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2023 (1) TMI 1341 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - case of the assessee that the own interest free reserves are far more than the amount of investment, therefore, no disallowance u/s 14A r.w.r 8D(2)(ii) of the Rules should have been made with regard to the interest element - HELD THAT - The said issue has been decided in Assessee s own case for A.Y.2011- 12, 2012-13 2023 (7) TMI 1357 - ITAT DELHI By respectfully following the order in assessee s own case, we are of the opinion that disallowance under Rule-8D(2)(ii) of the IT Rules should not have made by the AO, thus, the disallowance made by the AO is hereby deleted. Further, we direct the AO to compute the disallowance u/s 14A r.w.Rule-8D(2)(iii) of the Rules by considering only investment from each exempt income is earned. Accordingly, ground No.1 of the Revenue and the assessee are disposed off. Unexplained investment - search was conducted on the assessee wherein an estimated working was seized from the Laptop of the employee of the assessee containing details of certain land which was registered in the name of the assessee - HELD THAT - It is well settled law that the dumb documents having no evidentiary value cannot be taken as sole basis for determination of undisclosed income of the assessee. If the Department of Revenue wants to make use of dumb documents, then the onus on the Revenue Department to collect cogent corroborative evidences. As decided in the case of Mumar Trading Co. 2007 (9) TMI 284 - HIGH COURT OF JUDICATURE AT ALLAHABAD held that, it is settled principle of law that if the Revenue wants to rely upon the entries of the document, seized from the premises of third party, the burden lies upon the Revenue Authorities to prove the genuineness and authenticity of the said entries to connect the said entry with the dealer. As found that the person from who s possession the seized document is recovered, was not subject to the cross examination of the assessee and no opportunity of cross examination has been given to the assessee. Therefore, for the detailed discussion made above, in our considered opinion, AO as well as the CIT(A) have committed error in making the addition u/s 69 of the Act which deserves to be deleted. Accordingly, the ground No.2 of the assessee is allowed and the subject addition sustained by the Ld. CIT(A) is deleted. Allowability of claim of education Cess - HELD THAT - In view of the above settled position of law, we hold that the education Cess can t be allowed as an allowable expense, accordingly, we find no merit in Ground of the assessee and the Ground assessee is dismissed. Nature of receipt - FPS/FMS receipt - capital receipt received as per foreign trade policy in computing the total income of the assessee - HELD THAT - The issue of claim of FPS/FMS as capital receipt received as per foreign trade policy in computing total income has been dealt and decided by the Co-ordinate Bench of the Tribunal in Assessee s own case for Assessment Year 2013-14 in favour of the assessee 2023 (7) TMI 1357 - ITAT DELHI Apart from the same, the Hon'ble High Court of Rajasthan in the case of Principal Commissioner of Income Tax, Ajmer Vs. Nitin Spinners Ltd 2019 (9) TMI 1154 - RAJASTHAN HIGH COURT held Focus Marketing Scheme was concerned, apparently the Central Government gave the subsidy to enhance Indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. The ITAT took note of judgment in Ponni Sugars Chemicals Ltd. 2008 (9) TMI 14 - SUPREME COURT and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason. Judgment of the Hon'ble High Court of Rajasthan has also been affirmed by the Hon'ble Supreme Court wherein the SLP filed by the Department has been dismissed which is reported 2021 (9) TMI 430 - SC ORDER Interest subsidy under TUFFS - capital or revenue receipt - HELD THAT - The allowability of claim of interest subsidy under TUFFS and RIPS have been decided by the Hon'ble High Court of Rajasthan in the case of PCIT vs. Nitin Spinners Ltd. 2019 (9) TMI 1154 - RAJASTHAN HIGH COURT the amount was received as capital stream and therefore, not taxable.
Issues Involved:
1. Disallowance under Section 14A read with Rule 8D. 2. Addition under Section 69 for unexplained investment. 3. Deduction of education cess as a business expenditure. 4. Classification of subsidies (FPS/FMS, TUFS, RIPS, SHIS) as capital receipts. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A read with Rule 8D: The assessee contested the disallowance of Rs. 81,01,633/- (A.Y. 2014-15) and Rs. 60,27,158/- (A.Y. 2015-16) under Section 14A read with Rule 8D, arguing that no valid satisfaction was recorded by the Assessing Officer (AO) and the investments were made out of interest-free funds. The Tribunal noted that the assessee's interest-free reserves exceeded the investments, thus no disallowance under Rule 8D(2)(ii) was warranted. The Tribunal directed the AO to compute disallowance under Rule 8D(2)(iii) by considering only investments that yielded exempt income. 2. Addition under Section 69 for unexplained investment: The AO added Rs. 1,52,45,000/- as unexplained investment based on a document seized from an employee's laptop, which the assessee claimed was an incomplete estimate. The Tribunal found no corroborative evidence supporting the AO's inference of cash payments. The Tribunal emphasized that dumb documents without evidentiary value cannot form the sole basis for additions and noted the absence of any opportunity for the assessee to cross-examine the person from whose laptop the document was seized. Consequently, the addition was deleted. 3. Deduction of education cess as a business expenditure: The assessee's claim for deduction of education cess was rejected by the AO and upheld by the CIT(A), stating that cess is part of income tax and not allowable under Section 40(a)(ii). The Tribunal referred to the ITAT Kolkata decision in Kanoria Chemicals and Industries Ltd., which held that education cess is not an allowable deduction. The Tribunal also noted the retrospective amendment to Section 40(a)(ii) by the Finance Act, 2022, which included cess within the definition of "tax." Thus, the Tribunal dismissed the assessee's claim. 4. Classification of subsidies (FPS/FMS, TUFS, RIPS, SHIS) as capital receipts: The AO added various subsidies to the income, which the CIT(A) deleted, treating them as capital receipts. The Tribunal upheld the CIT(A)'s decision, relying on the Rajasthan High Court's judgment in PCIT vs. Nitin Spinners Ltd., which classified such subsidies as capital receipts and excluded them from book profits under Section 115JB. The Tribunal noted that the Supreme Court had dismissed the Department's SLP against this judgment, affirming the High Court's view. Conclusion: The appeals by the assessee were partly allowed for statistical purposes, and the appeals by the Revenue were dismissed. The Tribunal's decision emphasized the need for corroborative evidence for additions, proper recording of satisfaction for disallowances, and adherence to judicial precedents in classifying subsidies.
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