2024 (3) TMI 199 - AT - Income Tax

Disallowance u/s 14A - Addition of expenditure attributable to exempt dividend income - HELD THAT - As decided in assessee' own case 2014 (6) TMI 1041 - ITAT AHMEDABAD the matter is set aside to the file of AO to examine the facts and figures of the case in the light of our observations made above in order to arrive at a final conclusion as to whether disallowance u/s 14A is to be made and if so, then the amount thereof which in no case should exceed the exempted income earned by assessee during the year under appeal. It is needless to mention that AO shall allow reasonable and sufficient opportunity of hearing to the assessee before adjudicating the same. These grounds are allowed for statistical purposes. Characterization of receipts - Treatment of interest income from staff loans and advances, interest income from other loans and advances and miscellaneous income - HELD THAT - Though interest on other loans and advances has been contended as was of business exigencies on the assessee, it has not been able to be demonstrated by the assessee that the nature of this income is from business activities particularly when separate head for interest income in the return of income has been shown which is to be included in other income. Neither the miscellaneous income has been able to be shown from routine business activities of the assessee. The assessee failed to demonstrate that the income which is not revenue from operations as required to be treated in the other heads which includes income from other sources and capital gain. The impugned amount of 33.23 lakhs on account of interest income from other loans and advances and miscellaneous income of 9.46 lakhs are rightly been treated as income from other sources. We, therefore, quash the order passed by the Ld. CIT(A) in granting relief to the assessee and confirm the order passed by the AO. Hence, this ground of appeal raised by the Revenue is allowed. Disallowance u/s. 14A for the purpose of computation of book profit u/s. 115JB is hereby deleted.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Initiation of penalty proceedings under Section 271(1)(c).
3. Charging of interest under Sections 234A, 234B, 234C, and 234D.
4. Treatment of interest income and miscellaneous receipts.
5. Adjustment to Book Profit under Section 115JB.

Summary:

1. Disallowance under Section 14A:
The primary issue was the disallowance of Rs. 77,58,44,809/- under Section 14A due to expenditure attributable to exempt dividend income. The Tribunal found that the issue was covered by the assessee's own case for A.Y. 2015-16, where the matter was remanded to the Assessing Officer (AO) for fresh adjudication. The Tribunal reiterated that the AO should re-examine the facts and figures to determine the correct disallowance under Section 14A, ensuring it does not exceed the exempt income earned during the year. This ground was allowed for statistical purposes.

2. Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal did not specifically adjudicate on this ground, as it was considered general in nature and did not require specific adjudication.

3. Charging of Interest under Sections 234A, 234B, 234C, and 234D:
Similarly, this ground was considered general in nature and did not require specific adjudication.

4. Treatment of Interest Income and Miscellaneous Receipts:
The Revenue challenged the treatment of interest income from staff loans and advances, other loans and advances, and miscellaneous income as business income instead of income from other sources. The Tribunal upheld the AO's treatment, noting that the nature of these incomes was not from business activities and should be included under other income. The Tribunal quashed the CIT(A)'s order granting relief to the assessee and confirmed the AO's order, allowing this ground of the Revenue's appeal.

5. Adjustment to Book Profit under Section 115JB:
The AO had added Rs. 77,58,44,809/- to the Book Profit under Section 115JB due to disallowance under Section 14A. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s decision, relying on the jurisdictional High Court's ruling that no addition can be made to Book Profit under Section 115JB based on disallowance under Section 14A. This ground of the Revenue's appeal was dismissed.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, and the appeal filed by the Revenue was partly allowed for statistical purposes.