2020 (7) TMI 467 - AT - Income Tax

MAT Computation - Addition on account of subsidy received on the Technology Upgradation Fund (TUF) - computation of book profit under Section 115JB - HELD THAT - Proposition that book profit is not to be tinkered with is duly supported by Hon'ble Jurisdictional High Court decision in M/S. BHAGWAN INDUSTRIES LTD. 2017 (8) TMI 32 - BOMBAY HIGH COURT , AKSHAY TEXTILES TRADING AND AGENCIES P. LTD. 2007 (10) TMI 251 - BOMBAY HIGH COURT AND ADBHUT TRADING CO. P. LTD. 2011 (7) TMI 716 - BOMBAY HIGH COURT Hon ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd 2008 (9) TMI 11 - SUPREME COURT has expounded that non-consideration of jurisdictional High Court decision can render a decision of the Tribunal suffering from mistake apparent from record. We note that honourable Supreme Court in the case of Kapurchand Shrimal v CIT 1981 (8) TMI 2 - SUPREME COURT had expounded that it is the duty of the appellate authority to correct the errors in the orders of the authorities below and remit the matter, with or without directions for their consideration, unless prohibited by law. In our considered opinion, this issue needs to be remitted to the file of learned CIT(A). The learned CIT(A) is directed to consider this issue de novo after taking into account the aforesaid Hon ble Jurisdictional High Court decisions. Needless to add, the assessee should be granted adequate opportunity of being heard. Disallowance u/s 14A of the Act read with rule 8D(2)(ii) - HELD THAT - We find that it has not been denied by the Assessing Officer that assessee has sufficient interest free funds. However, the Assessing Officer has held that assessee has not submitted the cash flow statement. CIT(A) is correct in holding that if assessee has sufficient interest free funds, no disallowance under Section 14A of the Act on account of interest for funds utilised for earning the exempt income needs to be done. See HDFC BANK LTD. 2014 (8) TMI 119 - BOMBAY HIGH COURT . Disallowance with respect to employees contribution to the Provident Fund under Section 36(1)(va) - HELD THAT - The issue is squarely covered in favour of the assessee by the decision of Hon ble Bombay High Court in CIT vs Ghatge Patil Transports Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT that the said contributions made before the due dates of return or grace period is allowable. Hence, we uphold the order of ld. CIT(A) in this regard.

Summary

Issues:
1. Addition on account of subsidy received on the Technology Upgradation Fund (TUF)
2. Treatment of subsidy received under TUF for computation of book profit under Section 115JB of the Act
3. Disallowance under Section 14A of the Act read with rule 8D(2)(ii)
4. Disallowance under Section 36(1)(iii) of the Act
5. Disallowance with respect to employees' contribution to the Provident Fund under Section 36(1)(va) of the Act

Issue 1: Addition on account of subsidy received on the Technology Upgradation Fund (TUF)
The appeal concerned the direction by the learned CIT(A) to delete the addition on account of subsidy received on TUF. The ITAT upheld the order of the learned CIT(A) based on the precedent set in the assessee's own case by the ITAT, where the issue was decided in favor of the assessee. The ITAT found no contrary decision and emphasized that the pendency of the ITAT decision before the Hon'ble Bombay High Court did not warrant a departure from the established precedent.

Issue 2: Treatment of subsidy received under TUF for computation of book profit under Section 115JB of the Act
This issue revolved around whether the subsidy received under TUF should be excluded while calculating the income under Section 115JB of the Act. The ITAT noted conflicting viewpoints, with the learned counsel of the assessee citing ITAT decisions in favor of the assessee, while the Departmental Representative referred to decisions by the Hon'ble Jurisdictional High Court and a Special Bench. The ITAT concluded that the ITAT orders did not consider the High Court decision, leading to the decision to remit the issue to the file of the learned CIT(A) for a fresh consideration in light of the High Court decisions.

Issue 3: Disallowance under Section 14A of the Act read with rule 8D(2)(ii)
The dispute centered on the disallowance under Section 14A of the Act, where the Assessing Officer disallowed the claim despite the availability of sufficient interest-free funds. The ITAT upheld the learned CIT(A)'s decision, emphasizing that if sufficient interest-free funds were available, no disallowance under Section 14A was necessary. The ITAT rejected the Revenue's argument that a Supreme Court decision superseded the High Court decision, finding no specific indication of such supersession in the Supreme Court's ruling.

Issue 4: Disallowance under Section 36(1)(iii) of the Act
The Revenue contended that the assessee lacked adequate interest-free funds, leading to disallowance under Section 36(1)(iii) of the Act. The ITAT upheld the learned CIT(A)'s decision, noting that the assessee had sufficient interest-free funds as per the submissions. The ITAT found no infirmity in the CIT(A)'s order, which relied on the High Court decision in a similar case.

Issue 5: Disallowance with respect to employees' contribution to the Provident Fund under Section 36(1)(va) of the Act
The final issue involved a disallowance related to employees' contribution to the Provident Fund under Section 36(1)(va) of the Act. The ITAT concurred with the learned counsel of the assessee, citing High Court decisions supporting the allowance of such contributions made before the due dates of returns. The ITAT upheld the CIT(A)'s order in this regard.

In conclusion, the ITAT partially allowed the Revenue's appeals for statistical purposes, addressing various complex issues related to subsidies, book profit computation, disallowances, and contributions to the Provident Fund, providing detailed analyses and legal references for each issue.