2020 (4) TMI 302 - HC - Income Tax

Deduction u/s 80IA - Disallowance of Project Facilities Expenses - Whether disallowance of expenditure would increase profit derived from industrial undertaking and as the AO has not disputed eligibility of such deduction under section 80IA ? - HELD THAT - As emerging from the record, it is evident that the sole ground on which the AO has sought to disallow the expenditure is that, such expenses were incurred in the previous year and not in the current year. It is an admitted position that the assessee was entitled to deduction under section 80IA of the Act. The consequence of disallowance of expenditure by the Assessing Officer is that the eligible income under section 80IA of the Act would get enhanced and the assessee would be entitled to deduction thereof under section 80IA of the Act. The Tribunal was, therefore, justified in coming to the conclusion that the issue was tax neutral and upholding the order passed by the Commissioner (Appeals). It not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to question of law, much less, a substantial question of law warranting interference.

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding disallowance of Project Facilities Expenses under the Income Tax Act, 1961 for the assessment year 2013-14.

Analysis:
The appellant, challenging the Income Tax Appellate Tribunal's order, questioned the disallowance of ?4,10,06,609/- for Project Facilities Expenses, arguing that the expenditure was not allowable for the relevant year. The Assessing Officer observed the ledger account and found an opening balance of ?4,10,06,609/-, with additional expenditure incurred during the year. The appellant failed to provide a convincing explanation for not claiming the expenditure in the year it was incurred, leading the Assessing Officer to disallow the claimed amount.

The Commissioner (Appeals) relied on previous court decisions and considered the issue tax neutral, deleting the addition. The appellant contended that the expenses were accounted for in previous years and were not prior period expenses. The appellant also claimed eligibility for deduction under section 80IA of the Act, arguing that the Assessing Officer erred in restricting the deduction and not extending the benefit to the assessed income after the disallowance.

The Tribunal upheld the Commissioner (Appeals)'s decision, emphasizing that the issue was tax neutral. The Tribunal noted that the disallowance would enhance the eligible income under section 80IA, entitling the assessee to deduction. The Tribunal found the Assessing Officer's reasoning for disallowance insufficient, as the assessee was entitled to the deduction under section 80IA.

Consequently, the High Court found no legal infirmity in the Tribunal's order, dismissing the appeal as it failed to raise any substantial question of law warranting interference. The court upheld the Tribunal's decision, concluding that the issue was tax neutral, and the appellant was entitled to the deduction under section 80IA of the Act.