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2019 (7) TMI 922 - AT - Income TaxDisallowance of provision for post-retirement medical expenses - actuarial basis - HELD THAT - As decided in RURAL ELECTRIFICATION CORPN LTD. 2018 (3) TMI 1572 - ITAT DELHI where the provision has been created on the basis of actuarial calculation on a scientific basis the liability is not contingent but definite. We do not find any infirmity in the order of the Id CIT(A) in deleting the above disallowance. Disallowance of Management fee and trusteeship fees u/s 14A - not claimed in computation - HELD THAT - Since the CIT(A) has given his decision based on factual finding that said expenses have not been claimed in the profit and loss account, and said finding has not been disputed by the learned DR, though in the ground it is submitted that disallowance has been deleted without affording an opportunity to the AO. However, we find that before us no material has been brought on record to dispute this factual finding that those expenses were not claimed in the profit and loss account. In view of the above, we do not find any error in the order of the Ld. CIT(A) and accordingly we uphold the same . D isallowance under rule 8D(2)(ii) and 8D(2)(iii) - HELD THAT - Investment out of interest-free funds available exist in the year under consideration, thus respectfully following the finding of the Tribunal, the disallowance for indirect interest expenses under rule 8D(2)(ii) amounting to ₹ 14,64,536/- is deleted. On the issue of 0.5% of average investment, the Tribunal 2018 (3) TMI 1572 - ITAT DELHI has upheld the disallowance under rule 8D(2)(iii), thus respectfully, following the finding, the disallowance in the year under consideration of ₹ 6,24,445/- is sustained. Addition interest accrued on the Special Reserve Fund created and maintained by various cooperative electrical societies - HELD THAT - As decided in assessee's own case CIT(A) has deleted the addition with respect to those societies whose confirmation of offering the interest income in the hands of those societies was finished by those societies. In absence of those certificates the additions were confirmed. DR could not point out any infirmity in the order of Id CIT(A). We are also of the considered view when the income has been offered by those societies in their own hand it cannot be taxed in the hands of the assessee. In the result, we do not find any merit in the appeal of the revenue Addition treating the interest income earned by the Cooperative Electric Society, Siricila on the special reserve fund as income of the assessee - HELD THAT - As decided in RURAL ELECTRIFICATION CORPN LTD. 2018 (3) TMI 1572 - ITAT DELHI Tribunal not only on the principle of the judicial discipline, but also relied on the finding of the coordinate bench that rules and other criteria related to creation of the special reserve fund and its control established that interest accrued in the hands of the assessee. Thus, respectfully following the above decision, the ground No. 3 of the appeal of the assessee is dismissed. Computation of the deduction under section 36(1)(viii) and 36(1)(viia)(c) - HELD THAT - CIT(A) has only given direction to verify that additions to the income are in the nature of the income from long-term finance and then allow the benefit accordingly. Since the CIT(A) has directed to verify the quantum of deduction available on long-term finance in accordance with law, we do not find any error in the order of the CIT(A) on the issue in dispute, and we, accordingly, uphold the same. The ground of the appeal of the Revenue is accordingly dismissed.
Issues Involved:
1. Disallowance of provision for post-retirement medical expenses. 2. Disallowance under section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules. 3. Treatment of interest income earned by Cooperative Electrical Societies on special reserve funds as income of the appellant company. 4. Re-computation of deductions under sections 36(1)(viii) and 36(1)(viia)(c) of the Income Tax Act. Detailed Analysis: 1. Disallowance of Provision for Post-Retirement Medical Expenses: The assessee claimed a provision for post-retirement medical benefits amounting to ?4,97,27,224/-. The Assessing Officer (AO) disallowed the claim, treating it as a contingent liability. The Ld. CIT(A) allowed the claim, considering it an ascertained liability backed by actuarial valuation, citing precedents from the Hon’ble Supreme Court. The Tribunal upheld the Ld. CIT(A)'s decision, noting that the provision was created in accordance with accounting standards and was not contingent in nature. 2. Disallowance Under Section 14A Read with Rule 8D: The AO disallowed ?62,91,445/- under section 14A for expenses related to earning exempt income. The Ld. CIT(A) deleted ?42,01,977/- related to management and trusteeship fees, as these were not claimed in the profit and loss account, but upheld the remaining disallowance. The Tribunal upheld the deletion of ?42,01,977/-, as the factual finding that these expenses were not claimed in the profit and loss account was not disputed. The Tribunal also deleted the disallowance of ?14,64,536/- under Rule 8D(2)(ii) due to sufficient interest-free funds being available, but sustained the disallowance of ?6,24,933/- under Rule 8D(2)(iii). 3. Treatment of Interest Income from Special Reserve Funds: The AO added ?4,43,25,897/- as interest income accrued on special reserve funds created by various Cooperative Electrical Societies, treating it as the income of the assessee. The Ld. CIT(A) held that the interest income belonged to the societies, not the assessee, except for certain societies where documentary evidence was insufficient. The Tribunal upheld the Ld. CIT(A)'s decision for societies that provided evidence of declaring the interest income in their returns. For societies without sufficient evidence, the Tribunal remanded the issue back to the AO for verification. The Tribunal also upheld the addition of ?1,29,25,650/- for the Siricilla Society, following the coordinate bench's decision that the interest accrued to the assessee. 4. Re-Calculation of Deductions Under Sections 36(1)(viii) and 36(1)(viia)(c): The Ld. CIT(A) directed the AO to verify if the additions to income were from long-term finance and to allow deductions accordingly. The Tribunal upheld this direction, finding no error in the Ld. CIT(A)'s approach. Summary: The Tribunal dismissed the Revenue's appeals regarding the disallowance of post-retirement medical expenses and upheld the Ld. CIT(A)'s deletion of certain disallowances under section 14A. The Tribunal remanded the issue of interest income from special reserve funds for verification in cases with insufficient evidence and upheld the addition for the Siricilla Society. The Tribunal also upheld the Ld. CIT(A)'s direction for re-computation of deductions under sections 36(1)(viii) and 36(1)(viia)(c). The appeals were partly allowed for statistical purposes.
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