M/S. JINDAL SAW LTD.,DELHI V. DCIT, NEW DELHI

ITA 2758/DEL/2015

AI Insights

The case involves Jindal Saw Ltd, which appealed against the orders of the Commissioner of Income Tax (Appeals) concerning the assessment years 2007-08 and 2008-09. The appeals were related to the treatment of certain government incentives received by the company as part of the Incentive Scheme for the economic development of the Kutch District following the 2001 earthquake. The main legal issue was whether the excise duty refund, sales tax remission, and VAT/input tax refund received by the company should be treated as capital receipts, which are not chargeable to tax, or as revenue receipts, which are taxable. The Tribunal found that the incentives were intended to promote industrial development and generate employment, thus should be treated as capital receipts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314315 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Other Referred Cases: Goetze (India) Limited vs CIT, CIT vs Ponni Sugars and Chemicals Ltd, SAL Steel Limited vs Union of India, CIT vs R.R. Sen & Brothers P Ltd, Taparia Tools Ltd vs JCIT, South Indian Bank Ltd vs CIT, CIT vs S.K Tekriwal
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ROHIT JAIN
• Keywords: Capital receipt; TDS; Earning of tax free income; Rule 8D
• Section: 143(3); 2; 14A; 201(1); 40(a)(ia); 194C

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA Nos. 2758 & 2759/Del/2015 (Assessment Years: 2007-08 & 2008-09) Jindal Saw Ltd, 28, Najafgarh Road, Delhi-110015 Vs. DCIT, Circle-13(2), Delhi (Appellant) (Respondent) PAN: AABCS7280C ITA Nos. 3016 & 3017/Del/2015 (Assessment Years: 2007-08 & 2008-09) DCIT, Circle-13(2), Delhi Vs. Jindal Saw Ltd, (formerly known as M/s. Sar Pipe Ltd) 28, Najafgarh Road, Delhi-110015 (Appellant) (Respondent) PAN: AABCS7280C Assessee by : Shri Rohit Jain, Adv Shri Tavish Verma, Adv Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR Shri Sanjay Kumar, Sr. DR Date of Hearing 07/01/2025 & 25/04/2025 Date of pronouncement 07/05/2025 O R D E R PER BENCH: 1. The appeal in ITA Nos. ITA Nos. 2758 & 2759/Del/2015 filed the assessee and ITA Nos. 3016 & 3017/Del/2015 for AYs 2007-08 & 2008-09, arise out of the order of the Commissioner of Income Tax (Appeals)-44, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 19.02.2015 for AY 2007-08 and 23.02.2015 for AY 2008-09 against the order of assessment ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 2 passed u/s 143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.01.2011 for AY 2007-08 and 30.01.2012 for AY 2008-09 by the Assessing Officer, DCIT, Circle-4(1), New Delhi (hereinafter referred to as ‘ld. AO’). As these are cross appeals and identical issues are involved in all the appeals for both the years, they are taken up together and disposed of by this common order for the sake of convenience. 2. Let us take up the assessee’s appeal first for AY 2007-08. The ground No. 1 raised by the assessee for AY 2007-08 was stated to be not pressed by the ld AR. Accordingly, the same is hereby dismissed as not pressed. 3. Ground Nos. 2 to 4 raised by the assessee are challenging the action of the ld CIT(A) in dismissing the assessee’s additional ground raised before the ld CIT(A) seeking direction to the ld AO to treat the excise duty refund of Rs. 86,41,12,734/-, sales tax/ VAT input tax refund of Rs. 6,78,70,248/- and sales tax remission of Rs. 33,24,88,449/- as capital receipt not chargeable to tax for the reason that the said claim was not made in the return of income. 4. We have heard the rival submissions and perused the material available on record. The assessee company is engaged in the business of manufacturing various types of pipes. In the wake of devastation caused by earthquake in the Kutch District of Gujarat, the Central Government, in public interest, issued Notification No.39/2001-Central Excise dated 31st July 2001. The Notification postulated the following important conditions, among others, for eligibility under the Scheme: - It shall apply only to new industrial units which are set up on or after 31.07.2001 in the Kutch district but before 31.07.2003 [refer para 3(1)]; - Further fact that the assessee had set up eligible unit and is entitled to the incentive under Notification No. 39 dated 31.07.2001 was also a fact available in the public domain; ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 3 - The manufacturer shall produce a certificate from a Committee consisting of the Chief