2024 (2) TMI 880 - AT - Income Tax

Deduction u/s 35AC denied - HELD THAT - As CIT(A), after verifying the facts, came to the conclusion that there is no claim of deduction u/s 35AC of the Act. Therefore, there is no question of any disallowance or addition. Before us, the ld. DR could not bring any factual error or infirmity in the findings of the ld. CIT(A). Addition being interest on loans and advances - Before us, assessee vehemently stated that the ld. DR could not bring any evidence to show that the impugned amounts are loans and advances given to the sister concern - CIT(A) as explained that the transactions mentioned in the chart are self explanatory and are business transactions entered into in normal course of business and are certainly not loans and advances - HELD THAT - On the contrary, on proper appreciation of facts, we find that the outstanding balances are outcome of business transactions and certainly not loans and advances and further, the AO has erred in imputing an imaginary income which neither accrued nor arose to the assessee. We, therefore, decline to interfere. Ground stands dismissed. Disallowance u/s 14A - CIT(A) deleted addition - HELD THAT - The undisputed fact is that the assessee has not claimed any exempt income. Therefore, provisions of section 14A r.w.r 8D of the Rules are not at all applicable as held in Cortech Energy 2014 (3) TMI 856 - GUJARAT HIGH COURT Applicability of amendment brought in the Statute by the Finance Act, 2022 is concerned, the Hon'ble High Court of Delhi in the case of Era Infrastructure India Ltd 2022 (7) TMI 1093 - DELHI HIGH COURT has held that amendment by the Finance Act, 2022 to section 14A of the Act will take effect from 01.04.2022 and cannot be presumed to have retrospective effects. Addition on account of interest income - CIT(A) deleted addition - HELD THAT - After verifying the facts from the ledger account and after being satisfied with the entries/narrations, the ld. CIT(A) deleted the impugned addition. Before us, the ld. DR could not bring any factual error in the findings of the ld. CIT(A). Assessing Officer has not properly appreciated the facts in true perspective and on proper appreciation of facts, we decline to interfere. Revenue appeal dismissed.

Summary

Issues:
1. Deletion of addition on account of disallowance of claim of deduction u/s 35AC of the Income-tax Act, 1961.
2. Deletion of addition being interest on loans and advances.
3. Deletion of addition/disallowance u/s 14A of the Act.
4. Deletion of addition on account of interest income from a specific entity.

Deletion of Addition on Account of Disallowance of Claim of Deduction u/s 35AC:
The Assessing Officer disallowed a deduction claimed under section 35AC of the Income-tax Act, 1961, amounting to Rs. 1,24,12,036, due to lack of necessary evidence. The appellant explained that the claimed amount was not for deduction under section 35AC but represented provisions made as per RBI guidelines in earlier years. The CIT(A) verified the facts and concluded that no deduction under section 35AC was claimed, leading to the deletion of the addition. The Tribunal found no factual error in the CIT(A)'s findings and declined to interfere, dismissing Ground No. 2.

Deletion of Addition Being Interest on Loans and Advances:
The Assessing Officer imputed interest on certain outstanding balances as loans and advances, making an addition of Rs. 1,43,63,802. However, the CIT(A) determined that the transactions were business-related and not loans or advances. The CIT(A) further noted that the Assessing Officer erred in imputing an imaginary income. The Tribunal agreed with the CIT(A)'s findings, stating that the outstanding balances were outcomes of business transactions and not loans or advances. Consequently, Ground No. 3 was dismissed.

Deletion of Addition/Disallowance u/s 14A of the Act:
The Assessing Officer computed a disallowance under section 14A of the Act regarding non-current investments. The appellant clarified that no exempt income was claimed, rendering the provisions of section 14A inapplicable. The Tribunal referred to a High Court decision stating that the amendment to section 14A by the Finance Act, 2022, would not have retrospective effects. Following this decision, Ground No. 4 was dismissed.

Deletion of Addition on Account of Interest Income from a Specific Entity:
An addition was made based on interest income from a specific entity, which was disputed by the appellant. The CIT(A) reviewed the ledger account and entries, leading to the deletion of the addition. The Tribunal found no factual error in the CIT(A)'s decision and declined to interfere, dismissing Ground No. 5.

In conclusion, the appeal by the Revenue was dismissed by the Tribunal, upholding the decisions made by the CIT(A) on various grounds related to deductions, interest, and income additions.