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2020 (6) TMI 5 - AT - Income TaxDenial of deduction u/s. 80IA for interest on income tax refund - HELD THAT - Interest accrues to the assessee as per statutory mandate only and it accrues to every assessee under certain conditions irrespective of manner of earning of the income. The source of the interest was necessarily to be traced to the fact that the assessee was deprived of use of money due to excess payment of taxes and the same would bear no nexus with the business activities being carried out by the assessee. The argument that lower TDS would have meant lower interest expenditure is misplaced. The deduction of interest is allowed to the assessee as per the mandate of Sec. 36(1)(iii) only. The TDS is also deducted as per statutory mandate only and the same is applicable to each type of assessee under certain conditions. Therefore, the said argument, in our opinion, would not materially alter the basic fact that interest on Income Tax refund would bear no nexus with the eligible activities being carried out by the assessee. Going by the ratio of Liberty India 2009 (8) TMI 63 - SUPREME COURT we confirm the stand of Ld. CIT(A) in the impugned order. Interest on fixed deposits since the accrual / source of interest would be traced to investment made by the assessee with the Banks in the shape of FDRs notwithstanding the motive which led to make those investments. The assessee s only source of income may be the earnings from eligible business but the accrual of interest could not be said to have any nexus with the eligible business rather the same would be traced to investments made by the assessee with the Bank. The words derived from would not cover sources of income beyond first degree. Therefore, the action of Ld. CIT(A) in bringing to tax the same, is upheld. Consequently, ground No. II stands dismissed. Depreciation on Terminal Rights - HELD THAT - This issue is covered in assessee s favor by the cited decision of the Tribunal for AY 2010-11 2018 (3) TMI 1865 - ITAT MUMBAI wherein it was held that since prescribed rate of depreciation as per Rule is 25%, the assessee would be entitled for the same. Facts are parimateria the same in this year. Therefore, taking the same view, we direct Ld. AO to allow depreciation at prescribed rate of 25%. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI .
Issues Involved:
1. Denial of deduction u/s. 80IA for interest on income tax refund. 2. Denial of deduction u/s. 80IA for interest on Fixed Deposit with bank. 3. Amortization / Depreciation claimed on Terminal Rights. Detailed Analysis: Ground I: Denial of Deduction u/s. 80IA for Interest on Income Tax Refund 1. Facts and Arguments: - The assessee claimed a deduction u/s. 80IA for interest on an income tax refund amounting to ?2,35,18,687. - The AO denied this deduction, treating the interest as "Income from Other Sources," arguing it was not derived from the business. - The assessee argued that the refund arose due to excess TDS by customers, which was part of the business receipts. It was contended that if there had been no excess TDS, the funds could have been used for business purposes, reducing interest liability and increasing profits. 2. Tribunal's Findings: - The Tribunal referred to the decision in Liberty India vs. CIT, emphasizing that the term "derived from" is narrower than "attributable to." - It was concluded that the interest on the income tax refund arises due to statutory provisions and not directly from the business activities. - The Tribunal upheld the CIT(A)'s decision, confirming that the interest on the income tax refund bears no direct nexus with the eligible business activities. 3. Conclusion: - The Tribunal dismissed this ground, affirming that the interest on the income tax refund is not eligible for deduction u/s. 80IA. Ground II: Denial of Deduction u/s. 80IA for Interest on Fixed Deposit with Bank 1. Facts and Arguments: - The assessee claimed a deduction u/s. 80IA for interest on fixed deposits amounting to ?8,67,66,538. - The CIT(A) enhanced the assessment by denying this deduction, arguing that the interest from surplus funds parked in the bank does not have a direct nexus with the business. - The assessee contended that the fixed deposits were made to comply with a court order in a tariff dispute and were directly related to the business. 2. Tribunal's Findings: - The Tribunal noted that the source of interest was the investment in fixed deposits, not the business itself. - The Tribunal reiterated that "derived from" requires a direct source, which was not the case here. - The Tribunal upheld the CIT(A)'s decision, stating that the interest on fixed deposits is not eligible for deduction u/s. 80IA. 3. Conclusion: - The Tribunal dismissed this ground, affirming that the interest on fixed deposits is not eligible for deduction u/s. 80IA. Ground III: Amortization / Depreciation Claimed on Terminal Rights 1. Facts and Arguments: - The assessee claimed depreciation at 25% on terminal rights, which were amortized over 10 years. - The AO reworked the depreciation, amortizing the terminal rights over 30 years, leading to a disallowance of ?76,12,752. - The CIT(A) upheld the AO's decision. 2. Tribunal's Findings: - The Tribunal referred to its own decision in the assessee's case for AY 2010-11, where it was held that the prescribed rate of depreciation is 25%. - The Tribunal found the facts to be similar and directed the AO to allow depreciation at the prescribed rate of 25%. 3. Conclusion: - The Tribunal allowed this ground, directing the AO to allow depreciation at the rate of 25%. Conclusion: - The appeal was partly allowed. The Tribunal upheld the denial of deductions u/s. 80IA for interest on income tax refund and fixed deposits but allowed the claim for depreciation on terminal rights at the prescribed rate of 25%.
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