2012 (10) TMI 21 - AT - Income Tax

Deduction u/s 80I - denial in respect of income of DEPB in view of the decision in the case of Liberty India(2009 (8) TMI 63 - SUPREME COURT) - assessee contended that while computing eligible amount of deduction, the assessee itself has excluded DEPB receipts from eligible profit - Held that - In the interest of justice, matter restored to the file of AO with a direction to verify computation of assessee s total income and if he finds that income from DEPB has already been excluded from income of the industrial undertaking on which deduction is claimed u/s 80I, no further dis-allowance is warranted otherwise, same is to be decided as per verdict in case of Liberty India. Dis-allowance u/s 14A - Held that - It is found from record that no direct expenditure was incurred by the assessee for earning exempt income. Only interest expenditure of Rs. 848/- was shown as indirect expenditure, which was also incurred in respect of vehicle loan availed by employees of the assessee company. Since no expenditure was incurred either directly or indirectly for earning exempt income, no disallowance is warranted u/s 14A - Decided in favor of assessee

Summary

Issues:
1. Deduction u/s 80-I
2. Addition u/s 14A

Deduction u/s 80-I:
The Revenue appealed against the CIT(A)'s order for the assessment year 2008-09, challenging the deletion of Rs. 34,04,971 under section 80-I. The Revenue contended that the CIT(A) erred in deleting the addition without properly appreciating the case facts and solely relying on the ITAT's decision from earlier years. The Revenue argued that the income from Duty Entitlement Pass Book (DEPB) did not qualify as income from an industrial undertaking, citing relevant Supreme Court judgments. However, the Authorized Representative highlighted that the assessee had already excluded DEPB receipts from eligible profit. The Tribunal, following precedent, upheld the CIT(A)'s decision, directing the Assessing Officer to verify the computation of the assessee's total income regarding DEPB income.

Addition u/s 14A:
The Revenue also contested the deletion of Rs. 16,26,640 under section 14A. The CIT(A) noted that no direct expenditure was incurred by the assessee for earning exempt income, with only indirect interest expenditure of Rs. 848 shown, related to vehicle loans for employees. The CIT(A) found the Rule 8D computation by the Assessing Officer to be mechanical and excessive, as it exceeded the actual expense claimed by the assessee. The Tribunal agreed with the CIT(A), emphasizing that since no expenditure was incurred directly or indirectly for earning exempt income, no disallowance under section 14A was warranted. Consequently, the Tribunal confirmed the CIT(A)'s decision to delete the disallowance made by the Assessing Officer under section 14A of the Income-tax Act, 1961.

In conclusion, the Tribunal partially allowed the Revenue's appeal for statistical purposes, upholding the decisions regarding deduction under section 80-I and addition under section 14A based on the facts and legal interpretations presented during the proceedings.