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2021 (9) TMI 357 - AT - Income TaxDisallowance u/s 14A - expenditure incurred for earning exempt income - HELD THAT - Since the assessee had earned dividend income the CIT(A) has restricted the disallowance to that extent. Therefore, we do not find any infirmity in the decision of the CIT(A) and accordingly, upholding the same, we dismiss the ground raised by the revenue in all the appeals under consideration. Deduction u/s 80IA on Gross total income instead of on business income - whether the assessee can claim deduction u/s 80IA from the gross total income of the assessee? - HELD THAT - As relying on case M/S. RELIANCE ENERGY LTD. (FORMERLY BSES LTD.) THROUGH ITS M.D. 2021 (4) TMI 1237 - SUPREME COURT we deem it fit and proper to remit the issue back to the file of the AO with a direction to recalculate the deduction as per the provisions of section 80IA. Accordingly, ground No. 3 raised by the revenue on this issue in all the appeals under consideration is allowed for statistical purposes.
Issues Involved:
1. Restriction of disallowance under Section 14A to the dividend income. 2. Consideration of Section 14A for expenditure incurred for earning exempt income. 3. Allowance of deduction under Section 80IA on Gross Total Income instead of on business income. Detailed Analysis: 1. Restriction of Disallowance under Section 14A to the Dividend Income: The Revenue contended that the CIT(A) erred in restricting the disallowance under Section 14A to the dividend income. The Assessee had received exempt income (dividend from mutual funds and equities) amounting to ?43,61,557/- and did not claim any expenditure related to this income. The AO computed the disallowance under Section 14A at ?13,51,57,665/- based on the provisions of Section 14A and CBDT Circular No. 5/2014. However, the CIT(A) restricted the disallowance to ?43,61,557/- on the ground that the Assessee earned dividend income of ?43,61,557/- during the year under appeal. The Tribunal upheld the decision of the CIT(A), stating that there was no infirmity in restricting the disallowance to the extent of the dividend income earned by the Assessee. Thus, the Tribunal dismissed the ground raised by the Revenue. 2. Consideration of Section 14A for Expenditure Incurred for Earning Exempt Income: The Revenue argued that the CIT(A) did not consider that Section 14A provides for the disallowance of expenditure incurred for earning exempt income. The AO had added back ?68,75,000/- towards filing fees for the increase of authorized capital, considering it as capital expenditure. The CIT(A) confirmed this addition. The Tribunal noted that the CIT(A) had correctly restricted the disallowance under Section 14A to the dividend income earned by the Assessee. Therefore, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's ground on this issue. 3. Allowance of Deduction under Section 80IA on Gross Total Income Instead of on Business Income: The primary issue was whether the Assessee is eligible to claim deduction under Section 80IA from the Gross Total Income, including income from "Income from house property," "Capital gains," and "Income from other sources," or if it should be restricted to income under the head "Profits and gains of business or profession." The AO denied the deduction under Section 80IA from the Gross Total Income, while the CIT(A) allowed the same, following the decision of the coordinate bench in the Assessee's own case for AY 2010-11. The Revenue, relying on the decision in the Assessee's case for AY 2011-12, argued that the Assessee is not eligible to claim deduction under Section 80IA from the income from house property. The Tribunal considered the recent judgment of the Hon’ble Supreme Court in CIT Vs. Reliance Energy Ltd., which clarified that Section 80AB pertains to the determination of the quantum of deductible income in the "gross total income" and does not curtail the width of Section 80IA. The Supreme Court held that the scope of Section 80IA(5) is limited to the determination of the quantum of deduction and cannot be used to restrict the deduction to "business income" only. Based on this judgment, the Tribunal remitted the issue back to the AO with a direction to recalculate the deduction as per the provisions of Section 80IA. Thus, the ground raised by the Revenue on this issue was allowed for statistical purposes. Conclusion: The Tribunal upheld the CIT(A)'s decision to restrict the disallowance under Section 14A to the dividend income and confirmed the addition towards ROC fees. However, the Tribunal remitted the issue of the deduction under Section 80IA back to the AO for recalculation, following the Supreme Court's judgment in CIT Vs. Reliance Energy Ltd. The appeals of the Revenue were partly allowed for statistical purposes.
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