2023 (8) TMI 1368 - HC - Income Tax

Disallowance u/s 14A - Sufficiency of own interest free funds for investing - HELD THAT - Tribunal restricted addition on the ground that assessee had sufficient interest free funds for investing in assets earning tax free income. Disallowance was made for administrative expenses. This issue we have already examined in assessee s Tax Appeals . 2018 (9) TMI 604 - GUJARAT HIGH COURT . No separate discussion is necessary. Bad debt u/s 36(1)(viii) - Tribunal examined the claim at length and accepted the assessee s stand inter alia observing that undisputedly the assessee is in the business of lease financing and investment. The bad debts claim were in relation to higher purchase and lease transactions and were in respect of principal amount interest penalty bill discounting etc. The Tribunal therefore correctly observed that such bad debts arose out of the assessee s ordinary course of business. No question of law arises. Addition of disallowance u/s.14A to the Book Profit u/s 115JB - Tribunal s judgment in relation to deletion of disallowance under Section 14A of the Act there would be no further question of considering its impact on the assessee s computation of income for Section 115JB.

Summary

Issues involved:
The issues involved in the judgment are:
1. Disallowance under Section 14A of the Act
2. Claim of bad debt under Section 36(1)(viii) of the Income Tax Act, 1961
3. Claim of depreciation on leased assets

Disallowance under Section 14A of the Act:
The Appellate Tribunal restricted the disallowance to Rs.2.40 lacs based on the assessee's sufficient interest free funds for investing in tax-free income assets. The Tribunal also made a disallowance of Rs.2.40 lacs for administrative expenses. The Court noted that this issue was already examined in the assessee's Tax Appeals No.1022 and 1023 of 2018, hence no separate discussion was deemed necessary.

Claim of bad debt under Section 36(1)(viii) of the Income Tax Act, 1961:
The Revenue objected to the assessee's claim of bad debt under Section 36(1)(viii). The Tribunal accepted the assessee's claim after examining it in detail. It observed that the bad debts claimed were related to hire purchase and lease transactions, arising out of the ordinary course of the assessee's business in lease, financing, and investment. The Tribunal found no legal question arising from this issue.

Claim of depreciation on leased assets:
The issues related to the assessee's claim of depreciation on leased assets were discussed in a separate order passed on the same day in the case of the same assessee in Tax Appeal No.1022 of 2018. The Court noted that the claim of depreciation on leased assets was addressed in a separate judgment.

The Court dismissed the Tax Appeal, stating that since the disallowance under Section 14A of the Act was confirmed, there was no need to further consider its impact on the assessee's income computation for Section 115JB of the Act.