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2024 (7) TMI 1628 - AT - Income TaxDisallowing the claim of the assessee u/s.35D - HELD THAT - The issue as travelled up to Tribunal and the Tribunal had allowed the assessee s claim of 1/5th expenditure in the A.Y. 2009-10 for 5 years in their order for assessment year 2009-10. Similarly the same amount which has been spent during the A.Y. 2010-11 had been allowed to claim for 5 assessment years u/s. 35D of the Act from the assessment years 2010-11 to 2014-15 in their order 2016 (10) TMI 807 - ITAT CHENNAI for assessment year 2010-11. Therefore it is noted that the lower authorities have erred in understanding the facts properly and passed the orders erroneously by disallowing the deduction of 1/5th expenditure of Rs. 75.00 lakhs for the assessment year 2014-15 which the assessee is eligible as per the orders of the Tribunal (Supra) and hence we are of the considered view that the lower authorities erred in disallowing the deduction U/s.35D of the Act. Therefore we delete the impugned disallowance u/s.35D of the Act and allow the ground of the appeal of the assessee. Disallowing the withholding tax and Relief U/s.90 - assessee has earned interest income from Singapore and paid to the Singapore Tax authorities - HELD THAT - The same issue is squarely covered in favour of the assessee in their own case in the co- ordinate bench of this Tribunal 2016 (10) TMI 807 - ITAT CHENNAI for the A.Ys.2010-11 2011-12 2017 (6) TMI 1345 - ITAT CHENNAI 2012-13 2021 (4) TMI 768 - ITAT CHENNAI 2015-16 2022 (4) TMI 1582 - ITAT CHENNAI 2016-17 wherein the Tribunal has held that once the interest income subject to tax in any manner in the hands of the assessee the corresponding credit to be given. Therefore in view of the fact that the assessee has filed the confirmation of payment of withholding tax from the Singapore Tax authorities and respectfully following the decision of the co-ordinate bench of the Tribunal this issue is remitted to the file of the AO and direct the AO to verify the confirmation of payment filed by the assessee and allow the relief u/s.90 in accordance with law. Hence this ground of the appeal is allowed for statistical purposes. MAT credit not considered - lower authorities have not given any tax credit u/s. 115JB of the Act to the assessee stating that the assessee has not claimed as per the return of income filed for the assessment year 2014-15 on 28.11.2014 and in the Schedule right from AY 2006-07 to 2014-15 no MAT credit was claimed for any of the years - HELD THAT - Assessee is eligible for the credit of legitimate taxes paid and hence we deem it proper to remand this issue to the file of the AO by allowing this ground of the assessee s appeal and direct the AO to give the MAT Credit in accordance with law. Assessee to be diligent in providing the relevant details and documents before the AO in support of their claim of MAT credit. Therefore this ground of the assessee s appeal is allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS I. Deduction under Section 35D of the Act (1/5th deduction of Rs. 75,00,000 for AY 2014-15) Relevant legal framework and precedents: Section 35D allows deduction of expenditure incurred on issue of shares in five equal installments starting from the year in which the expenditure is incurred. The Tribunal had earlier allowed the assessee's claim of 1/5th deduction of Rs. 3.75 crores spent in AY 2009-10 and AY 2010-11 for five years respectively, including the last installment for AY 2014-15. Court's interpretation and reasoning: The AO disallowed the 1/5th deduction of Rs. 75 lakhs for AY 2014-15 on the ground that the five-year period for the expenditure incurred in AY 2010-11 had already expired in AY 2013-14. The CIT(A) upheld this disallowance. However, the Tribunal found that the AO and CIT(A) misunderstood the facts, as the expenditure of Rs. 3.75 crores was incurred separately in AY 2009-10 and AY 2010-11, each eligible for five years of deduction. The Tribunal referred to its earlier orders in ITA Nos. 1947/Mds/2015 and 585/Mds/2015, which had allowed the 1/5th deduction for five years for each of these expenditures. Key evidence and findings: The Tribunal relied on the earlier orders where the deduction was allowed for the expenditure incurred in AY 2010-11 for five years, including AY 2014-15. The AO's rectification order and CIT(A)'s order failed to consider this separately incurred expenditure and the corresponding entitlement to deduction. Application of law to facts: Since the expenditure of Rs. 3.75 crores was separately incurred in AY 2010-11, the assessee is entitled to claim 1/5th deduction of Rs. 75 lakhs for AY 2014-15 under Section 35D. Treatment of competing arguments: The AO and CIT(A) argued that the five-year deduction period had expired. The assessee countered by clarifying the separate expenditure and entitlement to deduction for AY 2014-15. The Tribunal agreed with the assessee. Conclusion: The disallowance of Rs. 75 lakhs under Section 35D for AY 2014-15 was erroneous and is deleted. The assessee's claim is allowed. II. Relief under Section 90 of the Act (Tax credit for foreign tax paid) Relevant legal framework and precedents: Section 90 provides relief for double taxation by allowing credit for taxes paid in a foreign country on income that is also taxable in India. The Tribunal has consistently held that once