9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 403 - AT - Income TaxDisallowance u/s 14A r.w.s 8D - HELD THAT - We find that the mutual funds, which are the subject matter of computation of disallowance, are neither in the opening balance nor in the closing balance. This means that the mutual funds have been purchased and sold during the year itself. u/r 8D, the average of value of investment income from which does not form part of total income as appearing in the balance sheet of the assessee on the 1st day and last day of previous year have been mentioned. Since the average value of investment appearing in the balance sheet on the 1st day and last day is NIL, we are in agreement with the contention of the ld. counsel for the assessee that it is impossible to compute the disallowance either in Rule 8D(ii) or 8D(iii). On peculiar facts of the case in hand, we direct the Assessing Officer to delete the disallowance. Licence fee paid to Government of India department of Telecommunication in consideration for grant of licence to operate and provide services - AO was of the opinion that the expenses incurred on license fee are capital expenditure as per Section 35ABB - HELD THAT - Since the Revenue is in the process of filing appeal before the Hon'ble High Court the additions have been made. We are of the considered opinion that since the impugned issue is covered by the decision of the coordinate bench in assessee s own case for Assessment Year 2007-08 2015 (1) TMI 924 - ITAT DELHI as held if any expenditure on account of licence fee was payable up to 31.07.1999, it should be treated as capital expenditure and the licence fee on revenue sharing basis after 01.08.1999 should be treated as revenue in nature. - Decided in favour of assessee. TDS claimed on the deferred Revenue - HELD THAT - We find that section 199(3) of the Act gives power to the Board to make such rules for the purposes of giving credit in respect of tax deducted or tax paid in terms of provisions of the Act and also A.Y for which such credit may be given. Rule 37BA(3)(ii) provides that where tax has been deducted at source and paid to Central Government and income is sustainable over a number of years, credit for tax deducted at source shall be allowed across those years in same proportion in which income is assessable to tax. We, accordingly, direct the Assessing Officer to give proportionate credit of TDS for the income declared during the year under consideration. With these directions, Ground no. 3 is allowed.
Issues Involved:
1. Disallowance under Section 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962. 2. Disallowance on account of License fee. 3. Addition on account of credit of tax deducted at source (TDS). Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962: The assessee's appeal contested the disallowance of ?25,09,817/- under Section 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962. The Assessing Officer (AO) noticed significant investments in mutual funds, which generated dividend income. The AO computed the disallowance as per Rule 8D, resulting in an additional disallowance of ?25,09,817/-. The assessee argued that no expenditure was incurred for earning tax-free dividend income and that the AO did not record requisite satisfaction before making the disallowance. The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the AO's decision, noting that satisfaction could be derived from the facts and that significant investments implied some expenditure. Upon further appeal, it was noted that the mutual funds involved were neither in the opening nor closing balance, indicating they were purchased and sold within the year. Since the average value of investments was NIL, it was deemed impossible to compute the disallowance under Rule 8D(ii) or 8D(iii). The tribunal directed the AO to delete the disallowance of ?25,09,817/-. 2. Disallowance on account of License fee: The AO disallowed ?3,29,84,635/- of the license fee paid to the Government of India, treating it as capital expenditure under Section 35ABB of the Act. The assessee contended that the license fee, being a percentage of gross revenue, was correctly claimed as revenue expenditure under the Revenue Sharing Scheme post-1999. The CIT(A) failed to adjudicate this ground. The tribunal noted that similar disallowance was previously deleted by the ITAT for Assessment Year 2007-08. The tribunal, following the precedent set by the Hon'ble Jurisdictional High Court in CIT Vs Bharti Hexacom Ltd., held that the license fee payable post-31-07-1999 should be treated as revenue expenditure. Consequently, the tribunal directed the AO to delete the addition of ?3,29,84,635/-. 3. Addition on account of credit of tax deducted at source (TDS): The assessee claimed TDS of ?3,52,41,551/-, including an additional claim of ?2,19,476/-. The AO found deferred revenue and disallowed TDS credit of ?12,40,180/- on deferred revenue, stating it would be allowed in the relevant year when the revenue is offered to tax. The AO also denied the additional TDS claim, citing the Supreme Court's decision in Goetz 284 ITR 223. The CIT(A) upheld the AO's decision. On appeal, the tribunal referred to Section 199(3) of the Act and Rule 37BA(3)(ii), which allow TDS credit in the proportion of income assessable to tax over multiple years. The tribunal directed the AO to give proportionate credit of TDS for the income declared during the year under consideration. Conclusion: The tribunal allowed the appeal of the assessee, directing the deletion of disallowances and proportionate credit of TDS as per the relevant provisions and judicial precedents.
|
