2017 (4) TMI 1031 - HC - Income Tax

Addition u/s 14A r.w.R 8D both for normal taxation purposes and taxation under Section 115JB - Held that - The issue is covered against the Revenue in light of the decision of Delhi High Court in the case of Maxopp Investment Limited v. Commissioner of Income-tax, reported in 2011 (11) TMI 267 - Delhi High Court . Learned counsel appearing on behalf of the Revenue is not in a position to point out anything contrary to the said decision

Summary

Issues:
1. Transfer pricing adjustments involving overseas associated enterprise
2. Retrospective application of Advance Pricing Agreement
3. Treatment of non-crystallized notional capital expenses under ESOP
4. Allowability of contributions to specific foundations as business expenses
5. Deletion of addition under Section 14A for earning exempted dividend income
6. Disallowance of claim under Section 80IB/80IC

Analysis:
1. The first issue pertains to transfer pricing adjustments involving overseas associated enterprises. The Tribunal directed the deletion of an addition of ?238.16 Crores, considering the overseas associated enterprise as the "tested party" despite the absence of transactions between unrelated parties. The High Court admitted the appeal to consider whether this direction was justified.

2. The second issue involves the retrospective application of an Advance Pricing Agreement (APA) with the CBDT for A.Y 2014-2015 to A.Y 2008-2009. The Tribunal directed this retrospective application, raising the question of its legality and justification under the circumstances of the case and the law.

3. The third issue concerns the deletion of an addition of ?1,03,33,543/- on account of non-crystallized notional capital expenses under ESOP. The Tribunal directed this deletion, prompting a review of whether the Assessing Officer was justified in allowing this deduction.

4. The fourth issue revolves around the treatment of contributions made to specific foundations as business expenses. The Tribunal directed the Assessing Officer to treat contributions of ?47 lakhs and ?12.50 Crores to certain foundations as allowable expenses under Section 37 [1] of the Act. The question arises regarding the eligibility of these contributions as business expenses.

5. The fifth issue involves the deletion of an addition of ?7,40,66,105/- under Section 14A for earning exempted dividend income. The Tribunal justified this deletion based on the Delhi High Court's decision in a similar case. The High Court upheld this decision, dismissing the appeal concerning this issue.

6. The final issue relates to the disallowance of a claim under Section 80IB/80IC of the Act. The Tribunal directed this disallowance due to various reasons, including improper appropriation of expenses, non-submission of prescribed forms, and other income not qualifying for deduction. This issue requires a detailed examination of the Tribunal's justifications for the disallowance.