Commissioner of Central Excise, Ahmedabad and the Principal Secretary to the Government of Gujarat, Department of Industry, to the Jurisdictional Central Excise Officer certifying that the unit in respect of which exemption is claimed is a new unit and has been set up on or after 31.07.2001 but not before 31.07.2003 [refer para 3()]; - The manufacturer is first required to pay the excise duty with the Central Excise department and thereafter claim refund of the said amount from the department (refer para 21); - The exemption shall apply for a period not exceeding five years from the date of commencement of commercial production by the unit 4.1.The date of setting up of the new industrial unit was vide Notification 45/2002 dated 02.09.2002 extended from 31.07.2003 to 31.07.2004 and thereafter, vide Notification No. 9/2004 dated 21.01.2004 and vide Notification No. 55/2004 dated 09.11.2004, the last date of setting up of the new unit was further extended to 31.12.2004 and 31.12.2005 respectively. 4.2.The aforesaid notification dated 31.07.2001 was followed by Incentive Scheme, 2001 dated 9.11.2001 (enclosed in pages 72-82 of Paper Book) which clearly indicated that underlying purpose of the incentives being issued as under:- - Government of India have announced excise duty exemption for new industries to promote large scale investment in the district, along with which the State Government has also decided to announce the scheme of sales tax incentives; - Eligible units will be able to avail of the benefits of sales tax exemption or sales tax deferment on their eligible fixed capital investment; ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 4 - Under the sales tax incentives, the tax to be recovered against the sales proceeds under the Gujarat Sales Tax Act or Central Sales Tax Act shall be considered; Sales Tax Exemption: - the eligible unit will be entitled to purchase the raw materials, packing materials and all the processing materials utilized for the purpose of manufacturing goods, without the payment of sales tax; - In addition, it will be exempt from the payment of sales tax in respect of sale of finished goods, intermediates, by-products, and scrap produced by it ; Sales Tax Deferment Unit will have to pay the amount of sales tax to the Government on the finished goods, intermediates, by-products, waste and scrap manufactured by it after the prescribed period of time and the amount so payable will be recovered in six equal annual instalments by the Sales Tax Dept, as per certain conditions; Option - While applying for the scheme, the unit will have to submit its option before the approving authority indicating option for sales tax exemption or sales tax deferment ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 5 Composite Scheme - The units with capital investment exceeding Rs.100 crore will be entitled to the benefit of both the schemes salės tax exemption and sales tax deferment; - Under the scheme, the eligible unit for the purpose of manufacturing products will be entitled to purchase of raw materials, consumables, packing materials, processing materials, free of tax; - Finished goods, intermediate products including by-products, scrap, waste material produced by the unit will be eligible to receive benefits of sales tax exemption and sales tax deferment; Quantum of Incentives - At the rate of 100% for a period of five years from the date of commencement of commercial production for the eligible fixed capital investment upto Rs.10 crore; - At the rate of 100% for a period of seven years from the date of commencement of commercial production for the eligible fixed capital investment exceeding Rs. 10 crore but upto Rs.50 crore; - At the rate of 100% for a period of ten years from the date of commencement of commercial production for the eligible fixed capital investment exceeding Rs. 50 crore; 4.3. During the year 2003, the assessee set up pipe coating unit namely, Anti Corrosion and Concrete Weight Coating (ACCWC) at Mundra, Gujarat. Thereafier, in the year 2005, the assessee also set up another unit for pipe ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 6 manufacturing namely, Integrated Pipe Unit (IPU) at Mundra, Gujarat. The said new units had been set up by the assessee in compliance with the aforesaid Notifications and the Certificate issued by the Customs and Central Excise, Ahmedabad certifying that the said new units have been established during the period prescribed in the said Notifications is enclosed at