9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (3) TMI 339 - AT - Income TaxAddition u/s 14A read with Rule 8D - investments were made out of own interest free funds - HELD THAT - Coordinate bench of Kolkatta tribunal in Babul fiscal Services Pvt Ltd. 2022 (9) TMI 98 - ITAT KOLKATA has followed the decision in the case of Era Infrastructure (India) Ltd. 2022 (7) TMI 1093 - DELHI HIGH COURT and held that explanation to section 14 A of the Act is prospective. Therefore we find merit in the submission of decision holding the amendment to be retrospective in nature is wrong and cannot be applied. On this score alone, the order of Ld. CIT(A) cannot be sustained. We note that the assessee s own funds were far more than investment made in shares and securities in the preceding financial years and presumption has been drawn that the investments were made out of own interest free funds. The case of assessee finds support from the decision of case of Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT where the ratio has been laid that no disallowance can be made u/s 14A read with Rule 8D(2)(ii) of the Act where the assessee s own funds were far more than the value of investments which yielded the exempt income. In the present case, we note that the assessee has invested in equity shares - Therefore on this count, we find merit in the contentions of the A.R that no disallowance can be made under Rule 8D(2)(ii). In view of the above facts and circumstances, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance. Club expenses confirmed as incurred for business purposes - HELD THAT - We observe that the assessee reported revenue from operations of Rs. 28,751 Lacs whereas the expenses were only Rs. 1,58,263/-. We find merit in the contentions of assessee that these expenses were incurred primarily for the business purpose and for promoting the interest of the company and therefore allowable u/s 37 - The case of assessee finds support from the decision of in the case of CIT vs. United Glass Mfg. Co. Ltd. 2012 (9) TMI 914 - SUPREME COURT wherein it was held that such expenses are purely business expenses. Club membership fee incurred by the assessee is business expense u/s 37 of the Act and none of the decisions have been challenged in this Court. Similarly in the case of OTIS Elevator Co. (India) Ltd. 1991 (4) TMI 53 - BOMBAY HIGH COURT and CIT vs. Samtel Color Ltd. 2009 (1) TMI 26 - DELHI HIGH COURT similar issue has been decided in favour of the assessee by holding that the club expenses/admission fee paid towards business expense is wholly and exclusively incurred for the purpose of business. Considering this fact and ratio laid down in above decisions we are inclined to set aside the order of Ld. CIT(A) by directing the AO to delete the addition. Non-granting TDS/TCS credit - HELD THAT - We find that the issue is required to be examined at the level of AO. Accordingly we direct the AO to examine this issue and allow the same after such examination. Assessee is also directed to produce the necessary evidences in this regard before the AO. Accordingly ground no. 7 is allowed for statistical purposes.
Issues Involved:
1. Confirmation of addition under Section 14A read with Rule 8D. 2. Confirmation of club expenses disallowance. 3. Non-granting of TDS/TCS credit. Issue 1: Confirmation of Addition under Section 14A read with Rule 8D The assessee filed a return of income showing a total loss and had investments in equity shares, earning a dividend income. The Assessing Officer (AO) invoked Section 14A read with Rule 8D to disallow Rs. 4,48,83,429/-, but the assessee contended that investments were made from own funds and no expenditure was incurred to earn exempt income. The AO did not record satisfaction on how the assessee's disallowance of Rs. 4,000/- was incorrect, which is a prerequisite as per the Supreme Court's decision in Maxopp Investment. The CIT(A) upheld the AO's decision, considering the amendment to Section 14A as retrospective based on the Gauhati Bench's judgment in Williamson Financial Services Ltd. The Tribunal found that the AO did not record necessary satisfaction and noted that the amendment to Section 14A is prospective, as held by the Delhi High Court in Era Infrastructure (India) Ltd. The Tribunal also noted that the assessee's own funds were sufficient to cover the investments, aligning with the Bombay High Court's decision in Reliance Utilities and Power Ltd. Consequently, the Tribunal directed the AO to delete the disallowance, allowing grounds 1 to 4. Issue 2: Confirmation of Club Expenses Disallowance The AO disallowed club expenses of Rs. 1,58,263/-, considering them personal and not for business purposes. The CIT(A) upheld the disallowance, stating the assessee failed to substantiate the business purpose. The Tribunal noted the expenses were minimal compared to the revenue and aligned with the Supreme Court's decision in CIT vs. United Glass Mfg. Co. Ltd., which held such expenses as business-related. The Tribunal directed the AO to delete the addition, allowing ground 6. Issue 3: Non-Granting of TDS/TCS Credit The assessee claimed non-granting of TDS/TCS credit of Rs. 9,270/-. The Tribunal directed the AO to examine and allow the credit after verification, allowing ground 7 for statistical purposes. Conclusion The Tribunal allowed the appeal for statistical purposes, directing the AO to delete the disallowance under Section 14A and club expenses, and to verify and grant the TDS/TCS credit. The order was pronounced on 23rd December 2022.
|
