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2018 (10) TMI 1751 - AT - Income TaxAddition u/s 14A r.w.r 8D - HELD THAT - There is no whisper about rejection of assessee s contention of expenses disallowed suo moto in relation to earning of exempt income. Hence according to us there is no satisfaction recorded by the AO for rejection of the assessee s disallowance and accordingly we delete the disallowance. Disallowance of expenses relatable to exempt income under section 14A while computing the book profit under section 115JB - HELD THAT - Tribunal in the case of Vireet Investments (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned Sr. DR could not controvert the above proposition. Accordingly we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra). Respectfully following the same we delete the disallowance and allow this issue of assessee s appeal. Depreciation on computer accessories and printers at 60% - BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. 2010 (8) TMI 58 - DELHI HIGH COURT Interest receipt are business income because the assessee for a very short period investing in FD s and Mutual Funds and earned interest income which is incidental
Issues Involved:
1. Disallowance of expenses related to exempt income under Section 14A of the Income Tax Act. 2. Disallowance of expenses related to exempt income while computing book profit under Section 115JB of the Income Tax Act. 3. Depreciation rate on computer accessories and printers. 4. Classification of interest income as business income. Issue-wise Detailed Analysis: 1. Disallowance of expenses related to exempt income under Section 14A of the Income Tax Act: The assessee earned dividend income of ?8,14,31,884/- and claimed it as exempt under Section 10(34) of the Act. The assessee suo moto disallowed expenses related to this exempt income at ?3,98,152/-. However, the AO invoked Rule 8D(2)(iii) and disallowed administrative expenses at ?23,72,503/-. The CIT(A) confirmed the AO’s action. The Tribunal, referencing the Supreme Court decision in Maxopp Investment Ltd. vs. CIT, emphasized that the AO must record satisfaction before applying Rule 8D. Since the AO did not record any dissatisfaction with the assessee's computation, the Tribunal deleted the disallowance for both AY 2008-09 and AY 2009-10. 2. Disallowance of expenses related to exempt income while computing book profit under Section 115JB of the Income Tax Act: The CIT(A) confirmed the addition of ?15,24,386/- to the computation of book profit under Section 115JB. However, the Tribunal referred to the Special Bench decision in Vireet Investments (P.) Ltd., which held that no disallowance under Section 14A read with Rule 8D can be made while computing book profit under Section 115JB. Therefore, the Tribunal deleted the disallowance. 3. Depreciation rate on computer accessories and printers: The AO allowed depreciation on printers and scanners at 15%, while the assessee claimed 60%. The CIT(A) allowed the claim of 60% depreciation, referencing various decisions that considered computer accessories and peripherals as integral parts of the computer system. The Tribunal upheld the CIT(A)’s decision, citing its own earlier decision in the assessee’s case for AY 2007-08 and the Delhi High Court judgment in CIT vs. BSES Yamuna Powers Ltd. 4. Classification of interest income as business income: The CIT(A) directed the AO to assess interest income under the head "business income," following the assessee's own case for AY 2007-08. The Tribunal found that the interest income arose from the deployment of short-term business receipts in FDs and mutual funds, which is incidental to the business. The Tribunal upheld the CIT(A)’s decision, referencing the Bombay High Court decision in CIT vs. Lok Holdings and other relevant judgments. Conclusion: The Tribunal allowed the assessee's appeals for AY 2008-09 and AY 2009-10, deleting the disallowances under Section 14A and Section 115JB. The Tribunal dismissed the Revenue’s appeal, confirming the higher depreciation rate on computer accessories and the classification of interest income as business income.
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