2018 (8) TMI 1136 - AT - Income Tax

Disallowance of unpaid operational charges - assessee has filed the copy of ledger account of the said expenses debited to the profit and loss account, but the same have not been verified either by the AO or by the ld. CIT(A) so as to ascertain as to why ONGC has paid lesser amount as compared to the bills raised by the assessee. - The AO has also observed that some payment might have related for the previous year, but it has been debited to the current year s profit and loss account. The assessee has not furnished any bill-wise reconciliation statement clarifying as to for how much amount the bills were raised and how much was actually received by the assessee from ONGC. It was also not explained, if there was any agreement with ONGC for payments lesser than the bill amounts. Matter remanded back to the file of AO for verification.

Summary

Issues Involved:
1. Deletion of disallowance of ?3,78,40,423/- on account of interest-free loans to a subsidiary company.
2. Deletion of disallowance of ?49,54,769/- under Section 14A read with Rule 8D.
3. Deletion of disallowance of ?15,85,719/- on account of depreciation claimed on an aircraft.
4. Deletion of disallowance of ?4,95,74,440/- on account of unpaid operational charges to ONGC.
5. Deletion of disallowance of ?90,89,065/- on account of expenses claimed as previous year adjustment under administration and other expenses.
6. Deletion of disallowance of ?4,42,355/- on account of provision for gratuity.
7. Deletion of disallowance of ?12,66,36,468/- under Section 115JB.
8. General assertion that the order of the CIT(A) is erroneous and untenable on facts and in law.

Detailed Analysis:

1. Deletion of Disallowance on Interest-Free Loans to Subsidiary:
The Tribunal found that the issue regarding the disallowance of notional interest on interest-free loans given to the subsidiary company had already been settled in favor of the assessee in the previous assessment year 2010-11. The Tribunal observed that the assessee had sufficient interest-free funds to advance the loans and that the advances were made out of commercial expediency. The Tribunal upheld the CIT(A)'s decision to delete the disallowance, noting that the Assessing Officer (AO) failed to establish a nexus between interest-bearing loans and the interest-free advances.

2. Deletion of Disallowance under Section 14A read with Rule 8D:
The Tribunal upheld the CIT(A)'s deletion of the disallowance made under Section 14A read with Rule 8D. The Tribunal referenced its decision in the assessee's case for the assessment year 2010-11, where it was held that since the assessee gets Tonnage Tax benefit under Section 115VP/115VR, the addition under Section 14A/Rule 8D is not required.

3. Deletion of Disallowance of Depreciation on Aircraft:
The Tribunal found that the issue regarding the disallowance of depreciation on the aircraft was also covered by its decision in the assessee's case for the assessment year 2010-11. The Tribunal noted that the CIT(A) had followed the Tribunal's earlier decision and deleted the disallowance. The Tribunal upheld the CIT(A)'s decision, emphasizing that the depreciation claim was justified.

4. Deletion of Disallowance of Unpaid Operational Charges to ONGC:
The Tribunal observed that the CIT(A) had not verified the necessary details regarding the unpaid operational charges to ONGC. The Tribunal restored the issue to the AO for fresh examination and verification of the ledger account, bill-wise reconciliation, and any agreements with ONGC for payments lesser than the billed amounts. The Tribunal directed the AO to provide the assessee with a reasonable opportunity to present evidence.

5. Deletion of Disallowance of Expenses Claimed as Previous Year Adjustment:
The Tribunal upheld the CIT(A)'s deletion of the disallowance of ?90,89,065/- on account of expenses claimed as previous year adjustment. The Tribunal referenced its decision in the assessee's case for the assessment year 2010-11, where it was held that since the assessee gets Tonnage Tax benefit, the addition under this head is not required.

6. Deletion of Disallowance of Provision for Gratuity:
The Tribunal upheld the CIT(A)'s deletion of the disallowance of ?4,42,355/- on account of provision for gratuity. The Tribunal noted that the CIT(A) had followed the Tribunal's decision in the assessee's case for the assessment year 2010-11, where it was held that since the assessee gets Tonnage Tax benefit, the addition under this head is not required.

7. Deletion of Disallowance under Section 115JB:
The Tribunal upheld the CIT(A)'s deletion of the disallowance of ?12,66,36,468/- under Section 115JB. The Tribunal referenced its decision in the assessee's case for the assessment year 2010-11, where it was held that the assessee's shipping unit qualifies for exemption under the Tonnage Tax Scheme.

8. General Assertion of Erroneous Order:
The Tribunal dismissed the general assertion that the order of the CIT(A) is erroneous and untenable on facts and in law, finding that the CIT(A)'s decisions were consistent with the Tribunal's and High Court's rulings in the assessee's favor in previous years.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes by restoring the issue of unpaid operational charges to the AO for fresh examination and upheld the CIT(A)'s decisions on all other issues, finding them consistent with prior rulings in the assessee's favor. The appeal was partly allowed for statistical purposes.