2021 (7) TMI 322 - AT - Income Tax

Disallowance u/s.14A - HELD THAT - It is undisputed fact that during the year under consideration the assessee company has earned exempt income in the form of dividend only. However the ld. CIT(A) has sustained the addition to the extent of Rs. 2, 58, 487/-. After considering the decision of Jivraj Tea Ltd. vs. DCIT 2014 (9) TMI 131 - ITAT AHMEDABAD wherein it is held that disallowance u/s. 14A cannot be exceeded the exempt income we restrict the disallowance to the extent of the exempt income in the form of dividend earned by the assessee during the year under consideration to the amount . Accordingly this ground of appeal of the revenue is dismissed. Computing book profit u/s. 115JB - HELD THAT - No addition of disallowance made u/s. 14A can be made while computing book profit u/s. 115JB of the Act as held by Special Bench decision of Delhi ITAT in the case of ACIT vs. Vineet Investment Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI The ld. counsel is fair enough not to controvert this undisputed fact that this issue is covered in favour of the assessee by the decision of Special Bench of the ITAT Delhi as referred above. Therefore we do not find any merit in the appeal of the revenue therefore the same stands dismissed. Disallowance u/s. 40(a)(ia) on account of non-deduction of tax - HELD THAT - After verifying that assessee has not filed supporting details and invoices of reimbursement of expenditure. In this regard it is observed that ld. CIT(A) has not demonstrated the specific deficiencies in the details filed by the other parties in respect of payment made therefore we restore this issue to the file of Assessing Officer for adjudicating afresh after verification of specific detail and the claim of payment of taxes by payee. Accordingly the appeal of the revenue is dismissed and cross objection filed by the assessee is allowed for statistical purposes. Disallowance u/s. 36(i)(iii) - AO observed that assessee has given interest free loan to M/s. Lalbhai Realty Finance Ltd. an associated concern of the assessee company - CIT(A) has deleted the disallowance after verification of undisputed fact that assessee was having sufficient interest free funds to the amount in the form of share capital and reserves and surplus - HELD THAT - The revenue had not disproved these undisputed fact that assessee was having sufficient interest free fund out of which the impugned loan was advanced to its sister concern. In the light of the above facts and findings we do not find any infirmity in the decision of ld. CIT(A) therefore the appeal of the revenue stands dismissed. Carry forward LTC loss as assessee had not filed revised return of income revising claim - HELD THAT - In view of the direction of the ld. CIT(A) to the Assessing Officer to allow the claim of the assessee after verifying the revised working we do not find any reason to interfere in the finding of ld. CIT(A). Therefore this ground of appeal of revenue is dismissed. Addition u/s. 41(1) - HELD THAT - Considering the fact that auditor has remarked in the Audit report in form NO. 3CD that the said liability was still existed subject to confirmation we restore this issue to the file of Assessing Officer to adjudicate afresh after giving opportunity to the assessee to make compliance as recommended in the Audit report. Therefore this ground of appeal is allowed for statistical purposes. Non granting credit for TDS - HELD THAT - As perused the material on record connected with the issue filed by the assessee during the course of assessment proceedings and appellate proceedings. Since this issue of granting credit for TDS has not been specifically adjudicated by the lower authority therefore we restore this issue to the file of the Assessing Officer for deciding afresh after verification of the supporting material after providing due opportunity to the assessee. Accordingly this ground of the cross objection is allowed for statistical purposes. Computation of book profit u/s 115JB - CIT(A) has directed the Assessing Officer to verify the contention of the assessee that the provision was made in assessment year 2010-11 and same was added while computing book profit u/s. 115JB of the Act and the same was reversed in the year under consideration if it is found correct the Assessing Officer is directed to reduce book profit - HELD THAT - After hearing both the sides and taking into consideration the detailed finding of the ld. CIT(A) we do not find any infirmity in the decision of ld. CIT(A) in directing the Assessing Officer to consider the claim of the assessee after verification of the facts available on the record. Accordingly this ground of appeal of Revenue stands dismissed.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Addition in computing book profit under Section 115JB.
3. Disallowance under Section 40(a)(ia) for non-deduction of TDS.
4. Disallowance under Section 36(1)(iii) for interest on loans to sister concerns.
5. Carry forward of Long-Term Capital Loss (LTC loss).
6. Addition under Section 41(1) for cessation of trading liability.
7. Granting credit for TDS.

