,94,11,382/- along with interest. 2.2 The learned CIT(A) has directed the matter back to the learned A.O. for adjudication without considering the submission made by the appellant. 2.3 The appellant humbly prays to your honour that refund of excess dividend distribution tax amounting to Rs. 9,94,11,382/- along with interest may kindly be granted. ITEM NO. III: Non granting of Credit of Advance Tax Rs. 4,90,26,943/- (Rs. 1,06,25,00,000/- Advance Tax paid as per return Less: Rs. 1,01,34,73,057/- Advance Tax considered as per Sr. No. 29 of Income Tax Calculation Sheet) ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 6 - 3.1 The learned CIT(A) has grossly erred in not granting credit of Rs. 4,90,26,943/- (Rs. 1,06,25,00,000/- Advance Tax paid as per return Less: Rs. 1,01,34,73,057/- Advance Tax considered at Sr. No. 29 of the Income tax calculation sheet. 3.2 The learned CIT(A) has failed to appreciate that appellant has paid advance tax of Rs. 1,06,25,00,000/- at the time of filing of return of income. Thus, the learned A.O. has grossly erred in not granting credit of Advance Tax amounting to Rs. 4,90,26,943/-. 3.3 The learned CIT(A) has directed the matter back to the learned A.O. for adjudication without considering the submission made by the appellant. 3.4 The appellant humbly submits that advance tax credit of Rs. 4,90,26,943/- be allowed to the appellant. ITEM NO. IV: Non-granting of credit of TDS Rs. 87,604/- (Rs. 34,63,556/- TDS credit as per 26AS Less: Rs. 33,75,954/- TDS credit considered as per Sr. No. 28 of Income Tax calculation sheet) 4.1 The appellant has claimed TDS credit of Rs. 33,75,954/- at the time of filing of return of income and while passing the assessment order at Sr. No. 28 of the Income Tax Calculation Sheet, TDS credit of Rs. 33,75,952/- was considered. 4.2 The appellant humbly submits that in 26AS for the year under consideration TDS credit of Rs. 34,63,556/- is claimable. 4.3 The appellant further humbly submits the details of additional TDS credit of Rs. 87,604 (Rs. 34,63,556/- TDS credit as per 26AS Less: Rs. 33,75,952/- TDS credit considered as per Sr. No. 28 of Income Tax calculation sheet) as under. The corresponding income with reference to the additional TDS credit have already been offered to tax. Sr. No. Name of Deductor Amount of TDS Section 1. M/s Bharati Enterprise 1,841 194A 2. Sachin Dyeing & Printing Mills Pvt. Ltd. 904 194A 3. Shikhar Prints Private Limited 2,590 194A 4. State Bank of India 82,269 194A Total 87,604 ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 7 - 4.4 The Hon'ble CIT(A) has directed the matter back to the learned A.O. for adjudication without considering the submission made by the appellant. 4.5 The appellant humbly submits that TDS credit of Rs. 87,604/- be granted to the appellant and in turn demand be reduced proportionately. ITEM NO. V: Non-considering Loss of Rs. 7,50,00,000/- on sale of Investment in shares of Petroleum Infrastructure Ltd ("PIL") as allowable deduction U/s. 28 / 37 (11 of the Act 5.1 The learned CIT(A) has grossly erred in law and on facts in not considering that the Note no. 17 and 18 of Notes forming part of the return, wherein it was mentioned as under. "17. The company had invested Rs. 75,000,000/- in the shares of Petroleum Infrastructure Ltd ("PIL"). The entire investment was eroded and nothing was recoverable. Company has made provision for diminution in value of investment in A.Y. 1999-2000. The same was disallowed in the respective year while computing total income. During the year under consideration, assesse has received the High Court order for liquidation of PIL and liquidation PIL has been concluded. Accordingly, while computing total income, the assesse has claimed resultant capital loss in accordance with provisions of Section 46(2) rws 48 of the Act on account of liquidation of PIL. 18. Without prejudice to point no. 17, it is submitted that investment has been made for the expansion of existing activities and hence writing off the same should be allowed as deduction under section 28/37 (1) of the Act. As winding up process has been completed during the year under consideration, the same should be allowed as deduction in the current year." 5.2 The learned CIT(A) has failed to appreciate that as the investment in shares of Petroleum Infrastructure Ltd ("PIL") was made for the expansion of existing activities and hence writing off the same be allowed as deduction under section 28 / 37 (1) of the Act as the process of winding up of Petroleum Infrastructure Ltd ("PIL") has been completed during the year under appeal. 5.3 The Hon'ble CIT(A) has directed the matter back to the learned A.O. for adjudication without considering the submission made by the appellant. 5.4 The appellant further submits that, if the Loss on sale of Investment in shares of Petroleum Infrastructure Ltd ("PIL") is allowed as business ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 8 - expenditure u/s. 28 / 37 (1), then the appellant would withdraw its claim of carry forward of Long-Term Capital Loss., ITEM NO.VI: Initiation of Penalty Proceedings U/s. 271(l)(c) of The Act: 6.1 The learned A.O. grossly erred in law and on facts in initiating penalty proceedings U/s. 271(1)(c) of the Act. 6.2 The appellant states that initiation of penalty proceedings is clearly contrary to law and the same may kindly be quashed. ITEM NO. VII: Non - Granting of deduction of "Education cess, including secondary and higher education cess" amounting to Rs. 2,94,53,686/- paid as allowable deduction under Income Tax Act, 1961 while computing income chargeable under the head "Profit and Gains of Business or profession" in view of decision of Bombay High Court in the case of Sesa Goa Limited Vs. JCIT Range 1 passed in Tax Appeal No. 17 of 2013 and 18 of 2013 dated 28-02-2020 6.1 The appellant humbly draws your attention to decision of Bombay High Court in the case of Sesa Goa Limited Vs. JCIT Range 1, passed in Tax Appeal No. 17 and 18 of 2013 dated 28-02-2020 where it was held that deduction of "Education Cess and Higher and Secondary Education Cess" while computing income chargeable under the head "Profit and Gains of Business or profession" be allowed whenever paid in relation to business. 