2013 (7) TMI 1207 - AT - Income Tax

2017 (10) TMI 1624 - AT

Issues Involved:
1. Disallowance of education expenses.
2. Addition on account of income-tax recoverable from GEB/Essar Steel Ltd.
3. Disallowance of expenses u/s 14A.
4. Classification of interest received on loans and advances to employees.
5. Addition of income-tax recoverable while computing book profit u/s 115JB.

Summary:

1. Disallowance of Education Expenses:
The issue raised in Ground no. 1 pertains to the addition of Rs. 5 Lakhs made by the AO and confirmed by the ld. CIT(A) on account of disallowance of education expenses. The AO disallowed the expenditure on the grounds that it was not incurred wholly and exclusively for business purposes. The ld. CIT(A) upheld this disallowance due to the assessee's failure to establish any business nexus. The Tribunal found no justifiable reason to interfere with the ld. CIT(A)'s order, thus dismissing Ground no. 1 of the assessee's appeal.

2. Addition on Account of Income-Tax Recoverable from GEB/Essar Steel Ltd.:
Ground no. 2 of the assessee's appeal concerns the addition of Rs. 4.96 Crore made by the AO and confirmed by the ld. CIT(A). Both parties agreed that this issue was covered by the Tribunal's decision in the assessee's own case for A.Y. 2003-04, where it was held that the amount paid by power purchasers as tax on tariff charges is taxable as income. The Tribunal upheld the ld. CIT(A)'s order, dismissing Ground no. 2 of the assessee's appeal.

3. Disallowance of Expenses u/s 14A:
Ground no. 3 of the assessee's appeal and Ground no. 3 of the Revenue's appeal relate to the disallowance of expenses u/s 14A. The AO disallowed Rs. 18,35,586/- based on the interest attributable to investments made in mutual funds. The ld. CIT(A) remitted the issue back to the AO for re-computation following CBDT guidelines. The Tribunal noted that Rule 8D is applicable prospectively from A.Y. 2008-09 and upheld the AO's reasonable basis for disallowance, thus partly allowing both appeals.

4. Classification of Interest Received on Loans and Advances to Employees:
Ground no. 1 of the Revenue's appeal for A.Y. 2004-05 challenges the classification of interest received on loans and advances to employees as business income. The Tribunal, following its earlier decisions in the assessee's own case, upheld the ld. CIT(A)'s order treating the interest as business income, dismissing Ground no. 1 of the Revenue's appeal.

5. Addition of Income-Tax Recoverable While Computing Book Profit u/s 115JB:
Ground no. 2 of the Revenue's appeal for A.Y. 2004-05 involves the addition of Rs. 4.96 Crores on account of income-tax recoverable while computing book profit u/s 115JB. The Tribunal restored this issue to the AO for fresh decision, following its directions in the assessee's case for A.Y. 2003-04. This ground was allowed for statistical purposes.

Subsequent Years (A.Y. 2005-06 and 2006-07):
The Tribunal followed similar conclusions for the issues involved in A.Y. 2005-06 and 2006-07 as decided for A.Y. 2004-05. The appeals were partly allowed, with specific issues restored to the AO for fresh consideration.

Conclusion:
All six appeals were partly allowed, with specific directions for re-computation and fresh consideration by the AO as per the Tribunal's instructions.

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