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2020 (1) TMI 621 - AT - Income TaxAddition u/s 14A r.w.r. 8D - HELD THAT:- There is no dispute as to the quantum of the dividend earned during the year and it is ₹ 37,13,348/-. In Joint Investments Private Limited [2015 (3) TMI 155 - DELHI HIGH COURT] Hon’ble jurisdictional High Court held that where the assessee declared tax-exempt income and voluntarily disallowed a certain expenditure under section 14A, in the absence of any reason why the assessee’s claim for disallowance u/s 14A had to be rejected, learned Assessing Officer was not justified in computing the disallowance - no stretch of imagination can section 14A of the Act read with Rule 8D of the Rules be interpreted so as to mean that the entire tax exempt income is to be disallowed, the window for disallowance is indicated in section 14A and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”, and this proportion are portion of the tax exempt income surely cannot swallow the entire amount. In assessee’s own case, a coordinate Bench of this Tribunal held that the disallowance in any case cannot exceed the exempt income. Ld. DR does not dispute this proportion of law as laid down by the Hon’ble High Court and in a number of decisions by the coordinate benches of this Tribunal. We, therefore, while respectfully following the same answer the issue in favour of the assessee Disallowance under section 14A of the Act read with Rule 8D of the Rules under section 115JB - In Vireet Investment (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] the Special Bench dealt with this aspect at length and held that the computation under clause (f) of explanation 1 to section 115 JB (2) is to be made without resorting to the computation as contemplated under section 14A of the Act read with Rule 8D of the Rules. There is no dispute on this proposition. We therefore, while respectfully following the said decision answer the issue in favour of the assessee Disallowance on account of provision for leave encashment and provision for gratuity while computing the profits under section 115 JB - HELD THAT:- This issue is covered by the view taken by the Tribunal in the earlier assessment years like 2002-03, 2003-04 and 2005-06. We, therefore, while respectfully following the same, while upholding the findings of the Ld. CIT(A) in respect of the provision for leave encashment, remand the issue relating to the verification of the actuarial valuation in respect of gratuity, to the file of the learned Assessing Officer. Disallowance on account of unfurnished expenses of Tropicana Beverage Manager - HELD THAT:- The details of such income and expenditure are shown. On a perusal of the details we are of the considered opinion that the sum of ₹ 12,30,17,600/-does not relate to the amalgamation expenses and on the other hand they represent the expenses incurred by the assessee on behalf of Tropicana Beverages and were disclosed in the profit and loss account. We, therefore, do not find any perversity in the findings of the Ld. CIT(A) and, accordingly, decline to interfere with the same on this aspect. Ground No. 4 of Revenue is accordingly dismissed. Disallowance of excess depreciation on computer peripherals - HELD THAT:- We uphold the contention of the assessee that UPS, printer and projector form part of the computer peripherals and direct the Assessing Officer to recomputed the depreciation in respect of these 3 items at 60%. Disallowance of depreciation on the non-compete fees paid by the assessee - HELD THAT:- Reasoning given by the Assessing Officer to disallow this claim is that the issue hinges around the interpretation of the phrase “business or commercial rights of similar nature” used in clause (ii) of section 32, and a careful reference to the language of the provisions in section 32 makes it clear that all the specific awards that a preceding general words “business or commercial rights of similar nature” are related to a class of rights which are intellectual property rights whereas the alleged payment is for non-compete fee. Further, according to the learned Assessing Officer the right to non-compete acquired by the assessee is only a right in personam and therefore the assessee is not entitled to claim depreciation on the non-compete fee. AO does not refer to any change of circumstances from the earlier years so as to deviate from the view that was taken for earlier years. We therefore do not find anything illegality or irregularity in the Ld. CIT(A) following the view taken for the earlier years under identical circumstances. Disallowance of depreciation on account of merger with the Tropicana Beverages Company under normal computation - HELD THAT:- CIT(A) considered the original tax audit report and the revised tax audit report and directed the Assessing Officer to verify from the records and allow depreciation as per the tax audit report that was filed pursuant to the merger of Tropicana Beverages Company with the assessee. We do not find any reason for grievance of the Revenue on this aspect, because the Ld. CIT(A) did not delete addition and on the other hand she rectified the apparent mistake committed by the learned Assessing Officer. We therefore decline to interfere with the findings of the Ld. CIT(A) and dismiss ground No. 7.
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