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2021 (5) TMI 351 - AT - Income TaxDisallowance u/s.14A - HELD THAT - Assessee has sufficient interest free funds in the form of share capital and reserves and surplus as tabulated in the order of the ld. CIT(A), which is much more than the investments that had actually yielded exempt income to the assessee. Hence, following the ratio decidendi of the Hon ble Jurisdictional High Court, in the case of HDFC Bank 2014 (8) TMI 119 - BOMBAY HIGH COURT we hold that the ld. CIT(A) had rightly deleted disallowance of interest under second limb of Rule 8D(2) of the Rules. With regard to 8D(2)(iii) of the Rules, the ld. CIT(A) had only directed the AO to consider only investments which had actually yielded exempt income. This we find is in consonance with the decision of the Hon ble Special Bench decision of Delhi Tribunal in the case of Vireet Investments 2017 (6) TMI 1124 - ITAT DELHI and hence, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, we direct the ld. AO to consider only those investments which had actually yielded exempt income for the purpose of making disallowance under Rule 8D(2)(iii) of the Rules and recompute the disallowance accordingly and thereafter reduce the voluntary disallowance made by the assessee in the return of income. Expenses incurred on replacement of electricity meters - HELD THAT - We find that this issue has been decided in favour of the assessee for all the earlier assessment years by various orders of this Tribunal and various orders of the Hon ble Jurisdictional High Court on the similar facts and circumstances in assessee s own case. We find that ld. CIT(A) had relied on the decision of the Hon ble Jurisdictional High Court for A.Y₹ 1999-2000 to 2004-05 wherein the Hon ble Bombay High Court did not admit the departmental appeals in respect of this issue of expenditure on replacement of meters. We also find that this issue is also decided in favour of the assessee in assessee s own case in A.Y.2011-12 2017 (12) TMI 1121 - ITAT MUMBAI Hence, by respectfully following the said decisions, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, the ground No.4 raised by the Revenue is dismissed. Addition made on account of proportionate apportionment and allocation of head office expenses while calculating deduction u/s.80(IA) - HELD THAT - We find that this issue is squarely covered in favour of the assessee in its own case for A.Y.2013-14 2014-15 2019 (11) TMI 1357 - ITAT MUMBAI we find that there is no dispute that these units are eligible for claiming deduction u/s 80IA. Whether the deduction u/s.80IA of the Act is allowable to the extent of gross total income or only to the extent of business income? - Since this issue is already covered in favour of the assessee by the decision of the Hon ble Jurisdictional High Court in assessee s own case, which has been followed by the ld. CIT(A), we do not find any infirmity in the order of the ld. CIT(A) in this regards. Accordingly, the ground No.6 raised by the Revenue is dismissed. Disallowance made u/s.14A of the Act while computing book profit u/s.115JB - HELD THAT - We find that the Special bench of Delhi Tribunal in the case of Vireet Investments 2017 (6) TMI 1124 - ITAT DELHI had categorically held that computation mechanism provided in Rule 8D(2) of the Rules cannot be applied for making disallowance of expenses under Clause (f) of Explanation 1 to Section 115JB(2) of the Act. We find that the Special Bench of Delhi Tribunal had held that actual expenses debited to profit and loss account which are incurred for the purpose of earning exempt income need to be disallowed under Clause (f) of Explanation 1 to Section 115JB(2) of the Act. As stated supra, we find that assessee had already made disallowance voluntarily in the return of income which alone need to be considered for the purpose of computation of book profits u/s 115JB of the Act. Hence, no further disallowance need to be made thereon. Accordingly, we find that the ld. CIT(A) had rightly deleted the disallowance made by the ld. AO in this regard. Ground raised by the Revenue is dismissed.
Issues:
1. Disallowance made under section 14A of the Income Tax Act. 2. Treatment of expenses incurred on replacement of electricity meters. 3. Allocation of head office expenses for deduction under section 80IA of the Act. 4. Allowability of deduction under section 80IA against gross total income. 5. Disallowance made under section 14A while computing book profit under section 115JB of the Act. 1. Disallowance under Section 14A: The appeal challenged the deletion of disallowance made under section 14A of the Act. The assessee, engaged in the power and infrastructure sectors, had earned exempt dividend income. The Assessing Officer (AO) applied Rule 8D(2) to make disallowances, which the Commissioner of Income Tax (Appeals) (CIT(A)) partly deleted. The ITAT held that the CIT(A) rightly deleted the disallowance of interest and directed the AO to consider only investments yielding exempt income for disallowance under Rule 8D(2)(iii). The appeal was partly allowed. 2. Treatment of Expenses on Replacement of Electricity Meters: The Revenue challenged the deletion of expenses incurred on replacing electricity meters. The ITAT found that this issue had been decided in favor of the assessee in previous years and upheld by higher courts. By following previous decisions, the ITAT dismissed the Revenue's appeal. 3. Allocation of Head Office Expenses for Deduction under Section 80IA: The Revenue challenged the deletion of expenses allocated to various units for calculating deduction under section 80IA. The ITAT noted that this issue was previously decided in favor of the assessee, and by following past decisions, dismissed the Revenue's appeal. 4. Allowability of Deduction under Section 80IA against Gross Total Income: The Revenue challenged whether the deduction under section 80IA should be allowed against gross total income or only against business income. The ITAT referred to a previous decision by the High Court in the assessee's case, which held in favor of the assessee. Following the High Court's decision, the ITAT dismissed the Revenue's appeal. 5. Disallowance under Section 14A while Computing Book Profit under Section 115JB: The Revenue challenged the deletion of disallowance made under section 14A while computing book profit under section 115JB. The ITAT held that the disallowance mechanism under Rule 8D(2) could not be applied for disallowances under Clause (f) of Explanation 1 to Section 115JB(2). Since the assessee had already made voluntary disallowance, no further disallowance was required. The ITAT upheld the CIT(A)'s decision to delete the disallowance made by the AO. Conclusion: The ITAT partly allowed the Revenue's appeal on certain grounds while dismissing others based on previous decisions and legal interpretations. The judgments were delivered on various issues related to disallowances, expenses treatment, deduction calculations, and book profit computation under different sections of the Income Tax Act.
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