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TMI Blog2024 (7) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... HNAN, HON BLE ACCOUNTANT MEMBER For the Appellant : Sri GVN Hari, AR For the Respondent : Dr. Satyasai Rath, CIT-DR ORDER PER DUVVURU RL REDDY, Judicial Member: 1. This appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Ld. CIT(A)-NFAC] in DIN Order No. ITBA/NFAC/S/250/2023-24/1052850064(1), dated 15/05/2023 arising out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] for the AY 2010-11. 2. Briefly stated the facts of the case are that the assessee is a Port Trust which came into existence under the Major Port Trust Act, 1963 and has been carrying on commercial activities and services of a port and allied facilities relating to maritime trade and commerce since inception. The assessee being a Local Authority was exempted U/s. 10(20) of the Act up to the AY 2002-03. From AY 2003-04 to 2008-09, total income of the assessee was exempted U/s. 11 of the Act. Consequent to amendment to section 2(15) of the Act, the assessee filed its return of income for the AY 2009-10 onwards admitting its income under the head business income . Further, the registration U/s. 12AA of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 4,21,233 2008 -09 2009 -10 2. Productivity Linked Bonus 36,90,328 Upto 2006-07 Upto 2007-08 12,27,664 2007 -08 2008 -09 3. Leave Encashment 4,44,91,804 Upto 2007-08 Upto 2008-09 5,09,64,466 4. The Ld. CIT-1, Visakhapatnam observed that since the assessee has been granted registration U/s. 12A of the Act up to the AY 2007-08, the entire income of the assessee was exempted from income tax. Therefore, the Ld. CIT-1, Visakhapatnam observed that in the light of the provisions of section 14A of the Act, the expenditure of Rs. 5,09,64,466/- pertaining to the AY 2007-08 and earlier assessment years, where exemption u/s 11 was claimed by the assessee, the expenditure pertaining to those assessment years clearly disqualified for being granted deduction on payment basis U/s. 43B of the Act on the reasoning that such disallowance made in the earlier years in the respective computation of income of the assessee did not materially affect the non-taxable status of the assessee which claimed and enjoyed the total exemption from taxation on account of its status as a Charitable Trust / institution. The Ld. CIT-1, Visakhapatnam observed that allowing the deduction of expenditure relating to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)-NFAC. On appeal, the Ld. CIT(A)-NFAC partly allowed the appeal of the assessee by granting part relief to the extent of Rs. 4,21,233/- and sustained the addition of Rs. 5,05,43,233/-. Aggrieved by the order of the Ld. CIT(A), the assessee filed the present appeal before the Tribunal by raising the following grounds of appeal: 1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts. 2. The Ld. CIT(A) is not justified in disallowing the Seigniorage Charges of Rs. 11,33,437/-. 3. The Assessing Officer is not justified in disallowing the productivity lined bonus of Rs. 49,17,992/-. 4. The Assessing Officer is not justified in disallowing the leave encashment amounting Rs. 4,44,91,804/-. 5. Any other ground that may be urged at the time of appeal hearing. 7. At the outset, Ld. AR submitted that in the first round of proceedings, the assessee instead of contesting the consequential order of the Ld. AO passed U/s. 143(3) r.w.s 263 of the Act, the assessee filed an appeal against the order U/s. 263 of the Act, dated 21/11/2013 passed by the Ld. CIT-1, Visakhapatnam. The Ld. AR further submitted that on appeal of the assessee, the Hon ble Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of expenditure on payment basis pertaining to the AY 2007-08 and earlier years. The reliance placed by the Ld. AR in the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd vs. CIT reported in [2000] 243 ITR 0083 (SC) wherein it was held that both the conditions ie., the order must be erroneous and also prejudicial to the interest of the Revenue should be present while invoking the provisions of section 263 of the Act by the Ld. CIT-1, Visakhapatnam. In the instant case, the order of the Ld. AO is not erroneous as the Ld. AO has applied his mind while allowing the deduction claimed by the assessee U/s. 43B of the Act and therefore one of the conditions as laid down U/s. 263 of the Act is absent. Further, in the case of CIT vs. Chettinad Logistics Pvt Ltd reported in [2017] 248 Taxman 0055 (Madras) the Hon ble High Court of Madras held that if no exempt income forming part of the total income of the assessee was earned in the relevant assessment year, additions made by the Ld. AO by relying upon section 14A of the Act read with Rule 8D is beyond the scope and content of the main provisions. Further, in the case of Redington (India) Ltd vs. Addl. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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