6.2 The learned CIT(A) has failed to consider that the appellant had vide written submission dated 13-02-21 filed vide E-filing ACK no.: 13022114154468 has requested to grant deduction "Education cess, including secondary and higher education cess" paid while computing income chargeable under the head "Profit and Gains of Business or profession. 6.3 The learned CIT(A) has grossly erred in not considering the submission made by the appellant and has passed Order u/s. 250 of the Act without granting the deduction. 6.4 The learned CIT(A) have also not provided any reason for non- granting of the deduction of "Education cess, including secondary and higher education cess" 6.5 The appellant humbly also draws your attention to the following decision passed wherein deduction of Education cess and Higher and Secondary Education Cess was allowed as deduction ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 9 - (a) ITAT Mumbai in the case of Voltas Limited Vs. ACIT Range 8(3)(2) passed in ITA No. 6612 / Mum / 2018 dated 30-06-20. (b) ITAT Delhi in the case of MUFG Bank Ltd Vs. ACIT (International Taxation) Circle 2(2)(1) passed in ITA No. 7895/Del/2019 dated 16-10-20. 6.6 The appellant humbly prays to your honour that deduction of "Education cess, including secondary and higher education cess" be allowed as deduction under Income Tax Act, 1961 while computing income chargeable under the head “Profit and Gains of Business or profession” in view of decision of Bombay High Court in the case of Sesa Goa Limited Vs. JCIT Range 1 passed in Tax Appeal No. 17 of 2013 and 18 of 2013 dated 28- 02-2020 and in turn total income be reduced proportionately. 7. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.” Ground No.1:- Disallowance of additional depreciation on concealed GI Wall (Rs. 7,85,670/-). 3. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer observed that the assessee has claimed additional depreciation of Rs. 7,85,670/- on concealed GI Wall. The Assessing Officer disallowed the claim of the assessee on the ground that additional depreciation is allowable only on new Plant & Machinery, while the assessee has claimed the aforesaid depreciation with respect to replacement of GI Pipes. Accordingly, the Assessing Officer made disallowance of additional depreciation of Rs. 7,85,670/-. 4. In appeal, CIT(A) dismissed the appeal of the assessee primarily on the ground that since the assessee is not engaged in the business of manufacturing or production of any article or thing, and is engaged only in the business of processing and adjustment of natural gas to domestic, ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 10 - commercial, industrial and CNG customers, the assessee is not eligible for additional depreciation under Section 32(1)(ia) of the Act. While dismissing the appeal of the assessee the CIT(A) observed as under:- “5.5 I have carefully perused the submission of the appellant and the order of Ld. CIT(A)-2 as relied upon by the appellant. The AO has disallowed the claim of additional depreciation u/s.32(l)(iia) on the ground that GI Pipe cannot be treated as a new P & M. However on careful reading of the relevant section it is noted that for the purpose of claim of additional depreciation at least two conditions to be satisfied are that (i) new M & P must be acquired and installed and (ii) the assessee must be engaged in business of manufacture or production of any article or thing. Irrespective of whether GI Pipes are P & M or not it transpires that the appellant is not engaged in business of manufacturing or production of any article or thing. In its submission itself the appellant has stated that it is a Government of Gujarat undertaking and is engaged, in the business of processing and distribution of natural gas to domestic commercial industrial and CNG customers. The position is correctly worded by the appellant. It is not engaged in making of natural gas by way of fractional distillation of petroleum which can only be treated as production of natural gas. Mere compression and distribution (and metering) of natural gas procured from other companies is neither a manufacturing nor a production of natural gas/CNG. Even extraction of natural gas from the earth will not be manufacturing or processing of natural gas. Thus with due respect to predecessor CIT(A) and higher Appellate Authorities who might have allowed claim of additional depreciation on a/c of new P & M in other assessment year, the appellant, in my considered view, is not at all eligible for additional depreciation, as it is not engaged is a business of manufacture or production of any article or thing which is other necessary condition laid u/s.32(i)(iia) of the Act Under the circumstances the addition of Rs.7,85,670/- is confirmed and related ground is rejected.” 