2015 (10) TMI 2778 - AT - Income Tax

Disallowance on tax free investment u/s 14A rw. rule 8D - HELD THAT - It is true that Rule 8D is not applicable for assessment year 2007-08. To the above extent, the Ld. CIT(A) is absolutely correct. We set aside the findings of the Ld. CIT(A) on this issue and remand the matter to CIT(A) with the direct ion to decide the same afresh keeping in view the observations of the Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing. Co. Ltd Vs. DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT . The CIT(A) shall provide an opportunity of being heard to the assessee in the matter. For statistical purposes, the ground No.1 of the appeal is allowed. Disallowing the claim of the assessee u/s 80IC on job work - Whether income from job charges cannot be treated to have been derived by the undertaking by manufacturing or producing any article or thing not prohibited by 13 th Schedule - HELD THAT - We by our order of even date in the case of ACIT Vs. M/s Cremica Agro Foods Pvt Ltd., Ludhiana 2015 (10) TMI 2703 - ITAT CHANDIGARH have set aside the order of CIT(A) and remanded the identical issues to the file of the CIT(A) for a fresh decision in accordance with law. For the detailed reasons given therein, we set aside the order of CIT(A) and remand the issues to the file of CIT(A) with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. Investments in shares and mutual funds which was exempt u/s 10(34) - HELD THAT - It is apparent from the order of the CIT(A) that assessee earned dividend income of ₹ 53,11,447/- which was claimed exempt u/s 10(34) 10(35) of the Act, during the course of assessment proceedings. It was shown as taxable in the return of income as the assessment has been made u/s 115JB, it did not affect any taxability of the income. Considering the entire facts and circumstances of the present case, we are satisfied that the assessee was prevented by sufficient cause from filing the present appeal. At the same time, it is also well settled law that length of delay is not to matter in the context of condonation of delay. The jurisdiction to condone delay should be exercised liberally. The matter relating to Condonation of Delay should be judged broadly and not in a pedantic manner. In the case of Collector, Land Acquisition Vs. Mst. Katji 1987 (2) TMI 61 - SUPREME COURT the Hon'ble Supreme Court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay. It is also well settled that ordinarily, a litigant does not stand to benefit by lodging an appeal late. In fact, he runs a serious risk. In view of the above, we condone the delay in filing the appeal. Since we have restored the main issue to the CIT(A) and, therefore, we think it appropriate to remand this issue also to the CIT(A) with the direction to consider the content ion of the assessee and dispose of the same in accordance with law.

Summary

Issues Involved:
1. Deletion of addition made under Section 14A read with Rule 8D.
2. Deletion of addition related to Section 80IC on job work.
3. Deletion of addition by reducing eligible profits under Sections 80IA(8) and 80IA(10).
4. Deletion of addition under Section 80IB.
5. Exemption of dividend income under Sections 10(34) and 10(35).
6. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Deletion of Addition Made Under Section 14A Read with Rule 8D:
The Assessing Officer (AO) disallowed Rs. 36,02,230 under Section 14A of the Income-tax Act, 1961, read with Rule 8D of the I.T. Rules, 1962, due to investments in mutual funds amounting to Rs. 24,47,37,681. The AO's calculation was based on the observation that certain investments were tax-free and thus required disallowance of related expenditure. However, the CIT(A) deleted this disallowance, relying on the judgment of the Bombay High Court in the case of Godrej and Boyce Manufacturing Co. Ltd. v. DCIT, which stated that Rule 8D is not applicable for the assessment year 2007-08. The Tribunal agreed with the CIT(A) that Rule 8D is not applicable for the assessment year 2007-08 but noted that the AO still had to determine the expenditure incurred in relation to tax-free income using a reasonable basis. The matter was remanded to the CIT(A) for fresh consideration in line with the Bombay High Court's judgment.

2. Deletion of Addition Related to Section 80IC on Job Work:
The AO disallowed Rs. 29,43,718 claimed under Section 80IC, arguing that income from job charges cannot be treated as derived from manufacturing or producing any article or thing. The CIT(A) deleted this addition, following a precedent set in the case of M/s Cremica Agro Foods Pvt Ltd. for the assessment year 2006-07. The Tribunal remanded the issue back to the CIT(A) for fresh consideration, as it had done in the case of M/s Cremica Agro Foods Pvt Ltd., directing the CIT(A) to decide the issue afresh in accordance with the law.

3. Deletion of Addition by Reducing Eligible Profits Under Sections 80IA(8) and 80IA(10):
The AO reduced the eligible profits by Rs. 16,05,289 by invoking Sections 80IA(8) and 80IA(10). The CIT(A) deleted this reduction, again relying on the decision in the case of M/s Cremica Agro Foods Pvt Ltd. The Tribunal remanded this issue back to the CIT(A) for a fresh decision, consistent with its ruling in the case of M/s Cremica Agro Foods Pvt Ltd.

4. Deletion of Addition Under Section 80IB:
The AO disallowed Rs. 17,32,506 under Section 80IB, and the CIT(A) deleted this disallowance, following the decision in the case of M/s Cremica Agro Foods Pvt Ltd. The Tribunal also remanded this issue back to the CIT(A) for fresh consideration in line with its decision in the case of M/s Cremica Agro Foods Pvt Ltd.

5. Exemption of Dividend Income Under Sections 10(34) and 10(35):
The assessee claimed an exemption for dividend income of Rs. 53,11,447 under Sections 10(34) and 10(35) in submissions before the AO and CIT(A), but it was not claimed in the return of income. The CIT(A) did not specifically address this issue. The Tribunal noted that the dividend income was shown as taxable in the return but did not affect taxability due to assessment under Section 115JB. The Tribunal remanded this issue to the CIT(A) for fresh consideration, directing the CIT(A) to address the exemption claim in accordance with the law.

6. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 891 days, explaining that the delay was due to an oversight and the fact that the issue of dividend income exemption was not specifically addressed by the lower authorities. The Tribunal condoned the delay, emphasizing that the jurisdiction to condone delay should be exercised liberally and that substantial justice should be preferred over technical considerations. The Tribunal cited the Supreme Court's judgment in the case of Collector, Land Acquisition v. Mst. Katji, which supports a liberal approach to condonation of delay.

Conclusion:
For statistical purposes, both the appeals were allowed, and the matters were remanded to the CIT(A) for fresh consideration and decision in accordance with the law, after providing due and reasonable opportunity to the assessee.