9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (1) TMI 938 - AT - Income TaxDeduction u/s. 80IA on the addition made u/s. 14A r.w. Rule 8D - Held that - It is an undisputed fact that the assessee is eligible to claim deduction u/s. 80IA of the Act. The effect of disallowance u/s. 14A r.w. Rule 8D is that there is increase in profits. The assessee is eligible to claim deduction on such increase in profits as the said profits are arising from the business of assessee eligible to claim deduction u/s. 80IA of the Act. Similar view has been taken by the Tribunal in the case of ITO Vs. Kalbhor Gawade Builders (2013 (2) TMI 68 - ITAT PUNE ). Further we find that disallowance u/s. 14A r.w. Rule 8D was made in the case of assessee on similar grounds in assessment year 2009-10. The assessee carried the issue in appeal before the Tribunal. The Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee. As the issue raised by the Department in appeal has already been decided in favour of the assessee in the immediately preceding year and in the light of CBDT Circular dated 2nd November 2016 the present appeal by the Department is liable to be dismissed.
Issues Involved:
1. Allowing deduction under Section 80IA of the Income Tax Act, 1961 on the addition made under Section 14A read with Rule 8D. Detailed Analysis: Background and Facts: The case involves an appeal by the Department against the order of the Commissioner of Income Tax (Appeals)-2, Nashik, which allowed the assessee a deduction under Section 80IA on the addition made under Section 14A read with Rule 8D for the assessment year 2010-11. The assessee is engaged in infrastructure development, specifically constructing roads and bridges on a Built Operate and Transfer (BOT) basis. The Assessing Officer had made a disallowance of ?7,41,26,060 under Section 14A read with Rule 8D during the scrutiny assessment. Issue Raised by the Department: The sole issue raised by the Department was against allowing the deduction under Section 80IA on the addition made under Section 14A read with Rule 8D. Arguments by the Assessee: The assessee argued that the issue had already been adjudicated in its favor in a previous assessment year (2009-10) by the Tribunal. The assessee also pointed to CBDT Circular No. 37/2016, which states that the Department should not file appeals regarding deductions claimed on enhanced profits due to disallowances made under various sections, including Section 14A. Arguments by the Department: The Department's representative admitted that the issue had already been decided in favor of the assessee for the assessment year 2009-10. Tribunal's Findings and Judgment: 1. Eligibility for Deduction under Section 80IA: - The Tribunal noted that it is undisputed that the assessee is eligible to claim a deduction under Section 80IA. The effect of the disallowance under Section 14A read with Rule 8D is an increase in profits, and the assessee is eligible to claim a deduction on such increased profits. 2. Precedent and Consistency: - The Tribunal referenced its own decision in the case of ITO Vs. Kalbhor Gawade Builders, where a similar view was taken. - It was also noted that a similar disallowance was made in the previous assessment year (2009-10), and the Tribunal had decided in favor of the assessee. 3. Commercial Expediency and No Exempt Income: - The Tribunal observed that the assessee had made investments in subsidiary companies for commercial expediency and had not received any exempt income from these investments. This was consistent with the Tribunal's decision in the case of Hari Infrastructure Pvt. Ltd. Vs. Dy. CIT. 4. CBDT Circular No. 37/2016: - The Tribunal emphasized the CBDT Circular, which clarifies that disallowances under sections like 14A, which increase business profits, should allow for corresponding deductions under Chapter VI-A, including Section 80IA. 5. Revenue Neutrality: - The Tribunal accepted the argument that since the entire income of the assessee is eligible for deduction under Section 80IA, any disallowance under Section 14A would increase business income, resulting in a revenue-neutral situation. Conclusion: The Tribunal directed the Assessing Officer to delete the disallowance made under Section 14A, aligning with the CBDT Circular and previous Tribunal decisions. The appeal by the Department was dismissed. Order Pronouncement: The order was pronounced on January 11, 2017, dismissing the Department's appeal.
|