5. Before us, the Counsel for the assessee submitted that firstly, on identical issue, the Ld. CIT(A) has decided this issue in favour of the assessee for A.Ys. 2011-12 and 2012-13. The Counsel for the assessee drew our attention to Pages 304 to 306 of the Paper Book wherein on the identical set of facts, CIT(A) has allowed the appeal of the assessee. Further, the Counsel for the assessee drew our attention to the decision of ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 11 - Gujarat High Court which has specifically held that the assessee is carrying out manufacturing activity. Further, the Counsel for the assessee also drew our attention to Pages 293 to 294 of the Paper Book, wherein Ld. CIT(A) on identical set of facts for A.Y. 2011-12 allowed the appeal of the assessee. Accordingly, it was submitted before us that in view of the aforesaid facts, the matter may be decided in favour of the assessee on this issue. 6. In response, Ld. D.R. placed reliance on the observations made by the CIT(A) in the appellate order. 7. We have heard the rival contention and perused the material on record. On going through the orders passed by Ld. CIT(A) on identical issues for A.Y. 2011-12 and 2012-13 and also in light of the order passed by Hon’ble Gujarat High Court dated 22.07.2016, wherein the Gujarat High Court held that the assessee is engaged in carrying out manufacturing activity, Ground No. 1 of the assessee’s appeal is allowed. 8. In the result, Ground No. 1 of the assessee’s appeal is allowed. Ground Nos. 2, 3, 4 & 5:- Related to non-grant of refund / credit of advance tax / TDS and non-consideration of loss on sale of investment in shares by the Assessing Officer, while passing the assessment order. 9. Before us, the Counsel for the assessee submitted that the Ld. CIT(A) has given a specific direction to the Assessing Officer to look into the aforesaid issues and pass appropriate order in accordance with law, and ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 12 - therefore, the assessee has no specific grievance with respect to the aforesaid issues. 10. In view of the order passed by Ld. CIT(A), Ld. Assessing Officer is directed to kindly look into the aforesaid issues and pass order in accordance with law after giving due opportunity of hearing to the assessee. 11. In the result, Ground Nos. 2, 3, 4 & 5 are allowed for statistical purposes. 12. Ground No. 6 of the assessee’s appeal (Initiation of penalty proceedings under Section 271(1)(c) of the Act) is general in nature and does not require any specific adjudication. 13. Before us, the Counsel for the assessee submitted that he shall not be pressing Ground No. 7 (Deduction of Education Cess) and accordingly, Ground No. 7 of the assessee’s appeal is dismissed as not pressed. 14. In the result, the assessee’s appeal is partly allowed For A.Y. 2013- 14. Now we shall discuss the Department’s appeal for A.Y. 2013-14 15. The Department has raised the following grounds of appeal:- “1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of expenses made U/s 14A of the Act r.w.r. 8D of I.T.Rule of Rs.2,11,84,097/-. 2. On the facts and circumstances of the case, Ld. CIT(A) ought to have upheld the order of the Assessing Officer. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 13 - 3. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored.” Ground No. 1:- Disallowance under Section 14A of Rs. 2,11,84,097/- 16. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer observed that the assessee had earned dividend income of Rs. 20.34 crores from large amount of investment made in assets yielding tax free dividend and claimed as exempt under the Act. During the course of assessment, the assessee submitted that the aforesaid investment had been made by the assessee out of surplus fund available with the assessee and no interest expenses were incurred for this purpose. However, the Assessing Officer rejected the contention of the assessee and held that it is not possible for the assessee to maintain a portfolio of such huge investments without incurring administrative expenses. Accordingly, the Assessing Officer made disallowance amounting to Rs. 2,11,84,097/- under Section 14A r.w.r. 8D of the Income Tax Rules. 17. In appeal, Ld. CIT(A) allowed the appeal of the assessee on the ground firstly that the assessee during the year under consideration had made a suo moto disallowance on Rs. 11,27,938/- as expenses under Section 14A of the Act. However, while making the disallowance in the hands of the assessee the Assessing Officer did not provide any cogent reason for not accepting the method of disallowance worked out by the assessee. Ld. CIT(A) held that from the perusal of the assessment order, it is evident that no such dissatisfaction as required for invoking Rule 8D was recorded by the Assessing Officer while making addition under Section 14A ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 14 - of the Act. Accordingly, the Ld. CIT(A) allowed the appeal of the assessee with the following observation:- “5.2 As to the disallowance of Rs.2,11,84,097/- U/S.14A rwr 8D, it is submitted by the appellant that it had earned dividend income of Rs.20,34,81,539/- and had self disallowed Rs.11,27,938/- as expenses U/S.14A in the return of income towards administrative expenditure for managing the portfolio whereas the AO calculated the disallowance U/S.14A at Rs.2,23,12,035/- by applying the provisions of Rule 8D for which the AO did not provide any cogent reasons for not accepting the method of disallowance worked out by the appellant whereas the AO was required to examine the accounts of the appellant and then if not satisfied with correctness of claim, to invoke Rule 8D but the AO has presumed the average value of investment at 0.5% of the total value without any examination and in violation of provisions of Rule 8D. It is the case of the appellant that its self disallowance is worked out in scientific and systematic manner after considering the time devoted by the employees and stationery expenses expended for earning said dividend income and that all the investments are in demat form and dividends are electronically credited to its bank a/c and that appellant is not required to enter any expenditure for earning the dividend on its investment. For the purpose appellant has relied on host of case laws as already reproduced. 