Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 819 - AT - Income TaxDisallowance u/s 14A - Sufficiency of own funds - HELD THAT:- Only the own funds had been utilized for making investments that had yielded exempt income and hence, there cannot be any disallowance of interest on borrowed funds u/s.14A of the Act. Reliance in this regard was placed on the decision of Reliance Utilities and Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] . We find that with regard to disallowance of indirect expenses, the Co-ordinate Bench of this Tribunal in assessee’s own case [2011 (9) TMI 635 - ITAT MUMBAI] had remanded this issue to the ld. AO for fresh consideration. The ld. AO vide order dated 09/01/2013 in giving effect proceedings to the said Tribunal order had followed the computation mechanism as was given by the Tribunal for the A.Y.2006-07. In other words, the computation methodology adopted by the assessee which was submitted during the course of assessment proceedings for A.Y.2006-07 i.e. the year under appeal before us before the ld. AO was practically adopted by the ld. AO in giving effect proceedings to Tribunal order for A.Y.2001-02. Hence, the workings of disallowance u/s.14A of the Act given by the assessee before the ld. AO towards disallowance u/s.14A of the Act in the sum of ₹ 59,06,284/- had become final and deserves to be upheld. Set off of unabsorbed depreciation of earlier years while deduction u/s.80IA - HELD THAT:- covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of ACIT vs. Velayudhaswamy Spinning Mills Pvt. Ltd [2016 (11) TMI 373 - SC ORDER] wherein the SLP filed by the revenue against the order of the Hon’ble Madras High Court was dismissed by holding that loss in years earlier to initial assessment year which were already absorbed against profit of other business cannot be notionally brought forward and set off against profits of eligible business in the Initial Assessment Year as no such mandate is provided in Section 80IA(5) of the Act. It is not in dispute that A.Y.2006-07 is the Initial Assessment Year in respect of Jojo Bera unit in terms of Section 80IA(5) of the Act. It is not in dispute that Jojo Bera Unit is an eligible undertaking and is entitled for claim of deduction u/s.80IA of the Act. We also find that the recent Circular issued by the CBDT vide Circular No.1/2016 dated 15/02/2016 also had endorsed the view taken in the case of Velayudhaswamy Spinning Mills supra and had directed the revenue to withdraw the said ground before various appellate forums. Deduction on prepayment of debentures and its related impact while computing deduction u/s.80IA - HELD THAT:- We direct the ld. AO accordingly to give life to the issue of allowability of deduction towards premium on prepayment of debentures based on the final outcome of the appeals of the revenue for the Asst Years 2004-05 and 2005-06. The ground Nos. 3(a) to 3(d) raised by the assessee are disposed off subject to the directions mentioned hereinabove. Disallowance u/s.40A(9) of the Act in respect of payments made to local schools in the locality in which eligible undertakings are situated - HELD THAT:- As decided in STATE BANK OF INDIA [2019 (6) TMI 1183 - BOMBAY HIGH COURT] assessee is entitled for deduction in the sum of ₹ 38,85,333/- in respect of payments made to schools in which children of the employees of the assessee are studying, among others. Disallowance of discount on issue of Euro Bonds - HELD THAT:- AO had observed that in earlier year, the assessee had earned some gain out of this transaction and the same had not been offered to tax as it is notional in nature. We are unable to persuade ourselves to accept to the contentions of the ld. AO that assessee had made certain foreign exchange fluctuation gain in the earlier year which was not offered to tax by the assessee on a totally different footing, whereas the subject mentioned issue in dispute being liability of discount on issue of Euro notes, which has got absolutely nothing to do with the foreign exchange gain which arose in earlier years. Hence, we hold that the ld. AO had grossly erred in disallowing the said sum of ₹ 18,88,103/- towards discount on issue of Euro notes. We find that the action of the assessee is exactly in line with the ratio laid down by the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation [1997 (4) TMI 5 - SUPREME COURT] . Accordingly, ground No.3 raised by the revenue is dismissed. Disallowance u/s.40a(ia) - payment of retention amount - HELD THAT:- The comments made by the Tax Auditors in the tax audit report that tax has not been deducted at source by the assessee at the time of payment of retention amount was in respect of a solitary case of payment made to United Shippers Ltd, where payments were made during the year by the assessee without deduction of tax at source since adhoc payments were made without reconciliation of the amount finally payable to the party. The assessee had even submitted evidence that even in this case i.e. United Shippers Ltd, the short fall of tax amounting to ₹ 11,21,342/- was indeed remitted to the account of Central Government on 07/03/2006 which is before the end of the previous year relevant to A.Y.2006-07. We find that in any case, the ld. AO is absolutely not justified to take the figure of sundry deposits from the balance sheet and treat the same as retention money and thereafter treat 50% of the said sum as retention money. The entire exercise of the ld. AO is absolutely without any basis. We hold firstly that there is absolutely no default committed by the assessee in accordance with provisions of Chapter XVIIB of the Act in the instant case. Secondly, the figures taken by the ld. AO are totally incorrect. Hence, by all force, the disallowance u/s.40(a)(ia) of the Act deserves to be deleted which has been rightly done by the ld. CIT(A) on which action, we do not find any infirmity. Direction of ld. CIT(A) to ld. AO to decide the issue as per the report of ITO International Transaction in respect of TDS on payment to foreign parties - HELD THAT:- We find that the ld. AO cannot have any grievance on this direction as admittedly the ld. AO had been merely directed to follow the order passed by ITO International Transaction, TDS Range-2, Mumbai. It is also pertinent to note that the ld. AO had passed an order dated 13/05/2013 giving effect to the order of the ld. CIT(A) wherein he had merely followed the directions of ITO International Transaction, TDS Range-2, Mumbai and granted some relief to the assessee u/s.40(a)(i) of the Act. We find that assessee had not preferred further appeal to this Tribunal against the findings of International Transaction, TDS Range-2, Mumbai. Hence, we do not find any merit in the ground No.5 raised by the revenue and hence, the same is dismissed. Disallowance of prior period expenses - HELD THAT:- In the instant case there is no dispute that the entire expenses got crystallized during the year under consideration and hence, we do not find any infirmity in the order of the ld. CIT(A) granting deduction towards prior period expenses to the assessee. Accordingly, ground No.3 raised by the revenue is dismissed. Rectification of mistake - double deduction - Reduction of premium on prepayment of debentures attributable to the eligible undertaking according to the ld. AO, which was reduced by the ld. AO while computing the deduction u/s.80IA of the Act while framing the assessment - HELD THAT:- CIT(A) had rightly observed that there is double disallowance of ₹ 2,44,86,356/- pursuant to the said action of the ld. AO in view of the fact that the ld. AO had granted deduction towards premium on prepayment of debentures of ₹ 4,32,67,811/- only while framing assessment and had further reduced this sum of ₹ 2,44,86,356/- from the claim of deduction u/s.80IA of the Act. We find that the ld. CIT(A) had directed the ld. AO to verify the record in this regard and rectify the mistake. We are not able to appreciate the grievance, if any, for the revenue in this regard
|