2018 (6) TMI 1590 - AT - Income Tax

Claim of deduction u/s. 80IA(4) - HELD THAT - where assessee is carrying out CGS activities which is nothing but infrastructure facility as defined under section 80IA(4). Accordingly respectfully following the same, we confirm the order of the CIT(A) and direct the AO to allow the deduction under section 80IA(4). Thus, ground raised by the revenue does not stand and as such we dismiss the same. Resultantly, appeal of the revenue stands dismissed. See M/S ALL CARGO GLOBAL LOGISTICS LTD VERSUS DEPUTY COMMISSIONER OF INCOME TAX 2012 (7) TMI 222 - ITAT MUMBAI(SB) . Disallowance u/s. 14A - HELD THAT - As regards the disallowance u/s. 8D(2)(iii), it is noted that earlier the assessee has not pressed this issue and, hence, the addition @ 0.5% of the average value of the investment was confirmed by the ITAT in the earlier year. Now, the ld. Counsel of the assessee has prayed that the assessee needs to be granted relief in this regard with reference to the decision of the ITAT Special Bench in the case of ACIT vs. Vireet Investment P. Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein it was expounded that the investment which did not yield exempt income should not enter into the computation while arriving at the average value of investment. The inference hence is that the disallowance u/s. 8D(2)(iii) should be made only with reference to the investment which earned exempt income. Hence, assessee pleaded that while making the disallowance in this regard, the ratio from the Special Bench decision should be followed. We find ourselves in agreement with the submissions of the assessee. We direct the Assessing Officer to make the computation of disallowance u/s. 8D(2)(iii) of the Act by excluding the investment which have not earned any exempt income during the year in the computation in accordance with the afore-said Special Bench decision. MAT computation - Computation of section 115JB - HELD THAT - Disallowance u/s. 14A cannot be made in computing the deduction u/s. 115JB of the Act. The assessee accepted that the disallowance u/s.115JB in this case should also be made in accordance with the computation hereinabove and accepted the same. The Assessing Officer is directed accordingly.

Summary

Issues:
1. Revenue's appeal regarding deduction u/s. 80IA(4) of the Income Tax Act, 1961.
2. Assessee's cross objection regarding disallowance under section 14A of the Act r.w.r 8D of Income Tax Rules.

Revenue's Appeal - Deduction u/s. 80IA(4):
The Revenue appealed against the direction of the ld. Commissioner of Income Tax (Appeals) to allow the claim of deduction u/s. 80IA(4) amounting to ?80,55,84,323. The tribunal noted that the issue was squarely covered in favor of the assessee by previous ITAT decisions. The tribunal observed that the assessee, engaged in providing "Container Freight Station" services, was eligible for the deduction as it fell under the definition of infrastructure facility under section 80IA(4). Citing decisions of the Hon'ble jurisdictional High Court and Delhi High Court, the tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Assessee's Cross Objection - Disallowance under Section 14A:
The Assessing Officer disallowed ?22,32,147 under section 14A of the Act r.w.r 8D of Income Tax Rules, which was also considered while computing book profit u/s. 115JB. The ld. Commissioner of Income Tax (Appeals) confirmed this disallowance. The assessee filed a cross objection, arguing that the disallowance should be deleted based on previous ITAT decisions and the Hon'ble Bombay High Court's rulings. The tribunal agreed with the assessee, noting that interest-free funds exceeded investments made, and directed the AO to exclude investments not yielding exempt income while calculating disallowance u/s. 8D(2)(iii). The tribunal also directed that disallowance u/s. 14A cannot be made in computing deduction u/s. 115JB, following a Special Bench decision. As a result, the cross objection was partly allowed.

In conclusion, the tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross objection, providing detailed reasoning for each issue and referencing relevant legal precedents and decisions.