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2016 (1) TMI 856 - AT - Income TaxDisallowance u/s 14A - Addition towards expenditure alleged to be incurred in earning exempt income - Held that - It is undisputed fact that there was no exempt income earned during the previous relevant assessment year under consideration. It is trite law that in the absence of any exempt income no addition under Section 14A can be made. We hold that no addition is called for on account of any alleged expenditure towards any exempt income. - Decided in favour of assessee. Disallowance under Section 40(a)(ia) - TDS deducted was remitted by delay - Held that - The undisputed facts of the case are that the amount of TDS deducted was remitted to the account of the Government before the due date of filing of the return of income. This fact is emerging out of the assessment order vide page no. 13 of the assessment order. It is settled principle of law that the second proviso to section 40(a)(ia) is applicable with retrospective effect and in this connection reliance is placed on ITO Vs. Anil Kumar & Co. (2013 (7) TMI 231 - KARNATAKA HIGH COURT )- Decided in favour of assessee. Disallowance under Section 80G - Held that - There is no evidence on record to show that the receipts are produced before the Assessing Office. Accordingly we restore the matter to the file of the Assessing Officer for verification of the donations made. - Decided in favour of assessee for statistical purposes. Disallowance of gifts and awards distributed to the trainees for the best performance - Held that - Since the assesee company was engaged in the business of management consultancy and training it is not in dispute that the expenditure was actually incurred. The Assessing Officer only disallowed the same on the ground that the expenditure is not for business purposes. In the absence of management consultancy training & development and human resource development this expenditure cannot be considered to be non-business purposes and the reasoning of the Assessing Officer cannot be accepted. - Decided in favour of assessee
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Disallowance under Section 40(a)(ia) of the Income Tax Act. 3. Disallowance of deduction under Section 80G of the Income Tax Act. 4. Disallowance of prior period expenses. 5. Disallowance of gifts and awards expenses. Detailed Analysis: Issue 1: Disallowance under Section 14A of the Income Tax Act - Assessment Year 2008-09: The appellant argued that the disallowance under Section 14A was incorrect as no exempt income was earned during the year. The Tribunal referred to the decisions of the Hon'ble Jurisdictional High Court in the cases of Cheminvest Vs. ITO and CIT Vs. Holcim India P. Ltd., which held that Section 14A does not apply if no exempt income is received or receivable during the relevant year. Consequently, the Tribunal allowed the ground in favor of the assessee, stating that no addition is called for in the absence of exempt income. - Assessment Year 2009-10: For the same reasons mentioned for AY 2008-09, the Tribunal allowed this ground in favor of the assessee. Issue 2: Disallowance under Section 40(a)(ia) of the Income Tax Act - Assessment Year 2008-09: The appellant contended that the TDS was deposited before the due date of filing the return, and the second proviso to Section 40(a)(ia) should apply retrospectively. The Tribunal agreed, citing decisions from various High Courts, including ITO Vs. Anil Kumar & Co., CIT Vs. Virgin Creation, CIT Vs. Talbros P. Ltd., and CIT Vs. Santosh Kumar Shetty. Thus, the Tribunal allowed this ground of appeal. Issue 3: Disallowance of deduction under Section 80G of the Income Tax Act - Assessment Year 2008-09: The Tribunal noted that there was no evidence on record to show that the receipts for donations were produced before the Assessing Officer. Therefore, the matter was restored to the file of the Assessing Officer for verification of the donations made. This ground was allowed for statistical purposes. Issue 4: Disallowance of prior period expenses - Assessment Year 2008-09: The appellant did not press this ground. Consequently, it was dismissed as not pressed. Issue 5: Disallowance of gifts and awards expenses - Assessment Year 2009-10: The appellant argued that the expenses on gifts and awards were incurred wholly and exclusively for business purposes, as the company was engaged in management consultancy and training. The Tribunal accepted this reasoning, noting that the expenditure was indeed for business purposes and allowed this ground of appeal. Conclusion: - For AY 2008-09 (ITA No. 5752/Del/2013): The appeal was allowed for statistical purposes, with specific grounds being either allowed, dismissed, or remitted for further verification. - For AY 2009-10 (ITA No. 5753/Del/2013): The appeal was allowed, with the Tribunal ruling in favor of the assessee on all contested grounds. Decision Pronounced: The decision was pronounced in the open court on 6th November, 2015.
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