9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (9) TMI 147 - AT - Income TaxCompensation paid to lender treated as interest - Disallowance for non deduction of TDS u/s 194A - Expenditure must be accrued or paid/payable in the current year - Held that - Explanation to Section 194A r.w.s. 2(28A) provides that when such interest is credited in any account by whatever name it may be called then such credit will be deemed to be credit of such income to the account of the payee and provisions of Section 194A will apply - Liability for payment has neither accrued nor paid/payable in the current year therefore disallowed and added back - Decided in favor of Revenue. Deduction allowed for expenditure u/s 14A - Computation of book profit under MAT u/s 115JB - Held that - The provision of section 14A cannot be imported into while computing the book profit u/s 115JB of the Act as decided in case of Goetze (India) Ltd. 2009 (5) TMI 615 - ITAT DELHI - Therefore no addition to the book profit shall be made on account of alleged expenditure incurred to earn exempt income while computing income u/s 115JB of the Act - Decided in favor of Assessee
Issues Involved:
1. Adjustment of Rs. 80,00,000/- while computing tax liability under MAT. 2. Disallowance under Section 14A of the IT Act. Issue-wise Detailed Analysis: 1. Adjustment of Rs. 80,00,000/- while computing tax liability under MAT: The assessee appealed against the disallowance of Rs. 80,00,000/- during the scrutiny assessment by the AO. The AO disallowed this amount, considering it as compensation expenses claimed by the assessee, which were not liable to be paid in the relevant financial year. The AO observed that the assessee had entered into an agreement with Diana Tea Co. Ltd. for the repayment of a loan, and the interest of Rs. 80,00,000/- was to be paid in four installments starting from the financial year 2008-09. The AO concluded that since there was no liability to pay in the relevant financial year, the expenses were disallowed and added back to the total income, terming it as a misrepresentation of facts and furnishing wrong particulars of income. On appeal, the CIT(A) upheld the AO's decision, noting that the liability for payment did not pertain to the assessment year 2008-09 and no TDS was deducted on the agreed amount of Rs. 80,00,000/-. The CIT(A) observed that the amount was in the nature of interest payment, and the provisions of Section 194A r.w.s. 2(28A) and 40(a)(ia) were applicable, making the expenditure disallowable. The CIT(A) also highlighted the lack of a written agreement at the time of taking the loan and the inconsistency in the settlement deed and the books of accounts of M/s Diana Tea Co. Ltd. The Tribunal, upon review, agreed with the CIT(A) that the liability for the payment of Rs. 80,00,000/- did not pertain to the assessment year 2008-09 and upheld the disallowance under Section 115JB of the IT Act. The Tribunal found no infirmity in the CIT(A)'s order regarding this adjustment. 2. Disallowance under Section 14A of the IT Act: The AO disallowed an amount of Rs. 82,854/- under Section 14A of the IT Act, considering it as expenses incurred to earn exempt income. The CIT(A) restricted this disallowance to Rs. 70,000/-. The assessee argued that the revenue was not justified in making any disallowance under Section 14A while computing the tax liability under MAT. The assessee relied on the decision of the ITAT Delhi Bench in the case of Quippo Telecom Infrastructure Ltd vs ACIT, which held that no addition to the book profit should be made on account of alleged expenditure incurred to earn exempt income while computing income under Section 115JB of the IT Act. The Tribunal, after considering the submissions and the relevant case law, concluded that the revenue was not justified in making any disallowance under Section 14A while computing the tax liability under Section 115JB of the IT Act. The Tribunal followed the precedent set by the ITAT Delhi Bench and deleted the disallowance of expenses confirmed by the CIT(A) while computing book profit under Section 115JB of the Act. Conclusion: The appeal of the assessee was partly allowed. The Tribunal upheld the disallowance of Rs. 80,00,000/- while computing the tax liability under MAT but deleted the disallowance under Section 14A of the IT Act while computing the tax liability under Section 115JB of the IT Act.
|
