2022 (9) TMI 866 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - Expenditure incurred on earning exempt income - HELD THAT - In absence of any contrary material on record, we do not see any infirmity in the said findings of the CIT(A) who has followed the decisions of the Hon'ble High Court and Hon'ble Supreme Court in upholding the applicability of disallowance and restricting the same to the extent of exempt income. The ground taken by the assessee is accordingly dismissed. Disallowance u/s. 36(1)(viia) on account of provision of NPA written back - HELD THAT - After hearing the DR and pursuing the material available on record, we do not see any infirmity in the findings of the CIT(A) where a consistent position has been adopted by the CIT(A) and nothing has been brought on record to contest the said findings for the earlier years and for the year under consideration. Hence, the findings of the CIT(A) are hereby confirmed and the ground of appeal is dismissed. Addition on account of interest on seed money - HELD THAT - Assessee was entitled to collect and recover the seed money from entrepreneurs during the course of its business and therefore, the interest income on such seed money accrued to the assessee on its own right. It has been further held by CIT(A) that besides retaining the seed money, the assessee, the interest accruing on the seed money has been retained by the assessee and nothing has been brought on record to demonstrate the transfer of this amount to the State Government. CIT(A) observed that where any amount has actually paid by the assessee to the State Government that would be allowed as expenditure in the year it is actually paid and give that no amount has been paid by the assessee during the year, the AO was fully justified in adding interest received on seed money - we do not see any infirmity in the findings of the ld. CIT(A) and the same is hereby confirmed and ground of appeal taken by the assessee is dismissed.

Summary

Issues:
- Adjournment application due to lack of power of attorney
- Disallowance under Section 14A of the Income Tax Act
- Disallowance under Section 36(1)(viia) on account of provision of NPA written back
- Addition on account of interest on seed money
- Identical grounds of appeal in multiple assessment years

Adjournment Application and Lack of Power of Attorney:
The judgment addresses an adjournment application moved by CA B K Nohria on behalf of the assessee due to urgent work, requesting a postponement of proceedings. However, the Tribunal notes that despite previous adjournments and requests for a power of attorney, the assessee has not provided the necessary authorization. Consequently, the Tribunal decides to proceed ex-parte due to the lack of seriousness on the part of the assessee.

Disallowance under Section 14A of the Income Tax Act:
The assessee challenged the addition of Rs. 3.5 lakhs under Section 14A of the Act, related to exempt dividend income and interest on loans. The AO applied Rule 8D for disallowance, which was partly upheld by the CIT(A) based on relevant case laws. The Tribunal, after considering the arguments and following the decisions of higher courts, dismisses the appeal, confirming the CIT(A)'s findings regarding the applicability of disallowance and its restriction to the exempt income.

Disallowance under Section 36(1)(viia) on Account of NPA Written Back:
The assessee contested the disallowance of Rs. 4,29,72,691 under Section 36(1)(viia) concerning the provision of NPA written back. The AO made the addition after discrepancies were noted in the P&L account. The CIT(A) upheld the disallowance based on consistency with previous years. The Tribunal finds no fault in the CIT(A)'s decision and confirms the dismissal of the appeal.

Addition on Account of Interest on Seed Money:
The assessee disputed the addition of Rs. 35,60,752 as interest on seed money. The CIT(A) determined that the interest accrued to the assessee and was retained without evidence of transfer to the State Government. As no payment was made to the government, the AO's addition was deemed justified. The Tribunal upholds the CIT(A)'s decision, dismissing the appeal on this ground.

Identical Grounds of Appeal in Multiple Assessment Years:
For appeals pertaining to different assessment years with identical grounds, the Tribunal follows the decision on the first appeal and dismisses the subsequent appeals accordingly. The assessee is granted the liberty to seek a recall of the order upon demonstrating seriousness in prosecuting the appeals through an authorized representative.

In conclusion, all three appeals filed by the assessee are dismissed, and the order was pronounced in Chandigarh on July 26, 2022.