2022 (7) TMI 898 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - CIT-A deleted the addition - HELD THAT - We find the learned CIT (A) deleted the addition the reasons of which are already reproduced in the preceding paragraphs. We find the Finance Act 2022 has drastically amended the provisions of section 14A and a Coordinate Bench of the Tribunal has held the amendment to be retrospective in nature i.e. w.e.f. 1.4.1962. We, therefore, in the interest of justice deem it fit and proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue afresh in the light of the amendments to the provisions of section 14A by the Finance Act, 2022 and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes. Addition u/s 2(22)(e) - inter corporate deposit (ICD) from its subsidiary company - CIT (A) has directed the Assessing Officer to delete the deemed dividend u/s 2(22)(e) - HELD THAT - Although the submission of the assessee is that it is a typographical error, however, we find neither the assessee nor the Assessing Officer moved any rectification application u/s 154 of the I.T. Act before the learned CIT (A) for rectification of the typographic error. We deem it fit and proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue afresh in the light of the CBDT Circular No.19/07 dated 12.06.2017 and as per fact and law. Needless to say the Assessing Officer while deciding the issue shall give due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds raised by the Revenue on this issue are accordingly allowed for statistical purposes.

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act.
2. Deletion of addition under section 2(22)(e) of the Income Tax Act.

Issue 1: Disallowance under section 14A of the Income Tax Act

The appeal was against the order of the learned CIT (A) relating to the assessment year 2014-15. The Assessing Officer disallowed an amount under section 14A based on the balance sheet of the assessee company showing substantial investments. The CIT (A) deleted the addition, citing precedents where it was held that section 14A applies only when exempt income is earned. The Tribunal noted the amendment to section 14A by the Finance Act 2022 and directed the Assessing Officer to reconsider the issue in light of the amendment, ensuring due opportunity for the assessee. The grounds raised by the Revenue were allowed for statistical purposes.

Issue 2: Deletion of addition under section 2(22)(e) of the Income Tax Act

The Assessing Officer made an addition under section 2(22)(e) concerning an inter-corporate deposit received by the assessee from its subsidiary. The CIT (A) deleted the addition, accepting the appellant's submission that the transaction was in the nature of a trade advance and not covered under section 2(22)(e). The Tribunal found discrepancies in the CIT (A) order, noting that despite mentioning the applicability of deemed dividend, the deletion was directed. The issue was restored to the Assessing Officer for fresh consideration in line with a relevant CBDT circular. The grounds raised by the Revenue on this issue were allowed for statistical purposes.

The judgment addressed the disallowance under section 14A and the deletion of addition under section 2(22)(e) of the Income Tax Act, providing detailed analysis of each issue and directing the Assessing Officer to reevaluate the matters in light of relevant legal provisions and precedents.