2020 (5) TMI 745 - AT - Income Tax

Addition in respect of interest on FDs - CIT(A) made deleted addition as relying on caselaw Karnataka State Agricultural Produce Processing and Export Corporation limited 2013 (12) TMI 1668 - ITAT BANGALORE - HELD THAT - As DR could not point out about stay of operation or reversal of this judgment of Hon ble Karnataka High Court rendered in the case of CIT vs. Karnataka State Agricultural Produce Processing and Export Corporation limited for A. Y. 2008-09 and she also could not point out any valid reason because of which the CIT (A) was not correct in following this judgment in the present case. Hence, we decline to interfere in the order of CIT (A) about first issue in respect of interest income as per Grounds 1 to 3. Expenses incurred on schemes for which grants were received by the assessee from the Karnataka Government - CIT(A) allowed part relief - HELD THAT - We find that CIT (A) has noted the various schemes for which grants were received by the assessee from the Karnataka Government and break up of the expenses of Rs. 46,63,097/- claimed by the assessee and a categorical finding is given by him that only one item of expenses of Rs. 271,598/- for Belaku Yojana Scheme is in respect of a scheme for which grant is received by the assessee and he has disallowed this amount and in respect of the balance amount allowed by him, he has given a categorical finding that these are business expenses of the assessee and for any scheme for which grant is received by the assessee. These findings of CIT (A) could not be controverted by the learned DR of the revenue and therefore, on this issue also, we decline to interfere in the order of CIT (A). Revenue appeal dismissed.

Summary

Issues:
1. Deletion of addition of interest on FDs.
2. Justification of CIT (A) in relying on a specific judgment.
3. Relief allowed by CIT (A) regarding total disallowance by AO.

Analysis:

Issue 1: Deletion of addition of interest on FDs
The appeal by the revenue challenged the deletion of the addition of Rs. 195,88,089/- in interest on FDs by CIT (A). The revenue raised 7 grounds, with Grounds 1 to 3 specifically addressing this grievance. Ground No. 2 highlighted the revenue's objection to CIT (A) granting relief to the assessee based on a judgment of the Hon'ble Karnataka High Court. During the hearing, the bench queried the revenue's learned DR about the status of the mentioned judgment and whether it was stayed or reversed by the Hon'ble Supreme Court. The revenue's DR failed to provide any valid reason for opposing CIT (A)'s decision based on the judgment. Consequently, the tribunal declined to interfere in CIT (A)'s order regarding the interest income issue as per Grounds 1 to 3.

Issue 2: Justification of CIT (A) in relying on a specific judgment
The tribunal examined the grounds related to the relief allowed by CIT (A) concerning the total disallowance by the Assessing Officer (AO). The revenue supported the assessment order, while the assessee's representative supported CIT (A)'s decision. CIT (A) had meticulously analyzed the grants received by the assessee from the Karnataka Government and the breakdown of claimed expenses. CIT (A) found that only a specific expense related to a particular scheme was disallowed, while the rest were deemed as legitimate business expenses. The tribunal noted that the revenue's arguments failed to challenge CIT (A)'s findings on the expenses, leading to the decision not to interfere with CIT (A)'s order on this issue as well.

Conclusion
The tribunal dismissed the appeal by the revenue, upholding CIT (A)'s decisions on both the deletion of interest on FDs and the relief allowed on the total disallowance by the AO. The tribunal's decision was based on the lack of substantial grounds to overturn CIT (A)'s well-reasoned findings.