2021 (8) TMI 1321 - AT - Income Tax

Disallowance u/s. 36(1) - interest on housing loans - HELD THAT - As decided in own case 2019 (12) TMI 1600 - ITAT DELHI assessee stated that 62.75% in on account of interest on long term housing loan and worked out applying that percentage on the total business income calculated a sum of Rs. 549834543/- pertaining to long term housing loan and computed deduction @20% of Rs. 10.99 crores as deduction. AO changed the above ratio from 62.75 % to 55.89% as he considered the total receipt of business for the purpose of working out proportion. In the present case the methodology adopted by the assessee is consistently followed for last eight years. Same was accepted by the revenue without any objection. The only issue is with respect to how the profit of the business for the purpose of long term housing finance shall be worked out. The only issue is that assessee is computed with respect to the total income with respect to the interest income whereas the Id AO has applied the above ratio to the total receipt. When the method has been consistently accepted for the above year we do not find any reason to defer from that. In view of this we do not find any infirmity in allowing the assessee claim of deduction u/s 36(1 )(viii) of the Act applying the ratio of 62.75%. In the result we do not find any merit in ground No. 1 of the appeal. Disallowance u/s 14A r.w.r. 8D - HELD THAT - CIT(A) followed the binding precedent in the case of Joint Investments (P)Ltd. vs. CIT, 2015 (3) TMI 155 - DELHI HIGH COURT and deleted the addition. It is not established before us that the finding of fact by the ld. CIT(A) is in any way wrong. We, therefore, are of the opinion that in view of the binding precedent followed by the ld. CIT(A), findings of CIT(A) cannot be found fault with. Ground No. 2 of the Revenue s appeal is accordingly dismissed. Deduction in respect of education cess and higher and secondary education cess paid during the year - HELD THAT - As aR places reliance on the decision in the case of Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT and prayed that relief may be granted. DR submitted that this plea was not taken before either of the authorities below and therefore, the facts need to be verified. Ld. AR reports no objection. Recording the same, we leave the issue open to be adjudicated before the Assessing Officer. For this purpose, we remand the issue to the file of Assessing Officer for verification and taking a view in accordance with law.

Summary

Issues:
1. Disallowance under section 36(1)(viii) of the Income-tax Act, 1961.
2. Disallowance under section 14A of the Income-tax Act read with Rule 8D.
3. Entitlement of the assessee for deduction in respect of education cess and higher and secondary education cess.

Analysis:

1. Disallowance under section 36(1)(viii) of the Income-tax Act, 1961:
The issue revolved around the disallowance of Rs.1,88,65,937 under section 36(1)(viii) of the Income-tax Act. The Assessing Officer made this disallowance based on the amount transferred to special reserve. However, the Commissioner of Income Tax (Appeals) consistently granted relief on this issue for several assessment years, including the present one. The Tribunal also upheld the relief granted by the Commissioner for the assessment years 2009-10 and 2010-11. The Tribunal noted that the methodology adopted by the assessee was consistently followed and accepted by the revenue without objection. Given the consistent view taken by the authorities and the absence of any change in facts or law, the Tribunal dismissed the Revenue's appeal on this ground.

2. Disallowance under section 14A of the Income-tax Act read with Rule 8D:
Regarding the disallowance of Rs.3,87,94,000 by invoking the provisions of section 14A read with Rule 8D, the Commissioner of Income Tax (Appeals) found that no dividend was earned by the assessee on the investments considered by the Assessing Officer. The Commissioner relied on a binding precedent and deleted the addition. The Tribunal found no fault with the Commissioner's findings, as it was not established that the findings were incorrect. Therefore, the Tribunal dismissed the Revenue's appeal on this ground as well.

3. Entitlement of the assessee for deduction in respect of education cess and higher and secondary education cess:
The assessee filed cross-objections claiming entitlement to a deduction for education cess and higher and secondary education cess paid during the year. The assessee relied on a decision of the Hon'ble Bombay High Court and requested relief. The Departmental Representative argued that this plea was not raised before the lower authorities and requested verification of facts. The assessee had no objection to this verification. The Tribunal left the issue open to be adjudicated before the Assessing Officer and remanded the issue for verification and decision in accordance with the law.

In conclusion, the Tribunal dismissed the Revenue's appeal, upheld the relief granted by the Commissioner on both disallowances, and allowed the assessee's cross objection for statistical purposes. The decision was pronounced on August 24, 2021.