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TMI Blog2024 (11) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-contractors. We also concur with the CIT(A) that in absence of any material to substantiate the allegation that Assessee had paid commission at the rate of 1%, the addition made in respect of commission expenses of INR 8,81,3000/- cannot be sustained merely on assumptions and guess work. Decided against revenue. Additional deduction u/s 80IA - denial of claim of deduction u/s 80-IA because the said claim was not made in the original return of income - HELD THAT:- CIT(A) called for a remand report from the AO who in his remand report fairly conceded that the claim of deduction has been allowed in all subsequent assessment years. Therefore, the ld. CIT(A) also allowed the claim of deduction u/s 80-IA of the Act correctly. Decided against revenue. Disallowance u/s 14A - assessee has suo moto disallowed amount being 1% of the average investment as on 31/03/2016 - HELD THAT:- The undisputed fact is that the assessee borrowed funds from Shapoorji Pallonji and Company Ltd., and it is also not in dispute that the said borrowings were interest free and the shares were purchased out of such interest free borrowings. Therefore, no merit in the addition on account of interest payment. Inso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the claim of the assessee is not allowable in view of the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. Vs. CIT 284 ITR 23 (SC) [2006) as the claim of deduction was not made in the original return of income filed by the assessee? 7. Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in holding that the provisions of section 14A is not applicable where the assessee has no exempt income during the year and failing to appreciate that the provisions of section 14A clearly stipulates that expenditure incurred in relation to income not includible in total income has to be considered for computing the disallowance u/s 14A? 8. Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT was right in holding that the provisions of section 14A is not applicable when there is no exempt income earned by the assessee during the year failing to appreciate the clarification in Board's Circular No. 05/2014 dated 11.02.2014 wherein it is clearly laid down that expenses which are relatable to earning of exempt income have to be considered for disallowance irrespective of the fact whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and copy of TDS certificates to prove the genuineness of the transactions in question. It was explained by the assessee that it is engaged in the execution of all large and complex civil projects in India as well as abroad and it sub-contracted, part of the main contract to other sub-contractors in order to ensure timely completion of the contract. It was further explained that M/s. Kumar Enterprises, was one such subcontractor whose services were availed by the assessee by subcontracting part of its ongoing project for the assessment year under consideration. 5.1. To verify the documents furnished by the assessee, notices u/s 133(6) of the Act, were served upon the parties at the addresses provided by the assessee. However, the notices were returned by the postal authorities unserved. The AO was not convinced with the genuineness of payment of Rs. 11,18,83,910/- purported to have been paid to M/s. Kumar Enterprises and drawing support from various judicial decisions discussed in the body of the assessment order, the AO made the addition of Rs. 11,18,83,910/-. 5.2. The said addition was challenged by the assessee before the ld. CIT(A) and it was strongly contended that for the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions and perused the material on record in relation to grounds of appeal raised by the Revenue. The primary grievance of the Revenue is that the CIT(A) has reduced the amount of disallowance from 100% of payments made to the sub-contractors to 15% of such payments. According to the Revenue the disallowance made in the hands of the appellant should be restored to 100% of the payments made to sub-contractors. In this regard, it would be pertinent to refer to the following findings returned by the CIT(A) while granting partial relief to the Assessee: 11. The appellant is in the business of involved in the execution of large and complex civil engineering projects in India as well as abroad. For the purpose of carrying out work, the appellant had engaged several sub contractors. There is no dispute on the fact that, the projects for which the sub-contractors were deployed have been completed and handed over to the clients who were various Government and semi-Government authorities. It was not possible for the appellant to carry out such contract work without engaging sub contractors to carry out the same. It is also not a matter of dispute that the income earned from su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices issued under Section 133(6) of the Act to the two parties could not be served at the office address provided by the Appellant while restricting the disallowance to 15% of payments made to sub-contractors. There is nothing on record to support that the contention advance of the Revenue that 100% of payments made to sub-contractors should be disallowed. In our view, the CIT(A) has rightly restricted the disallowance to 15% of payments made to sub-contractors by taking into consideration the assessment order passed in the case of the Assessee for the Assessment Year 2010-2011 wherein the Assessing Officer had, in similar facts and circumstances, disallowed 12.5% of payments made to sub-contractors. During the course of hearing, it was pointed out by the Learned Department Representative that the Revenue had not accepted the aforesaid assessment order for the Assessment Year 2010-2011 and revision proceedings under Section 263 of the Act were initiated. In this regard, it was clarified by the Learned Authorized Representative for the Appellant that the Revenue had sought to revise the aforesaid assessment order under section 263 of the Act, however, the revision order passed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 80-IA of the Act. 12. After giving a thoughtful consideration to the findings of the ld. CIT(A), we could not find any reason to interfere with the findings. Ground No. 6 is accordingly dismissed. 13. Ground Nos. 7 to 11 relate to restriction of disallowance u/s 14A of the Act to Rs. 13,69,000/-. 14. During the course of scrutiny assessment proceedings, the AO found that the assessee had earned dividend income of Rs. 1,62,00,250/- from investment made in equity shares which has been claimed as exempt under section 10(34) of the Act. The AO noticed that the assessee had earned dividend of Rs. 1,62,00,000/- from investments in shares of Tata Consultancy Services (TCS) and Rs. 250/- from investments in shares of Simplex Infrastructures Ltd.. The AO also noticed that the assessee has suo moto disallowed Rs 13,69,000/- u/s 14A of the Act being 1% of the average investment as on 31/03/2016. Invoking the provisions of Section 14A r.w.r. 8D, the AO computed the disallowance at Rs. 68,17,000/-and after deducting suo moto disallowance of Rs. 13,69,000/-, the AO made the addition of Rs. 54,48,000/-. 15. The disallowance was challenged before the ld. CIT(A) on the ground that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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