2016 (10) TMI 3 - AT - Income Tax

Deduction u/s 80IB - Held that - The perusal of the order of ld.CIT(A) reveals that the discrepancies as pointed out by the AO and admitted by the assessee during the course of assessment proceedings regarding the finding of facts qua the said discrepancies being explained fully as the assessee has booked all the expenses on the basis of actual and thus there was no difference in allocation and restored the deduction of Rs. 1916.56 as claimed by the assessee. Looking into facts and circumstances of the case in totality we find no discrepancy or infirmity in the order of ld. CIT(A) which after considering the submissions of the ld.AR directed the AO to allow the claim of assessee for deduction u/s 80IB of the Act and therefore the same upheld by dismissing the appeal of the revenue on this ground. Addition u/s 14A - Held that - CIT(A) has directed the AO to exclude the cost of investment made in the bonds income of which was not tax free and was liable to be taxed under the income tax Act. The DR argued that the ld CIT(A) has erred in directing the AO to exclude the investments in bonds while calculating the disallowance u/s 14A read with rule 8D whereas the ld AR heavily relied on and supported the order of CIT(A) who rightly directed the AO to exclude the investments in bonds in the calculation of disallowance u/s 14A. We find no merit in the argument of the ld.DR that the CIT(A) was wrong in holding that the investments in bonds be excluded for the purpose of disallowance under section14A r.w.r 8D. We do not find any infirmity in the order of ld.CIT(A) who has recorded the finding of fact that the income from bonds was taxable and was not exempt as noted by the AO and do not require any interference . We therefore uphold the order of ld. CIT (A) and dismiss the appeal of the revenue on this issue

Summary

Issues involved:
1. Appeal against deduction under section 80IB of the Income Tax Act, 1961.
2. Appeal regarding disallowance under section 14A of the IT Act read with rule 8D.

Issue 1: Appeal against deduction under section 80IB:
The appeal by the revenue challenged the holding by the ld.CIT(A) allowing the assessee a deduction of &8377; 19,66,56,000 under section 80IB for the Silvassa Unit. The AO found discrepancies in expense allocation, leading to a reduction in the deduction claimed by the assessee. However, the ld.CIT(A) restored the deduction to &8377; 1916.56 lakhs after the assessee explained that expenses were allocated on an actual basis. The ld.CIT(A) noted that the Silvassa unit was involved in export business only, with expenses allocated accordingly. The Tribunal upheld the ld.CIT(A)'s decision, stating that no discrepancies were found in the allocation of expenses, and the deduction was correctly allowed.

Issue 2: Appeal regarding disallowance under section 14A of the IT Act:
The AO disallowed &8377; 17,05,460 under section 14A read with rule 8D, considering dividend income and interest expenses. The ld.CIT(A) partly allowed the appeal, directing the AO to exclude the cost of investments in bonds from the disallowance calculation. The Tribunal upheld the ld.CIT(A)'s decision, emphasizing that the income from bonds was taxable and not exempt, hence excluding them from the disallowance calculation. The Tribunal rejected the revenue's argument against excluding investments in bonds, affirming the ld.CIT(A)'s order.

In conclusion, the Tribunal dismissed the revenue's appeals on both issues, upholding the ld.CIT(A)'s decisions regarding deduction under section 80IB and disallowance under section 14A of the IT Act. The Tribunal's decision aligned with the explanations provided by the assessee regarding expense allocation and the taxability of income from investments in bonds.