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2020 (7) TMI 717 - AT - Income TaxAddition u/s 14A r.w.r. 8D - investments from which the appellant has not earned any exempt income - assessee suo motu has disallowed an amount u/s 14A r.w.r. 8D - HELD THAT - As relying on VIREET INVESTMENT (P.) LTD. 2017 (6) TMI 1124 - ITAT DELHI we find substance in the argument made by the Ld. Senior Counsel appearing for the assessee to this effect that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. In that view of the matter we find it fit and proper to restore the matter to the file of the Ld. AO for re-computing the disallowance under Section 14A in terms of the observation made hereinabove. Hence, this ground is allowed for statistical purposes. Nature of expenses - river diversion expense and HT line shifting expense - revenue or capital expenditure - HELD THAT - It became necessary for the appellant to shift the same for mining operation; similarly river diversion was also necessary to undertake the mining activities. Assessee has not spreaded particular expenditure over a period of years as it reflects from the return filed by it and it has claimed the entire expenditure as deductable in the same year. The assessee has claimed the expenditure in this particular year in which it has been incurred and, therefore, when it has chosen to claim the entire expenditure spent it is justifiable to allow such claims for the year under consideration invoking the provision of Sec. 36(1)(iii) of the Act and also the ratio laid down by the judgment TAPARIA TOOLS LIMITED VERSUS JOINT COMMISSIONER OF INCOME TAX 2015 (3) TMI 853 - SUPREME COURT - we allow the entire claim of the assessee. The addition is, therefore, deleted. - Decided in favour of assessee.
Issues Involved:
1. Addition under Section 14A read with Rule 8D regarding investments with no exempt income. 2. Treatment of river diversion and HT line shifting expenses as capital or revenue expenditure. Issue-Wise Detailed Analysis: Ground No. 1: Addition under Section 14A read with Rule 8D Facts and Arguments: - The assessee challenged the addition of ?51,72,597/- under Section 14A read with Rule 8D, arguing that only investments yielding exempt income should be considered. - The assessee had disallowed ?59,05,592/- suo motu and provided a calculation method to the Assessing Officer (AO). - The AO, finding the calculation unjustifiable, determined the disallowance at 0.5% of the average value of total investments, resulting in an additional ?51,72,597/- added to the total income. - The First Appellate Authority confirmed this addition. Judgment: - The Tribunal referred to the judgment in Corrtech Energy Private Limited and the Special Bench decision in ACIT vs. Vireet Investment Pvt. Ltd., which held that only investments yielding exempt income should be considered. - The Tribunal found substance in the assessee's argument and restored the matter to the AO for re-computation as per the observations made, allowing the ground for statistical purposes. Ground No. 2: Treatment of River Diversion and HT Line Shifting Expenses Facts and Arguments: - The assessee claimed ?28,79,712/- as revenue expenditure under "Mining and Project Development" expenses, which included river diversion and HT line shifting costs. - The AO disallowed 4/5th of the expenses, treating them as capital expenditure, following the previous year's assessment. - The First Appellate Authority upheld this disallowance. Judgment: - The Tribunal considered the Supreme Court’s decisions in Bikaner Gypsums Ltd. vs. CIT and Taparia Tools Ltd. vs. JCIT. - The Tribunal noted that the expenses were necessary for mining operations and did not provide any enduring benefit, thus qualifying as revenue expenditure. - The Tribunal allowed the entire claim of the assessee and deleted the addition, stating that the expenditure should be allowed in the year it was incurred. ITA No. 2278/Ahd/2018 A.Y. 2015-16: Ground No. 1 and Ground No. 2: - Both grounds were identical to those in ITA No. 2277/Ahd/2018 for A.Y. 2014-15. - The Tribunal applied the same reasoning and judgments mutatis mutandis, allowing both grounds for statistical purposes. Conclusion: - The appeals were allowed for statistical purposes, with directions for re-computation and allowance of the claimed expenditures as per the Tribunal's observations. - This Order pronounced in Open Court on 28/07/2019.
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