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2016 (7) TMI 815 - AT - Income TaxDisallowance u/s 14A - Held that - We find that the issue involved is squarely covered by the Hon ble Jurisdictional Calcutta High Court in the case of CIT vs R.R.Sen and Brothers (2013 (7) TMI 260 - Calcutta High Court) and accordingly direct the ld. AO to adopt 1% of the exempt income for making disallowance u/s 14A of the Act. - Decided partly in favour of assessee. Disallowance of provision of leave encashment u/s 43B(f) - Held that - As decided in assessee s own case for A.Y.2008-09 the provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. - Decided in favour of assessee. Disallowance u/s 14A of the Act could be made while computing the book profit u/s 115JB - Held that - As already in ground no.1 herein above that 1% of exempt income be adopted for the purpose of disallowance u/s 14A of the Act. We held that the same disallowance be made while computing the book profit u/s 115JB of the Act as requested by the ld. AR. - Decided partly in favour of assessee.
Issues:
1. Disallowance u/s 14A of the Act 2. Disallowance of provision for leave encashment under section 43B of the Act 3. Disallowance u/s 14A of the Act while computing book profit u/s 115JB of the Act Issue 1: Disallowance u/s 14A of the Act The first issue in this appeal pertains to the disallowance u/s 14A of the Act. The assessee contested the disallowance of &8377; 5,428 made by the Assessing Officer, which was upheld by the CIT(A). The main argument was whether Rule 8D could be applied, considering the assessment year was prior to A.Y. 2008-09. The AR cited the decision of the Hon'ble Bombay High Court in the case of Godrej and Boyce and Manufacturing Ltd. and the Jurisdictional Calcutta High Court in the case of CIT vs R.R.Sen and Brothers. The Tribunal directed the AO to adopt 1% of the exempt income for the disallowance u/s 14A, in line with the Calcutta High Court decision, partially allowing the assessee's appeal on this ground. Issue 2: Disallowance of provision for leave encashment under section 43B of the Act The next issue involved the disallowance of the provision for leave encashment amounting to &8377; 16,40,000 under section 43B(f) of the Act. The Tribunal referred to the decision in the assessee's own case for A.Y. 2008-09 and the judgment of the Calcutta High Court in the case of Exide Industries Limited vs Union of India. The Tribunal observed that the Supreme Court had not stayed the Calcutta High Court judgment during the leave proceedings, thus directing the AO to pass orders based on the outcome of the main appeal by the Supreme Court. Consequently, the appeal of the revenue was allowed for statistical purposes, granting relief to the assessee on this ground. Issue 3: Disallowance u/s 14A of the Act while computing book profit u/s 115JB of the Act The final issue concerned the disallowance u/s 14A of the Act while computing the book profit u/s 115JB of the Act. The AR requested the adoption of 1% of exempt income for disallowance, which was agreed to by the DR. The Tribunal, having already decided on the disallowance u/s 14A, directed the same disallowance to be made while computing the book profit u/s 115JB, partially allowing the assessee's appeal on this ground as well. In conclusion, the Tribunal partially allowed the assessee's appeal on all three issues discussed, providing detailed reasoning and legal references to support its decisions. The other grounds raised by the assessee were deemed general in nature and did not require adjudication.
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