2017 (9) TMI 117 - AT - Income Tax

Disallowance of other expenses (administrative expenses) as loss on Amritsar Project written off in the books - Held that - Subsequent to the AY 2010-11 nothing new happened giving rise to a cause of action in favour of the assessee to write off the so called cost/expenditure/ loss treating it as bad debt. We, therefore, have no hesitation to hold that the Assessing Officer is perfectly justified in reaching the conclusion that the amount of ₹ 64,72,52,645/- written off under the head other expenses (administrative expenses) as loss of Amritsar project written off was disallowable as the same does not relate to the AY 2012-13. In view of this conclusion, we deem it not necessary to deal with the nature of expenditure. On this premise, we confirm the orders of the authorities below and also the addition. - Decided against assessee. Addition u/s 14A - contention of no exempt income - Held that - CIT vs. Holcim India Pvt. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT) wherein it was held that Section 14A cannot be invoked when no exempt income was earned. On this aspect it is not the case of Revenue that the assessee earned any exempt income. We, therefore, while respectfully following the decision in CIT vs. Holcim India P. Limited (supra) direct the AO to delete the addition of ₹ 2,84,430/- on account of invocation of Section 14A of the Act read with Rule 8D of the Rules. Decided against revenue

Summary

Issues:
1. Disallowance of expenses related to Amritsar project.
2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules.

Issue 1: Disallowance of expenses related to Amritsar project:

The appeal challenged the assessment order disallowing expenses of ?64,72,52,645 for the AY 2012-13. The assessee argued that the loss became irrecoverable only in 2012-13 due to ongoing disputes, justifying the write-off. However, the Revenue contended that rights and liabilities were settled in 2007, with subsequent events not affecting this. The High Court order in 2009 confirmed the settlement, and a compromise in 2012 was unrelated to the Amritsar project. The Tribunal concluded that no new events post-2010 impacted the write-off claim, upholding the disallowance as not pertaining to 2012-13.

Issue 2: Disallowance under Section 14A read with Rule 8D:

Regarding the addition of ?2,84,430 under Section 14A read with Rule 8D, the assessee argued that no exempt income was earned during the relevant year, citing precedent. The Tribunal, following the cited decision, directed the AO to delete the addition as no exempt income was earned. Consequently, the appeal was partially allowed on this ground.

In summary, the Tribunal upheld the disallowance of expenses related to the Amritsar project, ruling that events post-2010 did not justify the write-off claim for the AY 2012-13. Additionally, the Tribunal directed the deletion of the disallowance under Section 14A read with Rule 8D due to the absence of exempt income during the relevant assessment year.