2017 (10) TMI 1399 - AT - Income Tax

Disallowance made u/s 14A - Held that - AO is directed to apply this proposition of law as laid down in the above decision to the facts of this case and determine the disallowance under Rule 8D2(ii) of the Rules. The claim of the assessee that it has made strategic investments and that these investments should not be considered while computing disallowance under Rule 8D2(ii) of the Rules, has also to be adjudicted by the Assessing Officer. The Hon ble Special Bench of the ITAT in the case of ACIT vs. Vireet Investment Pvt Ltd. 2017 (6) TMI 1124 - ITAT DELHI held that only those investments are to be considered for computing the average value of investment which yielded exempt income during the year. The Assessing Officer is directed to apply this proposition of law and work out the disallowance, if any, under Rule 8D2(ii) of the Act. Accordingly, this ground of the assessee is allowed for statistical purposes. Disallowance of the provisions for leave encashment - Held that - We find that the Kolkata A Bench of the Tribunal in the assessee s own case for the Assessment Year 2007-08, while adjudicating the same issue remitted the issue to the file of the Assessing Officer to decide the same taking into consideration the outcome of the case in M/S EXIDE INDUSTRIES LTD. & ANR. 2009 (5) TMI 894 - SUPREME COURT . Deduction u/s 10B - Held that - We find that the Tribunal in the assessee s own case on the very same issue for the Assessment Year 2004-05 up to Assessment Year 2008-09, has adjudicated the issue in favour of the assessee. It was held that rent realized from staff, insurance claim realized in respect of damage of goods, excess liability from sundry creditors written back, for revenue expenses and miscellaneous incomes and receipts including duty draw back have to be treated as income from business and have to be considered while calculating deduction u/s 10B. Provision for market to market losses to be allowed as relying on assessee s own case.

Issues:
1. Disallowance of expenses attributable to earning dividend income
2. Treatment of provision for leave encashment for computing disallowance
3. Allowability of penalty as business expenditure
4. Disallowance under Rule 14A of the Income Tax Rules
5. Disallowance of provisions for leave encashment
6. Levy of penalty amount
7. Disallowance made under section 10B
8. Disallowance against the claim of additional depreciation
9. Addition made under the head current liabilities
10. Provision for market to market losses

1. Disallowance of expenses attributable to earning dividend income:
The issue pertains to the disallowance of expenses related to earning dividend income. The Tribunal directed the Assessing Officer to determine the disallowance under Rule 8D2(ii) of the Income Tax Rules based on specific legal propositions. The Tribunal emphasized that only dividend-bearing investments should be considered for calculating disallowance. The decision was influenced by previous rulings in the assessee's case and a specific judgment by the Bombay High Court.

2. Treatment of provision for leave encashment for computing disallowance:
The Tribunal remitted the issue of disallowance of provisions for leave encashment to the Assessing Officer for fresh adjudication in accordance with the law. This decision was based on a previous ruling by the Kolkata 'A' Bench of the Tribunal and the outcome of a Supreme Court case.

3. Allowability of penalty as business expenditure:
The Assessing Officer disallowed a penalty amount, but the assessee argued that it was not paid for violating any law but as compensation for an injury. The Tribunal dismissed this ground as the assessee did not press the issue due to the insignificance of the amount.

4. Disallowance under Rule 14A of the Income Tax Rules:
The Tribunal allowed the assessee's appeal for statistical purposes concerning the disallowance under Rule 14A of the Income Tax Rules. The decision was influenced by previous rulings in the assessee's case and a specific judgment by the Hon'ble Special Bench of the ITAT.

5. Disallowance of provisions for leave encashment:
The Tribunal set aside the issue of disallowance of provisions for leave encashment to the Assessing Officer for fresh adjudication in line with previous decisions.

6. Levy of penalty amount:
The Tribunal dismissed the ground related to the penalty amount as the assessee did not press the issue due to the minimal amount involved.

7. Disallowance made under section 10B:
The Tribunal upheld the order of the CIT(A) in favor of the assessee regarding the disallowance made under section 10B, based on previous rulings and the decision of the Hon'ble Calcutta High Court in the assessee's case.

8. Disallowance against the claim of additional depreciation:
The Tribunal dismissed the revenue's ground against the direction to allow additional depreciation, following previous rulings and the decision of the Kolkata 'A' Bench of the Tribunal.

9. Addition made under the head current liabilities:
The Tribunal upheld the order of the CIT(A) in dismissing the addition made under the head current liabilities, based on previous rulings and the decision of the Hon'ble Tribunal.

10. Provision for market to market losses:
The Tribunal dismissed the revenue's ground on the provision for market to market losses, following previous rulings and the decision of the Kolkata 'B' Bench of the Tribunal.

In conclusion, the Tribunal allowed the assessee's appeal for the Assessment Year 2009-10 for statistical purposes and dismissed the revenue's appeal for the same year. The judgments were based on detailed legal analysis and consideration of previous decisions in the assessee's case.

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