2018 (10) TMI 1898 - AT - Income Tax

Disallowance of Railway punitive charges - HELD THAT - As decided in own case 2018 (1) TMI 850 - ITAT KOLKATA expenses were not allowed as deduction. We are of the view that in the facts and circumstances of the present case the claim of the assessee for deduction was rightly allowed by CIT(A) Interest paid on belated deposit of TDS - HELD THAT - This issue is squarely covered by the decision of the Coordinate Bench on identical issues in the case of M/S NARAYANI ISPAT PVT. LTD. 2017 (10) TMI 67 - ITAT KOLKATA to conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1) Disallowance u/s 14A r.w. Rule 8D(2)(ii) and (iii) - HELD THAT - As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench in assessee s own case 2018 (1) TMI 850 - ITAT KOLKATA wherein the Coordinate bench held that disallowance of interest expenses in terms of Rule 8D(2)(ii) was originally deleted by ld. CIT(A) as the own funds of the assessee are more than the investments. Disallowance under Rule 8D(2)(iii) - CIT(A) has followed the decision of the Tribunal in the case of REI Agro Ltd. 2013 (9) TMI 156 - ITAT KOLKATA and has directed the Assessing Officer to exclude the investment which do not yield tax from income while working average value of investment. That is only dividend bearing securities are included to compute the average investment. We note that the assessee s issue is squarely covered by the judgment of the Coordinate Bench (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid finding of the ld. CIT(A) and the ld. CIT(A) has allowed the appeal of the assessee by following the decision of the Tribunal in REI Agro Ltd. (supra). We find no reason to interfere in the order of the ld. CIT(A) and the same is hereby upheld.

Summary

Issues Involved:
1. Disallowance of Railway Punitive Charges
2. Disallowance on Account of Interest Paid on Belated Deposit of TDS
3. Disallowance under Section 14A read with Rule 8D(2)(iii)

Detailed Analysis:

1. Disallowance of Railway Punitive Charges
The Revenue challenged the deletion of the disallowance made by the Assessing Officer (A.O.) on account of Railway punitive charges. The Tribunal observed that the issue was covered by its own earlier decision in the assessee’s case for the Assessment Year 2013-14, where it was held that the punitive charges for overloading of wagons are compensatory in nature and not disallowable under Explanation to Section 37(1) of the Income Tax Act. The Tribunal referenced the decision in Feegrade & Company Pvt. Ltd, and Taurian Iron & Steel Co. (P) Ltd., where it was concluded that the charges levied by the Indian Railways for carrying goods beyond permissible weight are not for any purpose which is an offense or prohibited by law. The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s ground.

2. Disallowance on Account of Interest Paid on Belated Deposit of TDS
The Revenue contested the deletion of disallowance related to interest paid on the belated deposit of TDS. The Tribunal noted that the issue was covered by the decision in DCIT vs. M/s. Narayani Ispat Pvt. Ltd., where it was held that interest on delayed payment of service tax and TDS is compensatory in nature and allowable under Section 37(1) of the Act. The Tribunal distinguished this case from the Supreme Court’s decision in Bharat Commerce Industries Ltd., which dealt with interest on delayed payment of advance tax, not applicable here. The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s ground.

3. Disallowance under Section 14A read with Rule 8D(2)(iii)
The Revenue appealed against the deletion of disallowance under Section 14A read with Rule 8D(2)(iii). The Tribunal observed that the issue was covered by its decision in the assessee’s case for the Assessment Year 2013-14, where it was held that only investments yielding dividend income during the relevant year should be considered while computing the average value of investments for disallowance under Rule 8D(2)(iii). The Tribunal referenced the decision in REI Agro Ltd. vs. DCIT, supporting the exclusion of non-dividend yielding investments. The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s ground.

Conclusion:
The Tribunal dismissed the appeals filed by the Revenue for both ITA No.1532/Kol/2017 and ITA No.1533/Kol/2017, upholding the CIT(A)’s orders on all grounds. The Tribunal found no reason to interfere with the CIT(A)’s decisions, which were consistent with the established legal precedents and facts of the case.