Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (10) TMI 528 - AT - Income TaxDisallowance u/s 14A - CIT-A deleted the disallowance on account of interest expenditure however sustained the disallowance of administrative expenditure - assessee has submitted that it has huge interest free funds available with it which far exceeds the amount of investment made in those securities which yielded tax free exempt income u/s 10 (34) - HELD THAT:- Naturally the presumption would be available in favour of the assessee that, if the amount of investment made in such a tax free earning investments does not have any nexus with interest bearing borrowed funds, that the amount of investment made by the assessee in such exempt income-yielding instrument is out of interest free funds available with assessee. DR could not show that the amount of investment made by the assessee in those investments, which earned tax-free income, is higher than the amount of share capital and free reserve available with the assessee. In view of this, we do not find any infirmity in the order of the CIT – A in deleting the disallowance u/s 14 A on account of interest expenditure following the decision of Reliance Utilities And Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Accordingly, we find no infirmity in the order so far as the disallowance on account of interest expenditure is deleted. Administrative expenditure disallowance applying the ratio of administrative expenditure with respect to the dividend income to the total receipt of the assessee and thereafter making a proportionate disallowance is unwarranted. As in absence of proper rule for computation of disallowance, which came into effect only for assessment year 2008 – 09, the above method cannot be upheld. Therefore looking to the past assessment records wherein for assessment year 2004 – 05 the disallowance was restricted to ₹ 2 lakhs and for assessment year 2006 – 07 the disallowances restricted to ₹ 10 lakhs, we further direct the learned assessing officer to restrict the disallowance of expenditure to ₹ 10 lakhs only for this year too. Addition on account of interest on bonds disallowed u/s 43B - interest on PP bonds payable to unit trust of India - CIT(A) had held that the Assessment cannot be expected to comply with the law and the return had been filed as per the law prevailing at that time and hence the deduction of interest was allowable - HELD THAT:- Under clause (d) of Section 43B, shall be allowed, if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid. Therefore, the provision of the law amended retrospectively clearly provides that when such interest not actually paid but is converted into loan or borrowing it cannot be considered as actually paid for the purpose of its allowablity u/s 43B of the act. Even otherwise the issue is squarely covered against the assessee by the decision in case of Commissioner of income tax versus Gujarat Cypromet Ltd [2019 (2) TMI 1599 - SUPREME COURT]which is rendered with respect to assessment year 2001 – 02. - Decided against assessee. Depreciation on lease assets - HELD THAT:- As in assessee's own case [2020 (10) TMI 529 - ITAT DELHI] wherein we have allowed the claim of the assessee holding that assessee is owner of the asset and is entitled to the depreciation on lease assets. Addition of provision for bad and doubtful that which is debited to the profit and loss account as reserve while calculating book profit u/s 115JB - HELD THAT:- In view of the retrospective amendment by The Finance Number 2 Act, 2009, with retrospective effect from 1 April 2001, any amount or amount set aside as a provision for diminution in the value of any asset is required to be added back to the book profit as per explanation (1) of Section 115JB - The amount of provision for bad and doubtful debts is definitely a diminution in the value of the asset i.e. book debts, therefore, it is also required to be added back to the book profit. It may also be a reserve created by making a provision out of bad and doubtful debts for the future losses that may arise out of debts. We dismiss ground of the appeal of the assessee. Levy of interest u/s 234C - AO directed to charge the interest u/s 234C for short payment/deferment of the advance tax - HELD THAT:- We find that the issue squarely covered in favour of the assessee by the decision of Smt. Premlata Jalani [2003 (7) TMI 62 - RAJASTHAN HIGH COURT] as in this case also the capital gain arose after the last date of payment of the last installment of advance tax by the assessee for the impugned assessment year. Further provisions of Section 234C does not apply to any shortfall in the payment of the tax due on the returned income of such thoughtful is on account of under is to of the amount of capital gain. Disallowance u/s 14A - non recoding of satisfaction by AO - HELD THAT:- Before applying the theory of apportionment, the Assessing Officer needs to record satisfaction that having regard to the kind of the assessee, suo motu disallowance under section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO. In the present case, we do not find any such satisfaction recorded by the assessing officer with respect to the disallowance made by assessee on its own. In view of this, we hold that no disallowance u/s 14 A can be made in absence of proper satisfaction. Computing the book profit with respect to the disallowance made in the original computation of the income u/s 14 A - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of Vireet investments private limited [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that holding that the computation under clause (f) of Explanation 1 to section 115JB(2). is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962.. Accordingly we restore this ground of appeal back to the file of the learned assessing officer to decide the issue without resorting to the rule 8D of the income tax rules for disallowing expenditure in relation to the exempt income by working out the book profit. Fringe benefit tax credit to the book profit u/s 115JB - No disallowance to be made. Short interest was paid u/s 244A - revised return was processed u/s 143 (1) wherein the refund was determined of the above sum and interest u/s 244A - claim of the assessee is that the amount of refund and its interest should have been granted at the rate of 0.5% for a month from first day of April of assessment year to the date of actual refund - HELD THAT:- In the present case, the assessee filed original return in time without claiming any refund. Subsequently on 31st of March 2011, the assessee revised return after two years and claimed the substantial refund. In the revised return, the assessee submitted the details of the certificate as well as the claim were made. Therefore, it is apparent that the delay of claim of the refund is on account of the assessee and therefore the revenue is not obliged to grant interest to the assessee for this period. In view of this, we do not find any infirmity in the order of the learned CIT – A in refusing to grant interest to the assessee as claimed by it. In the result, appeal of the assessee is dismissed.
|