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2019 (3) TMI 799 - AT - Income TaxDisallowance u/s 14A - MAT u/s 115JB - Exclusion of yielded any exempt income investment - disallowance made under section 14A r/w rule 8D cannot be added to the book profit under section 115JB HELD THAT - carefully considered the same and find that all the aspects of disallowance u/s 14A has exhaustively been considered by the co-ordinate bench in assessee s own case 2018 (12) TMI 396 - ITAT MUMBAI . Facts circumstances being pari-materia the same, respectfully following the same, the grounds qua disallowance u/ 14A are disposed off Deduction under section 80IB(9) - activity of prospecting, exploration and production of mineral oil and natural gas undertaken by the assessee, whether satisfies the eligibility conditions of section 80IB(9) of the Act - each well by treating them as independent undertaking is allowable qua the provision of section 80IB(9) r/w the Explanation therein. - HELD THAT - Therefore, facts being pari-materia the same, while admitting the new claim as raised by the assessee, the issue stand remitted back to the file of Ld. AO for adjudication on similar lines as in assessee s own case 2018 (12) TMI 396 - ITAT MUMBAI . Disallowance of obsolete store and spares - AO, treat the same as capital expenditure and did not constitute stock-in-trade - deduction u/s 42 could be allowed to the assessee for capital expenditure as and when the same are certified by the Auditors - HELD THAT - The undisputed fact that emerges are that the assessee incorporates the assets, liabilities, income expenditure arising from unincorporated joint venture operations based on the audited statement on line-to-line basis and to the extent of its participating interest in the unincorporated joint venture. The obsolete stock / spares have clearly been identified by the operator of the two blocks under question and the assessee has claimed the deduction of the same to the extent of its own share therein as computed in the manner. Undisputedly, these are old inventories as identified by the operator, which are found to be obsolete and no longer usable for the blocks. This being the case, both the authorities, in our opinion, fail to clinch the issue in the proper perspective. The said stock / spares could, by no stretch of imagination, be treated as capital expenditure for the assessee. Further, there is no double deduction as concluded by first appellate authority as evident from financial statements provided by the operator. Therefore, by deleting the same, we allow this ground of assessee s appeal.
Issues Involved:
1. Disallowance under Section 14A read with Rule 8D. 2. Computation of Book Profits under Section 115JB. 3. Deduction under Section 80-IB(9). 4. Disallowance of obsolete store and spares. Detailed Analysis: 1. Disallowance under Section 14A read with Rule 8D: The assessee contested the disallowance under Section 14A of the Income Tax Act, which was confirmed by the CIT(A). The assessee argued that the Assessing Officer (AO) did not provide valid reasons for rejecting the disallowance offered by the assessee and mechanically applied Rule 8D. The AO had disallowed ?141.24 Lacs after adjusting the suo-moto disallowance of ?26.16 Lacs offered by the assessee. The Tribunal found that the AO did not record satisfaction before rejecting the assessee's computation and did not provide specific reasons for the disallowance. The Tribunal directed the AO to verify the assessee's claim and exclude investment in Nagarjun Oil Corporation if it did not yield any exempt income during the relevant year. The Tribunal also held that disallowance under Section 14A read with Rule 8D cannot be added to the book profit under Section 115JB. The issue was restored to the AO for de novo adjudication. 2. Computation of Book Profits under Section 115JB: The assessee argued that the disallowance made under Section 14A read with Rule 8D should not be included in the computation of book profit under Section 115JB. The Tribunal agreed with the assessee, following the Special Bench decision in Vireet Investment Pvt. Ltd., and directed the AO to exclude the disallowance while computing book profit under Section 115JB. 3. Deduction under Section 80-IB(9): The assessee claimed deduction under Section 80-IB(9) by treating each well as a separate undertaking, based on the Gujarat High Court's judgment in Niko Resources Ltd. The Tribunal noted that the issue was not raised before the lower authorities due to the retrospective amendment in Section 80-IB(9). The Tribunal restored the issue to the AO for fresh adjudication, considering the Gujarat High Court's judgment and the pending appeal before the Supreme Court. The Tribunal emphasized that the issue should be decided by applying the law to be laid down by the Supreme Court. 4. Disallowance of obsolete store and spares: The assessee claimed a deduction of ?54.18 Lacs for obsolete stores and spares. The AO disallowed the claim, treating it as capital expenditure. The CIT(A) confirmed the disallowance, stating that the assessee had already claimed joint venture expenditure. The Tribunal found that the obsolete stock/spares were identified by the operator of the blocks and were no longer usable. The Tribunal held that the deduction was allowable as the obsolete stock could not be treated as capital expenditure and there was no double deduction. The Tribunal deleted the disallowance and allowed the ground in favor of the assessee. Conclusion: Both appeals were partly allowed for statistical purposes, with directions for de novo adjudication by the AO on specific issues as indicated in the order. The Tribunal emphasized the need for verification and proper application of legal principles in deciding the issues.
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