2016 (3) TMI 1017 - AT - Income Tax

Treatment to interest income - Held that - We find that in assessment year 2005-06 and 2006-07 and also in assessment year 2009- 10, the Tribunal has restored back the matter to the file of the Assessing Officer for fresh decision with the direction to readjudicate the issue afresh in the light of the order of the State Government dated 03/04/80. Hence, in the present year also, we set aside the order of CIT(A) and restore the matter back to the file of the Assessing Officer for fresh decision in the light of the order of State Government dated 03/04/80. - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A - Held that - in the present case, the Assessing Officer has recorded his satisfaction with proper reasons that the assessee s claim regarding the amount to be disallowed u/s 14A is not correct. At the cost of repetition, we again narrate the reasoning given by the Assessing Officer in the assessment order for the present year. In Para 5 of the assessment order, the Assessing Officer has stated that the computation of disallowance u/s 14A of the Act is not in accordance with the provisions of Rule 8D and thereafter, the Assessing Officer has worked out the disallowance as per Rule 8D of the Act. We have also discussed earlier in this order that if the assessee gives actual working of the amount of expenses incurred for earning exempt income then the same has to be examined by the Assessing Officer and before rejecting the same, the Assessing Officer has to give proper reasons but if the working of the assessee is of the estimated expenditure then in our considered opinion, such working itself is not as per Rule 8D because Rule 8D prescribes a particular manner and method for estimation of expenses incurred for earning exempt income and therefore, if actual detail and working is not made available by the assessee then there is no other option but to adopt the basis of estimation as per Rule 8D and since the working of the assessee regarding estimation of the expenses is not as per Rule 8D, the reasoning given by the Assessing Officer for not accepting the working of the assessee that the same is not as per Rule 8D, is cogent reasoning in our considered opinion and therefore, none of the various judicial pronouncements cited by Learned A. R. of the assessee is rendering any help to the assessee in the present case. - Decided against assessee Addition of amount received for up gradation and development of computer labs - Held that - We find that this is the claim of the assessee that the amount in question was retained by Inotech for providing training and therefore, even if this amount is considered as income being grant received, then the expenses on account of training has to be allowed resulting into no effective addition and in view of these facts, we hold that this addition made by the Assessing Officer is not justified in the facts of the present case. The same is deleted. - Decided against revenue

Summary

Issues:
1. Taxability of interest income on funds parked in Bank FDR.
2. Addition made under section 14A of the Income Tax Act.
3. Addition of amount received for upgradation and development of computer labs.

Issue 1: Taxability of Interest Income on Funds Parked in Bank FDR

The appellant contended that the interest income of &8377; 5,59,454 on funds parked in Bank FDR, provided by the Government for a specific purpose, should not be assessed as the income of the appellant since the funds were to be utilized for that specific purpose only. The Tribunal noted that in previous years, similar issues were raised, and the Tribunal had directed the Assessing Officer to re-examine the matter in light of the State Government's order. Following this precedent, the Tribunal set aside the CIT(A)'s order and remanded the matter to the Assessing Officer for fresh decision based on the State Government's order dated 03/04/80. Consequently, ground No. 1 was allowed for statistical purposes.

Issue 2: Addition Made under Section 14A of the Income Tax Act

The appellant challenged the addition of &8377; 40,60,400 under section 14A, contending that the Assessing Officer applied Rule 8D mechanically without considering the facts and the appellant's submission. The Tribunal analyzed the Assessing Officer's observations and found that the appellant's working of disallowance was based on estimated expenses, not actual expenses. The Tribunal held that if actual expenses were not provided, Rule 8D's prescribed method for estimating expenses had to be adopted. The Tribunal found the Assessing Officer's reasoning for not accepting the appellant's working as per Rule 8D to be valid. Despite the appellant citing judicial pronouncements, the Tribunal concluded that none of the citations supported the appellant's case in the present scenario. Therefore, ground No. 2 was rejected.

Issue 3: Addition of Amount Received for Upgradation and Development of Computer Labs

The appellant contested the addition of &8377; 1,65,188 received for upgradation and development of computer labs, citing Government directions to spend the money for this purpose. The appellant provided evidence of the Government order specifying the allocation of profits for modernization of labs. Additionally, the appellant submitted minutes of a meeting indicating that the grant was only for setting up computer labs, not for running them. The Tribunal, considering this evidence, held that the addition made by the Assessing Officer was not justified. Consequently, the addition was deleted, and the appeal was partly allowed.

This detailed analysis of the judgment addresses the taxability of interest income, addition under section 14A, and the addition of funds received for computer labs' upgradation and development.