5.3 From the perusal of provisions of Section 14A and Rule 8D it is seen that while the expenditure incurred by an assessee in relation to income which does not form part of total income shall be disallowed and that the AO shall determined the amount of expenditure in relation to such exempt income in accordance with method prescribed under Rule 8D of Income Tax Rules only if the AO, having regard to the accounts of the assessee, is not satisfied with the correctness of claim of the assessee in respect of such expenditure. From the perusal of the assessment order it is evident that no such dissatisfaction as required for invoking Rule 8D has been made out by the AO. It is also noted that the appellant has given justification for its working of Rs. 11,27,938/- self disallowed U/S.14A and same was not accepted by the AO on mere surmises. Under the circumstances I find no basis to sustain the addition made by the AO under Section 14A rw Rule 8D. The addition of Rs.2,11,84,097/- is directed to be deleted. Related ground succeeds.” 18. Before us, the Ld. D.R. placed reliance on the observations made by the Ld. AO in the assessment order. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 15 - 19. In response, the Counsel for the assessee placed reliance on the decision of Nirma Chemical Works Ltd. in Tax Appeal No. 1280 of 2019 and also on the case of Sherno Ltd. 102 taxmann.com 129 (Gujarat), wherein the Gujarat High Court held that the mere fact that the assessee availed of mixed funds that is interest free as well as interest bearing funds and utilized them for making investment and securities earning tax free income, applicability of Section 14A r.w.r. 8D would not be automatic. 20. We have heard the rival contention and perused the material on record. 21. Looking into the instant facts, we observe that it is not a case where the Assessing Officer has not considered the method of disallowance of Rs. 11,27,938/- which was suo moto disallowed by the assessee. The Assessing Officer has considered the computation of disallowance made by the assessee and rejected the same on the ground that the method of disallowance is not in consonance with the method prescribed under Rule 8D of the Income Tax Rules. Accordingly, looking into the facts of the case, in the interest of justice, the matter is being restored to the file of the Assessing Officer to (a) firstly analyze whether the assessee is having sufficient interest free funds at it’s disposal for making the investment in instruments yielding interest free income and in case the interest free funds available with the assessee were sufficient to cover the investments made by the assessee amounting to Rs. 20.34 crores, then no disallowance is called for with respect to interest expenses, and (b) with respect to administrative expenses, the Assessing Officer may consider the issue afresh (we are of the view the Ld. AO did make a specific observation on why he rejected the suo ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 16 - moto disallowance made by AO since such disallowance was no in accordance with Rule 8D) and the Ld. AO is directed to pass appropriate order in accordance with law and make disallowance only if there is any infirmity found in the suo moto disallowance made by the assessee. 22. In the result, Ground No. 1 of the Department’s appeal is allowed for statistical purposes. 23. In the result, the appeal of the Department is allowed for statistical purposes. ITA No. 187/Ahd/2019(A.Y. 2014-15) (Assessee’s appeal) 24. The assessee has raised the following grounds of appeal:- “Item No. I: Disallowance of Expenses U/s. 14A r.w.r. 8D of the Act Rs. 2,54.23,353/- (Disallowance as Per Assessment Order Rs.2,67.65,962/- Less: Already Disallowed in the return Rs. 13,42,609/-) 1.1 The Learned CIT(A) has grossly erred in law and facts in partly upholding the decision of the learned A.O. regarding disallowance of expenses U/s. 14A of the Act Rs.2,54,23,353/-(Disallowance as Per Assessment Order Rs. 2,67,65,962/- Less: Already Disallowed in the return Rs. 13,42,609/-). 1.2 The learned CIT(A) has grossly erred in stating that at point no. 4.2 at Page no. 5 & 6 that "I have considered the facts of the case, assessment order and the submission made by the appellant. It is noticed that similar issue had been dealt by my Id. predecessor for AY 2012-13, wherein vide order no. CIT(A)/GNR/549/2016- 17 dated 16/06/2017 has held as under: "4.3 I have considered the facts of the case, assessment order and submission made by the appellant. On careful consideration of the facts and observation of AO and contention of Appellant, I observe that Appellant has made investment and earned dividend income which is claimed exempt. Appellant ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 17 - has not established any nexus between utilisation of interest - free funds and such investment hence argument of Appellant that it had not incurred any interest expenses cannot be accepted in view of Rule 8 D brought to Statute by Assessment Year 2008 - 09. The decisions relied upon by Appellant in support of this contention are related to assessment years in which Rule 8D was not on Statute hence ratio of these decision scan not be made applicable in current year. Further it is observed that as Appellant has earned exempt dividend income, AO was correct in making disallowance under Section 14A. It is also noted that CIT(A) - 4 in the case of the appellant for AY 2011 - 12 had rejected the contention so the appellant and addition made by the AO has been confirmed. Thus, disallowance under Section 14A read with Rule 8D of Rs.2,63,39,012/ - is confirmed. This ground of appeal is dismissed." Since the issue has been decided against the appellant in the preceding year, I find no reason to deviate from the decision taken by my Id. predecessor when the facts are similar. Therefore, it is held that the AO is justified in making addition of Rs.2,54,23,353/- and is confirmed. Ground of no. 1 appeal is confirmed." 