foreign income is offered to tax in India, corresponding tax credit must be granted for taxes paid abroad. Court's interpretation and reasoning: The AO disallowed the relief under Section 90 for Rs. 1,17,02,382/- paid as withholding tax in Singapore, citing lack of proof that the income was offered to tax in India. The CIT(A) confirmed this disallowance. The Tribunal noted that the assessee had submitted confirmation of payment of withholding tax from Singapore tax authorities during assessment proceedings. Further, the issue has been repeatedly decided in favour of the assessee by the Tribunal in earlier assessment years (2010-11, 2011-12, 2012-13, 2015-16, 2016-17), wherein the Tribunal held that tax credit must be allowed once the income is subjected to tax in India. Key evidence and findings: Confirmation of payment of withholding tax under Section 45 from Singapore tax authorities was submitted by the assessee. The Tribunal's earlier orders in the assessee's own case provided binding precedent supporting the claim. Application of law to facts: The foreign tax was deducted and paid on interest income earned by the assessee's Singapore subsidiary. The assessee included this income in its Indian return. Therefore, the assessee is entitled to relief under Section 90 by way of tax credit for the foreign tax paid. Treatment of competing arguments: The AO and CIT(A) argued lack of proof and non-compliance with procedural requirements. The assessee relied on documentary evidence and binding precedents. The Tribunal found the latter more persuasive. Conclusion: The matter is remitted to the AO for verification of the confirmation of payment and to allow relief under Section 90 in accordance with law. The ground is allowed for statistical purposes. III. Claim of MAT Credit under Section 115JB of the Act Relevant legal framework and precedents: Section 115JB provides for Minimum Alternate Tax and allows credit for MAT paid in earlier years against normal tax liability in subsequent years, subject to conditions and time limits. Court's interpretation and reasoning: The AO rejected the claim on the ground that the assessee had not claimed MAT credit in the return for AY 2014-15 and no MAT credit was shown in the records from AY 2006-07 to AY 2014-15. The CIT(A) upheld this rejection, noting absence of any proof. The assessee contended that it had paid MAT in earlier years and was entitled to carry forward and claim credit for the difference between tax paid under Section 115JB and normal tax liability in subsequent years. Key evidence and findings: The AO's records showed no claim of MAT credit in the relevant years. However, the assessee argued entitlement based on statutory provisions and payment history, though no documentary proof was submitted before the CIT(A). Application of law to facts: The Tribunal acknowledged the statutory entitlement to MAT credit where tax has been paid under Section 115JB and normal tax liability arises subsequently. Since the assessee claimed entitlement and the AO did not consider it, the Tribunal deemed it appropriate to remand the issue to the AO for fresh examination, directing the assessee to furnish relevant documents. Treatment of competing arguments: The AO and CIT(A) relied on absence of claim and proof. The assessee relied on statutory provisions and asserted payment of MAT in earlier years. The Tribunal balanced these by remanding the matter for verification. Conclusion: The issue is remanded to the AO for verification and consideration of MAT credit claim in accordance with law. The ground is allowed for statistical purposes. 3. SIGNIFICANT HOLDINGS On Section 35D deduction: "Therefore, it is noted that the lower authorities have erred in understanding the facts properly and passed the orders erroneously by disallowing the deduction of 1/5th expenditure of Rs. 75.00 lakhs for the assessment year 2014-15, which the assessee is eligible as per the orders of the Tribunal... Hence, we delete the impugned disallowance of Rs. 75.00 Lakhs U/s.35D of the Act and allow the ground No. 6 of the appeal of the assessee." On relief under Section 90: "In view of the fact that the assessee has filed the confirmation of payment of withholding tax from the Singapore Tax authorities and respectfully following the decision of the co-ordinate bench of the Tribunal, this issue is remitted to the file of the AO and direct the AO to verify the confirmation of payment filed by the assessee and allow the relief u/s.90 in accordance with law." On MAT credit under Section 115JB: "Therefore, we are of the considered view that the assessee is eligible for the credit of legitimate taxes paid and hence, we deem it proper to remand this issue to the file of the AO by allowing this ground of the assessee's appeal and direct the AO to give the MAT Credit in accordance with law. Needless to say that, the assessee to be diligent in providing the relevant details and documents before the AO in support of their claim of MAT credit." Core principles established:
Final determinations: The Tribunal allowed the claim for 1/5th deduction under Section 35D for AY 2014-15, remitted the issue of relief under Section 90 to the AO for verification and grant of tax credit, and remanded the claim of MAT credit to the AO for fresh consideration. The appeal was allowed for statistical purposes accordingly.
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