Page Nos. 86-87 of the Paper Book. The assessee was eligible for composite option (Exemption & deferment of sales tax) of Incentive Scheme 2001 for economic development of Kutch district as evident from Page Nos. 113 to 116 of the Paper Book. 4.4. Thereafter, in 2006, the State Government amended the aforesaid Scheme vide Notification No (GHN-43) VAT-2006/S.5(2)(2)- T11, dated 1st April, 2006 (enclosed in Page Nos. 109 to 112 of the Paper Book), providing the following as under:- - Such industrial units shall be entitled to tax incentives only for the balance amount and for the balance period of tax incentive on the appointed day on the basis of the Certificate for Entitlement issued under this Chapter; - The eligible units availing composite benefit under the earlier law shall have to give option either for tax remission or for tax deferment in Form-109; - On receipt of application made under sub-rule (3), the Commissioner may issue to the eligible unit a Certificate of Entitlement im Form-110 effective from the appointed day subject to the provisions of this Chapter and the terms and conditions of the respective Government Resolutions or ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 7 notifications, on the basis of which the eligible unit was granted the Eligibility Certificate; Remission of tax - Subject to the provisions of section 11, the eligible units to whom a Certificate of Entitlement has been issued under sub- rule (4) of rule 18A shall be granted refund of the tax [(excluding additional tax)] paid on purchase of taxable goods so manufactured; - Subject to the provisions of section 11, the eligible unit shall- (i) not claim tax credit of the amount equivalent to the amount of refund granted under clause (a) of this sub- rule; (ii) claim tax credit of additional tax paid on purchase of taxable goods. - The eligible unit shall make an application for refund along with its return to the concerned Commercial Tax officer and such Officer shall, as far as possible, grant refund subject to provisions of section 40, within one month after the receipt of the application for refund. - The eligible unit availing tax remission shall collect the tax on sales effected by him and shall [not pay tax payable under sub- section (1) of section 7 but pay additional tax payable under sub-section (1A) of section 7] into the Government Treasury. The concerned Commercial Tax Officer shall pass order for remission of such tax separately for each tax period. - The eligible unit shall be entitled to remission of the Central Sales Tax payable under the provisions of the Central Sales Tax Act, 1956 ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 8 on the sales effected by it in the course of inter-State trade and commerce. 4.5. The assessee applied for sales tax remission in Form 109 and after considering the application, the Commissioner granted the Certificate of Entitlement in Form-110 which is enclosed in Pages 117 to 119 of the Paper Book. As per Form 110, the assessee was granted eligibility certificate for the period 09.06.2005 to 05 11.2014 and total composite amount of Rs. 76.85 Crores was granted for remission amount remaining as on 01.04.2006 was also allowed. 4.6. During the year, the assessee had received- 1. Excise Duty Refund of Rs. 86,41,12,734/- 2. Sales Tax remission of Rs. 33,24,88,449/- 3. Sales/VAT input tax refund of Rs. 6,78,70,248/- The amount of excise duty refund and sales tax remission was included in schedule 13 of Balance Sheet, under the head \"Sales and operational income' under sub head 'Government Incentives/Grants' as evident from Page 88 of the Paper Book. The amount of sales/VAT input tax refund was reduced from purchases and debited in the schedule 10 of Balance Sheet under the head ‘Loans and Advances', under the sub head 'Balance with customs and port authorities, etc as evident from Page 88A of the Paper Book, instead of debiting purchases by the entire amount and considering the refund of sales/VAT input as capital receipt. To sum up, the first two items were shown as income and the last item was reduced from expenses. ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 9 4.7. The assessee, for the first time, during the course of proceedings before the ld CIT(A), claimed that the excise duty refund and others as not liable to tax since it is in the nature of a capital receipt. The same was however dismissed by the ld CIT(A) applying the decision of Hon'ble Apex Court in the case of Goetze (India) Limited vs CIT reported in 284 1TR 323 (SC). 