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2021 (9) TMI 1216 - AT - Income TaxAddition u/s 14A r.w.r.8D - CIT(A) deleted the addition by following the decision of his predecessor in assessee s own case in the preceding years - HELD THAT - We find, the issue stands decided in favour of the assessee by the decision of the Tribunal in assessee s own case in various assessment years starting from A.Y. 2000-01 and onwards. We find, the Hon ble Delhi High Court 2020 (3) TMI 507 - DELHI HIGH COURT has dismissed the appeal filed by the Revenue in assessee s own case where the Tribunal had held that in view of the provisions of section 44 r.w. the First Schedule, the provisions of section 14A are to be excluded in relation to computation of income of an insurance company. As already decided the issue in favour of the assessee, therefore, in absence of any contrary material brought to our notice, the order of the CIT(A) on this issue is upheld and the ground raised by the Revenue is dismissed. 50% disallowance on account of expenses incurred on Guest House made by the AO - expenditure on the maintenance and upkeep of the guest houses - HELD THAT - CIT(A), following the order for preceding assessment year i.e., 2014-15, deleted the disallowances. We do not find any infirmity in the order of the CIT(A) on this issue. We find, the issue stands decided in favour of the assessee by the decision of the Tribunal in assessee s own case. We find, the Tribunal 2019 (4) TMI 959 - ITAT DELHI has dismissed the appeal filed by the Revenue wherein the CIT(A) had deleted 50% of disallowance on account of guest houses - Decided against revenue. Addition being disallowance u/s 14A for the purpose of 115 JB - HELD THAT - We find, the AO, in the instant case, made addition which was disallowed by him u/s 14A of the Act for computation of the book profit u/s 115JB of the IT Act. We find, the ld.CIT(A), following the orders of his predecessor, deleted the addition being the disallowance u/s 14A of the Act made by the AO for the purpose of section 115JB of the Act. We do not find any infirmity in the order of the CIT(A) on this issue. We find, in the case of Shobha Developers Ltd. 2021 (1) TMI 378 - KARNATAKA HIGH COURT has held that disallowance made u/s 14A could not be added to book profit of the assessee u/s 115JB - Decided against revenue.
Issues Involved:
1. Deletion of addition under Section 14A of the Income Tax Act. 2. Deletion of 50% disallowance on guest house expenses. 3. Deletion of addition under Section 14A for the purpose of Section 115JB of the Income Tax Act. Detailed Analysis: 1. Deletion of Addition under Section 14A of the Income Tax Act: The Revenue appealed against the deletion of an addition of ?25,85,81,755/- made by the AO under Section 14A of the Income Tax Act. The assessee, a Public Sector Undertaking engaged in non-life insurance, had claimed exempt income but did not add back disallowance under Section 14A in its total income computation. The AO invoked Section 14A read with Rule 8D to disallow ?25,85,81,755/-. The CIT(A) deleted this addition, relying on previous consistent decisions in favor of the assessee, including the Hon’ble Delhi High Court’s judgment in the assessee’s own case. The High Court had held that Section 44 of the Income Tax Act, which applies to insurance companies, overrides Section 14A. The Tribunal upheld the CIT(A)’s decision, noting that the issue had been consistently decided in favor of the assessee in prior years and by the jurisdictional High Court. 2. Deletion of 50% Disallowance on Guest House Expenses: The Revenue contested the deletion of a 50% disallowance amounting to ?78,80,259/- on guest house expenses. The AO had disallowed 50% of the total guest house expenses of ?1,57,60,518/-, following a similar approach from previous years. The CIT(A) deleted this disallowance, aligning with the decision for the preceding assessment year 2014-15. The Tribunal found no infirmity in the CIT(A)’s order, noting that the issue had been consistently decided in favor of the assessee in earlier years. The Tribunal referenced its own prior decisions, which had allowed such expenses under Section 30(a)(ii) of the Income Tax Act, affirming the CIT(A)’s deletion of the 50% disallowance. 3. Deletion of Addition under Section 14A for the Purpose of Section 115JB of the Income Tax Act: The Revenue also appealed against the deletion of an addition of ?25,85,81,755/- made by the AO under Section 14A for the purpose of computing book profit under Section 115JB. The CIT(A) had deleted this addition, following the order for the assessment year 2014-15. The Tribunal upheld the CIT(A)’s decision, referencing multiple judicial precedents, including the Hon’ble Karnataka High Court’s ruling in Shobha Developers Ltd. The High Court had held that disallowance under Section 14A could not be added to book profit under Section 115JB, as it would contradict the statutory provisions of Section 115JB(1) and (5). The Tribunal found no merit in the Revenue’s appeal and dismissed it, affirming that the disallowance under Section 14A should not be added to the book profit for Section 115JB computation. Conclusion: The Tribunal dismissed the Revenue’s appeal on all grounds, upholding the CIT(A)’s deletions of the additions and disallowances made by the AO. The decisions were consistent with previous rulings in the assessee’s favor and supported by higher judicial authorities, including the jurisdictional High Court and the Hon’ble Karnataka High Court.
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