2014 (1) TMI 436 - AT - Income Tax

Disallowance on account of cess on green leaf Held that - Following assessee s own case for AY 2006-07 and AFT Industries Ltd. Vs. CIT 2004 (7) TMI 81 - CALCUTTA High Court the deduction is eligible after computing the income under rule 8 and the apportionment is to be made only after the income is so computed. Such apportionment cannot be made before the deduction. Rule 8 of the Income-tax Rules, 1962, requires that the computation is to be made as if by fiction the entire income out of the tea grown and manufactured as income assessable under the Income-tax Act, 1961 - Decided against Revenue. Disallowance on account of notional interest on sticky loans Held that - Following assessee s own case for AY 2006-07 in ITA No.2248/K/2010 Decided against Revenue. Disallowance of depreciation Plant purchased from amount withdrawn from account with NABARD Held that - Following assessee s own case for AY 2006-07 in ITA No.2248/K/2010 Decided against Revenue. Disallowance on account of the expenses u/s. 14A Held that - Following assessee s own case for AY 2006-07 in ITA No.2248/K/2010 Decided against Revenue. Mismatch in ITS details Transaction of purchase of shares - Held that - Assessee being a Public Limited Company and its account being subject to audit by internal Auditor as well as statutory auditors, no unaccounted transactions can be done by assessee - the AO has not made any enquiry qua these transactions Decided against Revenue. Disallowance u/s 14A Without establishing nexus of expenditure incurred with the earning of exempted income - Held that - The assessee did not raise any specific issue regarding nexus before CIT(A) - Rule 8D is applicable from AY 2008-09 Following Godrej & Boyce Mfg. Co. Ltd. vs. DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT Decided against assessee.

Issues Involved:
1. Addition made on account of cess on green leaf
2. Disallowance of notional interest on sticky loans
3. Disallowance of depreciation on plant and machinery purchased out of amount withdrawn from NABARD
4. Addition of expenses u/s. 14A to ascertain book profit u/s. 115JB disregarding Explanation 1(f) to section 115JB
5. Mismatch in ITS details
6. Disallowance u/s. 40A read with Rule 8D of the I.T. Rules, 1962

Issue 1: Addition made on account of cess on green leaf

The first issue in this appeal is regarding the addition made on account of cess on green leaf. The revenue challenged the deletion of this addition by the CIT(A). The revenue argued that the expenses on cess on green leaf were related to agricultural operations and cited a pending case before the Supreme Court. However, the Tribunal found that the issue was already covered by a judgment of the Calcutta High Court and a previous decision in the assessee's own case. Therefore, the Tribunal dismissed this issue of the revenue's appeal as a covered matter.

Issue 2: Disallowance of notional interest on sticky loans

The second issue concerns the disallowance of notional interest on sticky loans. The revenue disputed the deletion of this disallowance by the CIT(A). The Tribunal noted that this issue was also covered by a previous decision in the assessee's own case for a different assessment year. Based on this precedent, the Tribunal confirmed the CIT(A)'s decision to delete the addition, dismissing the revenue's ground of appeal.

Issue 3: Disallowance of depreciation on plant and machinery purchased from NABARD

The third issue revolves around the disallowance of depreciation on plant and machinery purchased from the amount withdrawn from NABARD. The revenue contested the CIT(A)'s decision to delete this disallowance. The Tribunal observed that this issue had already been decided in the assessee's favor in a previous case for a different assessment year. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing this issue of the revenue's appeal.

Issue 4: Addition of expenses u/s. 14A to ascertain book profit u/s. 115JB

The fourth issue relates to the addition of expenses under section 14A to ascertain book profit under section 115JB, disregarding Explanation 1(f) to section 115JB. The revenue challenged the CIT(A)'s decision to delete this addition. The Tribunal analyzed the provisions of section 14A and the computation of book profit under section 115JB. Relying on legal interpretations and precedents, the Tribunal confirmed the CIT(A)'s order, dismissing this issue of the revenue's appeal.

Issue 5: Mismatch in ITS details

The fifth issue involves the deletion of the addition due to a mismatch in ITS details. The revenue objected to the CIT(A)'s decision to delete this addition. The Tribunal considered the explanations provided by the assessee regarding the alleged transactions leading to the mismatch. As the revenue failed to substantiate the claim and conduct a proper inquiry, the Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing this issue of the revenue's appeal.

Issue 6: Disallowance u/s. 40A read with Rule 8D of the I.T. Rules, 1962

The final issue concerns the disallowance under section 40A read with Rule 8D of the I.T. Rules, 1962. The assessee raised a Cross Objection against the CIT(A)'s confirmation of the disallowance made by the AO. The Tribunal noted that the assessee had already disallowed the sum and failed to establish the nexus of expenditure with the earning of exempted income. As the assessee could not provide evidence to prove the nexus, the Tribunal confirmed the CIT(A)'s decision, dismissing the Cross Objection of the assessee.

In conclusion, the Tribunal dismissed both the appeal of the revenue and the Cross Objection of the assessee, upholding the decisions made by the CIT(A) on various issues raised in the case.

← Previous Next →