2018 (10) TMI 1843 - AT - Income Tax

Addition u/s 14A - Disallowance of interest expenditure - HELD THAT - The facts of the present case are similar to the facts of the case of Sudhir MehtaI 2017 (12) TMI 1668 - ITAT MUMBAI wherein as set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said interest accrued and calculated at 12% per annum after disallowing proportionate interest in respect of the investment in shares amounting after verifying the calculation of the interest quantification. Levy of interest u/s. 234A 234B and 234C - HELD THAT - As relying on case of Sudhir MehtaI 2017 (12) TMI 1668 - ITAT MUMBAI we direct the AO to recompute the interest liability after reducing the amount of tax deductible at source on the income earned. Appeal of assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of interest expenditure.
3. Calculation of book profit under Section 115JB.
4. Levy of interest under Sections 234A, 234B, and 234C.
5. Applicability of TDS provisions on the assessed amount.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 760 days, primarily due to the delay in obtaining the appeal filing fee from the custodian appointed by the Special Court (TORT). The Tribunal noted that similar delays had been condoned in related cases, including Eminent Holdings Pvt. Ltd. & Ors. vs. ACIT. The Tribunal condoned the delay, acknowledging that it was beyond the control of the assessee.

2. Disallowance of Interest Expenditure:
The assessee contested the disallowance of ?1,15,20,783/- towards interest expenditure. The Tribunal referenced its decision in the case of Sudhir Mehta vs. DCIT, where it allowed the claim of interest expenditure and remanded the issue to the Assessing Officer (AO) for verification. The Tribunal directed the AO to verify the facts and allow appropriate relief, noting that there was a nexus between the borrowed funds and investments in term deposits, and the assessee followed the mercantile system of accounting.

3. Calculation of Book Profit under Section 115JB:
The Tribunal noted that the issue of book profit calculation under Section 115JB was consequential to the resolution of the interest expenditure issue. Since the interest expenditure issue was remanded for verification, the Tribunal did not provide a separate ruling on the book profit calculation.

4. Levy of Interest under Sections 234A, 234B, and 234C:
The assessee argued against the levy of interest under Sections 234A, 234B, and 234C, citing similar issues in the case of Sudhir Mehta vs. DCIT. The Tribunal referenced its previous decision, directing the AO to recompute the interest liability after considering the amount of tax deductible at source on the income earned. The issue was remanded to the AO for fresh adjudication.

5. Applicability of TDS Provisions on the Assessed Amount:
The Tribunal did not provide a separate ruling on the applicability of TDS provisions, as it was intertwined with the resolution of the interest expenditure and book profit calculation issues.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding key issues to the AO for verification and fresh adjudication based on the directions provided in related cases. The decision emphasized the importance of consistency and proper verification in determining allowable deductions and interest liabilities.