2019 (4) TMI 768 - AT - Income Tax

Addition u/s 14A r.w.r. 8D - HELD THAT - AO will invoke Rule 8D only when he records that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. In the case under appeal, we do not find any proper satisfaction having been recorded by the Assessing Officer in the light of Section 14A(2). It is also stated by the AR that in the preceding as well as subsequent years, the disallowance made by the assessee was accepted by the Assessing Officer himself and no further disallowance has been made by invoking Rule 8D. In view of the above, we deem it appropriate to delete the additional disallowance made by the Assessing Officer. TDS u/s 194J - Disallowance u/s 40(a)(ia) - non-deduction of tax on payment of transmission charges - HELD THAT - The issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee s own case for the Assessment Year 2012-13 2018 (3) TMI 1080 - ITAT DELHI on identical facts stating AO has completely failed to bring relevant materials, whatsoever, on record to prove the existence of human interface/element in the present case. The Tribunal deleted the disallowance made by the Assessing Officer u/s 40(a) (ia) for non deduction of tax at source on transmission charges. Besides that no tax is required to be deducted at source from the amount of ₹ 6,55,09,814 out of the total expenditure on transmission and wheeling charges of ₹ 18,41,83,032 incurred by the assessee during the year under consideration, being reimbursement of cost.The Ld. DR could not controvert this factual aspect. It is just and proper not to withheld tax from transmission charges - Decided in favour of assessee.

Issues Involved:
1. Setoff of brought forward business loss and depreciation allowance.
2. Disallowance under Section 14A.
3. Disallowance under Section 40(a)(ia) for non-deduction of tax on transmission charges.
4. Incorrect quantification of book profit under Section 115JB.
5. Charging of interest under Sections 234B and 234D.

Issue-wise Detailed Analysis:

1. Setoff of brought forward business loss and depreciation allowance:
The assessee argued that the CIT(A) failed to adjudicate Ground No. 3, which concerned the setoff of brought forward business loss and depreciation allowance while calculating total taxable income. It was noted that the CIT(A) did not address this ground in his order. Consequently, the Tribunal directed the CIT(A) to adjudicate this specific ground, thereby allowing Ground Nos. 5, 5(a), and 5(b) of the assessee's appeal.

2. Disallowance under Section 14A:
The assessee contested the additional disallowance of ?53,624 under Section 14A, arguing that the Assessing Officer (AO) did not record proper satisfaction as required by Section 14A(2) before invoking Rule 8D. The Tribunal found merit in the assessee's argument, noting that the AO did not provide adequate reasons for not being satisfied with the assessee's claim. It was also highlighted that in preceding and subsequent years, the AO accepted the disallowance made by the assessee without invoking Rule 8D. Therefore, the Tribunal deemed it appropriate to delete the additional disallowance of ?53,624.

3. Disallowance under Section 40(a)(ia) for non-deduction of tax on transmission charges:
The assessee argued that the issue of disallowance under Section 40(a)(ia) for non-deduction of tax on transmission charges amounting to ?18,41,83,032 was covered in its favor by previous Tribunal decisions. The Tribunal referred to its earlier decision in the assessee's own case for the Assessment Year 2012-13, where it was held that such transmission and wheeling charges do not constitute fees for technical services under Section 194J, and thus no tax deduction at source was required. Additionally, the Tribunal noted that a portion of the transmission charges represented reimbursement of expenses, which also did not require tax deduction. Consequently, the Tribunal allowed Ground Nos. 7(a) to 7(d), deleting the disallowance made by the AO.

4. Incorrect quantification of book profit under Section 115JB:
The assessee contended that there was an error in the quantification of book profit under Section 115JB, with the AO calculating an excess of ?1 lakh. The Tribunal remanded this issue back to the AO for verification and correction. Thus, Ground No. 8 was partly allowed for statistical purposes.

5. Charging of interest under Sections 234B and 234D:
The issue of charging interest under Sections 234B and 234D was deemed consequential and was not adjudicated at this juncture.

Conclusion:
The appeal was partly allowed for statistical purposes, with directions for the CIT(A) to adjudicate the unaddressed ground and for the AO to verify and correct the quantification of book profit. The disallowances under Sections 14A and 40(a)(ia) were deleted based on the Tribunal's findings and previous decisions.

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