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2019 (8) TMI 104 - AT - Income TaxDisallowance u/s 14A - adjustment made while computing Book profits u/s115JB - no exempt income - HELD THAT - Admittedly there is no exempt income earned by assessee during years under consideration. Under such circumstances the ratio that no disallowance can be computed under section 14 A read with Rule 8D shall apply while computing Book profits u/s115JB. It is observed that this Tribunal in case of Windsor Gardens Private limited vs DCIT applied same analogy for computing book profit under section 115 JB Explanation 1 Clause (f). Respectfully following same we direct Ld. AO to delete the addition made on account of disallowance under section 14A while computing book profits. Admission of additional Ground - Issue not arising from impugned order - HELD THAT - The Additional Ground raised by assessee is in respect of disallowance computed u/s 14A as there is no exempt income earned during the year. It is observed that assessee raised this issue in an appeal against order passed u/s 154 where addition has been made to the book profits of assessee for years under consideration. As order passed u/s 143(3) by Ld. AO is not before us today. Accordingly these Additional Grounds though arising out of assessment proceedings deserves to be admitted however stands dismissed as not arising out of the order passed by Ld. CIT (A) impugned before us. Disallowance of harvesting transportation charges - non deduction of TDS u/s 194C - assessee paid to the harvester on behalf of farmer and therefore was not liable to deduct any TDS - no appeal against order of CIT(A) in earlier year on same issue - HELD THAT - Admittedly identical issue for assessment year 2011-12 has not been raised by revenue meaning thereby view adopted by Ld. CIT (A) stands accepted as on date. It is observed that for year under consideration Ld.CIT(A) followed the view of his predecessor to allow claim of assessee. We do not find any infirmity in the view adopted by Ld.CIT(A).
Issues Involved:
1. Validity of the order passed under section 154 of the Income Tax Act, 1961. 2. Applicability of section 14A to section 115JB for computing book profits under MAT provisions. 3. Disallowance of expenditure under section 14A when no exempt income is earned. 4. Interest enhancement under sections 234B, 234C, 244A, and 234D. 5. Applicability of section 194C regarding charges paid to laborers for harvesting. Issue-wise Detailed Analysis: 1. Validity of the Order Passed Under Section 154: The assessee contended that the order passed under section 154 was bad in law as the Assessing Officer (AO) did not provide a reasonable opportunity of being heard, violating sub-section 3 of section 154. Additionally, the assessee argued that the order was barred by limitation under sub-section 7 of section 154, as it was served on 1-04-2017. The Commissioner of Income Tax (Appeals) [CIT(A)] was also alleged to have wrongly stated that the assessee did not pray for quashing the order. 2. Applicability of Section 14A to Section 115JB: The assessee argued that section 14A, which pertains to disallowance of expenditure related to exempt income, could not be read into section 115JB, which deals with Minimum Alternate Tax (MAT). The assessee maintained that section 115JB is a complete code in itself and overrides other provisions of the Act. The tax liability under section 115JB should be based solely on adjusted book profits, not on income computed under normal provisions. The assessee relied on the Delhi High Court's decision in Bhushan Steel Ltd., which held that disallowance under section 14A read with Rule 8D could not be added while computing book profit under MAT provisions. 3. Disallowance of Expenditure Under Section 14A When No Exempt Income is Earned: The assessee contended that section 14A should not apply when no exempt income is earned during the year. This argument was supported by the Delhi High Court's decision in Cheminvest vs. CIT and the jurisdictional High Court's decision in Holcim India, which stated that section 14A would not apply unless exempt income was actually earned. The Tribunal agreed with this view, directing the AO to delete the addition made under section 14A while computing book profits. 4. Interest Enhancement Under Sections 234B, 234C, 244A, and 234D: The assessee challenged the enhancement of interest under sections 234B and 234C, arguing that the AO erred in enhancing the interest without proper jurisdiction. The AO also erred in adding a refund amount that the assessee had not received. The Tribunal found merit in the assessee's argument and directed the AO to reconsider the interest calculations. 5. Applicability of Section 194C Regarding Charges Paid to Laborers for Harvesting: The revenue contended that the CIT(A) erred in holding that harvesting charges paid to laborers by the assessee on behalf of cane growers were part of the cost price of sugar and not covered under the expression 'work contract' as defined under section 194C. The Tribunal observed that the issue was similar to the one in Ryator Sahakai Sakkare Karkhane Niyamit Vs. ACIT, where the Karnataka High Court's decision was reversed by the Supreme Court. The Tribunal upheld the CIT(A)'s view, dismissing the revenue's grounds. Conclusion: The appeals for assessment years 2010-11 and 2011-12 filed by the assessee were partly allowed, with the Tribunal directing the AO to delete the addition made under section 14A while computing book profits. The additional grounds raised by the assessee were dismissed as they did not arise from the CIT(A)'s order. The appeal filed by the revenue for assessment year 2013-14 was dismissed, with the Tribunal finding no infirmity in the CIT(A)'s view regarding the applicability of section 194C.
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