2017 (6) TMI 1229 - AT - Income Tax

Additions made u/s 14A r.w.r Rule-8D - Held that - the issue raised by Revenue is covered in assessee s own case 2017 (2) TMI 273 - ITAT KOLKATA for AY 2009-10 - thus following the decision of co-ordinate Bench in assessee s own case we uphold the impugned order of the Ld. CIT(A) giving relief to the assessee - Decided against revenue. Disallowance on account of cess on green leaf Held that - following the decision of co-ordinate Bench of this Tribunal in assessee s own case for A.Y. 2008-09 2014 (1) TMI 436 - ITAT KOLKATA the deduction is eligible after computing the income under rule 8 and the apportionment is to be made only after the income is so computed. Such apportionment cannot be made before the deduction. Rule 8 of the Income-tax Rules, 1962, requires that the computation is to be made as if by fiction the entire income out of the tea grown and manufactured as income assessable under the Income-tax Act, 1961 - Decided against Revenue. Disallowance on account of interest on sticky loan - Held that - following the assessee s own case in ITA No.684/Kol/2012 for A.Y. 2008-09 - Decided against the revenue. Disallowance u/s 14A on account of expenses relatable to exempt income u/s 115JB - Held that - the disallowance made under the normal provision u/s.14A of the Act cannot be imported or cannot be equated to the disallowance made u/s. 115JB of the Act. It is because the provisions of MAT are self-contained code and begins with non-obstante clause. Therefore it has no relation with other provision of the Act - therefore, the AO shall work out the disallowances in terms of the clause (f) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law - thus this ground of appeal of the Revenue is partly allowed.

Summary

Issues Involved:
1. Deletion of addition made under Section 14A read with Rule 8D.
2. Deletion of addition on account of cess paid on green tea leaf.
3. Deletion of addition on account of interest on sticky loan.
4. Deletion of addition of expenses related to exempt income under Section 115JB.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 14A read with Rule 8D:
The Revenue contested the deletion of ?59,75,517/- added by the Assessing Officer (AO) under Section 14A read with Rule 8D. The AO had disallowed this interest expense, claiming the assessee did not make any disallowance for interest expense. The CIT(A) deleted the addition, noting that the assessee had sufficient own funds and did not use borrowed funds for the investments. The Tribunal upheld the CIT(A)’s decision, referencing the assessee’s own case in earlier years where similar disallowances were deleted, and the Tribunal’s decision was upheld by higher courts. The Tribunal reiterated that the assessee had sufficient own funds, making the disallowance under Rule 8D(2)(ii) inapplicable.

2. Deletion of Addition on Account of Cess Paid on Green Tea Leaf:
The Revenue challenged the deletion of ?1,77,41,778/- related to cess paid on green tea leaf. The CIT(A) deleted the addition, citing earlier decisions in the assessee’s favor, including a judgment by the Hon’ble Calcutta High Court in the case of AFT Industries Ltd. The Tribunal upheld the CIT(A)’s decision, noting the consistency with previous rulings and confirming that the issue was covered by precedent.

3. Deletion of Addition on Account of Interest on Sticky Loan:
The Revenue disputed the deletion of ?37.50 lakh related to interest on sticky loans. The CIT(A) deleted this addition, referencing the Tribunal’s decision in the assessee’s own case for earlier years. The Tribunal upheld the CIT(A)’s decision, noting that similar issues had been consistently decided in favor of the assessee in prior years.

4. Deletion of Addition of Expenses Related to Exempt Income under Section 115JB:
The Revenue appealed against the deletion of ?59,75,517/- added by the AO while determining the book profit under Section 115JB. The CIT(A) deleted the addition, referencing earlier decisions in the assessee’s favor. However, the Tribunal noted that subsequent to the ITAT order, the Hon’ble jurisdictional High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. held that disallowance under Section 14A cannot be equated with disallowance under Section 115JB. The Tribunal directed the AO to independently work out the disallowance under Section 115JB, considering the expenses debited in the profit & loss account, thus partly allowing the Revenue’s appeal on this ground.

Conclusion:
The Tribunal partly allowed the Revenue’s appeals, upholding the CIT(A)’s decisions on the first three issues but directing the AO to independently determine the disallowance under Section 115JB for the fourth issue. The Tribunal’s decisions were consistent with precedents and earlier rulings in the assessee’s own cases.