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2021 (11) TMI 373 - AT - Income TaxDisallowance u/s 14A - claim of the ld. A.R that the CIT(A) had gravely erred in not restricting the disallowance under section 14A to the extent of the exempt income - HELD THAT - Disallowance under section 14A in the case of the assessee before us, as claimed by the ld. A.R, and rightly so, is liable to be restricted only to the extent of the exempt dividend income that was earned by it during the year under consideration. WE, thus, in terms of our aforesaid observations direct the A.O to restrict the disallowance u/s 14A to an amount of exempt income earned by the assessee during the year under consideration. The Ground of appeal no. 1 is thus allowed in terms of our aforesaid observations. Nature of income - Assessing u/s 22 of the Act the ALV of the flats/shops held by it as stock-in-trade of its business as that of a developer under the head House Property - whether or not the ALV of the flats/shops held by an assessee as its stock-in-trade is liable to be determined and therein assessed under the head House Property ? - HELD THAT - As decided in M/S OSHO DEVELOPERS OSHO VERSUS ACIT-32, MUMBAI 2020 (11) TMI 218 - ITAT MUMBAI Tribunal had directed the A.O to delete the addition made by him towards the ALV of the flats that were held by the assessee as stock- in-trade of its business as that of a builder and developer. -Thus we vacate the addition towards notional lettable value made by the A.O under the head House Property . The Ground of appeal no.2 is accordingly allowed. Correct head of income - income earned from letting out of buildings/developed spaces in Industrial Park/SEZ - HELD THAT - Admittedly, the CBDT vide its Circular No. 16/2017 dated 25.04.2017 had after referring to certain judicial pronouncements observed, that the income from the Industrial Parks/SEZ established under various schemes framed and notified under section 80IA(4)(iii) of the Income Tax Act, 1961 is to be treated as the assessee s income from business, provided the conditions prescribed under the schemes are met. As the aforesaid CBDT Circular No. 16/2017 (supra) was issued subsequent to the filing of the revised return of income by the assessee on 30.03.2017, therefore, there was no occasion for the assessee to have offered the lease rental income for tax under the head Income from Business Profession . Be that as it may, as the Circulars issued by the CBDT are binding on the Income-tax department, therefore, we herein restore the issue to the file of the A.O with a direction to consider the aforesaid claim of the assessee in the backdrop of the aforementioned Circular No. 16/2017 - A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. The additional ground of appeal is allowed for statistical purpose. Addition of disallowance u/s 14A that was made to the Book Profit of the assessee company - HELD THAT - The aforesaid issue is squarely covered by the order of ACIT Vs. Vireet Investments Pvt. Ltd 2017 (6) TMI 1124 - ITAT DELHI observed, that book profit under section 115JB is not to be enhanced by the disallowance made by the A.O under section 14A of the Act. We, thus, respectfully following the aforesaid view taken by the Tribunal, uphold the view taken by the CIT(A). The Grounds of appeal raised by the revenue are dismissed. Disallowance of commission /brokerage expenses - Principle of consistency - HELD THAT - When the Department after duly scrutinizing the aforesaid claim of deduction of commission/brokerage expenses raised by the assessee in the preceding and the succeeding years, had accepted the same vide its respective assessment orders passed under section 143(3) of the Act, therefore, in the absence of any change in the circumstances, there was no justification on its part in taking a different view and declining the said claim for deduction of expenses during the year under consideration. Although the principle of res-judicata is not applicable to income-tax proceedings, however, we cannot remain oblivious of the fact that an inconsistent approach of the Department can also not be permitted. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of Radha Soami Satsang 1991 (11) TMI 2 - SUPREME COURT as observed that in the absence of any material change justifying the Revenue to take a different view of the matter, a different and contrary stand could not be taken. We, thus, in the backdrop of our aforesaid observations find favor with the claim of the assessee that in the absence of any shift qua the facts attending to the assessee s claim for deduction of commission/brokerage expenses during the year under consideration, as in comparison to the preceding and succeeding years, there was no justification on the part of the lower authorities in declining its claim for deduction of the said expenditure during the year under consideration.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Addition of notional income as "Income from House Property" for unsold inventory. 3. Taxability of lease rental income under "Income from Business & Profession" vs. "Income from House Property". 4. Disallowance of brokerage expenses. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The assessee contested the disallowance under Section 14A, arguing that it should be limited to the exempt income earned during the year, which was ?1,43,78,956, despite having voluntarily disallowed ?4,85,50,063 in its return. The Tribunal agreed with the assessee, referencing multiple judicial pronouncements, including the Bombay High Court's decision in Pr. CIT-10 Vs. HSBC Invest Direct (India) Ltd., which upheld that disallowance under Section 14A cannot exceed the exempt income earned. Consequently, the Tribunal directed the Assessing Officer (A.O) to restrict the disallowance to ?1,43,78,946. 2. Addition of Notional Income as "Income from House Property" for Unsold Inventory: The A.O had added notional income from unsold flats/shops held as stock-in-trade, estimating their Annual Lettable Value (ALV) under Section 22 of the Act. The Tribunal, referencing the ITAT Mumbai's decision in M/s. Osho Developers and the Gujarat High Court's ruling in CIT vs. Neha Builders, determined that the ALV of properties held as stock-in-trade should not be assessed under "Income from House Property." The Tribunal vacated the addition of ?2,09,73,057 made by the A.O. 3. Taxability of Lease Rental Income under "Income from Business & Profession" vs. "Income from House Property": The assessee raised an additional ground, arguing that lease rental income from IT Parks should be taxed under "Income from Business & Profession" based on CBDT Circular No. 16/2017. The Tribunal admitted this additional ground, noting that the Circular, issued after the filing of the revised return, clarified that income from Industrial Parks/SEZ should be treated as business income. The Tribunal remanded the issue to the A.O to reconsider the claim in light of the Circular, allowing the additional ground for statistical purposes. 4. Disallowance of Brokerage Expenses: For A.Y 2012-13, the A.O disallowed brokerage expenses of ?1,33,90,855, incurred for earning rental income, under Section 37(1). The CIT(A) allowed a partial deduction proportional to the income offered under "Business." The Tribunal, however, noted that the Department had accepted similar claims in preceding and succeeding years under scrutiny assessments. Citing the Supreme Court's decision in Radha Soami Satsang Vs. CIT, which discourages inconsistent approaches by the Revenue, the Tribunal vacated the disallowance of ?1,27,15,319. Conclusion: The Tribunal allowed the assessee's appeals for A.Y 2015-16 and A.Y 2012-13, while dismissing the Revenue's appeal for A.Y 2015-16. The Tribunal's decisions were based on established legal precedents and consistent treatment of similar issues in prior and subsequent years.
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