2019 (11) TMI 82 - AT - Income Tax

Disallowance u/s.14A of Rule 8D - HELD THAT - In case there is no exempt income, then no expenses could be considered for disallowance. In the present case, the ld.CIT(A) has held that the assessee has no exempt income in this year. In view of the above situation, we find that no merit in the first ground of appeal raised by the Revenue Addition u/s 14A while computing the book profit u/s. 115JB - HELD THAT - In VIREET INVESTMENT (P.) LTD. 2017 (6) TMI 1124 - ITAT DELHI in the same set of facts the computation under clause (f) of explanation 1 to section 115JB as has been done by the authorities below u/s 14A r.w.r. 8D of the Income Tax Act, 1962 is not permissible and hence the Ld. CIT(A) deleted such disallowance without any ambiguity so as to warrant interference. Hence, this ground of appeal preferred by the Revenue is devoid of any merit and thus dismissed. This ground of appeal preferred by the assessee is thus allowed. Disallowance of Forex loss - HELD THAT - As decided in ADANI LOGISTICS LTD. VERSUS DCIT, CIRCLE-1 (1) (1) , AHMEDABAD AND VICE-VERSA 2019 (3) TMI 1662 - ITAT AHMEDABAD If we examine the order of the ld.CIT(A), then it would reveal that the ld.CIT(A) has examined the facts in right prospective while deleting the disallowance. The AO was of the view that such loss arose out of foreign currency loan acquired in respect of fixed assets. He failed to appreciate real transaction, and how the loss has been worked out by the assessee. In earlier year, the Tribunal has upheld deletion, and therefore, we do not see any reason to interfere in the order of the ld.CIT(A) - no reason to interfere with the order passed by the Ld. CIT(A) in favour of the assessee on the identical issue and hence, the same is hereby confirmed. Employees contribution to Provident Fund and ESIC Act not allowable u/s 36(1)(va) - HELD THAT - It has already been decided by the jurisdictional High Court in the matter of CIT vs. Gujarat State Road Transport Corporation that employees Provident Fund and ESIC welfare fund contribution is only allowable as a deduction Under Section 36 (1)(va) in the event if it is paid by the due date prescribed in the concerned Act. In that view of the matter the authorities below has disallowed such contribution made by the assessee. Argument has been advanced by the Ld. Counsel appearing for the assessee that since the issue is pending adjudication before the Hon ble Supreme Court this matter may be remitted to the Ld. AO for adjudication of the same afresh after the issue is decided by the Hon ble Apex Court and, therefore, the order passed by the Co ordinate Bench has been relied upon. However, We find no such justification in passing such an order since the matter at the present moment is covered against the assessee

Summary

Issues Involved:
1. Deletion of disallowance under Section 14A read with Rule 8D.
2. Non-inclusion of disallowance under Section 14A while computing book profit under Section 115JB.
3. Deletion of disallowance of Forex loss.
4. Disallowance of employees' contribution to Provident Fund and ESIC under Section 36(1)(va).

Issue-wise Detailed Analysis:

1. Deletion of Disallowance under Section 14A read with Rule 8D:
The Revenue challenged the deletion of an addition of ?89,72,884 made under Section 14A read with Rule 8D. The assessee's counsel argued that this issue was already settled in the assessee's favor for the previous assessment year (2013-14) by the Tribunal in ITA No. 2077/Ahd/2017. The Tribunal had held that in the absence of any exempt income, the provisions of Section 14A read with Rule 8D could not be invoked. The Revenue did not raise any serious objections. The Tribunal, relying on the previous decision, confirmed the CIT(A)'s order, thus dismissing the Revenue's appeal on this ground.

2. Non-inclusion of Disallowance under Section 14A while Computing Book Profit under Section 115JB:
The Revenue contested the CIT(A)'s decision that the addition of ?89,72,884 under Section 14A should not be included while computing book profit under Section 115JB. The assessee argued that the AO erroneously applied Section 14A read with Rule 8D in calculating income under MAT provisions. The Tribunal referenced the Special Bench decision in ACIT vs. Vireet Investment (P.) Ltd., which clarified that the computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A and Rule 8D. The Tribunal found no merit in the Revenue's appeal and upheld the CIT(A)'s order, dismissing this ground.

3. Deletion of Disallowance of Forex Loss:
The Revenue appealed against the deletion of a disallowance of Forex loss amounting to ?2,12,05,000. The assessee's counsel stated that this issue was covered in favor of the assessee in the previous assessment year (2013-14) by the Tribunal. The Tribunal had upheld the CIT(A)'s decision, which accepted the assessee's method of accounting for Forex loss as per the amended AS-11 issued by the Ministry of Corporate Affairs. The Tribunal found that the AO had failed to appreciate the real transaction and the correct method of accounting for the Forex loss. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal on this ground.

4. Disallowance of Employees' Contribution to Provident Fund and ESIC under Section 36(1)(va):
The assessee challenged the CIT(A)'s order confirming the AO's disallowance of ?2,55,876 towards employees' contribution to Provident Fund and ESIC under Section 36(1)(va). The assessee relied on a Tribunal decision for A.Y. 2015-16, suggesting the matter be remitted to the AO pending the Supreme Court's decision. However, the Tribunal noted that the jurisdictional High Court in CIT vs. Gujarat State Road Transport Corporation had already settled the issue against the assessee, stating that such contributions are only allowable if paid by the due date prescribed in the concerned Act. Therefore, the Tribunal found no merit in the assessee's cross-objection and dismissed it.

Conclusion:
Both the appeal filed by the Revenue and the cross-objection filed by the assessee were dismissed. The Tribunal upheld the CIT(A)'s decisions on all contested grounds, relying on previous judgments and the applicable legal framework.