STERLITE TECHNOLOGIES LTD, PUNE V. ASST CIT LTU, MUMBAI

ITA 4383/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8391 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 23-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BISTDR
• Assessee Lawyers: B V JHAVERI
• Keywords: Business income; Earning of tax free income
• Section: 14A; 115JB; 80IB; 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.4383/MUM/2014 ASSESSMENT YEAR: 2010-11 STERLITE TECHNOLOGIES LIMITED, 4 TH FLOOR, GODREJ MILLENNIUM 9, KOREGAON ROAD, PUNE, MAHARASHTRA-411001, / VS. ACIT,(L.T.U.), 29 TH CENTRE NO. 1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBA-400001 ( '# $ /ASSESSEE) ( % / REVENUE) P.A. NO. AAECS8719B '# $ / ASSESSEE BY SHRI B.V. JHAVERI % / REVENUE BY SHRI B.S. BIST-DR & % ' $ ( / DATE OF HEARING : 13/02/2017 ' $ ( / DATE OF ORDER: 16/02/2017 STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 18/03/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. GROUND NO. 1.1 TO 1.05 PERTAINS TO DISALLOWANCE MAD E U/S 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE AC T) AS PER RULE-8D OF THE RULES OF RS.33,84,025/-. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI B.V. JHAVERI, ADVANCED ARGUMENTS WHICH IS IDEN TICAL TO THE GROUND RAISED BY CONTENDING THAT THE EXPENSES I N RELATION TO EXEMPT INCOME CANNOT EXCEED RS.2,40,000/- INCLUD ING INDIRECT EXPENSES AS THE INTEREST FREE OWN FUNDS/IN TERNAL ACCRUALS WERE FAR IN EXCESS OF INVESTMENTS YIELDING EXEMPT INCOME AND FURTHER INVOKING THE DISALLOWANCE OF RS. 6 LAKH TOWARDS ADMINISTRATIVE EXPENSES. IT WAS CONTENDED T HAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TR IBUNAL DATED 20/01/2017 (ITA NO.2139, 2140, 2029 AND 2030/MUM/2014). THIS FACTUAL MATRIX WAS NOT CONTROV ERTED BY THE LD. DR, SHRI B.S. BIST, EXCEPT BY PLEADING T HAT THE DISALLOWANCE WAS RIGHTLY MADE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE CO MING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RE LEVANT PORTION OF THE ORDER OF THE TRIBUNAL DATED 20/01/20 17 FOR READY REFERENCE AND ANALYSIS:- STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 3 THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDERS PAS SED BY THE LEARNED CIT(A)-24, MUMBAI AND THEY RELATE TO A.Y. 200 8-09 AND 2009-10. ALL THESE APPEALS WERE HEARD TOGETHER AND HEN CE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF TELECOM CABLES, TELECOMMUNICATION EQUIPMENTS, ALLY/ ALUMINUM CONDUCTORS AND NETWORKING SOLUTIONS. 3. WE SHALL FIRST TAKE UP THE APPEALS RELATING TO A.Y . 2008-09. AT THE TIME OF HEARING, LEARNED COUNSEL APPEARING FOR THE ASS ESSEE DID NOT PRESS GROUND NO. 1 & 2 URGED IN THE APPEAL OF THE ASSE SSEE AND HENCE THEY ARE DISMISSED AS NOT PRESSED. 4. GROUND NO. 3 URGED BY THE ASSESSEE RELATES TO THE Q UANTUM OF DEDUCTION ALLOWABLE U/S. 80IB AND 80IC OF THE ACT. