2022 (12) TMI 1495 - AT - Income Tax

Disallowance u/s 14A - claim of interest - HELD THAT - Both the parties submitted that this issue is squarely covered in assessee s own case by Co-ordinate Bench of this Tribunal in 2020 (10) TMI 1021 - ITAT AHMEDABAD wherein the Hon ble ITAT remanded the matter back to the Assessing Officer for fresh adjudication to examine the facts and figures of the case in the light of our observations made above in order to arrive at a final conclusion as to whether disallowance u/s 14A is to be made and if so, then the amount thereof which in no case should exceed the exempted income earned by assessee during the year under appeal. Nature of expenses - Guarantee fees paid to Govt. of Gujarat related to capital work-in-progress which needs to be capitalized - assessee submitted that the certificate of utilization was already furnished before the Ld. CIT(A) stating that the loans on which guarantee fees was paid were utilized for construction of power plant and there was no capital work-in-progress in respect of such loans borrowed - HELD THAT - As decided in own case in 2020 (10) TMI 1021 - ITAT AHMEDABAD wherein CIT(A) directed to verify the certificate filed during the appellate proceedings that the loans on which guarantee fees was paid were utilized for construction of power plants at that time and there was no capital work-in-progress in respect of such loans during the Financial Year 2014-15. Both the assessee counsel as well as the Ld. D.R. could not place on record what is the giving effect order passed by the A.O. thereafter, pursuant to the direction of the Ld. CIT(A). Therefore this ground no. 2 is also set aside to the Assessing Officer for proper verification and adjudication. Disallowance u/s 14A r.w.r. 8D while determining the income under the provisions of MAT - HELD THAT - As this case is already remanded back to the Assessing Officer for verification for the earlier two issues under consideration for the Assessment Year 2015-16, this issue is also remanded back to the Assessing Officer for verification of the same and allow the submission of the assessee, if the same is found to be is in order

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Disallowance of guarantee fees.
3. Computation of book profit under Section 115JB.
4. Initiation of penalty proceedings under Section 271(1)(c).
5. Charging of interest under Sections 234B, 234C, and 234D.

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A:
The primary issue concerns the disallowance of expenses under Section 14A related to interest on loans. The assessee argued that the disallowance was uncalled for. The Tribunal noted that this issue was previously addressed in the assessee's own case by the Co-ordinate Bench of the Tribunal, which had remanded the matter back to the Assessing Officer (AO) for fresh adjudication. The Tribunal directed the AO to re-examine the facts and figures and calculate the disallowance under Section 14A according to the provisions of law. The Tribunal emphasized that the AO should consider the correctness of the claim and verify if the investments were made out of borrowed funds or non-interest-bearing funds.

2. Disallowance of Guarantee Fees:
The second issue pertains to the disallowance of guarantee fees paid to the Government of Gujarat. The assessee had provided a certificate during the appellate proceedings indicating that the loans on which guarantee fees were paid were utilized for the construction of power plants and not for capital work-in-progress. The Tribunal referred to its previous decision in the assessee's own case, where it was held that guarantee fees are revenue in nature and should not be capitalized. However, the Tribunal noted that the AO should verify the certificate provided by the assessee to ensure that the loans were indeed used for the stated purpose. Consequently, this issue was also remanded back to the AO for proper verification and adjudication.

3. Computation of Book Profit under Section 115JB:
The third issue involves the inclusion of dividend income while computing book profit under Section 115JB. The assessee contended that the dividend income had already been included in the book profit computation. The Tribunal observed that since the case was being remanded back to the AO for verification of other issues, this issue should also be verified by the AO. The AO was directed to verify the assessee's claim and allow the submission if found correct.

4. Initiation of Penalty Proceedings under Section 271(1)(c):
The fourth issue relates to the initiation of penalty proceedings under Section 271(1)(c). The Tribunal noted that this issue is consequential in nature and does not require separate adjudication. Therefore, it was not adjudicated.

5. Charging of Interest under Sections 234B, 234C, and 234D:
The fifth issue concerns the charging of interest under Sections 234B, 234C, and 234D. Similar to the penalty proceedings, the Tribunal considered this issue to be consequential and did not require separate adjudication.

Conclusion:
The Tribunal allowed the appeal filed by the assessee for statistical purposes, remanding the primary issues back to the AO for fresh adjudication and verification. The AO was instructed to re-examine the disallowance under Section 14A, verify the utilization of loans related to guarantee fees, and confirm the inclusion of dividend income in the book profit computation under Section 115JB. The issues related to penalty proceedings and interest charges were deemed consequential and not separately adjudicated.

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