COMMISSIONER OF INCOME TAX2 MUMBAI Vs. ULTRA TECH CEMENT LTD.
HIGH COURT OF BOMBAY
Commissioner Of Income Tax2 Mumbai
ULTRA TECH CEMENT LTD.
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(1.) This Appeal under Section 260A of the Income Tax Act, 1961 (the Act) challenges the order dated 28th February, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order dated 20th February, 2014 is a common order in respect of the Assessment Years 2007-08 and 2008-09. This appeal is in respect of Assessment Year 2008-09.
(2.) The Revenue urges the following reframed questions of law for our consideration :
(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the sales tax exemption benefit for the A.Y. 2008-09 is a capital receipt not liable to income tax?
(ii) Whether the respondent assessee is eligible for deduction under Section 80IA of the Income Tax Act by urging that the Rail system is a profit center but a cost saving exercise undertaken in terms of subsection (4) of Section 80IA?
(iii) Whether on the facts and circumstances of the case, the Tribunal was correct in law, in setting aside the issue of 'interest expenses' to the file of the Assessing Officer and deleting the 'other expenses' towards earning exempt income, without appreciating the fact that the Assessing Officer had made the disallowance as per the provisions of Section 14A after noting his satisfaction that the disallowance needed to be done as per Rule 8D, the applicability of which is upheld by the Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT (2010) 328 ITR 81 ?
(iv) Whether on the facts and circumstances of the case, the Tribunal was justified correct in law, in setting aside the issue of allowability of ESOP expenses to the file of the Assessing Officer for fresh consideration in the light of the findings of the Special Bench of the Hon'ble Tribunal in the case of Biocon Ltd. v. DCIT in ITA No. 368/Bang/2010 (2013) 25 ITR (Trib) 602 (Bang)(SB) ?
(v) Whether on the facts and circumstances of the case, the Tribunal was correct in law, in holding that the receipt from Certified Emission Reduction (CER) generated out of capital projects registered with United Nations Framework Conversation of Climate Change (UNFCCC), amounting to Rs. 7.64 crore, was a capital receipt ?
(3.) Regarding question no.(iii) :
(a) The impugned order of the Tribunal partly allowed the respondent assessee's appeal in respect of the disallowance made by the Assessing Officer under Section 14A of the Act r/w Rule 8D of the Income Tax Rules (Rules).
(b) In its Return of Income for A.Y. 2008-09, the respondent assessee had on its own disallowed an expenditure of Rs. 50,15,284/- under Section 14A of the Act i.e. expenditure incurred to earn exempt income. However, the Assessing Officer after holding that he is satisfied with the correctness of the disallowance of expenditure made by the respondent assessee applied Rule 8D of the Rules and determined a further the disallowance of Rs. 4.03 crores. Therefore, the disallowance in the aggregate was Rs. 4.53 crores under Section 14A of the Act in the assessment order dated 28th February, 2011.
(c) Being aggrieved, the respondent assessee carried the issue in appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 21st December, 2011, the CIT(A) upheld the order of the Assessing Officer holding that the Assessing Officer had recorded his nonsatisfaction with the disallowance made by the respondent assessee under Section 14A of the Act. Thus, according to the CIT(A), the Assessing Officer has rightly applied Rule 8D of the Rules to disallow the expenditure in the aggregate of Rs. 4.53 crores under Section 14A of the Act.
(d) Being aggrieved, the respondent assessee carried the issue in appeal to the Tribunal. The impugned order records the fact that for the subject assessment year unlike for the earlier Assessment Year 2007-08, Rule 8D of the Rules would be applicable subject to Assessing Officer being satisfied with the disallowance made under Section 14A of the Act by the respondent assessee, with reasons in support. However, the impugned order records the fact that the Assessing Officer did in his order give any reasons for his non-satisfaction with the disallowance claimed. Nevertheless, the impugned order after recording the fact that for the Assessment Year 2007-08 in respect of the same respondent assessee, it had directed the Assessing Officer to verify whether the investment made in exempted units were out of its own funds or out of borrowed capital and then decide the proportionate interest to be disallowed, followed the same for the subject Assessment Year. Thus, the impugned order of the Tribunal restored the issue so far as disallowance of interest is concerned to the Assessing Officer to determine the extent to which the investments in tax free units were made out of borrowed funds or out of its own funds, to the Assessing Officer in the subject assessment year. So far as disallowance of other expenses by the respondent assessee is concerned, the Tribunal records its satisfaction with it and holds no further disallowance is called for.;
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