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB TO THE TUNE OF RS. 22.5 9 CRORES IN RESPECT OF POWER TRANSMISSION DIVISION, RAKHOLI. IT AL SO CLAIMED DEDUCTION U/S. 80IC OF THE ACT TO THE TUNE OF RS. 8 .52 CRORES IN RESPECT OF POWER TRANSMISSION DIVISION, HARIDWAR. THE A O, WHILE COMPLETING THE ASSESSMENT DETERMINED THE BUSINESS IN COME OF THE ASSESSEE AFTER SETTING OFF OF BROUGHT FORWARD LOSS AT R S. 4,04,32,385/-. THE GROSS TOTAL INCOME OF THE ASSESSE E CAME TO BE COMPUTED AT RS. 6,53,71,905/-. THE ASSESSING OFFICE R, BY PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF SYNCO INDUSTRIES LTD. (2008) 299 ITR 444 AND ALSO PRO VISIONS OF SECTION 80AB OF THE ACT, TOOK THE VIEW THAT THE AGG REGATE AMOUNT OF DEDUCTION ALLOWABLE U/S. 80IB AND 80IC OF THE AC T SHOULD BE RESTRICTED TO THE AMOUNT OF BUSINESS INCOME COMPUTE D. ACCORDINGLY, HE RESTRICTED THE AGGREGATE AMOUNT OF DEDU CTION UNDER BOTH SECTIONS OF RS. 4,04,32,385/-. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US WITH THE CONTENTION THAT THE AGGREGATE AMOU NT OF DEDUCTION U/S 80IB AND 80IC SHOULD BE RESTRICTED TO T HE AMOUNT OF GROSS TOTAL INCOME. 5. LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFI CER HAS COMPUTED ALLOWABLE AMOUNT OF DEDUCTION U/S. 80IB TO THE TUNE OF RS. 21.97 CRORES ANDU/S. 80IC TO THE TUNE OF RS. 7.9 2 CRORES. HOWEVER, THE ASSESSING OFFICER HAS RESTRICTED THE AGGRE GATE AMOUNT OF DEDUCTION TO THE AMOUNT OF BUSINESS INCOM E INCLUDED IN THE GROSS TOTAL INCOME. BY PLACING RELIANCE ON THE DE CISION RENDERED BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF V.M. SALGAOCAR & BROTHER PVT. LTD. (TAX APPEAL NO. 25 OF 20 07 DATED STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 4 22.4.2015), LEARNED COUNSEL SUBMITTED THAT THE MAXIM UM AMOUNT ALLOWABLE U/S. 80IB & 80IC OF THE ACT SHOULD BE REST RICTED TO THE AMOUNT OF GROSS TOTAL INCOME AND NOT TO THE AMOUNT OF BUSINESS INCOME INCLUDED THEREIN, AS HELD BY THE TAX AUTHORI TIES. HE FURTHER SUBMITTED THAT IDENTICAL VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASES OF TRIDOSS LABORATORIES LTD. (328 ITR 448), M/S. ESKAY KNIT (INDIA) LTD. (I.T. APPEAL NO. 184 OF 2007 DATED 25.3.2010) AND ALSO BY OTHER HIGH COURTS. 6. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE SUPREME CO URT IN THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA) AND SUBMITTED T HAT THE TAX AUTHORITIES WERE RIGHT IN RESTRICTING THE DEDUCTION TO T HE AMOUNT OF INCOME FROM BUSINESS INCLUDED IN THE GROSS TOTAL INC OME. 7. WE HEARD THE PARTIES ON THIS ISSUE. WE NOTICE THAT THE AO HAS PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE SU PREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD (SUPRA) IN ORDER TO RESTRICT THE AMOUNT OF DEDUCTION TO THE AMOUNT OF BUSINESS INCOM E INCLUDED IN THE GROSS TOTAL INCOME. A CAREFUL PERUSAL OF THE ABOVE SAID DECISION WOULD SHOW THAT THE HONBLE SUPREME COURT HAS ONLY S TATED THAT THE BROUGHT FORWARD LOSSES HAVE TO BE SET OFF AS PER LA W IN ORDER TO ARRIVE AT THE GROSS TOTAL INCOME. THE CONTENTION OF TH E ASSESSEE BEFORE HONBLE SUPREME COURT WAS THAT THE DEDUCTION U/ S 80I OF THE ACT SHOULD BE ALLOWED FIRST AND THEN ONLY THE GRO SS TOTAL INCOME HAS TO BE COMPUTED AND IT WAS REJECTED BY THE HONBLE SUPREME COURT. 