2019 (2) TMI 1901 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance by assessee - HELD THAT - As the assessee itself had offered a disallowance under Sec.14A, therefore, the CIT(A) had in all fairness restricted the disallowance upto the said amount. We thus not finding any infirmity in the order of the CIT(A) who as observed by us hereinabove had restricted the addition to the extend as offered by the assessee in its return of income, uphold the same to the said extent. Adjustment made by the A.O to the book profit under Sec. 115JB on account of expenses relatable to exempt income under Sec.14A. - HELD THAT - As relying on VIREET INVESTMENT (P.) LTD. 2017 (6) TMI 1124 - ITAT DELHI the adjustment made under Sec. 14A is not to be considered for computing the book profit under Sec. 115JB - We thus uphold the order of the CIT(A) to the said extent. Decided against revenue. Additional depreciation u/s 32(iia) - A.O being of the view that as per the provisions of Sec.32(1)(iia) of the I.T. Act the additional depreciation was to be allowed @ 20% of the actual cost of machinery of plant in the year in which it had been acquired and installed and could not be spilled over to the subsequent years, thus declined to allow the additional claim of depreciation @ 10% - HELD THAT - There is no restriction made available on the statute as per which the assessee who had put to use the new machinery for a period of less than 180 days during a year, would be divested of its entitlement to claim the balance 10% of the additional depreciation in the succeeding assessment year. Our aforesaid view is fortified by the judgment of CIT, Madurai , Vs. T.P. Textiles (P) Ltd 2017 (3) TMI 739 - MADRAS HIGH COURT and Rittal India Pvt. ltd. 2016 (1) TMI 81 - KARNATAKA HIGH COURT . We thus being of the considered view that no infirmity arises from the order of the CIT(A) who had rightly deleted the disallowance of additional depreciation. Bad debts claim - assessee sought adjudication on its claim of bad debt on the basis of the facts which were already available on record - HELD THAT - As per the settled position of law as, we are of the considered view that no infirmity does emerge from the order of the CIT(A) who had directed the A.O to consider the said claim in the backdrop of the judgment of the Hon ble Supreme Court in the case of TRF Ltd Vs. CIT 2010 (2) TMI 211 - SUPREME COURT and the CBDT Circular No. 12/2016, dated 30.05.2016. We thus finding ourselves to be in agreement with the view taken by the CIT(A), uphold his order to the said extent. The Grounds of appeal No. 5 and 6 raised by the revenue before us are dismissed.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act, 1961.
2. Adjustment to Book Profit under Section 115JB of the Income Tax Act.
3. Additional Depreciation under Section 32(1)(iia) of the Income Tax Act.
4. Claim of Bad Debts not made in the original return of income.

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A of the Income Tax Act, 1961:
The revenue challenged the CIT(A)'s decision to restrict the disallowance under Section 14A to 2% of the exempt income based on previous years' appeal orders. The CIT(A) had restricted the disallowance to ?1,81,485/- as offered by the assessee in its return of income. The tribunal upheld the CIT(A)'s decision, citing that disallowance under Section 14A cannot exceed the exempt income itself, as supported by the judgments of the Delhi High Court in Joint Investments Pvt. Ltd. vs. CIT and Cheminvest Limited vs. CIT. Thus, the grounds of appeal No. 1 and 2 raised by the revenue were dismissed.

2. Adjustment to Book Profit under Section 115JB of the Income Tax Act:
The revenue contended that the CIT(A) erred in deleting the adjustment made to book profit under Section 115JB on account of expenses related to exempt income under Section 14A. The tribunal referred to the Special Bench decision in Vireet Investment Pvt. Ltd., which held that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. Therefore, the tribunal upheld the CIT(A)'s decision, dismissing the ground of appeal No. 3.

3. Additional Depreciation under Section 32(1)(iia) of the Income Tax Act:
The revenue argued that additional depreciation should only be claimed in the year the new machinery was acquired and installed. The CIT(A) allowed the assessee's claim for additional depreciation of 10% in the subsequent year, as the machinery was used for less than 180 days in the previous year. The tribunal agreed with the CIT(A), citing that there is no statutory restriction preventing the balance 10% of additional depreciation from being claimed in the succeeding year. This view was supported by the judgments of the Madras High Court in CIT vs. T.P. Textiles (P) Ltd. and the Karnataka High Court in CIT vs. Rittal India Pvt. Ltd. Thus, the ground of appeal No. 4 was dismissed.

4. Claim of Bad Debts not made in the original return of income:
The revenue objected to the CIT(A)'s direction to consider the assessee's second revised claim for bad debts amounting to ?544.20 lakhs, arguing it was not made in the original return and citing the Supreme Court's judgment in Goetze (India) Ltd. vs. CIT. The CIT(A) allowed the claim, referencing the Bombay High Court's decision in CIT vs. Pruthvi Brokers & Shareholders (P) Ltd., which permits appellate authorities to consider new claims not made in the original return. The tribunal upheld the CIT(A)'s decision, noting that the claim was based on facts already on record and should be considered in light of the Supreme Court's judgment in TRF Ltd. vs. CIT and CBDT Circular No. 12/2016. Thus, the grounds of appeal No. 5 and 6 were dismissed.

Conclusion:
The appeals for both A.Y. 2012-13 and A.Y. 2013-14 were dismissed, with the tribunal upholding the CIT(A)'s decisions on all contested issues. The tribunal emphasized adherence to legal precedents and statutory interpretations in its rulings.