Detailed Analysis:

Issue 1: Disallowance under Section 14A of the Income Tax Act
During the assessment, the Assessing Officer (AO) noticed that the assessee earned Rs. 1,92,663/- as dividend income and made investments of Rs. 36,24,000/- in equity shares. The AO disallowed Rs. 2,78,859/- under Section 14A and Rule 8D for administrative expenses. The CIT(A) reduced this disallowance to Rs. 2,58,478/-. However, the Tribunal restricted the disallowance to the exempt income (Rs. 1,92,663/-) based on the decision in Jivraj Tea Ltd. vs. DCIT. Thus, the revenue's appeal was dismissed, and the assessee's cross-objection was partly allowed.

Issue 2: Addition in computing book profit under Section 115JB
The AO included the disallowance made under Section 14A while computing book profit under Section 115JB. The CIT(A) deleted this addition, and the Tribunal upheld this decision, referencing the Special Bench decision in ACIT vs. Vineet Investment Pvt. Ltd., which states that no addition under Section 14A can be made while computing book profit under Section 115JB. Consequently, this ground of the revenue's appeal was dismissed.

Issue 3: Disallowance under Section 40(a)(ia) for non-deduction of TDS
The AO disallowed Rs. 23,59,638/- under Section 40(a)(ia) for non-deduction of TDS on freight and port/terminal handling charges, treating them as fees for technical services. The CIT(A) allowed the claim except for Rs. 4,05,359/- paid to M/s. Chinubhai Kalidas & Brothers, due to lack of supporting details. The Tribunal restored this issue to the AO for fresh adjudication after verifying the details. Thus, the revenue's appeal was dismissed, and the assessee's cross-objection was allowed for statistical purposes.

Issue 4: Disallowance under Section 36(1)(iii) for interest on loans to sister concerns
The AO disallowed Rs. 1.56 crores, calculating 12% interest on an interest-free loan of Rs. 13 crores given to M/s. Lalbhai Realty Finance Ltd., stating the assessee failed to prove it was from interest-free funds. The CIT(A) deleted this disallowance, verifying that the assessee had sufficient interest-free funds (Rs. 75.25 crores). The Tribunal upheld this decision, dismissing the revenue's appeal.

Issue 5: Carry forward of Long-Term Capital Loss (LTC loss)
The assessee submitted a revised working of loss (Rs. 1,60,45,749/-) on sale of shares and requested to carry forward a loss of Rs. 14,08,73,426/- instead of Rs. 13,59,35,856/-. The AO did not address this in the assessment order. The CIT(A) directed the AO to verify and pass an appropriate order. The Tribunal found no reason to interfere with the CIT(A)'s direction, dismissing the revenue's appeal.

Issue 6: Addition under Section 41(1) for cessation of trading liability
The AO added Rs. 5,25,935/- for sundry creditors (Sarvesh Cotton Mills Ltd.) outstanding since 2006-07, treating it as ceased liability under Section 41(1). The CIT(A) sustained this addition due to lack of contra confirmation. The Tribunal restored this issue to the AO for fresh adjudication after giving the assessee an opportunity to comply with the audit report's recommendations, allowing the assessee's appeal for statistical purposes.

Issue 7: Granting credit for TDS
The assessee's claim for TDS credit of Rs. 2,55,328/- was not specifically adjudicated by the lower authorities. The Tribunal restored this issue to the AO for fresh verification and decision, allowing the assessee's cross-objection for statistical purposes.

Conclusion:
The Tribunal dismissed the revenue's appeals (ITA Nos. 2107, 2108, and 2816/Ahd/2015) and partly allowed the assessee's cross-objections (CO Nos. 159, 160, and 191/Ahd/2015) for statistical purposes. The order was pronounced in the open court on 30-06-2021.