5. It is not in dispute that the assessee had indeed offered the receipt of excise duty refund, sales tax remission and sales/ VAT input tax refund in the return of income. The assessee made a fresh claim by way of an additional ground before the ld CIT(A) that the aforesaid receipts are to be construed as capital receipts not chargeable to tax as it was granted for the purpose of setting up all the industrial unit pursuant to devastations caused by earthquake in the Kutch District of Gujarat. This additional ground was sought was dismissed by the ld CIT(A) by applying the decision of Hon'ble Supreme Court in the case of Goetze India reported in 284 ITR 323. But on careful reading of para 4 of the decision of the Hon'ble Supreme Court, we find that the said restriction of not entertaining a fresh claim made by the assessee otherwise this by way of a valid return, applies only to ld AO and it does not restrict on the powers of the Income Tax Appellate Tribunal u/s 254 of the Act to accept the same. This goes to prove that the appellate authority could entertain a claim if the said claim is found to be correct. Hence, we hold that the ld CIT(A) ought to have admitted the additional ground raised by the assessee before him for the year under consideration. Further, we find that in the similar fashion, the ld CIT(A) had indeed admitted the additional ground in earlier year and had even treated the receipt of excise duty and sales tax etc as capital receipt not chargeable to tax. There is absolutely no logical reason for the ld CIT(A) to take a divergent stand for ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 10 the year under consideration. We find that the incentives claimed in 2001 for economic development of Kutch District of Gujarat are enclosed in pages 59 to 69 of the Paper Book. The copy of Notification No. 39/2001 dated 31.07.2001 issued by Central Excise Department is enclosed in pages 70 to 72 of the Paper Book. Further, there is a clarification issued by Department of Revenue, Ministry of Finance, Govt. of India dated 29.07.2008 clearly stating that intention behind the exemption scheme was to attract immediate investment by incentivizing setting up of new industrial unit so as to generate employment. The assessee in the instant case was given incentives in the form of excise duty refund, sales tax remission, sales/ VAT input tax refund. The same issue came up for adjudication in assessee’s own case before this Tribunal for AY 2005-06 in ITA 3437/Del/2014 dated 24.09.2024 wherein, it was held as under:- “4.4. We find that the appellate authorities are duly entitled to admit the additional ground if it is legal in nature and goes to the root of the matter and not requiring verification of fresh facts. All the facts relevant for adjudication of the said additional ground was already available on record before the ld. CIT(A). Since the same being legal ground, there was nothing wrong in the action of the ld. CIT(A) admitting the said additional ground, eventhough the same was offered to tax by the assessee voluntarily in the return of income. It is trite law that there is no estoppel against the statute . Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of Taparia Tools Ltd vs JCIT reported in 372 ITR 605 (SC). Hence the objection raised by the revenue before us in this regard is hereby dismissed. 4.5. The Incentive scheme 2001 for Economic Development of Kutch District dated 9.11.2001 issued by Government of Gujarat is enclosed in Pages 71 to 81 of the Paper Book. The Central Excise Notification No/. 39/2001 dated 31.7.2001 is enclosed in Pages 82 to 84 of the Paper Book. The Certificates issued by Chief Commissioner of Central Excise & Customs, Ahmedabad and Principal Secretary of Industries & Mines Department to Government of Gujarat are enclosed in Pages 85 to 86 of the Paper Book. The workings for claim of excise duty refund made by the assessee are enclosed in Page 87 of the Paper Book. It is trite law that the taxation of excise duty refund pursuant to incentive scheme is to be determined by the purpose for which the same is granted and not the form / mode / manner in which it is determined or disbursed. ‘Purpose Test’ qua the incentive scheme is the relevant consideration and not the manner of determining the incentive. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of CIT vs Ponni Sugars and Chemicals Ltd reported in 306 ITR 392 (SC). We find that the ld AR before us relied on the decision of Hon’ble Gujarat High Court in the case of ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 11 SAL Steel Limited vs Union of India reported in Special Civil Application No. 6299 of 2008 and 5909,6300,6298,5907,8468,6334 and 6562 of 2008 dated 18.3.2010. In our considered opinion, this decision relied by the ld. AR clearly brings out the purpose behind the excise duty exemption issued by the Government to achieve a larger public interest of incentivizing setting up of industries in the Kutch District of Gujarat in the wake of massive earthquake in the said region so as to generate employment and achieve industrial development with the larger public interest of rehabilitating the people and economic activity in the affected region. Infact in the said decision, the petitioners had challenged the validity of the subsequent notifications issued in the year 2008 substantially diluting excise incentives granted by the original notification issued in the year 2001 in the form of excise duty refund. Hence the Hon’ble Gujarat High Court was required to examine whether the subsequent notifications issued by the Government in the year 2008 were legally valid or not. The Hon’ble Gujarat High Court after going through the incentive scheme 2001 observed that exemption from excise duty was granted by the original notification in the year 2001 in order to incentivize setting up of industries in the Kutch region of Gujarat in the wake of massive earthquake. The intention behind the exemption scheme was to attract fresh investment so as to generate employment and for industrial development of the region. The subsequent notifications issued in the year 2008 substantially diluted the benefit granted by the original notification on the ground that there was substantial revenue loss to the Government. The Hon’ble High Court held that the notifications issued in the year 2008 to be invalid to the extent they were sought to be applied to the new unit set up in the Kutch District of Gujarat in compliance of the original notification in the year 2001 on the ground that it was contrary to the principles of promissory estoppel. Further it was clearly held by the Hon’ble Gujarat High Court that the purpose of the original notification issued in the year 2001 was to incentivize and promote setting up of industries in the Kutch Region of Gujarat thereby clearly satisfying the ‘purpose test’ thereon. Hence it could be safely concluded that the excise duty refund received is clearly in the nature of capital receipt not chargeable to income tax. We find that the ld. CIT(A) had rightly decided the issue in favour of the assessee and we do not find any infirmity in the said order granting relief to the assessee. Accordingly, the Ground No. 2 raised by the revenue is dismissed. “ 6. Respectfully following the aforesaid decision, we direct the ld AO to treat the receipt of aforesaid incentives under the Incentive Scheme as capital receipts not chargeable to tax. Accordingly, the Ground Nos. 2 to 4 raised by the assessee are allowed. 7. Ground No. 5 raised by the assessee is general in nature and does not require any specific adjudication. 8. In the result, the appeal of the assessee for AY 2007-08 is partly allowed. ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 12 ITA No. 3016/Del/2015 (Revenue Appeal) - AY 2007-08 9. The only issue to be decided in this appeal of the revenue is challenging the restriction of disallowance of Rs. 2,83,317/- instead of 5,25,22,992/- made by the ld AO u/s 14A of the Act read with Rule 8D(2) of the Income Tax Rules, 1962. 10. We have heard the rival submissions and perused the material available on record. During the year under consideration, the assessee received dividend income amounting to Rs. 2,83,31,675/- from various group companies. The assessee suo moto made disallowance of expenses of Rs. 2,46,776/- being the actual expenses incurred for earning exempt income on account of salary expenditure of staff of the department handling investments. The ld AO disregarded the voluntary disallowance made by assessee and without recording any satisfaction as to why the suo moto disallowance made by the assessee is incorrect, directly proceeded to apply the computation mechanism provided in Rule 8D(2)(ii) and Rule 8D(2)(iii) of the Rules and made disallowance of Rs. 5,25,22,992/- in the assessment. The ld CIT(A) restricted the disallowance of expenses @ 1% of exempt income to the tune of Rs. 2,83,337/- and from that, the suo moto disallowance made by the assessee in the sum of Rs. 2,46,776/- was directed to be reduced. We find that the Hon’ble Calcutta High Court in the case of CIT Vs. R.R. Sen & Brothers P Ltd in GA No. 3019 of 2012 in ITAT No. 243 of 2012 dated 04.01.2013 had held as under:- “The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under income tax. The tribunal has computed expenditure at 1% of such dividend income, which, according to them, is the thumb rule applied consistently. We find no reason to interfere. The appeal is dismissed.\" ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 13 11. Since, the action of the ld CIT(A) in restricting the disallowance u/s 14A of the Act to 1% of dividend income was approved by Hon’ble Calcutta High Court in the case referred supra, respectfully following the said decision, we direct the ld AO to make disallowance of Rs. 36,541/- (288317 -246776) u/s 14A of the Act. Accordingly, the grounds raised by the revenue are dismissed. 12. In the result, the appeal of the assessee for AY 2007-08 is partly allowed and appeal of the revenue is dismissed. ITA No. 2759/Del/2015 - AY 2008-09 (Assessee Appeal) 13. Ground No. 1 raised by the assessee was stated to be not pressed by the ld AR. Accordingly, the same is hereby dismissed as not pressed. 14. Ground Nos. 2 to 4 raised by the assessee for AY 2008-09 are identical with those raised for AY 2007-08, save that in this year, the fresh claim of treating amounts received towards excise duty refund, sales tax remission and VAT/ input tax refund as capital receipt, was made before the ld AO itself, even though it was offered to tax as revenue receipt in the return. 15. We have already held the said receipts to be capital receipts not chargeable to tax in assessee’s own case for AY 2005-06 vide order dated 24.09.2024. Respectfully following the same, Ground Nos. 2 to 4 raised by the assessee are hereby allowed. 16. Ground No. 5 raised by the assessee is general in nature and does not require any specific adjudication. 17. The assessee has raised additional grounds for claim of deduction of education cess, which was stated to be not pressed by the ld AR at the time of hearing. Accordingly, the same is not admitted herein. ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 14 18. In the result, the appeal of the assessee for AY 2008-09 is partly allowed. ITA No. 3017/Del/2015 (Revenue Appeal) – AY 2008-09 19. The first issue to be decided in this appeal is as to whether the ld CIT(A) was justified in restricting the disallowance of expenses u/s 14A of the Act to Rs. 1,42,936/-/- as against Rs. 3,39,66,565/- made by the ld AO in the facts and circumstances of the instant case. 20. We have heard the rival submissions and perused the material available on record. The assessee during the year under consideration had received dividend income amounting to Rs. 1,61,46,113/-. As in AY 2007-08, these are old investments brought forward from earlier years and no fresh investments were made which had yielded dividend income during the year under consideration. The assessee made suo moto disallowance of expenses being the actual expenses incurred u/s 14A of the Act by considering the salary of the staff of the department which handles the investment. The ld AO directly applied the computation mechanism provided under Rule 8D(2) of the Rules and made disallowance as under:- Under Rule 8D(2)(ii)- Rs. 2,86,24,236/- Under Rule 8D(2)(iii) – Rs. 54,85,265/- 21. On perusal of the submissions given by the assessee before the ld AO which are enclosed in pages 73 to 82 of the Paper Book, we find that assessee had specifically brought to the knowledge of the ld AO that it is having sufficient interest free funds in its kitty which would take care of the investments made by the assessee which had yielded exempt income. This fact is also evident from the financial statements enclosed in pages 3 to 22 of the Paper Book. Respectfully, following the decision of the Hon'ble Supreme Court in the case of South Indian Bank Ltd vs ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 15 CIT Vs. reported in 283 taxman 178 (SC), we hold that no disallowance of interest need to be made under Rule 8D(2)(ii) of the Income Tax Rules. 