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2022 (5) TMI 1574 - AT - Income TaxDisallowance of administrative expenses u/s 14A r.w Rule 8D(2)(iii) - HELD THAT - AO had failed to record his dissatisfaction as regards the claim of the assessee that no part of the expenditure claimed as deduction could be attributed towards earning of exempt dividend income therefore he had wrongly assumed jurisdiction u/s. 14A of the Act as a result whereof the disallowance determined by him by triggering the mechanism contemplated in Rule 8D(2)(iii) cannot be sustained and is liable to be vacated. As we have vacated the disallowance made by the A.O u/s. 14A(2)(iii) for want of valid jurisdiction on his part therefore we refrain from adverting to the other contentions that have been advanced by the Ld. AR qua sustainability of the said disallowance on merits which are left open. Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations. Disallowance of deduction of contributions to temple/panchayat - as contributions made by the assessee to the temple/panchayat were not eligible for deduction u/s. 80G A.O disallowed the assessee s claim for deduction of the aforesaid amount in question - HELD THAT - Aforesaid contributions/expenditure which are neither in the nature of personal expenditure or capital expenditure and have been incurred by the assessee company in order to facilitate running of its business of mining smoothly i.e. without any disturbance from the people in the surrounding villages thus being in the nature of an expenditure incurred by the assessee wholly and exclusively for the purpose of its business was allowable as a deduction u/s. 37(1) of the Act - no infirmity in the view taken by the CIT(Appeals) who had vacated the aforesaid disallowance. Addition u/s 41(1) - cessation of liabilities - Assessee had failed to furnish confirmations in respect of four creditors - HELD THAT - Now when it is the claim of the assessee that the impugned liabilities had ceased to exist in the aforementioned succeeding years then in case the A.O was to hold otherwise he was obligated to substantiate on the basis of irrefutable material that the said outstanding liabilities had in fact ceased to exist during the year under consideration itself i.e. A.Y.2009-10. - Decided against revenue. A.O could not have summarily concluded that the cessation of the aforementioned outstanding liability had occasioned during the year under consideration i.e. AY 2009-10. We thus in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition of made by the A.O u/s. 41(1) uphold the same. - Decided against revenue. Addition u/s. 28(iv) - assessee had received advances/deposits in the preceding years from 6 parties i.e. for providing handling services in connection with its business which stood reflected in its balance sheet on 31.03.2009 - HELD THAT - We find substantial force in the claim of the Ld. AR that the invoking of provisions of section 28(iv) of the Act pre-supposes any benefit or perquisite whether convertible into money or not arising from business or the exercise of a profession. As observed in the case of Commissioner Vs. Mahindra Mahindra Ltd. 2018 (5) TMI 358 - SUPREME COURT for invoking the provisions of section 28(iv) of the Act benefit received has to be in some form other than in shape of money. Observing that as the waiver of loan for acquiring a capital asset in the case before them represented cash/money the Hon ble Apex Court in its aforesaid order had concluded that the provisions of section 28(iv) of the Act would not be applicable. As stated by the AR and rightly so as cessation of a capital receipt of an amount by the assessee i.e. deposits/advances for providing handling services that were received by the assessee in the normal course of its business in the preceding years would undisputedly represent cash/money and is not in the nature of benefit or perquisite other than any shape of money therefore the provisions of section 28(iv) of the Act would not get triggered.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. 2. Disallowance of contributions to temple/panchayat. 3. Addition under Section 41(1) of the Income Tax Act, 1961. 4. Addition of unpaid creditors/advances under Section 28(iv) of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance under Section 14A read with Rule 8D: The assessee challenged the disallowance of Rs. 15,03,242/- made under Section 14A read with Rule 8D(2)(iii). The CIT(A) upheld the disallowance, and the assessee contended that the AO did not record dissatisfaction with the assessee's claim that no expenditure was attributable to earning exempt income. The Tribunal noted that the AO failed to record dissatisfaction as mandated by the Supreme Court in Maxopp Investment Ltd. Vs. CIT and Godrej & Boyce Manufacturing Company Ltd. vs. DCIT. The Tribunal concluded that the AO wrongly assumed jurisdiction under Section 14A, and the disallowance was vacated. 2. Disallowance of Contributions to Temple/Panchayat: The assessee claimed a deduction of Rs. 10,89,334/- for contributions to temple/panchayat under Section 37 of the Act. The AO disallowed the deduction, stating it was not eligible under Section 80G. The CIT(A) allowed the deduction, noting that the expenses were necessary for the smooth running of the business. The Tribunal upheld the CIT(A)'s decision, agreeing that the expenses were incurred wholly and exclusively for business purposes and were allowable under Section 37(1). 3. Addition under Section 41(1): The AO added Rs. 9,96,547/- under Section 41(1) due to the assessee's failure to furnish confirmations for certain creditors. The CIT(A) deleted the addition, noting that the liabilities were written off in subsequent years and offered as income. The Tribunal upheld the CIT(A)'s decision, stating that the AO failed to prove the cessation of liabilities during the assessment year. 4. Addition of Unpaid Creditors/Advances under Section 28(iv): The AO added Rs. 3,24,27,504/- under Section 28(iv) for advances/deposits from six parties, assuming they were no longer payable. The CIT(A) partly sustained the addition for three parties (Rs. 92,86,553/-) and deleted it for the remaining three (Rs. 2,31,40,951/-). The Tribunal found that Section 28(iv) applies to benefits other than money and cited the Supreme Court's judgment in Commissioner of Income-tax Vs. Mahindra & Mahindra Ltd., which held that monetary benefits do not fall under Section 28(iv). Consequently, the Tribunal vacated the entire addition, agreeing that the advances/deposits did not constitute a benefit or perquisite under Section 28(iv). Conclusion: The Tribunal allowed the assessee's appeal, vacating the disallowance under Section 14A and the addition under Section 28(iv). It upheld the CIT(A)'s decisions on the contributions to temple/panchayat and the addition under Section 41(1). The Revenue's appeal was dismissed.
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