2018 (6) TMI 828 - AT - Income Tax

Delay in payment of tds to government treasury - Disallowance u/s 40(a)(ia) on coal washing charges for non deduction of TDS - Held that - CIT(A) observed that TDS has been remitted to the Govt. within the extended period for filing of return as vivid from the facts and in any case if disallowed this year the assessee could have got the claim allowed in the next year on the strength of the TDS certificate as per the proviso to sec. 40(a)(ia) - thus the action of CIT(A) will in no way prejudice the Revenue - we fully agree with the reasoning and factual conclusion of CIT(A) in deleting the disallowance as made by the AO - hence the appeal of revenue is dismissed. Disallowance u/s 14A r.w.r. 8D - sufficiency of own funds - Held that - Assessee had own surplus funds in form of equity and free reserves - thus presuming that assessee has used its own funds for investment and not the borrowed funds for investment. We hold that the assessee has got sufficient own funds to make the investments and when that point is not in dispute no disallowance could be made u/s 14A - reliance is place on the judgement of THE COMMISSIONER OF INCOME TAX VERSUS RELIANCE UTILITIES & POWER LTD. 2009 (1) TMI 4 - BOMBAY HIGH COURT where it is held that investments were from interest free funds available with assessee - thus CIT(A) rightly directed disallowance @ .5% on the dividend earning scrip - Decided partly in favor of assessee. Disallowance u/s 14A r.w.r. 8D for the purpose of computing book profit u/s 115JB - Held that - he issue is squarely covered by the decision of Hon ble jurisdictional High Court in the case of CIT Vs. Jayshree Tea & Industries Ltd. 2014 (11) TMI 1169 - CALCUTTA HIGH COURT where it is held that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A - thus respectfully following the orders we restore the matter to AO to calculate the book profit u/s. 115JB - assessee s appeal is allowed for statistical purpose. Disallowance on account of provision for leave encashment u/s 43B(f) - Held that - the matter is restored back to the file of AO for adjudication as per the decision of M/S. S.R. BATLIBOI & CO. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-54 KOLKATA. 2012 (3) TMI 585 - ITAT KOLKATA - restore this issue back to the file of the AO for adjudication to await the final outcome of the Hon ble Apex Court in M/s. Exide Industries Ltd. case 2009 (5) TMI 894 - SUPREME COURT and thereafter decide this issue - hence the appeal of assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Deletion of disallowance of expenses on 'coal washing charges' under section 40(a)(ia) of the Income-tax Act, 1961.
2. Computation of disallowance under section 14A read with Rule 8D of the Income-tax Rules, 1962.
3. Addition of disallowance under section 14A to book profit for section 115JB computation.
4. Disallowance of provision for leave encashment under section 43B(f) of the Income-tax Act, 1961.

Detailed Analysis:

1. Deletion of Disallowance of Expenses on 'Coal Washing Charges':
The Revenue's appeal contested the deletion of disallowance of ?10,13,46,162/- on 'coal washing charges' for non-deduction of TDS under section 40(a)(ia). The Assessing Officer (AO) disallowed the expenditure as the assessee did not deposit TDS by the normal due date of 30.09.2010. However, the CIT(A) deleted the disallowance, noting that the TDS was deposited on 06.10.2010, within the extended due date of 15.10.2010 allowed by the CBDT due to floods and heavy rains. The Tribunal upheld the CIT(A)'s decision, emphasizing that the extended due date applied for compliance with section 40(a)(ia) and that any disallowance would be revenue-neutral over two years. Thus, the Revenue's appeal on this ground was dismissed.

2. Computation of Disallowance under Section 14A Read with Rule 8D:
Both the Revenue and the assessee appealed against the CIT(A)'s order on disallowance under section 14A read with Rule 8D. The AO had computed a disallowance of ?10,83,17,154/- against the assessee's claim of ?6,25,966/-. The CIT(A), following the jurisdictional High Court's decision in CIT Vs. REI Agro Ltd., directed that only dividend-yielding investments should be considered. The Tribunal noted that the assessee had sufficient own funds, negating the need for disallowance under Rule 8D(2)(ii). It upheld the CIT(A)'s direction for disallowance under Rule 8D(2)(iii) at 0.5% on dividend-earning scrips. Consequently, the Revenue's appeal was dismissed, and the assessee's appeal was partly allowed.

3. Addition of Disallowance under Section 14A to Book Profit for Section 115JB Computation:
The assessee's appeal challenged the addition of disallowance under section 14A to book profit for section 115JB computation. The Tribunal referred to the jurisdictional High Court's decision in CIT Vs. Jayshree Tea & Industries Ltd. and the Special Bench decision in ACIT Vs. Vireet Investment (P) Ltd., which held that disallowances under section 14A should not be applied to section 115JB computation. The Tribunal restored the matter to the AO for recalculating book profit under section 115JB independently. This ground of the assessee's appeal was allowed for statistical purposes.

4. Disallowance of Provision for Leave Encashment under Section 43B(f):
The assessee's appeal contested the disallowance of ?123 lakhs for leave encashment under section 43B(f). The AO had disallowed the unpaid amount, and the CIT(A) confirmed it. The Tribunal referred to its earlier decision in M/s. S. R. Batliboi & Co. vs. DCIT, which restored a similar issue to the AO pending the Supreme Court's decision in M/s. Exide Industries Ltd. case. Following this precedent, the Tribunal set aside the CIT(A)'s order and restored the matter to the AO to await the Supreme Court's final outcome. This ground of the assessee's appeal was allowed for statistical purposes.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, providing detailed reasoning and adhering to judicial precedents. The issues of coal washing charges, section 14A disallowance, and provision for leave encashment were addressed comprehensively, ensuring compliance with legal standards and precedents.