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2023 (3) TMI 473 - AT - Income TaxProtective addition u/s 80IA(4)(iii) - double addition - HELD THAT - AO had accepted the contentions of the respondent-assessee that the sale proceeds shown during the year under consideration represents the sales reversed in the financial year relevant to the assessment years 2009-10 and 2010-11, which is nothing but double addition. However, the Assessing Officer had chosen to make a protective addition, as the appeals filed by the assessee before the Tribunal were pending disposal, but however, the appeals for the assessment years 2009-10 and 2010-11 came to be dismissed by this Tribunal vide order 2017 (7) TMI 1444 - ITAT PUNE and the relevant grounds of appeal challenging the action of the Assessing Officer not accepting the revised returns of income came to be withdrawn by the assessee as evident from para 5 of the order of this Tribunal, which is enclosed. The submission of the ld. CIT-DR that the matter be remanded to the file of the ld. CIT(A) for fresh examination or verify whether the addition amounts to double addition or not, cannot be accepted for the reason that the Assessing Officer himself had accepted that it amounts to double addition as evident from para 3.14 of the assessment order. He only chosen to make protective addition for the reason that at relevant point of time, the appeals filed by the assessee before the Tribunal were pending disposal. AO never disputed the fact that the sum shown for the year under consideration is nothing but sales reversed during the financial year relevant to the assessment years 2009-10 and 2010- 11. The submission of the ld. CIT-DR cannot be accepted for another reason that it is settled position of law that the Department Representatives cannot argue the matter beyond the scope of the assessment order. We do not find any merits in the ground of appeal no.2 filed by the Revenue, hence the same is dismissed. Disallowance offered by the respondent-assessee u/s 14A r.w.r 8D - HELD THAT - As regards to the disallowance of indirect expenditure under Rule 8D(2)(iii), CIT(A) merely remanded the matter to the Assessing Officer to compute the disallowance in terms of the order passed by this Tribunal in assessee s own case for the assessment years 2009-10 and 2010-11. The finding of the ld. CIT(A) is under challenge before us in the present appeal. It is undisputed fact that during the previous year relevant to the assessment year under consideration, the appellant had not made any fresh investment which yielded the exempt income. In the earlier assessment years, in which the investments were made, no disallowance u/s 14A was sustained in view of orders of this Tribunal - Similarly, for the subsequent assessment year i.e. 2013-14 also, the Tribunal had deleted the disallowance of interest u/s 14A r.w. Rule 8D(2)(ii) after rendering categorically finding that the interest free funds far exceeds the investments made. Therefore, the findings of the ld. CIT(A) that no disallowance u/s 14A r.w. Rule 8D(2)(ii) is warranted, as it is based on the proper appreciation of facts as well as in consonance with the well settled position of law. Disallowance of indirect expenses of Rule 8D(2)(iii), CIT(A) only set-aside the computation of the disallowance in terms of the order passed by this Tribunal in assessee s own case for the earlier assessment years (supra). Therefore, we do not see any grievance for the Department. Thus, ground of appeal nos.3 and 4 stands dismissed.
Issues Involved:
1. Eligibility for deduction under section 80IA(4)(iii) of the Income Tax Act. 2. Reversal of disallowance under section 14A of the Income Tax Act. 3. Protective addition and potential double addition. 4. Admittance of additional grounds by CIT(A). 5. Disallowance of interest under Rule 8D(2)(ii) and indirect expenditure under Rule 8D(2)(iii). Detailed Analysis: 1. Eligibility for Deduction under Section 80IA(4)(iii): The respondent-assessee, a public company engaged in real estate development, claimed a deduction of Rs. 12,79,75,157 under section 80IA(4)(iii) for the development of Cerebrum IT Park. The project initially approved under the Industrial Park Scheme (IPS), 2002, was delayed and re-approved under IPS, 2008, requiring completion by 31.03.2011. The Assessing Officer (AO) added the amount protectively, suspecting a colorable device to postpone tax liability. The CIT(A) held that the deduction was valid, referencing earlier Tribunal orders confirming eligibility under section 80IA(4)(iii). 2. Reversal of Disallowance under Section 14A: The CIT(A) admitted an additional ground challenging the disallowance of Rs. 1,39,71,272 under section 14A, arguing that no interest-bearing funds were used for investments yielding exempt income, and no expenditure was incurred for earning such income. The CIT(A) followed the jurisdictional High Court's decision in CIT vs. Pruthvi Brokers & Shareholders, admitting the additional ground and concluding no disallowance of interest under Rule 8D(2)(ii) was warranted. The issue of disallowance under Rule 8D(2)(iii) was remanded to the AO for recalculation based on earlier Tribunal orders. 3. Protective Addition and Potential Double Addition: The AO had made a protective addition of Rs. 12,79,75,157 under section 80IA(4)(iii), acknowledging it as a double addition since the sales were already taxed in assessment years 2009-10 and 2010-11. The CIT(A) deleted this addition, and the Tribunal upheld this decision, noting the AO's acceptance of the double addition and the finality of earlier assessments. 4. Admittance of Additional Grounds by CIT(A): The CIT(A) admitted the additional ground regarding section 14A disallowance based on the argument that investments were made from interest-free funds and no expenses were incurred to earn exempt income. This admittance was supported by financial statements and judicial precedents, including CIT vs. Hero Cycles Ltd. and ACIT vs. SIL Investment Ltd. 5. Disallowance of Interest under Rule 8D(2)(ii) and Indirect Expenditure under Rule 8D(2)(iii): The CIT(A) concluded no disallowance under Rule 8D(2)(ii) was warranted, as no borrowed funds were used for investments yielding exempt income. This decision was based on the Tribunal's orders for earlier years. The issue of indirect expenditure disallowance under Rule 8D(2)(iii) was remanded to the AO for recalculation in line with earlier Tribunal orders. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The protective addition under section 80IA(4)(iii) was confirmed as a double addition, and the disallowance under section 14A was appropriately handled, with no interest disallowance warranted and the issue of indirect expenditure remanded for recalculation. The Tribunal's findings were based on a thorough examination of facts, financial statements, and judicial precedents.
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