2022 (6) TMI 237 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - AO held that the assessee has not considered any proportionate interest expenses and financial charges administrative expenses common facility utilization of assets of business for the investment activities - HELD THAT - When mixed funds were used for investment yielding exempt income and if own reserve surplus fund is more than such investment then presumption would arise that investment was made from own surplus reserve fund. Thus Rule 8D(i) and 8D(ii) are not applicable. So far as administrative expenses it is held that no disallowance u/s 14A of the Act in respect of interest and administrative expenses ought to be made where there are sufficient own funds - Since the reserve surplus fund are more than the investment made yielding exempt income hence further disallowance u/s. 14A of the Act i.e. more than that of the appellant was not required. In other words the AO is directed to restrict disallowance u/s 14A to the extent of disallowance-suo motu made by the appellant. Deduction u/s 80IA(4) - Whether CIT(A) is right in law in allowing deduction at the rate on which the GEB supplied power to its customers ignoring the rate on which GSECL (a power generating company) supplied its power to GEB and not considering rate other than the selling price charged by the assessee? - HELD THAT - Respectfully following judgment of jurisdictional High Court in the assessee s own case 2017 (1) TMI 513 - GUJARAT HIGH COURT decided the issue in favour of assessee.

Summary

Issues Involved:
1. Delay in filing the appeal by the Revenue.
2. Disallowance under section 14A of the Income-tax Act, 1961.
3. Deduction under section 80IA(4) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Delay in filing the appeal by the Revenue:
The appeal filed by the Revenue was delayed by 115 days. The Department attributed this delay to the COVID-19 restrictions and staff constraints, which prevented timely filing. The Revenue cited the Hon'ble Supreme Court's suo-moto Writ Petition (C) No.3 of 2020 in MA No.29 of 2022 dated 10.01.2022, which extended the period of limitation due to the pandemic. The Tribunal condoned the delay, recognizing the exceptional circumstances and the Supreme Court's directive, and proceeded to adjudicate the appeal on merit.

2. Disallowance under section 14A of the Income-tax Act, 1961:
The Assessing Officer (AO) disallowed Rs.43,70,500/- under section 14A read with Rule 8D, against the assessee's suo-moto disallowance of Rs.77,649/-. The AO argued that the assessee had not considered proportionate interest expenses and financial charges related to investments. The Commissioner of Income-tax (Appeals) [CIT(A)] found that the assessee's own funds were sufficient to cover the investments, citing the Supreme Court's decision in Reliance Utility Power, which presumes investments from own funds if they exceed the investment amount. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to establish that borrowed funds were used for the investments. The Tribunal referenced the assessee's own case in previous years, where similar disallowances were dismissed, and ruled in favor of the assessee.

3. Deduction under section 80IA(4) of the Income-tax Act, 1961:
The AO rejected the assessee's claim of Rs.4,07,76,334/- under section 80IA(4), arguing that the rates used for computing profits from the captive power plant were excessive and not based on actual transactions. The CIT(A) followed previous Tribunal decisions in the assessee's favor for similar claims in earlier years. The Tribunal noted that the Gujarat High Court had ruled in favor of the assessee on this issue in Tax Appeal No.1249 of 2014, confirming that the deduction under section 80IA(4) for captive consumption was allowable. The Tribunal, respecting the jurisdictional High Court's judgment, dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both the disallowance under section 14A and the deduction under section 80IA(4). The Tribunal's order was pronounced on 3rd June 2022 at Ahmedabad.