Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (5) TMI 786 - ITAT MUMBAITDS u/s 194A - deposits received from its members - Revenue’s approach of treating the Non-Availing Compensation (“NAC”) paid by the assessee to its members as interest, which was disallowed u/s 40(a)(ia) - HELD THAT:- In the present case, the assessee is engaged in the business of selling holiday membership plans to its customers/members. The amount received from the members was apportioned over the tenure of the membership, which differs from scheme to scheme offered by the assessee. Out of the apportioned receipts, the amount pertaining to the year was considered as “sales” and the balance amount was considered as “advances sales” over the tenure of the membership. Once the membership is accepted and confirmed, a member is entitled to avail of facilities as per terms and conditions related to the entitlement certificate. Approach of the Revenue, on one hand treating the NAC paid by the assessee to its members as interest and on the other hand treating the amount received from the members as the income of the assessee is self-contradictory since only when the deposits are considered as a loan, which was one of the allegations in the reasons recorded while reopening the assessment, the interest can be charged on it. Thus, when the assessee’s business was considered to be in the nature of CIS, all the consequences in relation thereto must follow. Entries in the books of account are not decisive or determinative of the true nature of the entries. Therefore, the amount received by the assessee from its members, to the extent the same is treated as income in its books of account, is directed to be reduced while calculating the total income of the assessee, since the same is in the nature of capital receipt. NAC paid to the members also includes the repayment of membership amount collected from the members and the same has been claimed as a deduction by the assessee. Since the said repayment has already been claimed as a deduction, therefore the said amount need not be again reduced while calculating the total income of the assessee for the year under consideration. Accordingly, ground No. 4 raised in assessee’s appeal is allowed. Disallowance u/s 14A r/w Rule 8D - AR submitted that the disallowance under section 14A of the Act cannot exceed the quantum of exempt income - HELD THAT:- We find that Hon’ble jurisdictional High Court in Nirved Traders (P.) Ltd. [2019 (4) TMI 1738 - BOMBAY HIGH COURT], has held that disallowance under section 14A of the Act cannot be more than exempt income. Thus, we direct the AO to restrict the disallowance made under section 14A of the Act to the extent of exempt income earned by the assessee, during the year under consideration. As a result, grounds raised in assessee’s appeal are partly allowed. MAT - disallowance u/s 14A for the purpose of computing the book profit under section 115 JB - HELD THAT:- We find that Special Bench of Tribunal in ACIT vs Vireet Investment (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] held that 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. Thus, we direct the AO to compute the book profit under section 115 JB of the Act, without resorting to computation under section 14A read with Rule 8D. Considering 30% of NAC for the purpose of disallowance under section 40(a)(ia) of the Act instead of the entire amount - HELD THAT:- CBDT, while explaining the provisions of the Finance (No.2) Act, 2014, vide Circular No.1 of 2015 dated 21/01/2015 clarified that the amendment by the Finance (No.2) Act, 2014 to the provisions of section 40(a)(ia) of the Act takes effect from 1st April 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years. We further find that the Hon’ble Supreme Court in Shree Choudhary Transport Company [2020 (8) TMI 23 - SUPREME COURT] held that the amendment by the Finance (No.2) Act, 2014 is with effect from 01/04/2015 and shall be applicable from the assessment year 2015-16. Since it is settled that the amendment to section 40(a)(ia) of the Act by the Finance (No.2) Act, 2014 is with effect from the assessment year 2015-16, the AO is directed to apply the said amended provision while computing disallowance under section 40(a)(ia).
|