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2014 (6) TMI 1041 - AT - Income TaxDisallowance u/s 14A - as argued entire investment was made in the earlier years by erstwhile Gujarat Electricity Board (GEB) which got de-merged in the immediately preceding year. The assessee was one of the seven de-merged companies thereof - HELD THAT - Respectfully following the precedent we restore this issue back to the file of the Assessing Officer for adjudication afresh with the same directions as given by the Tribunal in the Assessment Year 2006-07 2013 (9) TMI 1071 - ITAT AHMEDABAD as held that the investments were in the form of shares of subsidiary companies as part of the financial restructuring plan approved by the Government of Gujarat which was integral to the demerger - decision of Hon'ble Bombay High Court pronounced in the case of Godrej Boyce Mfg. Co. Ltd. Muimbai vs. Dy.CIT 2010 (8) TMI 77 - BOMBAY HIGH COURT - AO is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income - AO should provide a reasonable opportunity to the assessee of producing its accounts - Remanded back for statistical purpose. Disallowance under the head assets written off on the ground that the same is not a revenue expenditure - HELD THAT - Items in question are drills, tools and equipments which do not have life of more than a year has to be verified from the account books and documents of the assessee as they are not available on record. Therefore, we set aside the order of the Commissioner of Income Tax (Appeals) and restore the matter back to the file of the Assessing Officer for adjudication of the issue afresh in the line of the decision of ADI Artech Transducers (P) Limited 2013 (8) TMI 1105 - GUJARAT HIGH COURT after allowing reasonable opportunity of hearing to the assessee. Thus, this ground of appeal is allowed for statistical purpose. Disallowance of prior paid expenses - HELD THAT - Various claims in respect of transmission charges, tariff, additional capacity charges, building charges etc raised by National Thermal Power Corporation Limited, Power Grid Corporation of India Limited, Gandhar Power Station, Maharashtra State Electricity Board etc. were settled during the year and the liability to pay got crystallized only during the accounting year. The Departmental Representative has relied on the order of the Assessing Officer. He could not bring any material on record to show that the finding of the Commissioner of Income Tax (Appeals) that various expenses claimed by the assessee under the head prior paid expenses got crystallized during the year and therefore were claimed as deduction during the year under consideration was incorrect. Neither has it been shown by the Revenue that the expenses claimed by the assessee are not genuine. It is the claim of the Revenue that since the assessee is following mercantile system of accounting, therefore expenses relating to the year under consideration are only allowable to the assessee. Even in the case where assessee is following mercantile system of accounting, expenses which are disputed and are finally settled and crystallized in a later year, they are allowable as deduction to the assessee in the year of crystallization of such expenses. Therefore, we do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax (Appeals) which is confirmed and this ground of appeal of the Revenue is dismissed. Disallowance of miscellaneous expenses and write-off - HELD THAT - Assessing Officer should also get an opportunity to verify the documents which were filed before the Commissioner of Income Tax (Appeals) for the first time by the assessee. In view of the above submissions of the Departmental Representative, we set aside the order of the Commissioner of Income Tax (Appeals) and restore this matter back to the file of the Assessing Officer for adjudication of the issue afresh as per law after allowing reasonable and proper opportunity of hearing to the assessee. The assessee is also directed to file all the details and documents before the Assessing Officer as and when called upon to do so. Thus, this ground of appeal of Revenue is allowed for statistical purpose. Addition u/s. 40(a)(ia) - legal and professional charges - failure to furnish the details with regard to payment and tax deducted thereon and credited the same to the Government - HELD THAT - Assessing Officer should also get an opportunity to verify the evidences which were filed for the first time before the Commissioner of Income Tax (Appeals) by the assessee. Therefore, in view of the above submissions of the Departmental Representative, we set aside the order of the Commissioner of Income Tax (Appeals) and restore the matter back to the file of Assessing Officer for adjudication of the issue afresh after allowing reasonable and proper opportunity of hearing to the assessee. Thus, this ground of appeal is allowed for statistical purpose.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Disallowance of assets written off. 3. Enhancement of book profits under Section 115JB. 4. Disallowance of prior paid expenses. 5. Disallowance of miscellaneous expenses and write-offs. 6. Disallowance under Section 40(a)(ia) for failure to furnish details of TDS. Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The assessee contested the addition of Rs. 197.80 crores made by the Assessing Officer (AO) under Section 14A, attributing the interest expenditure to exempt dividend income. The AO observed that the assessee had claimed interest expenses of Rs. 18325.41 lakhs and invested Rs. 5,47,709.74 lakhs, earning a dividend income of Rs. 1283.95 lakhs, without attributing any expenditure to the exempt income. The Commissioner of Income Tax (Appeals) upheld the AO's decision, citing the Special Bench decision in ITO vs. Daga Capital Management Pvt. Ltd., which held that Section 14A and Rule 8D provisions apply retrospectively. The Tribunal restored the matter to the AO for fresh adjudication, following its own precedent in the assessee's case for the previous year. 2. Disallowance of Assets Written Off: The AO disallowed Rs. 1,04,52,500/- out of Rs. 1,13,00,000/- claimed as assets written off, treating them as part of plant and machinery and allowing depreciation instead. The Commissioner of Income Tax (Appeals) upheld this decision, noting that post-01.04.1996, items costing less than Rs. 5,000/- should be capitalized. The Tribunal set aside this order, directing the AO to verify the nature of the assets and adjudicate afresh in light of the Gujarat High Court's decision in CIT Vs. ADI Artech Transducers (P) Limited, which treated such expenses as revenue expenditure if the assets had a short life span. 3. Enhancement of Book Profits under Section 115JB: The assessee's appeal against the enhancement of book profits by Rs. 197.80 crores on account of disallowance under Section 14A was deemed consequential to the first ground. As the Tribunal restored the Section 14A issue to the AO, this ground was also set aside for fresh adjudication. 4. Disallowance of Prior Paid Expenses: The AO disallowed Rs. 6,84,06,000/- claimed as prior paid expenses, observing that the assessee follows a mercantile system of accounting. The Commissioner of Income Tax (Appeals) allowed the claim, noting that the expenses crystallized during the year under consideration due to disputes and settlements. The Tribunal upheld this decision, agreeing that expenses crystallized in a later year are allowable in that year. 5. Disallowance of Miscellaneous Expenses and Write-Offs: The AO disallowed Rs. 1,53,32,30,000/- claimed as miscellaneous losses and write-offs due to the lack of relevant details. The Commissioner of Income Tax (Appeals) allowed the claim, noting that the amount was initially offered for tax in an earlier year as a subsidy receivable, which was later reduced by the Government. The Tribunal set aside this order, directing the AO to verify the additional evidence and adjudicate afresh, as the Commissioner had admitted new evidence without a remand report. 6. Disallowance under Section 40(a)(ia) for Failure to Furnish Details of TDS: The AO disallowed Rs. 3,53,84,000/- for failure to furnish TDS details. The Commissioner of Income Tax (Appeals) deleted the disallowance, observing that the assessee had deducted and paid TDS on legal and professional charges, and payments below Rs. 5,000/- were not subject to TDS. The Tribunal restored the matter to the AO for fresh verification, as the details were submitted for the first time before the Commissioner without a remand report. Conclusion: The Tribunal's order resulted in partial relief for both the assessee and the Revenue, with several issues remanded back to the AO for fresh adjudication. The Tribunal emphasized the need for proper verification and adherence to procedural rules, particularly regarding the submission and verification of evidence.
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