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2023 (10) TMI 834 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - salary of three employees and other overhead expenses estimated by the management to be related to earning of exempt dividend income on units of Mutual Fund - HELD THAT - The Hon ble Supreme Court has, in the case of South India Bank Ltd 2021 (9) TMI 566 - SUPREME COURT held that in case own funds of the Assessee are sufficient for making investments, no disallowance is warranted under Section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Since the own funds were sufficient to cover the amount of investments, no disallowance of interest was warranted under Section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Accordingly, disallowance made by the AO u/R 8D(2)(ii) of the Rules is deleted. For the purpose of computing amount of disallowance under Rule 8D(2)(iii) only the investments yielding exempt income should be considered as per the decision of the Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI AO is directed to verify the same and computed the amount of disallowance u/s14A read with Rule 8D(2)(iii) of the Rules after taking into accounts only investments yielding exempt dividend income during the relevant previous year. As rightly contended by Assessee, disallowance under Section 14A of the Act cannot, in any case, exceed the amount of exempt income earned by the Assessee during the relevant previous year as per the judgment of State Bank of Patiala 2018 (11) TMI 1565 - SC ORDER . Accordingly, it is clarified that the aggregate amount of disallowance under Section 14A of the Act read with Rule 8D of the Rules shall not exceed the amount of exempt income. Short deduction of investment allowance u/s 32AC - investment allowance pertaining to addition to plant and machinery transferred from capital-work-in progress disallowed - HELD THAT - As we find that substantial part of the Plant Machinery was acquired and erected after 31.03.2013 but before 01.04.2015. The dispute before us pertains to 2.6% of the total addition to plant and machinery only. Further, the stand taken by the Assessee is supported by the decision of UltraTech Cement Ltd 2022 (1) TMI 923 - ITAT MUMBAI wherein in identical facts and circumstances the deduction for investment allowance was allowed. Therefore, we direct the Assessing Officer to allow investment allowance - Ground raised by the Assessee is allowed. Deduction u/s 80IA(4) - Railway Siding Unit was treated as infrastructure facility by the Assessee - AO concluded that the railway sidings were being used by the Assessee as a private facility and therefore, the same was not in the nature of infrastructure facility of public utility - HELD THAT - No infirmity in the order passed by the CIT(A) to the extent the CIT(A) holds that the Assessee eligible to claim deduction u/s 80IA(4) in respect of Railway Siding Unit utilised for captive use as per the terms of agreement with Indian Railways, a statutory body designated under the Indian Railways Act, by following the decision of Ultratech Cement Ltd. 2017 (12) TMI 1134 - ITAT MUMBAI As regards the computation of quantum of deduction, we note that the Revenue had contended that the profits of the Railway Siding Units were very high. Since the AO had rejected the claim of the Assessee under Section 80IA of the Act, the issue of computation of deduction was not examined. Accordingly we direct the AO to verify the computation of deduction claimed by the Assessee keeping in view the applicability or otherwise of the provisions of Section 80IA(8)/(10) before allowing claim of deduction u/s 80IA(4) - ground raised by the Revenue are disposed off as partly allowed. Nature of receipts - sale of carbon credits - revenue or capital receipts - AO treated the receipts as revenue receipts and brought the same to tax - HELD THAT - Both the sides agreed that identical issue was decided in favour of the Assessee by the Tribunal in appeal in the case of the Assessee for the Assessment Year 2015-16 2022 (7) TMI 620 - ITAT MUMBAI as held sale of Renewable Energy Certificate (Carbon Credit) of income received by the assessee is a capital receipt and could not be business receipt or income nor it is directly linked with the business of the assessee nor any asset is generated in the course of business but it is generated due to environmental concern. Disallowance of common expenses while claiming deduction u/s 80IA - CIT(A) directed the Assessing Officer not to disturb the allocation of travelling and conveyance expenses being convinced that the same have been properly allocated to respective undertakings - HELD THAT - As identical facts and circumstances, the Kolkata Bench of the Tribunal has, in Assessee s own case for the Assessment Year 2009-10 2018 (8) TMI 2133 - ITAT KOLKATA as find that legal and profession expenses as well as travelling and conveyance expenses incurred by these undertakings were debited to the stand alone account of these eligible undertakings and hence, no further allocation on account of these items of expenses to the eligible undertakings was warranted. DR was unable to controvert this fact which is evident from the documents on record. We, accordingly, uphold the order of the Ld. CIT(A) on this score.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Deduction of expenses related to illegal mining income. 3. Short deduction of investment allowance under Section 32AC. 4. Deduction under Section 80IA(4) for Railway Siding Unit. 5. Taxability of Carbon Credit Income. 6. Disallowance of common expenses under Section 80IA. Summary: Issue 1: Disallowance under Section 14A of the Income Tax Act The Assessee contended that the entire borrowed fund was used for business purposes, and thus no part of the interest should be disallowed under Section 14A. The CIT(A) directed the AO to compute disallowance under Section 14A read with Rule 8D(2)(ii) based on the Assessee's own funds exceeding investments. The Tribunal upheld that if the Assessee's own funds are sufficient, no disallowance is warranted. The Tribunal directed the AO to verify and compute the disallowance under Rule 8D(2)(iii) only for investments yielding exempt income, ensuring the disallowance does not exceed the exempt income. Ground No. 1 and 3 raised by the Assessee were allowed, Ground No. 2 partly allowed, and Ground No. 1 & 2 raised by the Revenue were dismissed. Issue 2: Deduction of expenses related to illegal mining income The Assessee did not press the grounds related to the deduction of expenses for illegal mining income as the corresponding additions were deleted. Grounds No. 4 & 5 were dismissed as not pressed. Issue 3: Short deduction of investment allowance under Section 32AC The Assessee argued that the investment allowance should be allowed for plant and machinery acquired and installed after 31.03.2013. The CIT(A) dismissed the ground, but the Tribunal found that substantial parts of the plant and machinery were acquired and installed within the eligible period. The Tribunal directed the AO to allow the investment allowance of INR 55,26,445/-. Ground No. 6 raised by the Assessee was allowed. Issue 4: Deduction under Section 80IA(4) for Railway Siding Unit The AO disallowed the deduction under Section 80IA(4) claiming the railway sidings were private facilities. The CIT(A) allowed the deduction, relying on the Tribunal's decision in a similar case. The Tribunal upheld the CIT(A)'s decision, directing the AO to verify the computation of deduction, considering the applicability of Section 80IA(8)/(10). Grounds No. 3 & 4 raised by the Revenue were partly allowed. Issue 5: Taxability of Carbon Credit Income The AO treated the Carbon Credit income as revenue receipts, but the CIT(A) and Tribunal treated it as capital receipts, relying on judicial precedents. Grounds No. 5 & 6 raised by the Revenue were dismissed. Issue 6: Disallowance of common expenses under Section 80IA The AO allocated common expenses to the Railway Siding Unit, which was deleted by the CIT(A) stating that separate audited accounts were maintained. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order. Grounds No. 7 & 8 raised by the Revenue were dismissed. Conclusion: The appeal by the Assessee was partly allowed, and the appeal by the Revenue was also partly allowed. The Tribunal upheld the CIT(A)'s decisions on various grounds while directing the AO to verify and compute specific deductions as per the legal provisions.
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