2024 (12) TMI 1596 - HC - Income Tax

Addition u/s 14A read with rule 8D - loss on shifting of securities from AFS/HFT category to HTM category - addition as sum credited to PNB Employees Pension Fund u/s 43B - excess of liabilities over assets of amalgamating company - HELD THAT - Insofar as questions no. a c d and e are concerned the same are covered by the decision in the assessee s own case for the other assessment years. The present appeal is admitted on the following remaining questions b) Whether in the facts and circumstances of the case and in law ITAT erred holding that Rs. 7, 14, 00, 803/- transferred to blocked accounts and taken to general reserve through the profit and loss account cannot be taxed as income? f) Whether in the facts and circumstances of the case and in law ITAT erred in holding that the nature of profit and loss earned by the assessee from the investment in venture capital funds could legally be characterized as business income and loss from other sources respectively by claiming exemption on profit and setting of loss against income from other sources? List in the category of regular matters.

Summary

The Delhi High Court, in ITA 194/2024, addressed multiple questions raised by the Revenue challenging the ITAT's deletions of substantial additions under various provisions of the Income Tax Act. Key issues included:- Whether ITAT erred in deleting an addition of Rs. 58.74 crore under section 14A read with rule 8D, despite the assessee earning exempt income of Rs. 58.39 crore (question a).- Whether ITAT erred in holding that Rs. 7.14 crore transferred to blocked accounts and credited to general reserve via P&L account "cannot be taxed as income" (question b).- Whether ITAT erred in deleting an addition of Rs. 386.75 crore on account of notional losses from shifting securities between categories (question c).- Whether ITAT erred in allowing deduction of Rs. 215.56 crore credited to PNB Employees' Pension Fund under section 43B despite non-payability as per fund terms (question d).- Whether ITAT erred in holding that excess liabilities over assets of amalgamating company can be "automatically classified as goodwill" in amalgamated company (question e).- Whether ITAT erred in characterizing profit and loss from venture capital funds as business income and loss from other sources respectively, allowing exemption on profit and set-off of loss (question f).The Court admitted the appeal only on questions (b) and (f), as questions (a), (c), (d), and (e) were covered by precedent in the assessee's own cases for other years. The parties were permitted to file relevant documents already on record, and the matter was listed with other regular appeals.This order primarily focuses on the essential legal reasoning regarding the taxability of amounts transferred to blocked accounts and the characterization of income/loss from venture capital funds, reserving detailed adjudication for further proceedings.