2025 (3) TMI 458 - AT - Income Tax

Disallowance u/s. 14A r.w.r. 8D while computing income under the normal provisions of the Act as also while computing book profit u/s. 115JB - HELD THAT - Disallowance u/s. 14A r/w Rule 8D in a particular assessment year cannot exceed the quantum of exempt income earned in the said year. Therefore the disallowance made by the A.O. u/s. 14A read with Rule 8D could not have exceeded the quantum of income earned by the assessee. No infirmity in the decision of the first appellate authority in deleting the disallowance made u/s. 14A read with Rule 8D while computing income under the normal provisions of the Act. Insofar as similar disallowance made while computing book profit u/s. 115JB of the Act we concur with the decision of first appellate authority that since the provisions contained u/s. 115JB do not provide for any disallowance with reference to section 14A read with Rule 8D no such disallowance could have been made. In view of the afore-said grounds are dismissed. Disallowance made u/s. 69A - FAA held that assessee had not received any cash compensation as alleged by the A.O. deleted the addition - HELD THAT - The email communication cannot be considered as an evidence demonstrating cash compensation transaction between the assessee and another Indian company. We have further observed the first appellate authority has recorded a factual finding that in course of assessment proceeding the A.O. had not made any independent enquiry either with Biacon Textile Ltd. or its parent company in Italy. When the assessee has denied of receiving any cash compensation the logical thing to do for the A.O. was to make enquiry and bring enough corroborative evidence on record to prove receipt of cash compensation by taking up enquiry with the other party who allegedly paid cash compensation. Admittedly no such enquiry has been taken up by the AO to elicit the actual facts. Thus in absence of any corroborative evidence on record to back his finding that the assessee has actually received the cash compensation no addition can be made merely on conjectures and surmises. Therefore we uphold the decision of the first appellate authority on the issue. Ground raised is dismissed. Disallowance made u/s. 80IA - undertaking /unit was acquired by the assessee through a slump sale - CIT(A) deleted addition - HELD THAT - As far as the claim of deduction u/s. 80IA for the unit at Vapi is concerned the finding of the A.O. is factually incorrect. Hence unacceptable. Therefore the claim of deduction u/s. 80IA of the Act in respect of Captive Power Plant at Vapi land is clearly allowable. Insofar as Captive Power Plant at Anjar is concerned acquired through slum sale the facts on record clearly reveals that the undertaking was eligible for deduction u/s. 80IA due to fulfillment of the conditions mentioned in the said provision. Merely because of change of the ownership of the undertaking it would not get disentitled from availing deductions u/s. 80IA of the Act for remaining years for which deduction has not been claimed. As rightly observed by the first appellate authority deduction u/s. 80IA of the Act is qua undertaking and not qua the assessee. Since the Revenue has not brought on record any cogent material to controvert the factual findings of the first appellate authority while deciding the issue we are inclined to uphold the decision of first appellate authority by dismissing the ground raised.

Summary

The appeal before the Appellate Tribunal concerned various challenges raised by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2018-19. The key issues considered and analyzed in the judgment are as follows:1. Disallowance under Section 14A of the Income Tax Act:The Revenue challenged the deletion of disallowance made under Section 14A read with Rule 8D while computing income under normal provisions and book profit under Section 115JB of the Act. The Assessing Officer had disallowed a certain amount based on the average value of investments made by the assessee in exempt income yielding assets. However, the first appellate authority directed the AO to restrict the disallowance to the quantum of exempt income earned by the assessee, which was only Rs. 4/-. The Tribunal upheld the decision of the first appellate authority, stating that the disallowance under Section 14A cannot exceed the quantum of exempt income earned in the relevant year. Therefore, the disallowance made by the AO was deemed excessive and not supported by the facts, leading to the dismissal of the grounds raised by the Revenue.2. Disallowance under Section 69A of the Act:The Revenue challenged the deletion of disallowance of Rs. 48,50,000 made under Section 69A of the Act. The AO had added this amount based on evidence found during a search and seizure operation, alleging that the assessee received cash compensation from an Indian entity. However, the first appellate authority, after considering the submissions and evidence, deleted the addition. The Tribunal upheld the decision of the first appellate authority, noting that there was a lack of corroborative evidence to prove the receipt of cash compensation by the assessee. The Tribunal emphasized the importance of conducting independent inquiries and relying on concrete evidence rather than conjectures, leading to the dismissal of the ground raised by the Revenue.3. Disallowance under Section 80IA of the Act:The Revenue challenged the deletion of disallowance made under Section 80IA of the Act. The AO disallowed the deduction claimed by the assessee on the grounds of belated filing of the return of income and acquisition of the undertaking through a slump sale. The first appellate authority allowed the deduction after verifying the fulfillment of conditions under Section 80IA. The Tribunal found that the AO had incorrectly mixed up the facts related to two separate units for which the deduction was claimed. The Tribunal upheld the decision of the first appellate authority, emphasizing that the deduction under Section 80IA is specific to each undertaking and not the assessee as a whole. Therefore, the claim of deduction for the unit set up by the assessee was deemed allowable, while the unit acquired through slump sale was also eligible for the deduction under Section 80IA. The lack of concrete evidence to dispute the findings of the first appellate authority led to the dismissal of the grounds raised by the Revenue.In conclusion, the Tribunal dismissed the appeal by the Revenue and upheld the decisions of the first appellate authority on all the grounds raised, emphasizing the importance of factual accuracy, evidence-based decisions, and adherence to the provisions of the Income Tax Act.