2017 (11) TMI 573 - HC - Income Tax

Deduction u/s 80IA - Held that - The issue No.1 regarding 80IA deduction is squarely covered by the decision of Bombay High Court Commissioner of Income Tax, Central II vs. ABG Heavy Industries Ltd. reported in (2010 (2) TMI 108 - BOMBAY HIGH COURT Delayed payment of employees contribution of ESI and PF - Held that - The issue No. 2, the same is now covered by the decision of this Court in CIT vs. State Bank of Bikaner & Jaipur (2014 (5) TMI 222 - RAJASTHAN HIGH COURT) Disallowance u/s 14A - Held that - The issue is governed by the decision of Supreme Court the case of Godrej & Boyce Manufacturing Company Limited vs. Deputy Commissioner of Income Tax 2017 (5) TMI 403 - SUPREME COURT OF INDIA as held we do not find any mention of the reasons which had prevailed upon the Assessing Officer, while dealing with the Assessment Year 2002-2003, to hold that the claims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not acceptable to the Assessing Officer, particularly, in the absence of any new fact or change of circumstances. Neither any basis has been disclosed establishing a reasonable nexus between the expenditure disallowed and the dividend income received. That any part of the borrowings of the Assessee had been diverted to earn tax free income despite the availability of surplus or interest free funds available remains unproved by any material whatsoever.While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case - Decided in favour of assessee.

Summary

Issues:
1. Challenge to Tribunal's order confirming CIT(A)'s decision.
2. Questions of law framed by the Court.
3. Disallowance under Section 80IA, Section 14A, and Section 43B.

Analysis:
1. The High Court addressed the challenge to the Tribunal's order confirming the CIT(A)'s decision in two appeals. The first appeal (No. 202/2017) involved the deletion of the addition made by disallowing deduction under Section 80IA of the Act. The Court referred to precedents like the decision of the Bombay High Court and a previous decision of the Court to rule in favor of the assessee on this issue. The second issue in this appeal related to the disallowance of a specific amount by the Assessing Officer, which the CIT(A) deleted. The Court relied on a previous decision involving the State Bank of Bikaner & Jaipur to decide in favor of the assessee, subject to a pending SLP before the Supreme Court. The third issue in this appeal concerned disallowance under Section 14A, with the Court citing a Supreme Court case to support its decision in favor of the assessee.

2. In the second appeal (No. 204/2017), the first issue was the deletion of expenditure made by the Assessing Officer under Section 14A r/w Rule 8D. The Court connected this issue to the third issue in the first appeal and ruled in favor of the assessee. The second issue in this appeal questioned the justification of the Tribunal's finding that no expenditure was incurred for earning dividend income, and the Court decided in favor of the assessee based on the previous rulings. The third issue involved the deletion of an addition by relying on Section 43B, which the Court found in favor of the assessee.

3. The Court's analysis of the issues under Section 14A involved detailed consideration of the law and precedents. The Court referred to the requirement for establishing a nexus between the expenditure and the dividend income, emphasizing the need for a satisfaction by the Assessing Officer regarding the correctness of the claim. The Court highlighted the lack of disclosed reasons for disallowing the claim and the absence of a reasonable nexus between the disallowed expenditure and the dividend income. Ultimately, the Court ruled in favor of the assessee in both appeals, dismissing the challenges raised by the department.

This detailed analysis of the judgment showcases the Court's thorough consideration of the legal issues involved and its reliance on established precedents to deliver a comprehensive decision in favor of the assessee.