22. We find that the assessee had made suo moto disallowance of Rs. 1,42,936/- towards administrative expenses being the actual expenses incurred for the purpose of earning exempt income. The basis of such disallowance is provided in page 194 of the Paper Book which is reproduced below:- ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 16 23. The ld AO without recording the objective satisfaction with cogent reasons as to why the aforesaid basis is incorrect, directly proceeded to apply the computation mechanism provided in the Rule 8D(2)(iii) of the Rules and proceeded to work out the disallowance thereon in the sum of Rs. 54,85,265/-. The recording of objective satisfaction with cogent reasons is mandated in terms of section 14A(2) of the Act read with Rule 8D(1) of the Rules. This issue is no longer res integra in view of the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Taikisha Engineering India Ltd reported in 2014-TIOL-2239-HC-DEL-IT, which has been relied upon by the ld CIT(A) in his order. Since, the relief is granted by the ld CIT(A) by placing reliance on the decision of the Hon’ble Jurisdictional High Court, which is clearly applicable in the facts and circumstances of the instant case, we direct the ld AO to restrict the total disallowance of expenses u/s 14A of the Act only to the expenditure of Rs. 1,42,936/- and delete the remaining sum. Accordingly, Ground No. 1 raised by the revenue is dismissed. 24. Ground No. 2 raised by the revenue is challenging the deletion of disallowance made u/s 40(a)(ia) of the Act. 25. We have heard the rival submissions and perused the material available on record. During the year under consideration, the assessee deducted tax at source on wharfage charges and hire charges amounting to Rs. 76,44,990/- u/s 194C of the Act and accordingly deducted tax at source of Rs. 3,97,069/-. During the course of TDS proceedings u/s 201(1) of the Act for AY 2009-10, the TDS Officer vide order dated 28.03.2011 held that tax on the aforesaid payment was required to be deducted at source u/s 194I and not 194C of the Act. Accordingly, the ld AO during the course of present assessment proceedings, made disallowance of Rs. 44,43,455/- u/s 40(a)(ia) of the Act for alleged failure of lower deduction of tax at source u/s 194I of the Act. The ld AR stated before us that proceedings of the TDS officer u/s 201(1) of the ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 17 Act dated 28.03.2011 was quashed by Coordinate Bench of Rajkot Tribunal in ITA No. 220/RJT/2014 for AY 2009-10. We find that this issue is no longer res integra in view of the decision of this Tribunal in assessee’s own case for AY 2009-10 in ITA No. 2714/Del/2015 wherein, it was held as under:- “14. We have considered rival submissions and perused material on record. Notably against the order passed under section 201(1) and 201(1A) of the Act, which forms the basis of present disallowance, the assessee had gone in appeal before learned Commissioner (Appeals) and thereafter before the Tribunal. While deciding the appeal, the Tribunal in ITA Nos. 219 & 220/Rjt./2014 dated 10.11.2017 has clearly and categorically held that the payments made towards bus hire charges and wharfage required deduction of tax at source under section 194C of the Act and accordingly, deleted the demand raised under sections 201(1) and 201(1A) of the Act. Admittedly, the assessee has deducted tax on both the payments applying the provisions of Section 194C of the Act. Thus, keeping in view the aforesaid factual position, we do not find any infirmity in the decision of learned Commissioner (Appeals). Accordingly, ground raised is dismissed. In the result, the appeal is dismissed.” 26. In any event, we find that provisions of Section 40(a)(ia) of the Act cannot be made applicable for short deduction of tax at source as held by the Hon’ble Calcutta High Court in the case of CIT vs S.K Tekriwal reported in 361 ITR 432 (Cal). Respectfully following the aforesaid judicial precedent in assessee’s own case as well as the decision of the Hon’ble Calcutta High Court, we do not find any infirmity in the order of the ld CIT(A) deleting the differential amount u/s 40(a)(ia) of the Act. Accordingly, Ground No. 2 raised by the revenue is dismissed. 27. Other grounds raised are general in nature and does not require any specific adjudication. 28. In the result, the appeal of the assessee for AY 2008-09 is partly allowed and the appeal of the revenue is dismissed. ITA Nos. 2758 & 2759/Del/2015 ITA Nos. 3016 & 3017/Del/2015 Jindal Saw Ltd Page | 18 29. To sum up, both the appeals of the assessee are partly allowed and both the appeals of the revenue are dismissed. Order pronounced in the open court on 07/05/2025. -Sd/- -Sd/- (YOGESH KUMAR U.S.) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "