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2021 (11) TMI 360 - AT - Income TaxAddition u/s 14A - computation of expenditure required to be disallowed for earning tax free income - HELD THAT - Case of the assessee was that it has earned exempt income without incurring any expenditure, as the assessee has sufficient interest free funds available with it for making investment, and some of these investments are in the nature of strategic for the purpose of the business. CIT(A) in the impugned order has recorded a finding that investment in shares of ₹ 38.9 crores against which the assessee has share capital of ₹ 24.5 cores and reserves and surplus of ₹ 262.6 crores, and therefore, the assessee has sufficient interest free funds available with for making this much investment. Undisputedly, before us, the ld.DR could not show that the amount of investment made by the assessee in those investments, which earned tax-free income, is higher than the amount of share capital and free reserve available with the assessee, nor could show that borrowed funds were utilised so as to invoke the provisions of section 14A of the Act, therefore, we do not find any infirmity in the order of the ld.CIT(A) in deleting the disallowance on account on interest expenditure. Disallowance of administrative expenses - At the end of the assessee, neither before the AO nor before the CIT(A) nor before the ITAT, it has been demonstrated that a particular amount of expenditure were incurred or sufficient for earning that tax free income. The assessee failed to submit details of investment and as to how those details/investments have been taken care of; whether any employees are devoted towards keeping track of the investment or not. Investment of this much size, does require constant monitoring. It is quite impossible that a tax free income of ₹ 1,42,19,234/- generated to the assessee without incurrence of any energy from the work force. Therefore, we find that in the compelling circumstances, the ld.CIT(A) has taken a shelter by invoking Rule 8D of the Income Tax Rules. Assessee has relied upon the order of the Tribunal in earlier years, wherein according to it, under similar circumstances, disallowances have been deleted. It is pertinent to observe that in the written submissions, no parity of circumstances has been highlighted. The magnitude of exempt income, cost of employees in terms of tracking quantum of investment etc. have not been filed, nor is discernible from order of the Coordinate Bench cited by the assessee. In this view of the matter, we do not find any infirmity in the order of the ld.CIT(A) on this issue, which is upheld, and this ground of assessee is rejected. Confirmation of addition on account of deemed house property income - HELD THAT - We find that the assessee has not filed evidence to prove its claim that the impugned flats were utilized for the purpose of business as guest house. The Revenue authorities have considered two flats out of four to be used for the business purpose, and in respect of remaining two flats notional income was calculated at the rate of ₹ 90,000/- per flat, and thus made addition of ₹ 1,80,000/- under the head income from house property . Before us also, there is no material putforth by the assessee to substantiate its claim. Similar claim of the assessee for the preceding two assessment years i.e. 2011-12 and 2012-13 was rejected upto the Tribunal by holding that there was any material produced by the assessee demonstrating that properties were utilized for the purpose as guest; so was the situation before us also. This being so, in the year under our consideration, we do not find any infirmity in order of the ld.CIT(A) confirming the addition made by the AO in respect of deemed rental income. Thus, order of the ld.CIT(A) on this issue confirmed. Deduction claimed under section 80IA - HELD THAT - Assessee has claimed the impugned deduction from the assessment year 2009-10, and upto 2014-15 and such claim was allowed either at the end of the first appellate authority or at the end of the Tribunal. The submissions of the assessee were not disputed by the ld.DR, however, the Revenue is constantly challenging this issue year after year, despite clear cut stand taken by the Tribunal in favour of the assessee in this behalf. Admittedly, there is no change in the facts and circumstances, and therefore it is not appropriate for us to revisit eligibility of claim more so when, for the aforesaid reasons. Assessee has placed on record copies of orders of the Tribunal passed in favour of the assessee in the earlier years. Accordingly, we reject this ground of the Revenue. Disallowance made u/s.14A restricting calculation of book profit under section 115JB - HELD THAT - We find that the issue is covered in favour of the assessee by the decision of Special Bench in the case of ACIT Vs. Vireet Investments P.Ltd 2017 (6) TMI 1124 - ITAT DELHI wherein it is held that no increase or decrease can be effected in the book profit calculated under section 115JB on account of certain disallowance made under section 14A.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act, 1961. 2. Addition on account of deemed house property income. 3. Deletion of addition made on account of deduction claimed under Section 80IA. 4. Restriction of disallowance under Section 14A for the purpose of calculating book profit under Section 115JB. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act, 1961: The assessee was aggrieved by the confirmation of disallowance of ?18,20,951 under Section 14A for earning tax-free income. The Revenue also contested the deletion of disallowance of ?91,46,082 by the CIT(A). The AO had initially disallowed a total of ?1,09,67,033 under Section 14A read with Rule 8D, attributing interest and administrative expenses to the earning of exempt income. The CIT(A) deleted the disallowance of interest expenditure, recognizing that the assessee had sufficient interest-free funds. However, the CIT(A) upheld the administrative expenses disallowance, applying Rule 8D(iii). The Tribunal found no infirmity in the CIT(A)'s order regarding the deletion of interest expenditure disallowance, affirming that the assessee had sufficient interest-free funds. However, it upheld the disallowance of administrative expenses, noting that the assessee failed to provide detailed evidence of expenditure incurred for earning tax-free income. 2. Addition on account of deemed house property income: The assessee contested the addition of ?1,80,000 on account of deemed house property income. The AO had added this amount, considering notional income from two out of four flats, which the assessee claimed were used as guest houses for business purposes. The CIT(A) confirmed this addition. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to provide evidence supporting the claim that the flats were used for business purposes. 3. Deletion of addition made on account of deduction claimed under Section 80IA: The Revenue challenged the deletion of ?8,92,30,519, which was disallowed by the AO under Section 80IA. The deduction was claimed by the assessee in respect of a power plant acquired through amalgamation. The AO disallowed the claim, considering the plant and machinery as old. However, the CIT(A) allowed the claim based on similar claims allowed in earlier years. The Tribunal upheld the CIT(A)'s decision, noting that the issue had been consistently decided in favor of the assessee in earlier years, with no change in facts and circumstances. 4. Restriction of disallowance under Section 14A for the purpose of calculating book profit under Section 115JB: The Revenue was aggrieved by the CIT(A)'s decision to restrict the disallowance under Section 14A for the purpose of calculating book profit under Section 115JB. The Tribunal referred to the Special Bench decision in ACIT Vs. Vireet Investments P. Ltd., which held that no adjustments should be made to book profit under Section 115JB based on disallowances made under Section 14A. Accordingly, the Tribunal directed the AO not to make such adjustments, dismissing the Revenue's ground of appeal. Conclusion: Both the appeals of the assessee and the Revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions on the disallowance under Section 14A, the addition on account of deemed house property income, and the deletion of the addition under Section 80IA. It also affirmed the restriction of disallowance under Section 14A for the purpose of calculating book profit under Section 115JB.
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