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2023 (2) TMI 1113 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - suo moto disallowance made by the assessee - sufficiency of interest free funds - HELD THAT - The aggregate of the Share Capital, the General Reserves and Surplus in Profit and Loss account, which can be termed as interest free funds available with the assessee as at 31st March 2009 is much in excess of the investments as on 31st March 2009. In the case of Reliance Utilities Power Ltd. ( 2009 (1) TMI 4 - BOMBAY HIGH COURT ) has held that where an assessee had own funds as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. We further find that identical issue arose before the co-ordinate Bench of Tribunal in assessee s own case in A.Y. 2012-13 2020 (2) TMI 1485 - ITAT DELHI also. The Coordinate Bench of Tribunal while deciding the issue in that year has deleted the additional disallowance made by AO for the reasons noted therein. Before us, Revenue has not placed on record any contrary binding decision in its support nor has pointed to any distinguishing feature of the case in the year under consideration and that of earlier years. Considering all we are of the view that no additional disallowance as made by AO in excess of the suo moto disallowance made by the assessee was warranted in the present case. We, therefore, direct the deletion of the additional disallowance made by AO. Thus the ground of assessee is allowed. TP adjustment u/s 92CA(3) - interest on loan to assessee s 100% subsidiary - HELD THAT - We find that identical issue arose before the Tribunal in assessee s own case in A.Y. 2014-15 2021 (12) TMI 1428 - ITAT DELHI and Co-ordinate Bench of Tribunal by following the order of Tribunal in assessee s own case for A.Y. 2010-11 2018 (2) TMI 2030 - ITAT DELHI has decided the issue in favour of the assessee. Nature of receipt - Receipts of of Carbon Emission Reduction (CERs) - According to assessee, the aforesaid amount was in the nature of capital receipt and should have been excluded while computing the taxable income but however it had recognized it as Revenue receipt in the return of income - HELD THAT - We hold that the AO was not justified in considering the receipt from CERs to be revenue receipts. We, therefore, direct the AO to consider the receipts on transfer of CER to be capital receipt. Since the amount is held to be capital receipt, it cannot be considered for the purpose of computing book profit u/s 115JB of the Act. Thus the grounds of assessee are allowed. Claim of depreciation on goodwill - claim of depreciation of goodwill was not made by assessee either in the return of income or during the assessment proceedings - HELD THAT - No material has been placed by the Revenue to point out any judicial precedence to support his contention that when depreciation arising out of the same transaction has been allowed in other years, whether it can be denied in other years. Before us, Revenue has also not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2012-13 2020 (2) TMI 1485 - ITAT DELHI has been stayed/set aside/overruled by higher judicial forum. In view of the aforesaid facts, we are of the view that Assessee is eligible to claim depreciation on goodwill. We accordingly direct the AO to allow the claim of depreciation. Calm first time made before CIT-A - Disallowance of donation paid to Schools of SRF Vidyalay and SRF Foundation - Claim for deduction was neither made by the assessee in the original return of income nor had the assessee filed revised return of income to claim such deduction - HELD THAT - As decided in Mitesh Impex 2014 (4) TMI 484 - GUJARAT HIGH COURT held that CIT(A) was not justified in not deciding the claim made by the assessee before him for the first time. We for the same reasons hold that CIT(A) has erred in not deciding the claim made before him for the first time and should have decided the claim of the assessee. Revenue has also not placed any material on record to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2010-11 2018 (2) TMI 2030 - ITAT DELHI has been stayed/set aside/overruled by higher judicial forum. In view of the fact that there is no finding by the lower authorities on the allowability of the expenses, we, following the order of the coordinate bench of Tribunal in assessee s own case and for similar reasons restore the issue back to the file of the AO and direct him to decide the claim of the assessee in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Nature of receipt - additional depreciation, seeking of indexation benefit for long term capital gains and treating the TUF subsidy as revenue receipts - HELD THAT - We for the reasons given while deciding the issue A.Y. 2014-15 2021 (12) TMI 1428 - ITAT DELHI and for similar reasons, restore the issue back to the file of AO and direct him to decide the