9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (1) TMI 1187 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - AO found that the assessee earned dividend income - mandation of recording satisfaction - assessee contended that the purpose of investment in equity shares is to have controlling interest in the respective investee companies and not to earn dividend income which has causally arisen; the expenditure incurred is not in relation to exempt dividend income and that the investments have been made out of surplus funds available with the company - CIT(A) confirmed the disallowance representing administrative expenses @0.5% u/R 8D(2)(iii) on the total average investment and allowed relief being indirect interest disallowed by the Ld. AO on account of investments made in earlier years and new investments made in the year - HELD THAT - As factual finding of the CIT(A) could not be controverted by the Ld. CIT-DR by bringing on record any adverse material whereas the record reveals that as against available amount of share capital, reserve and surplus was more than investment in shares for AY 2011-12, 2012-13, 2013-14 and 2014-15 respectively. In such a scenario, the decision of the CIT(A) cannot be faulted on the ground that he erred in holding that no interest bearing funds were used by the assessee in making investment giving rise to tax exempt income i.e dividend. We, therefore, reject the Revenue s stand in this regard. Moreover, the decision of the Ld. CIT(A) is in consonance with the view expressed by the Hon ble Supreme Court in the case of South Indian Bank Ltd. ( 2021 (9) TMI 566 - SUPREME COURT . Mandation of recording satisfaction - Non-recording of satisfaction as embedded in sub-section (2) of section 14A is a legal infirmity committed by the Ld. AO which cannot be ignored. Computation of book profit u/s 115JB - The Hon ble Karnataka High Court has held in its decision in Shobha Developer Ltd. ( 2021 (1) TMI 378 - KARNATAKA HIGH COURT that once disallowance made u/s 14A r.w. Rule 8D is deleted, said disallowance cannot be made while computing book profit u/s 115JB of the Act. No contrary decision has been brought to our notice by the Ld. CIT-DR. We therefore, accept the contention of the Ld. AR in this regard. Denial of reduction of refund claim of excise duty (CENVAT) being a capital receipt while computing book profit under section 115JB - HELD THAT - As decided in Ankit Metal and Power Ltd. 2019 (7) TMI 878 - CALCUTTA HIGH COURT as held the CENVAT credit, as received by the appellant, in accordance with the incentive scheme for J K as Formulated by the Central Government is a capital receipt not liable to tax, accordingly the same cannot be part of book profit u/s 115JB also. Deduction u/s 80IB on scrap sale generated out of manufacturing activity of the assessee - disallowance for the reason that income from sale of scrap generated during manufacturing cannot be said to have been derived from industrial activity as it does not flow directly from such activity - CIT(A) deleted addition - HELD THAT - Since the issue is covered in favour of the assessee and against the Revenue by the decision of Sadhu Forging Ltd 2011 (6) TMI 9 - DELHI HIGH COURT which has been followed by the Ld. CIT(A) as also by the Coordinate Bench of the Tribunal, we decline to interfere with the order of the Ld. CIT(A) on the point and reject this ground of the Revenue. Deduction u/s 80IB other income comprising of freight, exchange rate fluctuation and insurance recovery - CIT(A) deleted addition - HELD THAT - Nothing has been brought on record by the Ld. CIT-DR to interfere with the above findings of the Ld. CIT(A). AR has relied on the decision of the Hon ble Supreme Court in CIT vs. Meghalaya Steels Ltd. 2016 (3) TMI 375 - SUPREME COURT - Hence, we have no reason to interfere with the findings of the Ld. CIT(A). Accordingly, ground No. 3 of the Revenue is dismissed. Deduction u/s 80IB export incentive receipt - as held by the Ld. CIT(A) as part of sale proceeds and hence an allowable - HELD THAT - We find no infirmity in the order of the Ld. CIT(A). Interest, export incentive and other misc income as already been reduced from eligible profit which is evident from the computation of income itself. The nature of remaining amount of other income in Jammu Unit I, Unit II and Unit III has been explained by the CIT(A) along with cogent reasons for their inclusion in eligible profits in the respective units. We, therefore, decline to interfere.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act, 1961. 2. Addition to book profits under Section 115JB of the Act. 3. Deduction under Section 80IB of the Act for scrap sales and other income. 4. Treatment of excise duty (CENVAT) refund as a capital receipt. Summary: Issue 1: Disallowance under Section 14A of the Income Tax Act, 1961 The assessee contested the disallowance of Rs. 88,16,520/- under Section 14A, arguing that investments were made from its own funds, not borrowed ones. The Tribunal found that the assessee's own funds exceeded the investments, aligning with the Supreme Court's decision in South Indian Bank vs. CIT, thus disallowing the Revenue's claim. The Tribunal also noted that the Assessing Officer (AO) did not record the necessary satisfaction under Section 14A(2), rendering the disallowance invalid as per the Tribunal's previous decision in the assessee's case for AY 2010-11. Issue 2: Addition to Book Profits under Section 115JB of the Act The Tribunal agreed with the assessee that disallowance under Section 14A should not be added to book profits under Section 115JB, following the ITAT Delhi Special Bench decision in ACIT vs. Vireet Investment Pvt. Ltd. and the Karnataka High Court decision in Shobha Developers Ltd. vs. DCIT. Issue 3: Deduction under Section 80IB of the Act for Scrap Sales and Other Income The AO disallowed deductions for scrap sales and other income under Section 80IB, but the CIT(A) allowed these deductions, referencing the Delhi High Court's decision in CIT vs. Sadhu Forging Ltd. The Tribunal upheld this decision, noting that scrap sales and other income like freight, exchange rate fluctuation, and insurance recovery are part of the business's profits and eligible for deduction under Section 80IB. Issue 4: Treatment of Excise Duty (CENVAT) Refund as a Capital Receipt The assessee argued that the excise duty (CENVAT) refund should be treated as a capital receipt and excluded from book profits under Section 115JB. The Tribunal agreed, referencing its own decision in the assessee's case for AY 2010-11 and the Calcutta High Court decision in PCIT vs. Ankit Metal and Power Ltd., confirming that capital receipts should not be included in book profits. Conclusion: The Tribunal allowed the assessee's appeals for AY 2011-12 and subsequent years, while dismissing the Revenue's appeals for the same periods. The Tribunal's decisions were based on established legal precedents and factual findings that supported the assessee's claims.
|