1.3 The learned CIT(A) has grossly erred in not appreciating that provisions of Rule 8D is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic base Rs. 13,42,609/- as the amount inadmissible u/s. 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income. The learned CIT(A) has further erred in not appreciating the fact that the learned A.O. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant in relation to expenses incurred by the appellant for earning exempt income and hence Rule 8D should not be applied. 1.4 The learned CIT(A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest- bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made. 1.5 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case (erstwhile GGCL) for A.Y. 04- 05 wherein Hon'ble ITAT has deleted the aforesaid disallowance. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 18 - 1.6 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad & Hon'ble Gujarat High Court in the appellant's own case (erstwhile GGCL) for A.Y. 05-06 wherein Hon'ble ITAT & Hon'ble Gujarat High Court have decided the matter in favour of the appellant. 1.7 The appellant further respectfully states that the impugned disallowance U/s. 14A Rs. 2,54,23,353/-(Rs.2,67,65,962/- Disallowance as per Assessment Order Less: Rs.13,42,609/- Already disallowed in the return) as made by the learned CIT(A) being contrary to law may kindly be deleted. Item No. II: Initiation of Penalty Proceedings U/s. 271(1)(c) of the Act:” 2.1 The learned CIT(A) has grossly erred in law and on facts in initiating penalty proceedings under Section 271(1)(c) of the Act. 2.2 The appellant states that initiation of penalty proceedings is clearly contrary to law and the same may kindly be quashed. 3. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.” 25. In view of our observations made for A.Y. 2013-14 with respect to similar issue and the directions given for A.Y. 2013-14, the matter is being restored to the file of Assessing Officer for carrying out the necessary verification and pass order in accordance with law. 26. In the result, the assessee’s appeal is allowed for statistical purposes. ITA 379/Ahd/2019 (A.Y. 2014-15)(Department’s Appeal) 27. The Department has raised the following grounds of appeal:- “4. The ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.2,54,23,353/- made by the AO to the book profit despite allowing the addition to the normal income. 5. It is, therefore prayed that the order of the Ld. Commissioner of Income-tax(Appeals) may be set aside and that of the Assessing Officer be restored. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 19 - 6. The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary.” 28. The brief facts of the case are that Ld. CIT(A) deleted the addition of Rs. 2,54,23,353/- made by the Assessing Officer to the book profit while allowing the addition to the normal income. The Ld. CIT(A) made the following observations while allowing the issue in favour of the assessee:- “6.2 I have carefully considered the rival contentions, case laws relied upon by the appellant as well as the observations of the assessing officer with regard to the calculation of book profit for the purpose of section 115JB of the Act. The AO has made an addition of Rs.2,54,23,353/- to the book profit of Rs.66,52,81,697/- and re-worked out the book profit at the enhanced figure of Rs.69,07,05,050/-. The appellant has contended that the said adjustment is not permissible in view of the provisions of section 115JB of the Act while relying on the decision of ACIT VS. Vireet Investment Pvt. Ltd. reported in ITA No.502/Del.2012 dated 16.02.2017. The copy of this judgement is also made available which has been carefully perused and considered. I have also come across several decisions of various high courts and tribunals in which the decisions in favour of the appellant have been rendered. Recently, the Hon'ble Tribunal of Ahmedabad Bench in the case of Gujarat Fluro Chemicals Ltd. Vs. DCIT Circle-1(1)(1), Vadodara reported in [2018] 97 Taxmann.com has decided the identical ground of appeal as raised in the present appeal. In that case, the Hon'ble Tribunal has, after considering the decisions rendered by the two Hon'ble High Courts of Gujarat and Mumbai, held that no adjustment on account of disallowance made u/s.14A of the Act is to be made. The relevant portion of this judgement is reproduced as under:- "Question No. 6 concerns deletion of addition of Rs. 89,00,000 made by the AO for computation of the income for the purposes of Minimum Alternate Tax (‘MAT’) under Section 115 JB of the Act. This pertained to the expenditure incurred for earning exempt income under Section 14A read with Rule 8D. The ITAT has rightly held that this, being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs. 89,00,000 was not justified. The view taken by the ITAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax 255ITR 273 (SO which held that "the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 20 - provided in the Explanation to Section 115J." The Court declines to frame a question on the above issue.'" 21. Apart from the above, we have a binding precedent before us - One from Hon'ble jurisdictional High Court and other from the Hon'ble Bombay High court. The question considered by the Hon'ble Gujarat High Court in the case of Alembic Ltd. (supra) is as under: "Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that adjustment made on account of disallowance u/s 14A of the Act in computation of book profit u/s 115JB of the Act is not as per law without appreciating that the amount disallowable under section 14A is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profits?" 22. The Hon'ble Gujarat High Court has replied this question as under: 7. So far as issue Nos. (iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income-tax-I v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat) where this court has held in paragraph Nos. 6 to 6.5 this court has observed as under: "6. So far as the fourth question is concerned, it pertains to addition of Rs.1,14,43,040/- under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the said provision of Sect/on 115JB(2) of the Act added the said amount considering that any amount of expenditure relatable to the income exempted under Section 10 of the Act shall need to be added in the profit shown in the 'Profit and Loss Account'. 6.2 When the matter travelled to the CIT (Appeals), since it deleted the addition of Rs.1,14,43,040/- while deciding the question No.1, it consequently deleted such addition under Section 115JB of the Act on the ground that this would not serve any purpose. 6.3 The Tribunal decided the said issue as follows: "94. We have considered the rival submissions and we find that similar issue was raised by Revenue as per ground No.3 above in ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 21 - respect of regular assessment of income and while deciding that ground, we have already upheld that disallowance of'Rs.5 lakh in respect of administrative expenses will meet the ends of justice and no disallowance is called for in respect of interest expenditure. Hence, for the purpose of computing book profit u/s 115 JB of the Act also, we hold accordingly and confirm the addition of Rs.5 lakh. This ground of Revenue's appeal is partly allowed." 6.4 As rightly held by both, the CIT (Appeals) and the Tribunal, this issue has a direct correlation with the first question. It was argued by the Revenue that while computing the book profit under Section 115JB of the Act, the disallowance of interest expenditure on exempt income was wrongly negatived by both the authorities on the ground that it was not the liability for expenses, but a liability relating to assets. 6.5 We find no fault in the approach adopted by both the authorities. The addition under Section 115JB of the Act of a sum ofRs.1,14,43,040/- when was made as an expenditure estimated on earning" of dividend income under Section 14A of the Act, without reiterating the rationale of confirming deletion of such amount as has been elaborately done at the time of deciding question No.1, this deletion requires to be confirmed." 8. Taking into consideration the evidence on record and considering the decision of this court in the case of Commissioner of Income-tax-1 v. Gujarat State Fertilizers & Chemicals Ltd. (supra), we are of the opinion that issue Nos. (Hi) and (iv) required to be answered in favour of the assessee and against the revenue. In that view of the matter, we answer questions (iii) and (iv) referred to us in favour of the assessee and against the revenue. The appeal of revenue is dismissed.' 23. Similarly, Hon'ble Bombay High Court has formulated following question in the case of Bengal Finance & Investments (P.) Ltd. (supra) and replied as under: (b) Whether on the facts and in the circumstances of the case, and in law, the ITAT is justified in deleting the addition of Rs. 78,84,387/under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd, v. CrTf2009) 32 SOT 101 {Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 22 - by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case?" 4 So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v. DCIT in TTA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue's Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law. 24. Respectfully following the above decision, we hold that no addition in the book profit would be made on the basis of calculations worked out under section 14A of the Act. We allow this ground of, appeal in both the years and delete the additions." 6.3 Respectfully following the above decision of the Hon'ble Tribunal of Ahmedabad Bench, the adjustment made to the book profit is directed to be deleted for the purpose of section 115JB of the Act. Thus, the ground of appeal in relation to adjustment of disallowed expenses U/S.14A of the Act is allowed.” 29. In our considered view, this issue has been decided in favour of the assessee by various Courts which are held that addition / disallowance made under Section 14A does not impact the computation of book profit under Section 115JB of the Act. The relevant judgments have also been reproduced by Ld. CIT(A) while allowing the appeal of the assessee. Accordingly, we find no infirmity in the order so as to call for any interference. 30. In the result, the appeal of the Department is dismissed for A.Y. 2014-15. ITA No. 188/Ahd/2019(A.Y. 2015-16)(Assessee’s Appeal) 31. The assessee has raised the following grounds of appeal:- ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 23 - “ITEM NO.I: Disallowance of expenses u/s. 14A r.w.r. 8D of the Act Rs. 3,87,65,215/-(Disallowance as per Assessment Order Rs. 4,03,96,682/- Less: Already Disallowed in the return Rs. 16,31,467/-). 1.1 The Learned CIT(A) has grossly erred in law and facts in partly upholding the decision of the learned A.O. regarding disallowance of expenses U/s. 14A of the Act Rs. 3,87,65,215/-(Disallowance as per Assessment Order Rs. 4,03,96,682/- Less: Already Disallowed in the return Rs. 16,31,467/-). 1.2 The learned CIT(A) has grossly erred in stating that at point no. 4.2 at Page no. 8 & 9 that "I have considered the facts of the case, assessment order and the submission made by the appellant. It is noticed that similar issue had been dealt by my Id. predecessor for AY 2012-13, wherein vide order no. CIT(A)/GNR/549/2016- 17 dated 16/06/2017 has held as under: "4.3 I have considered the facts of the case, assessment order and submission made by the appellant. On careful consideration of the facts and observation of AO and contention of Appellant, I observe that Appellant has made investment and earned dividend income which is claimed exempt. Appellant has not established any nexus between utilisation of interest - free funds and such investment hence argument of Appellant that it had not incurred any interest expenses cannot be accepted in view of Rule 8 D brought to Statute by Assessment Year 2008 - 09. The decisions relied upon by Appellant in support of this contention are related to assessment years in which Rule 3D was not on Statute hence ratio of these decision scan not be made applicable in current year. Further it is observed that as Appellant has earned exempt dividend income, AO was correct in making disallowance under Section 14A. It is also noted that CIT(A) - 4 in the case of the appellant for AY 2011 - 12 had rejected the contention so the appellant and addition made by the AO has been confirmed. Thus, upon by Appellant in support of this contention are related to assessment years in which Rule 8D was not on Statute hence ratio of these decision cannot be made applicable in current year. Further it is observed that as Appellant has earned exempt dividend income, AO was correct in making disallowance under Section 14A. It is also noted that CIT(A) - 4 in the case of the appellant for AY 2011 - 12 had rejected the contention so the appellant and addition made by the AO has been confirmed. Thus, disallowance under Section 14A read with Rule 8D of Rs.2,63,39,012/ - is confirmed. This ground of appeal is dismissed." Since the issue has been decided against the appellant in the preceding year, I find no reason to deviate from the decision taken by my Id. predecessor when ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 24 - the facts are similar. Therefore, it is held that the AO is justified in making addition of Rs.3,87,65,215/- and is confirmed. Ground of no.l of appeal is confirmed." 1.3 The learned CIT(A) has grossly erred in not appreciating that provisions of Rule 8D is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic base Rs. 16,31,467/- as the amount inadmissible u/s 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income. The learned CIT(A) has further erred in not appreciating the fact that the learned A.O. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant in relation to expenses incurred by the appellant for earning exempt income and hence Rule 8D should not be applied. 1.4 The learned CIT(A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest- bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made. 1.5 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case (erstwhile Gujarat Gas Company Limited - eGGCL) for A.Y. 04-05 wherein Hon'ble ITAT has deleted the aforesaid disallowance. 1.6 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad & Hon'ble Gujarat High Court in the appellant's own case (erstwhile GGCL) for A.Y. 05-06 wherein Hon'ble ITAT & Hon'ble Gujarat High Court have decided the matter in favour of the appellant. 1.7 The appellant further respectfully states that the impugned disallowance U/s. 14A Rs. 3,87,65,215/-(Disallowance as per Assessment Order Rs. 4,03,96,682/- Less: Already Disallowed in the return Rs. 16,31,467/-) as made by the learned CIT(A) being contrary to law may kindly be deleted. ITEM NO. II: Initiation Of Penalty Proceedings U/s. 271(1)(c) of the Act: 2.1 The learned CIT(A) has grossly erred in law and on facts in initiating penalty proceedings under Section 271(1)(c) of the Act. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 25 - 2.2 The appellant states that initiation of penalty proceedings is clearly contrary to law and the same may kindly be quashed. 3. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.” 32. In view of our observations made for A.Y. 2013-14 with respect to similar issue and the directions given for A.Y. 2013-14, the matter is being restored to the file of Assessing Officer for carrying out the necessary verification and pass order in accordance with law. 33. In the result, the assessee’s appeal is allowed for statistical purposes. ITA No. 380/Ahd/2019(A.Y. 2015-16)(Department’s Appeal) 34. The Department has raised the following grounds of appeal:- “1. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,87,65,215/- made by the AO to the book profit despite allowing the addition to the normal income. 2. It is, therefore prayed that the order of the Ld. Commissioner of Income – tax (Appeals) may be set aside and that of the Assessing Officer be restored. 3. The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary.” 35. Since the facts and the issues for consideration with respect to this issue are identical to Department’s appeal for A.Y. 2014-15 (ITA No. 279/Ahd/2019), in light of our observation made for A.y. 2014-15, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. 36. In the result, the Department’s appeal is dismissed for A.Y. 2015-16. ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 26 - ITA No. 1450/Ahd/2019(A.Y. 2016-17)(Assessee’s Appeal) 37. The assessee raised the following grounds of appeal:- “ITEM NO.I: Disallowance of expenses u/s. 14A r.w.r. 8D of the Act Rs. 2,30,53,648/-(Disallowance as per Assessment Order Rs. 2,34,24,713/- Less: Already Disallowed in the return Rs. 3,71,065/-). 1.1 The Learned CIT (A) has grossly erred in law and facts in upholding the decision of the learned A.O. regarding disallowance of expenses U/s. 14A of the Act Rs. 2,30,53,648/-(Disallowance as per Assessment Order Rs. 2,34,24,713/- Less: Already Disallowed in the return Rs. 3,71,065/-). 1.2 The learned CIT(A) has grossly erred in stating that at point no. 4.2 at Page no. 9 that, "4.2 I have considered the facts of the case, assessment order and the submission made by the appellant. It is noticed that similar issue had been dealt by my ld. predecessor for AY 2012-13, wherein vide order no. CIT(A)/GNR/549/2016-17 dated 16/06/2017 has held as under:- 4.3 I have considered the facts of the case, assessment order and submission made by the appellant. On careful consideration of the facts and observation of AO and contention of Appellant, I observe that Appellant has made investment and earned dividend income which is claimed exempt. Appellant has not established any nexus between utilisation of interest - free funds and such investment hence argument of Appellant that it had not incurred any interest expense scan not be accepted in view of Rule 8D brought to Statute by Assessment Year 2008 - 09. The decisions relied upon by Appellant in support of this contention are related to assessment years in which Rule 80 was not on Statute hence ratio of these decision scan not be made applicable in current year. Further it is observed that as Appellant has earned exempt dividend income, AO was correct in making disallowance under Section 14/4. It is also noted that CIT(A) - 4 in the case of the appellant for AY 2011-12 had rejected the contentions of the appellant and addition made by the AO has been confirmed. Thus, disallowance under Section 14A read with Rule 8D of Rs.2,63,39,012/ - is confirmed. This ground of appeal is dismissed. " Since the issue has been decided against the appellant in the preceding year, I find no reason to deviate from the decision taken by my Id. predecessor when the facts are similar. Therefore, it is held that the AO is justified in making ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 27 - addition of Rs.2,30,53,648/- and is confirmed. C^ Ground No. 1 of appeal is confirmed. " 1.3 The learned CIT (A) has grossly erred in not appreciating that provisions of Rule 8D is only applicable where the learned A.O. is not satisfied with the correctness of the claim of the appellant. The learned CIT(A) has failed to appreciate that appellant has identified on scientific and systematic base Rs. 3,71,065/- as the amount inadmissible u/s 14A in respect of expenditure of salary, wages and other administrative expenses (which includes stationery expenses, communication expenses and other overheads) incurred in relation to income which does not form part of total income. The learned CIT(A) has further erred in not appreciating the fact that the learned A.O. has nowhere in the body of the assessment order has recorded his dissatisfaction regarding the claim of the appellant in relation to expenses incurred by the appellant for earning exempt income and hence Rule 8D should not be applied. 1.4 The learned CIT (A) has not appreciated that appellant had made investments in securities yielding tax free income from its own surplus funds during the year under consideration and it did not borrow any interest- bearing funds to make investments hence there were no expenses incurred in relation to the exempt income and in turn no disallowance can be made. 1.5 The learned CIT(A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case (erstwhile GGCL) for A.Y. 04- 05 wherein Hon'ble ITAT has deleted the aforesaid disallowance. 1.6 The learned CIT (A) has failed to appreciate the findings of the Hon'ble ITAT, Ahmedabad in the appellant's own case (erstwhile GGCL) for A.Y. 05-06 wherein Hon'ble ITAT & Hon'ble Gujarat High Court have decided the matter in favour of the appellant and restricted the amount of disallowance at Rs. 6 Lakh i.e. disallowance U/s. 14A already made by the appellant on its own. 1.10 The appellant further respectfully states that the impugned disallowance U/s. 14A Rs. 2,30,53,648/- (Disallowance as per Assessment Order Rs. 2,34,24,713/- Less: Already Disallowed in the return Rs.3,71,065/-) as made by the learned CIT(A) being contrary to law may kindly be deleted. 2. The appellant reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.” ITA Nos. 165/Ahd/2021& 06 others Gujarat Gas Company Ltd. vs. DCIT Asst. Years –2013-14 to 2016-17 - 28 - 38. In view of our observations made for A.Y. 2013-14 with respect to similar issue and the directions given for A.Y. 2013-14, the matter is being restored to the file of Assessing Officer for carrying out the necessary verification and pass order in accordance with law. 39. In the result, the assessee’s appeal is allowed for statistical purposes. 40. In the combined result, the appeal of the Assessee is allowed for statistical purposes and the appeal of the Department is partly allowed for statistical purposes. This Order pronounced in Open Court on 11/10/2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 11/10/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 05&06.10.2023 2. Date on which the typed draft is placed before the Dictating Member 09.10.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 10.10.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .10.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 11.10.2023 7. Date on which the file goes to the Bench Clerk 11.10.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................