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2020 (2) TMI 245 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D on account of expenditure incurred for earning of tax exempt income - HELD THAT - Assessee was possessed of sufficient own funds to meet the investment in question. No interest expenditure disallowance u/s 14A of the Act read with Rule 8D(2)(ii) of the I.T. rules is attracted on this issue. Disallowance of administrative expenditure u/s 14A of the Act read with Rule 8D(2)(iii) - decisions of the Hon'ble Delhi High Court in the case of Joint Investments Private Ltd vs CIT 2015 (3) TMI 155 - DELHI HIGH COURT and ACB India Limited vs ACIT 2015 (4) TMI 224 - DELHI HIGH COURT wherein it is held that for computing the average value u/s 14A of the Act read with rule 8D(2)(iii), only the investment yielding non-taxable income have to be considered and not the entire investment. In view of this, the Assessing Officer is directed accordingly to consider only the investments yielding tax exempt income for computation of disallowance under Rule 8D(2)(iii) of the I.T. Rules. Deduction u/s 80IC - 10% of the disallowance out of deduction claimed on the ground of utilization of expertise of management of non-eligible unit in the eligible units at Tahiwal (HP) - HELD THAT - Issue to b decided in favour of assessee as relying on M/S CREMICA AGRO FOODS PVT. LTD. 2018 (1) TMI 842 - ITAT CHANDIGARH MAT Computation u/s 115JB - Foreign exchange fluctuation loss addition - HELD THAT - This issue is accordingly restored to the file of the Assessing Officer for verification of the aforesaid submissions of the assessee. If the assessee has offered the aforesaid amount for taxation in the return filed u/s 115JB of the Act in the subsequent assessment year 2010-11, then this amount should not be added / adjusted in computing the income of the assessee u/s 115JB for the year under consideration. This issue, with the above directions, is restored to the file of the Assessing Officer. . Claim of expenditure incurred on abundant project - assessee could not inadvertently make the aforesaid claim in the return of income, however, the plea for this claim was raised during the assessment proceedings - HELD THAT - Hon ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT has observed that the assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional clams before them. The appellate authorities have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The words 'could not have been raised' must be construed liberally and not strictly. There may be several factors justifying the raising of a new plea in an appeal and each case must be considered on its own facts. In view of this, ground No.4 taken by the assessee is admitted for adjudication - issue is restored to the file of the Assessing Officer for adjudication of the same on merits irrespective of the fact whether this claim was made in the return of income not. Addition u/s 43B - Delayed Contribution towards Provident Fund having been paid before the due date of filing of the return - HELD THAT - As decided in M/S HEMLA EMBROIDERY MILLS (P) LTD. 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT it is an admitted fact that there was delay in depositing the employees' contribution of provident fund and ESIC. However, it is accepted by the AO that the deposit was made before filing of the return of income - the impugned disallowance is deleted. - Decided in favour of assessee.
Issues Involved:
1. Disallowance under Section 14A read with Rule 8D. 2. Disallowance of deduction under Section 80IC. 3. Adjustments in book profits under Section 115JB. 4. Claim of expenses on the abandoned project. 5. Claim regarding employee's contribution towards Provident Fund. 6. Charging of interest under Section 234B. 7. Treatment of sales tax subsidy and transport subsidy as capital receipts. 8. Non-allowance of foreign exchange fluctuation loss in regular assessment. Detailed Analysis: 1. Disallowance under Section 14A read with Rule 8D: The assessee contested the confirmation of disallowance of ?2,31,241/- under Section 14A read with Rule 8D. The disallowance comprised ?1,99,050/- for proportionate interest expenditure and ?32,191/- for administrative expenditure. The assessee argued that it had sufficient own funds to make the investments, citing the Supreme Court decision in 'CIT (LTU) Vs. Reliance Industries Ltd.' which supports the presumption that if own funds are available, they are used for investments. The Tribunal agreed, holding that no interest expenditure disallowance under Section 14A read with Rule 8D(2)(ii) was warranted. For administrative expenditure, it directed the Assessing Officer to consider only investments yielding tax-exempt income for computation under Rule 8D(2)(iii). 2. Disallowance of deduction under Section 80IC: The assessee challenged the confirmation of a 10% disallowance of deduction under Section 80IC, arguing that the issue was covered by previous ITAT decisions. The Tribunal referred to its earlier decision, which found no evidence of transactions between the Tahliwal and Phillaur units that would justify the disallowance. It upheld the CIT(A)'s deletion of the disallowance, confirming that the provisions of Section 80IA(8) and (10) were not applicable. 3. Adjustments in book profits under Section 115JB: The assessee disputed adjustments made for: - Provision for doubtful debts and advances (?1,15,89,656/-): The assessee did not press this issue, and the adjustment was confirmed. - Foreign exchange fluctuation loss (?3,39,41,455/-): The Tribunal restored this issue to the Assessing Officer for verification, directing that if the loss was offered for taxation in the subsequent year, it should not be added for the current year. - Provision for diminution in value of investments (?5,25,600/-): The assessee did not press this issue, and the adjustment was upheld. 4. Claim of expenses on the abandoned project: The assessee argued that the claim, though not made in the return, was raised during assessment proceedings. The Tribunal, citing Supreme Court and Delhi High Court decisions, held that additional claims could be raised at the appellate stage. The issue was restored to the Assessing Officer for adjudication on merits. 5. Claim regarding employee's contribution towards Provident Fund: The assessee claimed that contributions paid before the return filing date should not be disallowed, referencing a Tribunal decision in 'New Time Contractors Builders (P) Ltd vs DCIT'. The Tribunal agreed, deleting the disallowance. 6. Charging of interest under Section 234B: This ground was deemed consequential and required no specific adjudication. 7. Treatment of sales tax subsidy and transport subsidy as capital receipts: The assessee raised this issue for the first time before the Tribunal. The Tribunal restored the matter to the CIT(A) for fresh adjudication, following its earlier decision to consider relevant case laws and the nature of the scheme. 8. Non-allowance of foreign exchange fluctuation loss in regular assessment: The assessee did not press this ground, and it was dismissed as 'not pressed'. Conclusion: The appeal was partly allowed, with several issues restored for further verification or adjudication by the Assessing Officer or CIT(A), and some disallowances confirmed or deleted based on precedents and legal principles.
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