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08-03-2019, Tata Petrodyne, Section 14A, 115JB, Tribunal Mumbai

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1 week 3 days ago #8772 by amit
Section - 14A, 115JB, 80-1B(9), 8D
Order Date - 08-03-2019
Favouring - Partly allowed for statistical purposes
Court - Tribunal Mumbai
Appellant - Tata Petrodyne Limited
Respondent - ACIT
Justice - PAWAN SINGH, JM & MANOJ KUMAR AGGARWAL, AM
Citation - 319Taxpundit221
Appeal No. - I.T.A. No.1856/Mum/2015
Asstt. Year - 2011-12

Order

PER : Manoj Kumar Aggarwal

1. Aforesaid appeals by the assessee for Assessment Years [AY] 2010-11 and 2011-12 contest separate orders of Ld. first appellate authority. Since common issues are involved, we proceed to dispose-off the same by way of this common order for the sake of convenience & brevity.

ITA No. 6959/Mum/2013, AY 2010-11

2.1 The assessee contest the order of Ld. Commissioner of IncomeTax (Appeals)-6, Mumbai, [CIT(A)], Appeal No. CIT(A)- 6/IT.134/Rg.2(3)/12-13 dated 30/09/2013. The only issue involved under the appeal is disallowance u/s 14A. For this, the assessee has raised original grounds vide revised Form No. 36 on 03/03/2015 and additional / supplemental grounds on 08/07/2016 & 06/03/2018 which do not require appreciation of new fact and hence taken on record in terms of judgment of Hon’ble Apex Court rendered in National Thermal Power Co. Ltd. Vs. CIT [229 ITR 383]. The final grounds, for ease of reference, may be regrouped in the following manner: -

1) Deduction U/S.14A r.w.r. 8D:

a) The CIT(A) erred in not considering the Appellant's argument that no valid reasoning was recorded by the Assessing Officer for not considering the disallowance offered by the Appellant under section 14A of the Act and further confirming the action of the Assessing Officer of computing the disallowance under section 14A of the Act by applying Rule 8D of the Income-tax Rule. 1962 ('the Rules").

b) The Appellant submits that the Assessing Officer has mechanically applied Rule 8D of the Rules for computing the disallowance under section 14A of the Act and has at no time established with valid reasons that the disallowance offered by the Appellant is erroneous. The Appellant therefore prays that the disallowance of the Assessing Officer under section 14A of the Act by applying Rule 80 of the Rules, which action has been confirmed by the CIT(A), be deleted and the disallowance offered by the Appellant under section 14A of the Act be restored.

c) The appellant submits that the disallowance under section 14A should be restricted to INR 5,32,236 which is arrived as per a scientific method factoring costs directly allocable of the concerned employees and common corporate costs such as electricity, rent, travelling expenses, etc. and estimated time spent.

It is therefore submitted that necessary directions may be given to the DCIT to restrict the disallowance under section 14A to INR 5,32,236.

d) Without prejudice to our contention that the disallowance under section 14A should be restricted as per the scientific method, the investment in Nagarjuna Oil Corporation Limited, being Strategic Investment should be excluded for the purpose of computation of disallowance under section 14A read with rule 8D and the disallowance should be restricted to INR 61,47,743.

It is therefore submitted that necessary directions may be given to the DCIT to restrict the disallowance under section 14A to INR 61,47,743. 2) Computation of Book Profits under section 115JB

The Appellant submits that the Assistant Commissioner erred in computing the book profit under section 115JB by including the disallowance made under section 14A read with rule 8D.

Having regards to the facts and circumstances of the case, the Appellant submits that the Assistant Commissioner be directed to exclude disallowance made under section 14A for computing book profit under section 115JB.

3) Deduction under section 80 1B(9)

The appellant submits that it is entitled to deduction under section 80-IB(9) by treating each well as a separate undertaking pursuant to the judgement of the Gujarat High Court in the case Niko Resources Limited v. Union of India (374 ITR 369) whereby the Explanation to section 80-IB(9) treating each block as an undertaking has been struck down.

It is therefore submitted that necessary directions may be given to the Deputy Commissioner of Income-tax - Range 2(3) to allow the claim of deduction under section 80-IB(9) by treating each well as a separate undertaking.

2.2 The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax-Central Circle-2(3), Mumbai [AO] in scrutiny assessment u/s. 143(3) on 11/02/2013 wherein the income of the assessee was determined at Rs.6968.15 Lacs under normal provisions after sole disallowance u/s 14A for Rs.141.24 Lacs as against returned income of Rs.6826.90 Lacs e-filed by the assessee on 21/09/2010. Similar disallowance has been made while computing Book Profits u/s 115JB. The assessee being resident corporate entity was stated to be engaged in the business of prospection, exploration of mineral oil and natural gas during impugned AY.

2.3 Facts qua the same are that during assessment proceedings, its transpired that the assessee earned exempt dividend income of Rs.523.36 Lacs and offered suo-moto disallowance against the same u/s 14A @5% which worked out to Rs.26.16 Lacs. However, not convinced, Ld. AO opined that investments could not be managed without inherent expenses and the disallowance was to be worked out as per Rule 8D. Applying the same, administrative expense disallowance u/r 8D(2)(iii) @0.5% of average investments of Rs.334.83 Crores, was worked out to be Rs.167.41 Lacs. After adjusting the suo-moto disallowance of Rs.26.16 Lacs, the net disallowance i.e. Rs.141.24 Lacs was added to the income of the assessee. The same upon confirmation by first appellate authority vide impugned order dated 30/09/2013 is under appeal before us.

3. The Ld. Sr. Counsel appearing for Assessee [AR], at the outset, drew our attention to the order of this Tribunal in assessee’s own case for AY 2008-09 & 2009-10, ITA Nos. 4887,5571,4914/Mum/2012, 2469/Mum/2013 dated 28/09/2018 [68 ITR (Trib) 38 Mumbai] and pleaded for similar directions in this year. Although Ld. DR supported the

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