2018 (9) TMI 211 - AT - Income Tax

Invoking section 79 - loss cannot be carry forward and set off against the income of the subsequent year - Held that - So far as the instant assessment year is concerned, the Assessing Officer is not competent to give a finding that the loss cannot be carry forward and set off against the income of the subsequent year. Accordingly, the matter is remanded back to the file of the Assessing Officer to remove the direction relating to denial of carry forward and set-off of loss. However, our direction should not be interpreted to be any reflection on the merits of invoking section 79 of the Act, which prohibits carry forward and set off of loss in specified situations. The same shall be open to be considered by the Assessing Officer in the subsequent year of actual set-off while evaluating the claim of the assessee for set off of the impugned business loss. We set aside the order of the CIT(A) and direct the Assessing Officer to expunge the directions so far as it relates to denial of carry forward and set off of loss. Thus, on this aspect the assessee succeeds for statistical purposes only. Disallowance u/s 14A - Held that - We find that before the Assessing Officer also, assessee had asserted that it has neither earned any tax fee income and nor debited any expenditure relating to equity investment of ₹ 10,00,00,030/- made in the shares of Ginger Enterprises P. Ltd. See case of Cheminvest Limited vs. CIT 2015 (9) TMI 238 - DELHI HIGH COURT .We also find no error on the part of the CIT(A) in directing the AO to retain the suo moto disallowance made by the assessee in this regard if any. Therefore, in our view, the ground raised by the assessee as well as the Revenue is liable to be dismissed. Addition earned by the assessee on account of providing common amenities and maintenance charges from the tenants - Held that - At the time of hearing, it was put across before the learned representative to establish that the impugned receipts by way of provision of amenities, etc. was contracted with the respective tenants by separate agreements. There was no material on record to establish the same and, therefore, factually speaking the amounts received by the assessee towards such amenities is to be taken as a part of rental arrangement. Thus, the ratio of the decision of Delhi Bench of the Tribunal, in the case of Sir Sobha Singh & Son (P.) Ltd (2013 (10) TMI 1491 - ITAT DELHI), is not attracted to the facts of the present case. In our view, the disallowance made by the Assessing Officer has been rightly sustained by the CIT(A) which we hereby confirm. Thus, on this aspect the assessee fails.

Summary

Issues Involved:
1. Denial of carry forward of losses under section 79 of the Income Tax Act, 1961.
2. Disallowance made under section 14A of the Income Tax Act, 1961.
3. Addition of common amenities and maintenance expenses.

Issue 1: Denial of carry forward of losses under section 79 of the Income Tax Act, 1961:
The case involved a dispute regarding the denial of carry forward of losses under section 79 of the Income Tax Act. The appellate tribunal considered the argument that section 79 can only be invoked in the year when the assessee seeks to carry forward and set off a loss. The tribunal referred to a previous judgment and concluded that the Assessing Officer in the current year cannot determine the denial of carry forward and set off of losses for future years. The tribunal directed the Assessing Officer to remove the directions related to the denial of carry forward and set off of losses. The decision emphasized that the application of section 79 should be considered in the subsequent year when the assessee claims the actual set off.

Issue 2: Disallowance made under section 14A of the Income Tax Act, 1961:
The dispute arose from a disallowance made by the Assessing Officer under section 14A of the Act. The disallowance was based on Rule 8D(2) of the Rules, totaling a specific amount. The appellant argued that as no tax-free income was earned during the year, no disallowance under section 14A was justified. The CIT(A) partially allowed the ground of appeal, restricting the disallowance to the amount self-disallowed by the appellant. The tribunal upheld the decision of the CIT(A) citing a direct decision of the Delhi High Court and found no error in directing the AO to retain the self-disallowed amount.

Issue 3: Addition of common amenities and maintenance expenses:
The last ground of appeal involved an addition of a specific amount earned by the assessee from providing common amenities and maintenance charges to tenants. The Assessing Officer disallowed the expenditure on maintenance, which was netted off against recoveries from tenants. The appellant contended that these amounts were not part of the Annual Letting Value (ALV) as per a separate agreement with tenants. However, as there was no evidence to support this claim, the tribunal confirmed the disallowance made by the Assessing Officer and upheld the decision of the CIT(A). Consequently, the appeal of the assessee was partly allowed while that of the Revenue was dismissed.

This detailed analysis of the judgment covers the issues of denial of carry forward of losses under section 79, disallowance under section 14A, and the addition of common amenities and maintenance expenses as decided by the Appellate Tribunal in Mumbai.