8. THE PROVISIONS OF SEC.80A(2) STATES THAT THE AGGRE GATE AMOUNT OF THE DEDUCTIONS UNDER CHAPTER VIA SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTALINCOME OF THE ASSESSEE. THE EXPRESSION GROSS TOTAL INCOME HAS BEEN DEFINED IN SEC. 80B(5) OF THE ACT TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIO NS OF THE ACT BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI-A OF THE ACT. THE HONBLE SUPREME COURT IN THE ABOVE CITED CASE HEL D THAT THE LOSSES SUFFERED SHOULD BE ADJUSTED WHILE WORKING OUT GROSS TOTAL INCOME AND IF THE GROSS TOTAL INCOME IS NIL, THEN TH E ASSESSEE SHALL NOT BE ENTITLED TO DEDUCTION UNDER CHAPTER VI-A. WE N OTICE THAT THE HONBLE SUPREME COURT HAS NOT DECIDED THE ISSUE AS TO WHETHER THE AGGREGATE AMOUNT OF DEDUCTION SHOULD BE RESTRICTED TO THE AMOUNT OF BUSINESS INCOME OR GROSS TOTAL INCOME. 9. THE LD CIT(A) HAS TAKEN SUPPORT OF THE PROVISIONS OF SEC. 80AB TO COME TO THE CONCLUSION THAT THE INCOME REFERRED TO IN SEC. 80IB AND 80IC IS THE PROFITS AND GAINS OF THE UNDERTAKINGS INC LUDED IN THE STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 5 GROSS TOTAL INCOME. ACCORDINGLY THE LD CIT(A) HAS HEL D THAT THE AGGREGATE AMOUNT OF DEDUCTION ALLOWABLE U/S 80IB AND 80IC CANNOT EXCEED THE BUSINESS INCOME, SINCE IT IS THE AMOUNT OF PROFITS AND GAINS INCLUDED IN THE GROSS TOTAL INCOME. IN OUR VIEW, THE LD CIT(A) HAS MISDIRECTED HIMSELF IN INTERPRETING THE PRO VISIONS OF SEC.80AB OF THE ACT. A STUDY OF HISTORY OF PROVISION S OF SEC. 80AB AND ITS PREDECESSOR 80AA WOULD SHOW THAT THE SAME IS INTENDED TO REFER TO THE NET INCOME, I.E., (GROSS INCOME LESS EX PENSES) INCLUDED IN THE GROSS TOTAL INCOME. THE INTENTION OF THE PARLIAMENT IS THAT THE DEDUCTION PRESCRIBED IN CHAPTER VI-A SHOUL D BE ALLOWED ON THE NET INCOME INCLUDED IN THE GROSS TOTAL INCOME AND NOT ON THE GROSS INCOME DERIVED BY THE ASSESSEE. 10. THE ADJUSTMENT OF BROUGHT FORWARD LOSSES FOR THE PU RPOSE OF ARRIVING INCOME FROM BUSINESS, IN OUR VIEW, CANNOT B E COME IN THE CATEGORY OF DETERMINING THE NET INCOME OF THE EL IGIBLE UNDERTAKING FOR THE YEAR UNDER CONSIDERATION, SINCE THE BROUGHT FORWARD LOSSES CANNOT BE CONSIDERED TO BE EXPENSES INC URRED TO EARN THE PROFITS AND GAINS OF ELIGIBLE UNDERTAKINGS. T HE ADJUSTMENT OF BROUGHT FORWARD LOSSES IS THE PROCESS PRESCRIBED BY TH E STATUTE TO DETERMINE THE GROSS TOTAL INCOME. HENCE WE ARE O F THE VIEW THAT, FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION, THE PROFITS AND GAINS OFELIGIBLE BUSINESS OF ELIGIBLE UN DERTAKING SHOULD BE CONSIDERED BEFORE SETTING OFF OF BROUGHT FORWARD LOS SES, BUT THE DEDUCTION SHOULD RESTRICTED TO THE AMOUNT OF GROSS TO TAL INCOME AS PER THE PROVISIONS OF SEC. 80A(2) OF THE ACT. OUR V IEW IS SUPPORTED BY THE BINDING DECISIONS RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASES REFERRED SUPRA. ACCORDINGLY WE SE T ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE AGGREGATE AMOUNT OF DEDUCTION U/S 80IB AND 80IC OF THE ACT TO THE AGGREGATE AMOUNT OR THE GROSS TOTAL INCOME, WHICH EVER IS LESS. 11. THE NEXT ISSUE CONTESTED BY THE ASSESSEE AS WEL L AS THE REVENUE RELATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE ASSESSEE RECEIVED A DIVIDEND INCOME OF RS.4,35,008/- AND CLAI MED THE SAME AS EXEMPT. THE ASSESSEE DID NOT DISALLOW ANY EXPEND ITURE RELATABLE TO EXEMPTED INCOME AS PER THE PROVISIONS OF SEC.14A O F THE ACT. THE AO COMPUTED THE DISALLOWANCE AS PER RULE 8D OF T HE I.T RULES AND ACCORDINGLY DISALLOWED INTEREST EXPENSES TO THE T UNE OF RS.23,85,447/- AND ADMINISTRATIVE EXPENSES TO THE TU NE OF RS.3,08,000/-. THE LD CIT(A) DELETED THE DISALLOWAN CE OF INTEREST EXPENSES BY HOLDING THAT NO PART OF INTEREST BEARING F UNDS HAVE BEEN USED TO MAKE INVESTMENTS. HE CONFIRMED THE DIS ALLOWANCE OF STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 6 ADMINISTRATIVE EXPENSES. BOTH THE PARTIES ARE AGGRIEVED BY THE DECISION OF LD CIT(A) ON THE ISSUES DECIDED AGAINST EACH OF THEM. 12. WE HEARD THE PARTIES ON THIS ISSUE. A PERUSAL OF BALANCE SHEET AS AT 31.3.2008 WOULD SHOW THAT THE INTEREST FREE FUN DS HELD BY THE ASSESSEE (RS.539.51 CRORE) AS ON 31.3.2008 IS IN FAR E XCESS OF THE AMOUNT OF INVESTMENTS (RS.6.01 CRORES). SIMILAR IS TH E POSITION IN THE EARLIER YEAR ALSO. HENCE, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF HDFC BANK LT D (366 ITR 505), THERE IS NO REQUIREMENT TO MAKE INTEREST DISALLOW ANCE UNDER RULE 8D(2)(II) OF THE IT RULES. ACCORDINGLY WE CONFIR M THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 13. WITH REGARD TO THE EXPENSES, WE NOTICE THAT THE A SSESSEE HAS MADE INVESTMENT ONLY IN ITS SUBSIDIARY COMPANIES DURI NG THE YEAR UNDER CONSIDERATION. IN THE PRECEDING YEAR, IT HAD AL SO MADE INVESTMENT IN UNITS OF TWO MUTUAL FUNDS AND THEY HA VE BEEN SOLD DURING THE YEAR UNDER CONSIDERATION. THE LD A.R SUBMIT TED THAT THERE IS NO REQUIREMENT TO APPLY THE PROVISIONS OF RULE 8D, WHEN THESE SPECIFIC DETAILS ARE AVAILABLE ON RECORD. HE SUB MITTED THAT THE ASSESSEE ITSELF HAS WORKED OUT ALLOCABLE EXPENSES AT RS.1,65,000/- AND ACCORDINGLY PRAYED THAT THE DISALLOWANCE MAY BE RE STRICTED TO THE ABOVE SAID AMOUNT. ON A CAREFUL PERUSAL OF THE SU BMISSIONS MADE BY THE ASSESSEE AND THE LD D.R, WE FIND MERIT I N THE SUBMISSIONS MADE BY LD A.R. WE HAVE NOTICED THE NAT URE OF INVESTMENTS AND THE VOLUME OF TRANSACTIONS. CONSIDERI NG THESE FACTUAL DETAILS, WE ARE OF THE VIEW THAT THE DISALLO WANCE OF RS.1,65,000/- IS REASONABLE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES U/S 14A TO R S.1,65,000/-. 14. THE NEXT GROUND URGED BY THE ASSESSEE RELATES TO T HE ADDITION OF AMOUNT DISALLOWED U/S 14A TO THE BOOK PROFIT COMP UTED U/S 115JB OF THE ACT. WE DIRECT THE AO TO ADD THE AMOUNT DISALLOWED U/S 14A OF THE ACT UNDER THE NORMAL PROVISIONS OF THE ACT TO BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. 15. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REV ENUE FOR AY 2008-09. THE FIRST RELATES TO THE RELIEF GRANTED BY LD CIT(A) IN RESPECT OF ADDITION MADE U/S 14A OF THE ACT. WE HAVE ALREADY DECIDED THIS ISSUE BY CONFIRMING THE ORDER PASSED BY L D CIT(A) IN THE PRECEDING PARAGRAPHS. 16. THE NEXT ISSUE URGED BY THE REVENUE RELATES TO THE RELIEF GRANTED BY LD CIT(A) IN RESPECT OF ESOP EXPENSES. THE ASSESSEE STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 7 CLAIMED DEDUCTION OF A SUM OF RS.4.47 CRORES RELATING TO THE DISCOUNT GIVEN ON THE STOCK OPTION ISSUED TO EMPLOY EES. THE AO NOTICED THAT IDENTICAL ISSUE WAS CONSIDERED IN THE P RECEDING YEARS AND THE ASSESSING OFFICER HAD TAKEN THE VIEW THAT TH E EXPENDITURE HAS NOT CRYSTALLIZED AND ACCORDINGLY DISALLOWED THE C LAIM. ACCORDINGLY, BY FOLLOWING THE VIEW TAKEN IN THE EARLI ER YEARS, THE AO DISALLOWED THE CLAIM. THE LD CIT(A) NOTICED THAT THE ITAT HAS DECIDED IDENTICAL ISSUE IN THE ASSESSEES OWN CASE IN AY 2002-03 (ITA NO.3889/MUM/2006 DATED 19- 01-2009 IN ASSESSEE S FAVOUR BY FOLLOWING DECISION RENDERED IN AY 2001-02 (ITA NO. 7136 & 7177/MUM/04 DATED 08-01-2008). ACCORDINGLY HE DIRECTE D THE AO TO ALLOW THE CLAIM RELATING TO ESOP EXPENSES. 17. BEFORE US, THE LD D.R RELIED UPON THE ASSESSMENT ORDER, WHILE THE LD A.R PLACED RELIANCE ON THE DECISIONS RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE. 18. WE HEARD THE PARTIES ON THIS ISSUE. WE NOTICE THA T AN IDENTICAL ISSUE WAS CONSIDERED BY THE SPECIAL BENCH OF BANGALO RE IN THE CASE OF M/S BIOCON LIMITED VS. DCIT (ITA NO.368/B/2010 D ATED 18-07- 2013)(25 ITR (TRIB) 602) AND THE SPECIAL BENCH HAS H ELD THAT THE DISCOUNT ON ESOP IS ALLOWABLE AS DEDUCTION. THE SPE CIAL BENCH HAS ALSO PRESCRIBED THE MANNER OF COMPUTATION OF DISCOUNT AND THE ADJUSTMENTS TO BE MADE IN THE SUCCEEDING YEARS. THERE SHOULD NOT BE ANY DISPUTE THAT THE DECISION RENDERED BY THE LARGE R BENCH OF TRIBUNAL IS REQUIRED TO BE PREFERRED OVER THE DIVISION BEN CH. ACCORDINGLY WE ARE OF THE VIEW THAT THIS ISSUE REQUIRE S FRESH EXAMINATION IN ACCORDANCE WITH THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF BIOCON LTD (SUPRA). ACC ORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO COM PUTE THE DEDUCTION IN ACCORDANCE WITH THE METHOD PRESCRIBED BY THE SPECIAL BENCH IN THE DECISION REFERRED SUPRA. THE ASSESSEE IS D IRECTED TO FURNISH THE DETAILS THAT MAY BE CALLED FOR BY THE AO IN THIS REGARD. 19. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE AS SESSEE FOR AY 2009-10. THE FIRST ISSUE URGED BY THE ASSESSEE RELATES TO THE CLAIM FOR DEDUCTION U/S 80IC OF THE ACT ON THE RECEIPTS FROM SALE OF SCRAP. