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2024 (5) TMI 1163 - AT - Income TaxDisallowance u/s. 14A r.w.r. 8D - interest expenditure and administrative expenditure - as argued assessee had sufficient self owned funds, therefore, no disallowance of any part of the interest expenditure was warranted - HELD THAT - The Hon ble High Court of Bombay in the case of CIT vs. HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT had observed that no disallowance for interest could be made based on the reasoning that if the assessee has more interest free funds than the tax-free investments, then a presumption would arise that tax free investments would be out of the interest-free funds. In fact, the aforesaid view is further supported by the judgment of South Indian Bank Ltd. 2021 (9) TMI 566 - SUPREME COURT wherein as held that if investment in exempt income yielding shares is made out of common funds and the assessee had available non-interest bearing funds larger than the investments made in tax-free securities then in such cases, no disallowance u/s. 14A would be called for. Thus considering the fact that he had sufficient self owned funds available with him to source the investment in the exempt income yielding investment in his capital account with M/s. Anoop Road Carriers, no disallowance of any part of the expenditure was called for in his case u/s. 14A of the Act. Disallowance of the administrative expenditure made by the A.O u/s. 14A r.w.r. 8D(2)(iii), as the Ld. AR had failed to come forth with any plausible explanation as to on what basis the same could not be sustained, therefore, we uphold the same to the said extent. Thus, the Ground of appeal No.1 raised by the assessee is partly allowed in terms of the aforesaid observations. Addition u/s. 41(1) - cessation of liability - outstanding liability had not been discharged till date, the A.O held the same as a liability that had ceased to exist - HELD THAT - Mere fact that the liability is outstanding for the last many years in the books of account of the assessee and had been brought forward from the preceding years cannot on such standalone basis justify the addition u/s. 41(1) of the Act. Also, there is nothing available on record which would reveal that the same was in the nature of a trading liability which the assessee had claimed as deduction. Ostensibly, Section 41(1) of the Act, inter alia, contemplates where any deduction has been made in the assessment for any year in respect of the trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained some benefit in respect of trading liability by way of remission or cessation thereof, then the amount of benefit accruing to him shall be deemed to be profits and gains of business or professions, which, accordingly, would be chargeable to income tax as his income of that previous year. As the A.O had failed to place on record any material which would justify the addition of the aforesaid amount of Rs. 10,00,000/- u/s. 41(1) of the Act, therefore, a strong conviction that the matter in all fairness requires to be revisited by him - we thus restore the matter to the file of the A.O with a direction to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his claim on the basis of fresh documentary evidence, if any. Thus, the Ground of appeal No.2 raised by the assessee is allowed for statistical purposes in terms of the aforesaid observations. Decline of credit of TCS - year of transaction of purchase of coal - Although the assessee had claimed the credit of the amount of TCS in his return of income, but as the coal was purchased in the immediately succeeding year, therefore, the A.O had declined to allow the credit of the aforesaid amount - HELD THAT - Schedule of TDS/TCS in the income tax return provides column to fill in information of deductions for the previous year but credit for the same has to be claimed in the future year. As in a case where the assessee cannot claim for TDS pertaining to the income which is taxable in the succeeding year has to carry forward the credit of TDS to the subsequent year and claim the same in the later year in which the income is offered to tax, therefore, A.O had rightly observed that as the transactions of purchase/sale of coal had materialized in the succeeding year, therefore, the claim for credit of TCS ought to have been raised by the assessee in the next financial year and not during the year under consideration. Direct the A.O to allow the assessee s claim of credit of TCS in the next year i.e. A.Y. 2017-18, in which, transaction of purchase of coal had materialized.
Issues Involved:
1. Disallowance u/s 14A. 2. Addition u/s 41(1). 3. Non-allowance of TCS credit. Summary: (A) Disallowance u/s 14A r.w.r. 8D: Rs. 2,94,308/- The assessee contested the disallowance of Rs. 2,94,308/- made u/s 14A, which included Rs. 2,09,936/- for interest expenditure and Rs. 84,372/- for administrative expenditure. The assessee argued that sufficient self-owned funds were available, negating the need for disallowance of interest expenditure. The Tribunal agreed with the assessee regarding the interest expenditure, citing the Bombay High Court's decision in CIT vs. HDFC Bank Ltd. and the Supreme Court's ruling in South Indian Bank Ltd. vs. CIT. However, the Tribunal upheld the disallowance of administrative expenditure due to the lack of a plausible explanation from the assessee. Thus, the disallowance was partly vacated. (B) Addition u/s 41(1) of the Act: Rs. 10,00,000/- The AO added Rs. 10,00,000/- u/s 41(1), considering it a ceased liability. The assessee claimed the amount was an advance from M/s. Laxmi Mahila Nagrik, later identified as M/s. Kalindi Power Limited. The Tribunal noted that the facts were unclear and that the addition u/s 41(1) was not justified without evidence of the liability being a trading liability. The Tribunal remanded the matter back to the AO for re-adjudication, allowing the assessee to present fresh evidence. (C) Declining of the assessee's claim for credit of TCS: Rs. 9,60,514/- The AO denied the TCS credit of Rs. 9,60,514/- for the year under consideration, stating it should be claimed in the subsequent year when the coal purchase transaction materialized. The Tribunal upheld the AO's decision, directing that the TCS credit be allowed in the next financial year (A.Y. 2017-18). Conclusion: The appeal was allowed for statistical purposes, with specific directions for each issue. The Tribunal pronounced the order on January 5, 2024.
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