GODREJ INDUSTRIES LTD Vs. ASSTT CIT
INCOME TAX APPELLATE TRIBUNAL
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J. Sudhakar Reddy, A.M. -
(1.) THESE appeals filed by the assessee are directed against separate but identical orders passed by the Commissioner (Appeal)-X, Mumbai dated 8-5-2006 for assessment year 2002-03 and 12-5-2006 for assessment year 2003-04. As some of the issues arising in these appeals are identical, for the sake of convenience, they were heard together and are disposed of by this common order.
ITA No. 4196/Munt/2006 - Assessment year 2002-03
(2.) The grounds raised in this appeal arc as follows:
This appeal is against the order of the Commissioner (Appeals)-X, Mumbai, and relates to the assessment year 2002-03.
(1) The learned Commissioner (Appeals) erred in holding that interest expenditure of Rs. 48,67,000 was not allowable under Section 36(1)(iii) of the Act.
(2) The learned Commissioner (Appeals) erred in holding that interest expenditure of Rs. 48,67,000 was attributable to the earning of tax-free dividend income. Having regard to the facts and circumstances of the case, and in law, the appellant submits that the arbitrary allocation of interest is erroneous and that exemption be allowed under Section 10(33) as claimed.
(3) The learned Commissioner (Appeals) erred in confirming the action of the assessing officer in disallowing a sum of Rs. 1,16,125 being the amortization of premium paid for leasehold land.
(4) The learned Commissioner (Appeals) erred in ignoring the provisions of Explanation 2B to Section 43(6) of the Act and holding that the block of assets transferred to the appellant company in a scheme of demerger with Godrej Foods Ltd., were to be considered at their tax written down values, for the purpose of computing depreciation allowable under Section 32 of the Act. Having regard to the facts of the case and the provisions of law, the appellant submits that the assessing officer be directed to accept the written down value of such assets as appearing in the books of account and to recomputed the depreciation accordingly.
(5) Without prejudice to the foregoing ground, the learned Commissioner (Appeals) erred in adjudicating an issue which was not before him.
(6) The appellant submits that the assessing officer be directed to carry forward/set-off unabsorbed depreciation and brought forward business loss of Godrej Foods Ltd., apportioned to it under Section 72A(4)(b) of the Act consequent to a scheme of demerger, as finally assessed in Income-tax proceedings for those years, including appeal effects, rectifications etc.
(7) The learned Commissioner (Appeals) erred in ignoring the contention of the appellant that the provisions of Section 80HHC(IB) were not applicable when the book profits were considered for the purposes of computing the deduction under Clause (iv) of the Explanation below Section 115JB(2). The appellant submits that the assessing officer be directed to allow the deduction under Section 80HHC as claimed by the appellant.
(8) The learned Commissioner (Appeals) erred in holding that interest expenditure of Rs. 48,67,000 was attributable to the earning of tax-free dividend income, for the purposes of computing thebook profits under Section 115JB of the Act.
After healing Shri F.V. Irani along with Shri F.H. Billimoria, the learned Counsels for the assessee and Shri Rajendra, the learned departmental representative, we hold as follows:
3.1 Grounds 1 & 2 are with respect to disallowance of expenditure under Section 36(1)(iii) by allocating notional interest to earning of dividend income. This issue was considered by the co-ordinate Bench "G" of the Mumbai Tribunal in assessee's own case for the assessment year 2000-01 vide order dated 13-12-2006 in ITA No. 501/Mum./2004 which was followed for assessment year 2001-02 by "B" Bench of the Mumbai Tribunal vide order dated 5-9-2007 in ITA No. 9088/Mum./2004. The "G" Bench of the Tribunal while dealing with the issue for assessment year 2000-01 on pages 3 and 4 found that the assessing officer has himself given a finding that no part of the borrowings can be attributed to the investments made from which assessee has earned dividend income and therefore there is no possibility of allocation of any interest expenditure on such dividend income. Based on this finding, the Tribunal decided the issue in favour of the assessee. This position undisputedly prevails in this assessment year also. In the circumstances, consistent with the earlier view of the Tribunal, we delete the disallowance of interest e
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