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSE E IN THE FOLLOWING CASES:- (A) CIT VS. SADHU FORGING LTD (336 ITR 444)(DELHI) (B) CIT VS. HARJIVANDAS JUTHABHAI ZAVERI (258 ITR 78 5)(GUJ) FOLLOWING THE ABOVE SAID DECISION, WE SET ASIDE THE ORDER PASSED BY STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 8 LD CIT(A) AND DIRECT THE AO TO ALLOW DEDUCTION U/S 8 0IC OF THE ACT ON THE RECEIPTS FROM SALE OF SCRAP. 20. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO T HE DISALLOWANCE MADE U/S 14A OF THE ACT. THE REVENUE HA S ALSO URGED THIS ISSUE IN RESPECT OF RELIEF GRANTED BY THE LD CIT( A). DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED DIVIDE ND INCOME OF RS.38,20,962/- AND CLAIMED THE SAME AS EXEMPT. THE AO COMPUTED THE DISALLOWANCE AS PER RULE 8D OF THE IT RULES AND ACCORDINGLY DISALLOWED A SUM OF RS.70,73,247/- TOWARDS INTEREST E XPENSES AND RS.9,00,500/- TOWARDS ADMINISTRATIVE EXPENSES. THE LD CIT(A) DELETED THE DISALLOWANCE OF INTEREST ON NOTICING THA T THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IS IN FAR EXCE SS OF THE AMOUNT OF INVESTMENTS. HOWEVER, THE LD CIT(A) CONFI RMED THE DISALLOWANCE MADE TOWARDS ADMINISTRATIVE EXPENSES. 21. WITH REGARD TO THE DISALLOWANCE MADE OUT OF INTERE ST EXPENSES, WE NOTICE THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE (RS.620.94 CRORES) ARE IN EXCESS OF THE AMOUNT OF INVE STMENTS (RS.92.01 CRORES). HENCE NO DISALLOWANCE IS REQUIRED T O BE MADE IN VIEW OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD (SUPRA). ACCORDINGLY WE CONFIRM THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. WITH REGARD TO THE DISALLOWANCE MADE OUT OF ADMINISTRATIVE EXPENSES, WE NOTICE THAT THE ASSESSEE HAS BROUGHT FORWARD THE AMOUNT OF INVESTMENT OF RS.6.0 1 CRORES MADE IN THE SUBSIDIARY COMPANY FROM THE PRECEDING YEA R. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE FRE SH INVESTMENT IN THE UNITS OF VARIOUS MUTUAL FUNDS. UND ER THESE SET OF FACTS, AS OPINED BY US IN THE PRECEDING AY, WE ARE OF THE VIEW THAT THERE IS NO REQUIREMENT TO APPLY THE PROVISIONS OF RULE 8D IN VIEW OF THE SPECIFIC DETAILS AVAILABLE ON RECORD. THE ASSE SSEE HAS FURNISHED A WORKING AS PER WHICH A SUM OF RS.2.00 LAKH S HAS BEEN WORKED OUT AS DISALLOWANCE U/S 14A OF THE ACT. A PERU SAL OF THE SAME WOULD SHOW THAT THE ASSESSEE HAS ALLOCATED A P ORTION OF SALARY EXPENSES AND ADMINISTRATIVE EXPENSES. ON THE C ONSIDERATION OF FACTS RELATING TO THIS YEAR, WE ARE OF THE VIEW TH AT THE DISALLOWANCE OF RS.2.00 LAKHS WORKED OUT BY THE ASS ESSEE APPEARS TO BE REASONABLE. ACCORDINGLY WE SET ASIDE THE ORDER PA SSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A OF THE ACT TO RS.2.00 LAKHS. 22. THE AO IS ALSO DIRECTED TO MAKE ADDITION OF RS.2 .00 LAKHS TO THE BOOK PROFIT UNDER CLAUSE (C) OF EXPLANATION 1 TO 115 JB OF THE ACT, AS HELD BY US IN THE PRECEDING YEAR WHILE ADJUDICATING I DENTICAL ISSUE. STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 9 23. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REV ENUE FOR AY 2009-10. THE ISSUES URGED THEREIN ARE IDENTICAL TO TH E ONE URGED IN AY 2008-09. HOWEVER, THE REVENUE HAS INADVERTENTLY ME NTIONED THE FIGURES RELATING TO ASSESSMENT YEAR 2008-09 IN THE GROUNDS URGED FOR AY 2009-10. 24. THE FIRST ISSUE RELATES TO THE RELIEF GRANTED BY LD CIT(A) ON THE ADDITION MADE U/S 14A OF THE ACT. IN THE EARLIER PARAG RAPHS WE HAVE CONFIRMED THE ORDER PASSED BY LD CIT(A) ON THIS I SSUE. ACCORDINGLY WE REJECT THIS GROUND OF THE REVENUE. 25. THE NEXT ISSUE URGED BY THE REVENUE RELATES TO THE DISALLOWANCE OF ESOP EXPENSES. THE AO DISALLOWED A SUM OF RS.68, 21,137/- DURING AY 2009-10. THE LD CIT(A) DELETED THE SAME BY FOLLOWING THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSEES OWN CA SE FOR EARLIER YEARS. WE HAVE CONSIDERED AN IDENTICAL ISSUE IN AY 20 08-09 IN THE PRECEDING PARAGRAPHS AND RESTORED THIS MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THIS ISSUE BY FOLLOWING THE DECISION RENDERED BY THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF BIOCON LIMITED (SUPRA). CONSISTENT WITH THE VIEW TAKEN THERE IN, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH IDENTICAL DIRECTIONS . 26. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND BOTH THE APPEALS OF THE REVENUE ARE TREATED AS PARTLY A LLOWED. 2.2. IN THE LIGHT OF THE FOREGOING DISCUSSION AND THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT AN ELABO RATE DISCUSSION HAS BEEN MADE BY THE TRIBUNAL IN THE AFO RESAID ORDER DATED 20/01/2017 FOR ASSESSMENT YEAR 2008-09 AND 2009-10 (REPRODUCED ABOVE), IN THE CASE OF ASSESSEE ITSELF, WHEREIN, THE DISALLOWANCE OF RS.1,65,000/- WAS FOUN D TO BE REASONABLE. IN THE PRESENT APPEAL, SINCE, THERE IS INCREASE IN THE VOLUME OF INVESTMENT, THEREFORE, ON IDENTICAL L INES THE DISALLOWANCE IS RESTRICTED TO RS.2,40,000/-, AS AGR EED FROM BOTH SIDES, THEREFORE, THIS GROUND OF THE ASSESSEE IS DISPOSED OF IN TERMS INDICATED HEREINABOVE. STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 10 3. SO FAR AS, GROUND NO. 2 & 3 ARE CONCERNED, THE SE WERE ARGUED TO BE CONSEQUENTIAL IN NATURE. THE LD. DR ALSO CONSENTED THAT THE THESE ARE CONSEQUENTIAL IN NATUR E. CONSIDERING THE FACTUAL MATRIX, ARGUMENTS FROM BOTH SIDES, WE HELD THAT BOTH THESE GROUNDS ARE CONSEQUENTIAL T O GROUND NO. 1, DISCUSSED HEREINABOVE. 4. GROUND NO. 4 IS WITH RESPECT TO INTEREST U/S 23 4C OF THE ACT. IT WAS ALSO ARGUED TO BE CONSEQUENTIAL IN NATURE. IN THE LIGHT OF THE FOREGOING DISCUSSION, THIS GROU ND IS HELD TO BE CONSEQUENTIAL IN NATURE. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND DISPOSED OFF IN TERMS INDICATED HEREINABOVE. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 13/02/2017. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & MUMBAI; * DATED : 16/02/2017 F{X~{T? P.S / +% !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 & 2$ ( ,- ) / THE CIT, MUMBAI. 4. 1 1 & 2$ / CIT(A)- , MUMBAI 5. 4%5$ , 1 ,-(, 6 , & / DR, STERLITE TECHNOLOGIES LIMITED ITA NO.4383/MUM/2014 11 ITAT, MUMBAI 6. 7'8 / GUARD FILE. ! / BY ORDER, 04-$$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI,