2017 (8) TMI 1511 - HC - Income Tax

Disallowance of interest expenditure - whether assessee had not even attempted to show that the investments in sister concerns served any business purpose? - Held that - Issue concluded by the decision passed by this Court in The Pr. Commissioner of Income Tax (Central), Ludhiana v. Shri Satish Bala Malhotra, Legal Heir of Shri Ashok Kumar Malhotra, Prop. M/s Modern Publishers, MBD House, Railway Road, Jalandhar 2017 (4) TMI 1330 - PUNJAB & HARYANA HIGH COURT whereby the questions have been decided against the revenue. Disallowance of deduction u/s 80-IC made by the AO on the job work got done outside the specified area, i.e. Himachal Pradesh and on the trading receipt from sale of unused papers - Held that - The matter is remanded to the Tribunal for fresh adjudication on Question No. (iii) after affording an opportunity of hearing to the parties.

Summary

Issues: Appeal under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the assessment year 2010-11 regarding disallowance of interest expenditure, deletion of addition under Section 80-IC of the Income Tax Act, 1961, and subsequent appeals filed by the assessee and the revenue.

Analysis:

Issue 1: Disallowance of Interest Expenditure
The appellant filed an appeal against the Tribunal's order deleting the addition of ?1,22,51,965/- on account of disallowance of interest expenditure. The Assessing Officer disallowed the interest expenditure as the assessee had surplus funds invested in sister concerns without any business purpose, leading to interest-bearing loans. The CIT(A) confirmed the disallowance, but the Tribunal allowed the appeal and deleted the addition. The High Court, citing a previous decision, upheld the Tribunal's decision, concluding against the revenue.

Issue 2: Disallowance of Deduction under Section 80-IC
The appeal also involved the disallowance of deduction under Section 80-IC of the Income Tax Act, 1961, for job work done outside the specified area and trading receipt from the sale of unused papers. The CIT(A) partially allowed the claim made under Section 80-IC, which was challenged by both the assessee and the revenue before the Tribunal. The Tribunal allowed the assessee's appeal and dismissed the revenue's appeal. However, the High Court remanded the matter to the Tribunal for fresh adjudication after a recent decision in a similar case.

In conclusion, the High Court disposed of the appeal by upholding the Tribunal's decision on the disallowance of interest expenditure based on a previous judgment. The Court remanded the issue of deduction under Section 80-IC for fresh adjudication, following a recent decision in a similar case.