2022 (8) TMI 242 - Income Tax

Disallowance of expenses u/s 14A - as argued assessee did not receive any dividend and hence did not make any disallowance under section 14A - CIT(A) deleted the disallowance - HELD THAT:- Since the assessee has not earned in dividend income, no disallowance is called for as per the decision rendered in the case of PCIT Vs. Il & Fs Energy Development Company (2017 (8) TMI 732 - DELHI HIGH COURT]. Since the decision rendered by Ld CIT(A) gets support from the above said decision, we do not find any reason to interfere with the order passed by him on this issue.

Disallowance of Provision for inventory written off - AO accepted that the debit made in the profit and loss account and reduction made in material consumption have mutual effect but since the closing stock of raw material is resultant figure after adjustment he took the view that the same has resulted in double deduction - HELD THAT:- We noticed that the Ld CIT(A) had confirmed identical disallowance made in AY 2009-10 and hence the assessee had challenged the same before Tribunal in A.Y. 2009-10 and the ITAT has deleted the disallowance by following the decision rendered by the Tribunal in assessee’s own case in A.Y. 2008-09.

Thus we notice that the assessee has done an accounting adjustment only, which may not lead to double deduction as presumed by the AO. Accordingly, following the order passed by the Tribunal in AY 2009-10, we confirm the relief granted by learned CIT(A) on this issue.

Disallowance of interest expenditure relating to loan given to the subsidiary - AO noticed that the assessee has advanced interest free loan to its subsidiary, group and associate companies, accordingly he disallowed proportionate interest expenditure u/s 36(1)(iii) - HELD THAT:- We notice that the Tribunal has deleted identical disallowance made in the earlier years on the ground that the loans to subsidiaries & group companies have been given out of own funds. During the current year, it is noticed from the order passed by Ld CIT(A), the outstanding amount of loan due from sister concerns - However, we could not find details of own funds/interest free funds available with the assessee. In the absence of relevant details, we have no other option but to restore this issue to the file of AO for examining this issue by following the ratio of the decision rendered by the Tribunal in the hands of the assessee in the earlier years after verifying relevant facts. Accordingly, we restore this issue to the file of AO.

Disallowance of bad debts claim - AO disallowed the claim observing that the assessee has not furnished any proof regarding its liability as per provisions of section 36(1)(vii) read with section 36(2) - CIT-A allowed the claim - HELD THAT:- In this year, the break-up details of bad debts written off have not be furnished. The main grievance of the AO is that the assessee has not proved the compliance of conditions prescribed in sec. 36(2) of the Act, i.e., the amount claimed as bad debts has been offered as income in the current year or in any of the earlier years. We notice that the Ld CIT(A) has also not examined this aspect. Accordingly, we are of the view that this issue also requires fresh examination at the end of AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh. The assessee is also directed to furnish the details of compliance of requirement of sec.36(2) of the Act to the AO.

Revenue appeal is partly allowed.