issue afresh in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Assessee shall also be free to file such documents, explanations, submissions as it deems fit in respect of this claim. Needless to state that the AO shall grant adequate opportunity of hearing to the assessee. Indexation benefit for the calculation of Long Term Capital Gain - We find that though the issue was raised by the Assessee before CIT(A) but however CIT(A) did not admit the claim for the reasons noted in the order and therefore there is no finding of the lower authorities on the issue. Since there is no finding by the lower authorities on the issue, we restore the issue back to the file of AO and direct him to decide the claim of the assessee in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Adjustment under Section 92CA(3) on account of interest on loan to subsidiary. 3. Treatment of Carbon Emission Reduction (CER) receipts. 4. Depreciation on goodwill. 5. Disallowance of donations paid to schools. 6. Non-adjudication of additional claims by CIT(A). Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The issue pertains to the disallowance of Rs. 1,22,44,820/- under Section 14A of the Income Tax Act. The Assessing Officer (AO) was not satisfied with the suo moto disallowance of Rs. 26,32,820/- made by the assessee and recalculated the disallowance as per Rule 8D. The CIT(A) upheld the AO's decision, noting that loans could have been used for investments. However, the Tribunal found that the assessee had sufficient interest-free funds to cover the investments, citing the Bombay High Court decision in CIT vs. Reliance Utilities & Power Ltd. and previous Tribunal decisions in the assessee's favor. The Tribunal directed the deletion of the additional disallowance. 2. Adjustment under Section 92CA(3) on account of interest on loan to subsidiary: The AO, based on the Transfer Pricing Officer's (TPO) recommendation, made an upward adjustment of Rs. 36,03,975/- for interest on a loan given to the assessee's subsidiary. The TPO had benchmarked the interest rate against Indian lending rates, which the Tribunal found inappropriate, citing the jurisdictional High Court judgment in Cotton Naturals (I) Pvt. Ltd. The Tribunal followed its earlier decisions in the assessee's favor and directed the deletion of the adjustment. 3. Treatment of Carbon Emission Reduction (CER) receipts: The assessee received Rs. 3,48,37,38,617/- from the transfer of CERs, which it claimed as a capital receipt during assessment proceedings. The AO and CIT(A) rejected the claim, citing the absence of a revised return. The Tribunal, however, admitted the additional ground, referencing the Gujarat High Court decision in CIT vs. Mitesh Impex, which allows appellate authorities to entertain new claims. On merits, the Tribunal followed its earlier decisions and various High Court judgments, holding that CER receipts are capital in nature and not taxable. The Tribunal also directed that these receipts should not be included in the computation of book profits under Section 115JB. 4. Depreciation on goodwill: The assessee claimed depreciation on goodwill arising from the purchase of business from SRF Polymers Ltd. The AO and CIT(A) disallowed the claim, arguing it was not made in the return or a revised return. The Tribunal, referencing its own decisions in the assessee's favor and the Supreme Court decision in CIT vs. Smifs Securities Ltd., held that the assessee is eligible for depreciation on goodwill and directed the AO to allow the claim. 5. Disallowance of donations paid to schools: The assessee claimed Rs. 1,04,00,000/- paid to SRF Vidyalay and SRF Foundation as business expenditure. The AO and CIT(A) disallowed the claim, citing the absence of a revised return. The Tribunal, following its earlier decision in the assessee's favor and the Bombay High Court decision in Mahindra & Mahindra Ltd. vs. CIT, restored the issue to the AO for fresh adjudication, directing him to consider the claim on merits. 6. Non-adjudication of additional claims by CIT(A): The assessee made additional claims for additional depreciation, indexation benefit for long-term capital gains, and treating TUF subsidy as capital receipt before CIT(A), which were not entertained. The Tribunal, referencing the Gujarat High Court decision in CIT vs. Mitesh Impex, held that CIT(A) should have entertained these claims. The Tribunal restored these issues to the AO for fresh adjudication, directing him to consider the claims on merits. Conclusion: The Tribunal allowed the appeal partly, directing the deletion of certain disallowances and adjustments, and restoring other issues to the AO for fresh adjudication. The Tribunal emphasized the importance of appellate authorities considering new claims and the proper application of legal precedents.
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