2015 (10) TMI 2640 - AT - Income Tax

Addition u/s 14A - as per assessee investments made in the companies are strategic investments which have been made for business purposes and therefore should not be considered when computing the average value of investments for the purpose of Rule 8D(2)(ii) and 8D(2)(iii) - Held that - The claim of strategic investments made by the assessee need verification. We therefore restore the entire issue to the file of the AO. The AO is directed to verify the claim of the assessee that the investments are made for strategic purposes and decide this issue afresh in the light of the findings given by the Tribunal in assessee s own case in earlier assessment years and also keeping in mind that if investments are found to be of strategic in nature then to decide the issue as per the decision of the Tribunal given in the case of J.M. Financial Ltd. 2014 (4) TMI 752 - ITAT MUMBAI read with M/s. Garware Wall Ropes Ltd. 2015 (2) TMI 628 - ITAT MUMBAI . With the above directions ground are treated as allowed for statistical purpose. Disallowance of amortization of premium paid for leasehold land - Held that - Tribunal has followed the decision of the Co-ordinate Bench in assessee s own case for A.Y. 2005-06 2010 (10) TMI 214 - ITAT MUMBAI and dismissed the appeal of the assessee. Addition on account of unutilized cenvat credit - Held that - This issue has been decided in favour of the assessee and against the Revenue by the Tribunal 2014 (9) TMI 1099 - ITAT MUMBAI wherein the Tribunal has observed the directions given to the AO to recast the accounts of the assessee by considering the element of Excise duty and other taxes in opening stock purchases sales and inventory has to be decided as per the findings given in A.Y. 2006-07. Respectfully following the directions given by the Co-ordinate Bench we direct accordingly. Value to be adopted with regard to the opening written down value of the block of assets - Held that - This issue has been decided against the assessee by the Tribunal in assessee s own case for A.Y. 2006-07 Disallowance on account of the provision for diminution in the value of investments while computing Book profits u/s. 115JB -Held that - This issue is now decided against the assessee and in favour of the Revenue in view of the retrospective amendment by the Finance Act No.2 of 2009 with effect from 1.4.2001 now that this issue is covered by the Amendment against the assessee

Summary

Issues involved:
1. Disallowance under section 14A of the Act
2. Disallowance of interest expenditure under section 36(1)(iii) and section 14A of the Act
3. Disallowance of expenditure under section 14A of the Act
4. Disallowance of amortization of premium paid for leasehold land
5. Addition on account of unutilized cenvat credit
6. Value to be adopted with regard to the opening written down value of the block of assets
7. Disallowance on account of provision for diminution in the value of investments while computing Book profits u/s. 115JB of the Act

Analysis:

1. Disallowance under section 14A of the Act:
The appellant raised grounds of appeal related to disallowance under section 14A. The Counsel argued that the issues were previously decided in favor of the appellant by the Tribunal in earlier assessment years. The Departmental Representative agreed with the Counsel's submissions. The Tribunal reviewed the orders of the authorities and the decisions in the appellant's previous cases. The Tribunal allowed the appellant's appeal, setting aside the disallowance made by the CIT(A).

2. Disallowance of interest expenditure under section 36(1)(iii) and section 14A of the Act:
The appellant contested the disallowance of interest expenditure under section 36(1)(iii) and section 14A. The CIT(A) had made disallowances based on certain calculations. The Tribunal examined the facts and submissions, finding that the appellant had sufficient own funds for investments, leading to the disallowance being set aside. The Tribunal directed the AO to delete the additions sustained by the CIT(A) in this regard.

3. Disallowance of expenditure under section 14A of the Act:
The appellant challenged the disallowance of expenditure under section 14A, citing it as arbitrary and excessive. The CIT(A) computed the disallowance, but the Counsel pointed out an arithmetical error in the calculations. The Tribunal directed the AO to verify the claim of strategic investments made by the appellant and decide the issue afresh, considering relevant precedents.

4. Other Disallowances:
The Tribunal upheld the disallowance of amortization of premium paid for leasehold land based on previous decisions. The addition on account of unutilized cenvat credit was allowed in favor of the appellant. However, the value to be adopted for the opening written down value of the block of assets was decided against the appellant. The disallowance on the provision for diminution in the value of investments while computing Book profits was also upheld due to a retrospective amendment.

In conclusion, the appeal filed by the appellant was partly allowed for statistical purposes, with various disallowances being upheld or set aside based on the Tribunal's analysis and directions.