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2021 (5) TMI 237 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D(2)(ii) - HELD THAT:- Disallowance under section 14A r.w.r. 8D cannot go beyond the extent of exempted income itself. This view is fortified by the judgment of CIT Vs. Chettinad Logistics (P.) Ltd., [2017 (4) TMI 298 - MADRAS HIGH COURT] and Joint Investments (P) Ltd [2015 (3) TMI 155 - DELHI HIGH COURT]. Following the aforesaid decision of the Madras High Court in the case of Envestor Ventures Ltd.[2021 (1) TMI 922 - MADRAS HIGH COURT] deleted the disallowance made under section 14A r.w.r. 8D. Same view was taken by Co-ordinate Bench in the case of Global Teck Park Pvt. Ltd. Being so, taking a consistent view, we are inclined to hold that disallowance in the case of assessee cannot exceed the exempted income to the tune of ₹ 4,180/- only. Thus, ground Nos.2 and 3 of appeal of the assessee are partly allowed. Disallowance of claim of assessee on account of reduction of closing stock of work in progress - Return filed under section 153A of the Act based on AS 9 - HELD THAT:- The assessee furnished the details of claim of deduction under section 80IB(10) in earlier years - AR submitted that the disallowance on account of reduction in value of closing stock of work in progress in the Assessment Year under consideration due to change of applicability of accounting standing from AS 7 to AS 9 to be restricted to only to the extent of ₹ 27,80,57,341/- on which the assessee has claimed deduction under section 80IB(10) of the Act in earlier years and the balance of ₹ 1,18,83,207/- on which the assessee has not claimed deduction under section 80IB(10) in earlier years. Hence, the disallowance in this Assessment Year shall be restricted to ₹ 27,80,57,341/- only account of change in following of accounting standard from AS 7 to AS 9. Otherwise, it will not reflect the true and correct state of affairs of the company and cost of work in progress is to be valued at cost or market price whichever is lower. Unexplained reduction in closing work in progress - HELD THAT:- As there was a difference on account of change in following of accounting standard from AS 7 to AS 9 in the valuation of closing work in progress and that was already disallowed by AO in his order by observing as follows and once again disallowing this difference amounting to double disallowance, which should be disallowed - Hence, the total addition made by the AO is deleted -This ground of assessee is allowed.
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