2019 (10) TMI 1573 - AT - Income Tax

Addition u/s 35AD - Deduction in respect of expenditure on specified business - HELD THAT - As decided assessee in own case 2019 (3) TMI 2037 - ITAT CHANDIGARH the lower authorities have wrongly interpreted the relevant provisions of the Act. There are two parts of the above said provisions. In the first part, it has been mentioned that an assessee is eligible to claim deduction of the capital expenditure if such an expenditure has been incurred wholly and exclusively in a specified business. There is no condition of any date or year of commencement of specified business. However, in the second part, it has been provided that if such an expenditure has been incurred prior to the commencement of business and has been duly capitalized in the books of account, the claim will be allowed in the year in which the assessee commences operations of his specified business. There is neither any overlapping nor any contradiction in the aforesaid provision. The assessee is covered in the first part i.e. the assessee has incurred the expenditure on the specified business during the year in which operations of his business of warehousing were already going on. No justification on the part of the lower authorities in denying the deduction to the assessee u/s 35AD - This ground is, accordingly, allowed in favour of the assessee.

Summary

Issues:
Appeal against CIT(A) order upholding addition under section 35AD of the Income Tax Act, 1961.

Analysis:
The appeal raised two grounds challenging the addition of Rs. 44,57,98,668 under section 35AD of the Income Tax Act. The assessee contended that the CIT(A) erred in law by upholding the AO's contention without providing a plausible explanation. The assessee referred to a previous order in their favor for the AY 2012-13, indicating a similar issue was decided in their favor previously. The Senior DR supported the lower authorities but failed to counter the assessee's contention. The Tribunal noted that a similar issue was decided in favor of the assessee for AY 2011-12 to 2014-15, where the deduction under section 35AD was allowed. The Tribunal analyzed the provisions of Section 35AD, emphasizing that the assessee is eligible for deduction if the expenditure is wholly and exclusively for the specified business. The Tribunal found no justification in denying the deduction to the assessee. Consequently, the appeal was allowed for statistical purposes, remanding the case back to the AO for further proceedings in line with the previous order.

This judgment dealt with the issue of deduction under section 35AD of the Income Tax Act. The assessee contested the addition made by the AO, which was upheld by the CIT(A). However, the Tribunal, considering the provisions of Section 35AD, ruled in favor of the assessee, allowing the deduction claimed. The Tribunal highlighted the eligibility criteria for claiming the deduction and found that the lower authorities had misinterpreted the relevant provisions of the Act. By referencing a previous order in the assessee's favor for a different assessment year, the Tribunal directed the case to be decided in line with the previous order. The judgment emphasized the importance of correctly interpreting the law to ensure rightful entitlement to deductions under the Income Tax Act.

In conclusion, the Tribunal's decision favored the assessee, allowing the appeal against the addition made under section 35AD of the Income Tax Act. The judgment underscored the correct interpretation of the law and the eligibility criteria for claiming deductions under Section 35AD. By remanding the case back to the AO, the Tribunal ensured that the matter would be decided in accordance with the directions given in a previous order that ruled in favor of the assessee.