2023 (8) TMI 1438 - AT - Income Tax

Addition u/s 115JB for disallowance u/s 14A - addition in the book profit by adding the amount of disallowance made u/s. 14A while calculating the taxable profit u/s. 115JB - HELD THAT - As in the book profit by adding the amount of disallowance u/s 14A of the Act while calculating taxable profit u/s 115JB of the Act, whereupon, the Co-ordinate Bench in 2022 (12) TMI 1495 - ITAT AHMEDABAD for A.Y. 2015-16 has been pleased to hold that disallowance made u/s 14A of the Act is not required to be added back to the book profit and relief accordingly was granted. However, the Ld. CIT(A) issued direction to the AO to include the dividend income while computing book profit. We, therefore, do not find any reason to deviate from the stand taken by the Coordinate Bench which has upheld such direction passed by the CIT(A). We, therefore, respectfully relying upon the same, do not find any reason to interfere with such order passed by the CIT(A). This ground of appeal appears to have been no merit and thus dismissed. Nature of expenses - disallowance being guarantee fees paid to Government of Gujarat - HELD THAT - We find that the Ld. CIT(A) following the order passed by his predecessor for A.Ys. 2008-09 2016 (6) TMI 1391 - ITAT AHMEDABAD wherein guarantee fees was directed to be allowed as revenue expenditure subject to verification of the certificate filed during the appellate proceedings that the loans on which guarantee fees was paid were duly utilized for construction of power plants at that time and there was no capital work-in-progress in respect of such loans during F.Y. 2014-15. Thus, we do not find any reason to interfere with the observations passed by the Ld. CIT(A). Hence, we uphold the same. This ground of appeal preferred by the Revenue is found to be devoid of any and thus, dismissed. Addition being 15% of capital grants - HELD THAT - As perused the order passed by the Co-ordinate Bench in 2023 (7) TMI 1378 - ITAT AHMEDABAD in assessee s own case, wherein issue has been discussed and decided in favour of the assessee upon deleting the addition made by the Ld. AO being addition of 15% of capital grant. Correct head of income - Treatment of interest income and miscellaneous income - HELD THAT - As relying on 2023 (7) TMI 1378 - ITAT AHMEDABAD - Tribunal s decision in assessee s own case, we hereby held that the interest income and miscellaneous income earned by the assessee were directly related to the business of the assessee and assessable as business income only and not as income from other sources . Disallowance u/s. 14A for the purpose of computation of book profit u/s. 115JB of the Act is hereby deleted . Disallowance of prior period expenditure - whether such expenditure crystallized during the year? - CIT(A) deleted addition - HELD THAT - It appears that the appellant had accounted for net prior period expenses of the impugned amount which is visible from the copy of computation of income placed at Annexure-III before the CIT(A). Considering which, the disallowance found to be not sustainable, which according to us, is just and proper so as to warrant interference. Thus, this ground of appeal is dismissed.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Disallowance of Guarantee Fee.
3. Addition of Capital Grant.
4. Treatment of Interest and Miscellaneous Income.
5. Adjustment of Book Profit under Section 115JB.
6. Disallowance of Prior Period Expenses.

Summary:

1. Disallowance under Section 14A of the Income Tax Act:
The Revenue challenged the CIT(A)'s restriction on disallowance under Section 14A. The Tribunal found that the issue was covered in the assessee's own case for A.Y. 2015-16, where the matter was remitted to the AO for fresh adjudication. The Tribunal upheld the CIT(A)'s decision to exclude disallowance under Section 14A from the book profit calculation under Section 115JB, but included dividend income in the computation.

2. Disallowance of Guarantee Fee:
The Revenue contested the CIT(A)'s direction to allow the guarantee fee after verification. The Tribunal noted that the issue had been addressed in the assessee's own case for A.Y. 2015-16, where the matter was remitted to the AO for verification. The Tribunal upheld the CIT(A)'s direction for verification and adjudication by the AO.

3. Addition of Capital Grant:
The Revenue disputed the CIT(A)'s deletion of the addition of Rs. 3750 Lacs being 15% of the capital grant. The Tribunal found that the issue was covered by the Gujarat High Court's judgment in the assessee's own case for A.Y. 2010-11, which held that the grant could not be treated as income as the assessee did not acquire any fixed assets on which depreciation was claimed. The Tribunal upheld the CIT(A)'s deletion of the addition.

4. Treatment of Interest and Miscellaneous Income:
The Revenue challenged the CIT(A)'s treatment of interest and miscellaneous income as business income. The Tribunal noted that the issue was covered by the Gujarat High Court's judgment in the assessee's own case for A.Y. 2010-11, which held that the interest and miscellaneous income were directly related to the business and should be treated as business income. The Tribunal upheld the CIT(A)'s decision.

5. Adjustment of Book Profit under Section 115JB:
The Revenue contested the CIT(A)'s deletion of the adjustment in book profit for disallowance under Section 14A. The Tribunal found that the issue was covered by the Gujarat High Court's judgment in the assessee's own case for A.Y. 2010-11, which held that no addition in book profit should be made based on Section 14A calculations. The Tribunal upheld the CIT(A)'s deletion of the adjustment.

6. Disallowance of Prior Period Expenses:
The Revenue challenged the CIT(A)'s deletion of the disallowance of prior period expenses. The Tribunal noted that the CIT(A) had found that the assessee had accounted for net prior period expenses and had disallowed them in the computation of income. The Tribunal upheld the CIT(A)'s deletion of the disallowance.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds.