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2022 (1) TMI 370 - AT - Income TaxDisallowance being the amortisable portion of lease premium payment - HELD THAT - Amortisable portion of the lease taken from the Noida Authority is concerned, Ld. AR fairly admitted that this issue is covered against the assessee by the order of the Hon'ble Delhi High Court in 2012 (7) TMI 526 - DELHI HIGH COURT pertaining to the assessment year 2004-05, and though the assessee is in appeal before the Hon'ble Supreme Court on that issue, as the things stand today the assessee is bound by the order of the Hon'ble Delhi High Court. Land at Visakhapatnam into Tuticorin - As observed that the nature of lease, the location of the land, the terms and conditions of lease etc, for example, it is located in the Porto premises, the entry and exit of which is with Port Security, land used only for storage during transit etc., that the assessee has in its long time lease with Visakhapatnam Port trust is different from the terms and conditions of lease from Noida Authority; that the principle on the issue whether the rent in question is to be allowed as Revenue expenditure or not, is laid down by the Hon'ble High Court in assessee's own case for earlier assessment years and this depends on the facts of each case; that the issue was to be examined in the interest of Justice; that no prejudice would be caused to the Revenue in examining the matter once again; and therefore, the issue was set aside to the file of the learned Assessing Officer for considering the arguments of the assessee de novo in accordance with law. AR, in all fairness, submits that the same course as adopted for the assessment year 2008-09 may also be followed for this assessment year in restoring the issue to the file of the learned Assessing Officer for considering the facts and circumstances relevant for this particular assessment year and to take a call de novo. Ld. DR reports no objection for sending it back to the learned Assessing Officer. Recording the same, we allow this ground for statistical purpose, by restoring the issue to the file of the learned Assessing Officer to take a view de novo for this particular assessment year after hearing the assessee de novo in accordance with law. Addition u/s 14A r.w.r. 8D - HELD THAT - AO advocated to the P L Account and the Balance Sheet of the assessee and not being satisfied with the claim of the assessee that no expenditure was incurred for earning the exempt income, he proceeded to determine the proportionate expenses attributable to the earning of the exempt income. We are, therefore, of the considered opinion that it is not a case of where the reasons are not recorded but is only a case where the dissatisfaction of the learned Assessing Officer inevitably follows. Alternative plea of the assessee, insofar as the interest component under rule 8D(2)(ii) - no material is produced before us to establish that the assessee invested out of its own funds comprising of share capital and reserves and no interest-bearing funds were invested during the year, or to show that there is no nexus between the deployment of the interest-bearing loans and investments. It is a verifiable fact. We, therefore, direct the learned Assessing Officer to verify whether the own funds of the assessee exceed the investments during the year, and whether the borrowed funds were utilised for the purpose for which they were borrowed during the year and in either case let there not be any disallowance on account of rule 8D(2)(ii) of the Rules. Insofar as the disallowance under rule 8D(2)(iii) of the Rules is concerned, we do not find any ground to interfere with the same. Credit for deemed tax on the dividend income - Dividend income received by the assessee from OMIFCO Oman and the consequential deemed tax credit relief allowed by the Ld. CIT(A) under the Indo Oman DTAA - HELD THAT - As relying on own case 2017 (4) TMI 1035 - DELHI HIGH COURT Assessee is entitled to the credit for deemed tax on the dividend income received by them by virtue of the provisions of DTAA read with section 90 of the Act as well as the clarification issued by the Sultanate of Oman and the assessment made under the Oman Law as well as the orders passed in the case of assessee for the earlier assessment years. Findings of the Ld. CIT(A) are, therefore, do not suffer any illegality or irregularity and do not warrant any interference. Consequently, we uphold the same and dismiss these grounds of appeal of the Revenue.
Issues Involved:
1. Disallowance of amortization of lease payment. 2. Disallowance under section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules. 3. Deletion of dividend income received from OMIFCO, Oman, and consequential deemed tax credit relief under the Indo Oman DTAA. Issue-wise Detailed Analysis: 1. Disallowance of Amortization of Lease Payment: The assessee challenged the disallowance of ?45,75,672/- as upheld by the Ld. CIT(A) regarding the amortization of lease payment. The disallowed amount pertains to lease payments for land at Noida, Visakhapatnam, and Tuticorin. The assessee conceded that the issue regarding the Noida land is covered against them by the Delhi High Court's order for the assessment year 2004-05, which is under appeal before the Supreme Court. For the Visakhapatnam and Tuticorin lands, the Tribunal noted that the issue is different from the Noida land and has been previously examined. The Tribunal decided to restore the issue to the Assessing Officer for de novo consideration, following the precedent set for the assessment year 2008-09. 2. Disallowance under Section 14A read with Rule 8D: The assessee earned dividend income of ?3,42,56,718/- and claimed exemption under section 10(34) of the Act. The Assessing Officer computed the disallowance under section 14A read with Rule 8D at ?10,35,89,041/-, but restricted it to the quantum of dividend received. The Ld. CIT(A) upheld the disallowance but confined it to ?1,12,50,439/-. The assessee argued that the Assessing Officer did not record satisfaction to discard their explanation and should not have disallowed any interest component as they used their own funds. The Tribunal found that the Assessing Officer had considered the assessee's submissions and determined the disallowance proportionately. The Tribunal directed the Assessing Officer to verify if the assessee's own funds exceeded the investments and whether borrowed funds were used for their intended purpose, and to adjust the disallowance accordingly. 3. Deletion of Dividend Income from OMIFCO and Deemed Tax Credit under Indo Oman DTAA: The Revenue challenged the deletion of the dividend income received from OMIFCO, Oman, and the consequential deemed tax credit relief allowed by the Ld. CIT(A). The Tribunal noted that the issue is covered in favor of the assessee by the Delhi High Court's orders for the assessment years 2010-11 and 2011-12, which upheld that the assessee is entitled to tax credit for the deemed dividend tax under the Indo Oman DTAA. The Tribunal, following the High Court's decision, found that the assessee is entitled to the credit for deemed tax on the dividend income and upheld the findings of the Ld. CIT(A). Conclusion: Both the appeals were allowed in part and for statistical purposes. The Tribunal restored the issue of amortization of lease payment to the Assessing Officer for de novo consideration, directed verification of the disallowance under section 14A read with Rule 8D, and upheld the deletion of the dividend income from OMIFCO and the consequential deemed tax credit relief under the Indo Oman DTAA.
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