2024 (7) TMI 790 - HC - Income Tax

Addition made u/s 14A r.w.r 8D - ITAT deleted addition on the basis that the related investments are out of assessee company s old and own funds - HELD THAT - No disallowance beyond what has been suo moto disallowed by the assessee can be made. In the result, the assessee's ground in this behalf is allowed and that of Revenue is dismissed. Disallowance u/s 80IA (4) - generation of power for captive consumption - HELD THAT - Issue decided in favour of assessee considering the decisions of Tamilnadu Petro Products Ltd. 2010 (11) TMI 645 - MADRAS HIGH COURT and Cethar Ltd., 2014 (9) TMI 831 - MADRAS HIGH COURT

Summary

Issues:
1. Disallowance under section 14A r.w.r 8D.
2. Disallowance of deduction under section 80IA (4) of the Income Tax Act 1961.

Issue 1: Disallowance under section 14A r.w.r 8D:
The Tax Appeal arose from an order passed by the Income Tax Appellate Tribunal, Ahmedabad, regarding the disallowance under section 14A r.w.r 8D of the Income Tax Act, 1961. The appellant challenged the deletion of the addition made under this section, arguing that the related investments were from the assessee company's old and own funds. The Tribunal held that the burden of establishing the nexus between tax-free investments and borrowed funds was on the Assessing Officer, not the assessee. The Tribunal relied on the assessee's own funds exceeding the tax-free investments and previous court judgments to support its decision. The High Court affirmed the Tribunal's decision, stating that no disallowance beyond what the assessee had voluntarily offered could be made. The Court dismissed the Revenue's appeal, emphasizing the lack of any contrary decisions or arguments in favor of the Revenue.

Issue 2: Disallowance of deduction under section 80IA (4) of the Income Tax Act 1961:
The second issue involved the disallowance of deduction under section 80IA (4) of the Income Tax Act 1961. The appellant had claimed a deduction for its captive power plant, which was rejected by the Assessing Officer as excessive and unreasonable. The CIT(A) directed a restricted disallowance under section 14A and favored the assessee on the deduction issue. The Tribunal dismissed the Revenue's appeal, leading the Revenue to approach the High Court. The High Court, after considering previous judgments and the Tribunal's decision, held in favor of the assessee on both issues raised by the Revenue. The Court emphasized that the issues had already been decided in previous cases, and no substantial question of law arose for consideration. Consequently, the Court dismissed the appeal, finding it lacking in merit and not warranting further deliberation.