2022 (9) TMI 1466 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - suo moto addition made by assessee - sufficiency of own funds - HELD THAT - DR could not substantiate argument as to why inspite of a suo moto disallowance being made by the Assessee without justifying anything to differ, the AO made a disallowance while the interest expenditure was incurred to earn taxable income only. At the same time the Assessee s own fund as on 31.03.2015 were Rs. 145173.31 and investment of Rs. 1957.39 lacs. No intervention required in the findings of the ld CIT(A) which based on correct interpretation and reliance of law. The ground is No. 1 decided against the revenue. Disallowance of prior period expenses - CIT-A deleted the addition - HELD THAT - DR could not submit anything to show that how there is any difference of facts or law in regard to the issue when the same has been decided in Assessee s own case by the order of Tribunal in preceding years. AO made addition relying on the orders for preceding years and the ld CIT(A) had deleted the addition relying on the decision of the tribunal in Assessee s own case for Assessment Year 2009-10. Thus, there is no substance in the ground. The same is decided against the revenue.

Summary

Issues:
1. Disallowance under section 14A read with Rule 8D
2. Disallowance of prior period expenses

Analysis:

Issue 1: Disallowance under section 14A read with Rule 8D
The appeal by the revenue challenges the order of the Ld. Commissioner of Income Tax (Appeals) concerning the disallowance of Rs 33,22,982 under section 14A read with Rule 8D of the Income Tax Act, 1961. The Assessee contended that no further disallowance was warranted based on various grounds, including the exclusive use of interest expenses for earning taxable income and the nature of non-cash investments in subsidiary companies. Previous disallowances made in earlier assessment years were also highlighted, where CIT (A) and ITAT had ruled in favor of the Assessee. The Tribunal upheld the findings of the Ld. CIT(A) and dismissed the revenue's appeal, emphasizing the correct interpretation and application of the law.

Issue 2: Disallowance of prior period expenses
The revenue also challenged the disallowance of Rs 2,23,09,000 as prior period expenses. The Assessee argued against further disallowance, citing self-disallowance of a significant amount as per law and the nature of prior period expenses being self-adjustable and compliant with Accounting Standards and the Companies Act. The Ld. CIT(A) relied on previous years' findings and allowed the appeal based on judicial precedents. The Tribunal found no merit in the revenue's arguments, noting the consistency in decisions across assessment years and the lack of substantial differences in facts or law. Consequently, the appeal by the revenue was dismissed, affirming the decision of the Ld. CIT(A) regarding the disallowance of prior period expenses.

In conclusion, the Tribunal upheld the decisions of the Ld. CIT(A) in favor of the Assessee regarding both the disallowance under section 14A read with Rule 8D and the prior period expenses, emphasizing the importance of consistent interpretation and application of the law based on established judicial precedents.