2014 (3) TMI 1208 - AT - Income Tax

Disallowance u/s 80JJAA - Additional wages to new regular workmen employed by the assessee in the previous year - new regular employees in respect of whom the claim was denied on the basis that they have not completed 300 days in the preceding year - CIT-A has held that the claim of deduction under sec.80JJAA in respect of regular workmen recruited in the earlier years and pertaining to relevant assessment year can be allowed only if the claim has been upheld in the assessment year in which the recruitment of such workmen was made - HELD THAT - As rightly held by the Commissioner of Income tax (Appeals), the above dictum of statute cannot by any stretch of imagination be extended to new regular workmen employed in the preceding year. Accordingly, we agree with the finding of the Commissioner of Income-tax (Appeals) that the claim of the assessee for deduction under sec.80JJAA in respect of regular workmen employed in the earlier years relevant to the assessment year is not sustainable in law. As this is the main issue raised by the assessee, it is not necessary to deal with the arithmetics, of different assessment years. Accordingly, we uphold the orders of the lower authorities including enhancement of disallowance made by the Commissioner of Income tax (Appeals) for the assessment year 2006-07. Decided against assessee. Disallowance made under sec.14A read with Rule 8D - HELD THAT - Sec.14A as well as Rule 8D do not apply for the assessment year 2006-07. Proportionate disallowance made by the Assessing Officer of the loan interest is not on any verifiable basis. It is a blunt disallowance. It cannot be upheld. Therefore, the said disallowance is deleted. This ground is decided in favour of the assessee.

Summary

Issues:
1. Disallowance of claim under sec.80JJAA
2. Disallowance under sec.14A read with Rule 8D

Analysis:

Issue 1: Disallowance of claim under sec.80JJAA
The appeals were filed against the order of the Commissioner of Income-tax (Appeals) concerning the assessment years 2006-07 and 2007-08. The main contention raised by the assessee was the disallowance of the claim made under sec.80JJAA of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) had confirmed the disallowance, stating that the claim for deduction under sec.80JJAA in respect of regular workmen employed in earlier years relevant to the assessment year is not sustainable in law. The Commissioner emphasized that the additional wages are to be determined only for "new regular workmen employed by the assessee in the previous year." The Tribunal agreed with the Commissioner's finding, upholding the disallowance made for the assessment year 2006-07. The Tribunal concluded that the claim for deduction under sec.80JJAA for regular workmen employed in previous years is not permissible under the law.

Issue 2: Disallowance under sec.14A read with Rule 8D
Another ground raised by the assessee was the disallowance under sec.14A for the assessment year 2006-07. The Tribunal noted that sec.14A and Rule 8D did not apply for the said assessment year. The disallowance made by the Assessing Officer regarding loan interest was considered blunt and not based on any verifiable basis. Consequently, the Tribunal ruled in favor of the assessee, deleting the disallowance under sec.14A read with Rule 8D for the assessment year 2006-07. As a result, the appeal filed by the assessee for the assessment year 2006-07 was partly allowed, while the appeal for the assessment year 2007-08 was dismissed.

In conclusion, the Tribunal upheld the disallowance of the claim under sec.80JJAA for regular workmen employed in previous years but ruled in favor of the assessee regarding the disallowance under sec.14A for the assessment year 2006-07. The judgment provided a detailed analysis of the legal provisions and their application to the specific circumstances of the case, resulting in a partial allowance of the appeal for one assessment year and dismissal for the other.