2014 (2) TMI 1278 - AT - Income Tax

Deemed dividend addition u/s 2(22)(e) - Held that - A perusal of the case file reveals that while examining a similar issue in the assessee s own case for assessment years 2003-04 2004-05 and 2005-06 the tribunal had held that no beneficial interest had accrued to the assessee by the aforesaid transactions and advances were made to carry out business which would not attract deeming provisions u/s 2(22)(e) of the Act. Undisputedly decisions of the tribunal have been upheld even by the hon ble high court. The only plea raised by the Revenue that its special leave petition is pending before the hon ble apex court hardly forms a justifiable reason not to follow the order of the tribunal . In these circumstances we confirm the findings under challenge of CIT(A) deleting impugned addition of deemed dividend. - Decided in favour of assessee Addition u/s 14A r.w.r 8D in assessment year 2009-10 - Held that - The Revenue has not filed any evidence before us so as to dispel the findings of the CIT(A) qua the total expenditure administrative expenses amount disallowed/added back on its own (supra)by the assessee as well as remaining amount of 11, 10, 836/-. It is evident to us that from the total expenses the assessee has itself disallowed/added back expenses of 18, 74, 911/- out of 29, 85, 747/-. Thus the expenses which remain in assessee s profit 11, 10, 836/-. From this amount as well the CIT(A) has chosen to disallow a sum of 10, 94, 691/-. This leaves expenditure of a very minimiscule amount of 16, 145/-. Undisputedly there is no material quoted on record by the appellant/Revenue in favour of its argument that these details of expenditure are against the record of the case. In our view on the basis of the fact that the authorities below have nowhere rejected the assessee s profit 21, 19, 659/- to 10, 24, 968/-. - Decided against revenue

Summary

Issues:
1. Deletion of additions made by the Assessing Officer towards deemed dividend u/s 2(22)(e) of the Income-tax Act.
2. Disallowance made by the Assessing Officer u/s 14A r.w.r 8D in assessment year 2009-10.

Deemed Dividend Issue:
The appeals filed by the Revenue challenged the deletion of additions towards deemed dividend u/s 2(22)(e) of the Act by the CIT(A). The Assessing Officer had added a deemed dividend of &8377; 32,82,500/- due to a loan taken by the holding company from its subsidiary. The CIT(A) deleted this addition, citing previous tribunal orders where no beneficial interest accrued to the holding company. The Revenue contended that the addition was rightly made, but the ITAT upheld the CIT(A)'s decision, emphasizing that the tribunal's decisions were upheld by the high court, and the pending special leave petition did not justify deviating from precedent.

Disallowance u/s 14A r.w.r 8D Issue:
In assessment year 2009-10, the Assessing Officer disallowed expenses under rule 8D(2)(i) and (iii) amounting to &8377; 21,19,659/- due to exempt income earned. The CIT(A) reduced this disallowance to &8377; 10,24,968/- based on the net expenses debited against business income. The Revenue argued for restoration of the original disallowance, but the ITAT found no evidence presented to challenge the CIT(A)'s findings. As the expenses disallowed were within the total expenses, the ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeals.

In conclusion, all appeals of the Revenue related to both deemed dividend and disallowance u/s 14A r.w.r 8D were dismissed by the ITAT, with the orders pronounced on February 19, 2014, in Chennai.