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2018 (5) TMI 1935 - AT - Income TaxDisallowance towards payment of royalty - nature of expenses - revenue or capital - HELD THAT - A similar royalty paid by the assessee was considered by this Tribunal for assessment year 2012-13 in 2016 (8) TMI 1204 - ITAT CHENNAI and found that the payment was made for the right to use the Logo hence it has to be allowed as revenue expenditure. In view of the order of this Tribunal for assessment year 2012-13 in the assessee s own case this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance u/s 14A - HELD THAT - The Madras High Court in the case of Redington (India) Ltd. v. Addl. CIT 2017 (1) TMI 318 - MADRAS HIGH COURT observed that tax cannot be levied in vacuum. In case no income was earned there cannot be any disallowance under Section 14A of the Act. Therefore the CIT(Appeals) restricted the disallowance to the income earned by the assessee. In view of the judgment of Madras High Court in Redington (India) Ltd. (sura) this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance of Reserve Fund under Section 45-IC of the Reserve Bank of India Act - HELD THAT - This Tribunal by placing reliance on 2016 (8) TMI 1204 - ITAT CHENNAI found that transfer of funds as required under Section 45-IC of the Reserve Bank of India Act is only application of income therefore it is liable for taxation. In view of the above this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Levy of interest under Section 234D - HELD THAT - Interest was charged on the excess amount refunded by the assessee while processing return under Section 143(1) of the Act. While proceeding under Section 143(1) of the Act the amount refunded to the assessee was considered as non-payment of tax and interest was charged for the period for which the assessee was holding the amount. Therefore this Tribunal confirmed similar order of the CIT(Appeals). Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Computation of income under Section 115JB - HELD THAT - This Tribunal is of the considered opinion that the transfer of funds to the Reserve under Section 45-IC of the Reserve Bank of India Act is only application of income therefore it is a profit of the assessee. Hence the same was rightly taken as income while computing book profit under Section 115JB of the Act. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Issues involved:
1. Disallowance of royalty payment 2. Disallowance under Section 14A of the Income-tax Act 3. Disallowance of Reserve Fund under Section 45-IC of the Reserve Bank of India Act 4. Levy of interest under Section 234D of the Act 5. Computation of income under Section 115JB of the Act 1. Disallowance of royalty payment: The Tribunal considered the disallowance of &8377;18,82,690/- towards payment of royalty. It was noted that a similar royalty payment by the assessee was previously allowed as revenue expenditure for the right to use the Logo. Referring to the precedent, the Tribunal upheld the disallowance made by the lower authority, as the payment was considered a revenue expenditure. 2. Disallowance under Section 14A of the Income-tax Act: The Assessing Officer disallowed &8377;1,52,36,898/- under Section 14A by applying Rule 8D(2) of the Income-tax Rules, 1962. The CIT(Appeals) directed to restrict the disallowance to the exempted income earned by the assessee. The Departmental Representative argued that the entire expenditure should be disallowed irrespective of the income earned. However, citing a judgment of the Madras High Court, the Tribunal confirmed the CIT(Appeals) decision to restrict the disallowance to the income earned by the assessee. 3. Disallowance of Reserve Fund under Section 45-IC of the Reserve Bank of India Act: The issue of disallowance of Reserve Fund under Section 45-IC of the Reserve Bank of India Act was considered. The Tribunal referred to a previous decision where it was held that the transfer of funds under this section is an application of income, thus liable for taxation. Consequently, the Tribunal confirmed the decision of the lower authority on this matter. 4. Levy of interest under Section 234D of the Act: The Tribunal reviewed the levy of interest under Section 234D of the Act, which was previously decided against the assessee. It was found that the interest was charged on the excess amount refunded by the assessee during return processing under Section 143(1) of the Act. Confirming the lower authority's decision, the Tribunal upheld the levy of interest. 5. Computation of income under Section 115JB of the Act: Regarding the computation of income under Section 115JB of the Act, the Tribunal addressed the issue of whether the amount transferred to the Statutory Reserve under Section 45-IC of the Reserve Bank of India Act should be considered as part of book profit. The Tribunal concluded that the transfer of funds to the Reserve is an application of income and should be included in the book profit computation under Section 115JB. Thus, the Tribunal confirmed the decision of the lower authority on this issue. In conclusion, both the appeals of the Revenue and the assessee were dismissed, and the orders of the lower authorities were upheld in each issue discussed in the judgment.
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