9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (5) TMI 786 - AT - Income TaxTDS u/s 194A - deposits received from its members - Revenue s approach of treating the Non-Availing Compensation ( NAC ) paid by the assessee to its members as interest which was disallowed u/s 40(a)(ia) - HELD THAT - In the present case the assessee is engaged in the business of selling holiday membership plans to its customers/members. The amount received from the members was apportioned over the tenure of the membership which differs from scheme to scheme offered by the assessee. Out of the apportioned receipts the amount pertaining to the year was considered as sales and the balance amount was considered as advances sales over the tenure of the membership. Once the membership is accepted and confirmed a member is entitled to avail of facilities as per terms and conditions related to the entitlement certificate. Approach of the Revenue on one hand treating the NAC paid by the assessee to its members as interest and on the other hand treating the amount received from the members as the income of the assessee is self-contradictory since only when the deposits are considered as a loan which was one of the allegations in the reasons recorded while reopening the assessment the interest can be charged on it. Thus when the assessee s business was considered to be in the nature of CIS all the consequences in relation thereto must follow. Entries in the books of account are not decisive or determinative of the true nature of the entries. Therefore the amount received by the assessee from its members to the extent the same is treated as income in its books of account is directed to be reduced while calculating the total income of the assessee since the same is in the nature of capital receipt. NAC paid to the members also includes the repayment of membership amount collected from the members and the same has been claimed as a deduction by the assessee. Since the said repayment has already been claimed as a deduction therefore the said amount need not be again reduced while calculating the total income of the assessee for the year under consideration. Accordingly ground No. 4 raised in assessee s appeal is allowed. Disallowance u/s 14A r/w Rule 8D - AR submitted that the disallowance under section 14A of the Act cannot exceed the quantum of exempt income - HELD THAT - We find that Hon ble jurisdictional High Court in Nirved Traders (P.) Ltd. 2019 (4) TMI 1738 - BOMBAY HIGH COURT has held that disallowance under section 14A of the Act cannot be more than exempt income. Thus we direct the AO to restrict the disallowance made under section 14A of the Act to the extent of exempt income earned by the assessee during the year under consideration. As a result grounds raised in assessee s appeal are partly allowed. MAT - disallowance u/s 14A for the purpose of computing the book profit under section 115 JB - HELD THAT - We find that Special Bench of Tribunal in ACIT vs Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI held that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules 1962. Thus we direct the AO to compute the book profit under section 115 JB of the Act without resorting to computation under section 14A read with Rule 8D. Considering 30% of NAC for the purpose of disallowance under section 40(a)(ia) of the Act instead of the entire amount - HELD THAT - CBDT while explaining the provisions of the Finance (No.2) Act 2014 vide Circular No.1 of 2015 dated 21/01/2015 clarified that the amendment by the Finance (No.2) Act 2014 to the provisions of section 40(a)(ia) of the Act takes effect from 1st April 2015 and will accordingly apply in relation to the assessment year 2015-16 and subsequent years. We further find that the Hon ble Supreme Court in Shree Choudhary Transport Company 2020 (8) TMI 23 - SUPREME COURT held that the amendment by the Finance (No.2) Act 2014 is with effect from 01/04/2015 and shall be applicable from the assessment year 2015-16. Since it is settled that the amendment to section 40(a)(ia) of the Act by the Finance (No.2) Act 2014 is with effect from the assessment year 2015-16 the AO is directed to apply the said amended provision while computing disallowance under section 40(a)(ia).
Issues Involved:
1. Re-opening of assessment under Section 147/148 of the Income Tax Act, 1961. 2. Applicability of Section 194A to Non-Availing Compensation (NAC). 3. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961. 4. Treatment of deposits as income. 5. Disallowance under Section 14A read with Rule 8D. 6. Computation of book profit under Section 115 JB of the Income Tax Act, 1961. Summary: Issue 1: Re-opening of Assessment under Section 147/148 The assessee challenged the re-opening of assessments for various years, arguing that it was done without valid reasons. The Tribunal did not specifically address this issue in detail as the primary relief sought by the assessee was granted on other grounds. Issue 2: Applicability of Section 194A to NAC The assessee contended that the provision of Section 194A should not apply to NAC. The Tribunal found that the NAC paid by the assessee to its members was treated as interest, and since the business was considered to be in the nature of Collective Investment Schemes (CIS), the amount received from members should be treated as capital receipts and not income. Thus, the Tribunal directed to reduce the amount received from members while calculating the total income of the assessee. Issue 3: Disallowance under Section 40(a)(ia) The Tribunal held that the NAC paid by the assessee was in the nature of interest, and since no TDS was deducted under Section 194A, the disallowance under Section 40(a)(ia) was upheld. However, the Tribunal allowed the reduction of deposits from the sale proceeds, treating them as capital receipts. This relief was consistently granted across all assessment years involved. Issue 4: Treatment of Deposits as Income The Tribunal agreed with the assessee that the deposits received from members should not be treated as income but as capital receipts, given the nature of the business as CIS. Consequently, the Tribunal directed that these amounts be reduced while calculating the total income. Issue 5: Disallowance under Section 14A read with Rule 8D For the assessment years 2013-14 and 2014-15, the Tribunal directed the AO to restrict the disallowance under Section 14A to the extent of exempt income earned by the assessee during the year. This decision was based on the jurisdictional High Court's ruling that disallowance under Section 14A cannot exceed the quantum of exempt income. Issue 6: Computation of Book Profit under Section 115 JB For the assessment year 2015-16, the Tribunal directed the AO to compute the book profit under Section 115 JB without resorting to the computation under Section 14A read with Rule 8D, following the Special Bench decision in ACIT vs Vireet Investment (P) Ltd. Additional Points: - Appeals for the assessment years 2009-10 to 2015-16 were heard together and disposed of by a consolidated order. - The delay of 2 days in filing some appeals was condoned in the interest of justice. - The Tribunal remanded certain issues back to the AO for verification and de novo adjudication, particularly regarding the correct amount of NAC and the principal amount repaid. Conclusion: The appeals were partly allowed, with the Tribunal granting significant relief to the assessee by treating deposits as capital receipts and restricting disallowances under Section 14A to the extent of exempt income. The Tribunal also directed the AO to apply the amended provisions of Section 40(a)(ia) for the assessment year 2015-16.
|
