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2025 (7) TMI 97 - AT - Income TaxDisallowance on inconsistency in amount of interest paid in respect of borrowed capital u/s 36(1)(iii) in the 143(1) order and subsequently in the assessment order passed u/s 143(3) - appellant has submitted that this amount was already disallowed by appellant itself which can be seen from the Return of Income and the Computation of Income enclosed to the Return of Income - HELD THAT - A copy of Computation of Income filed by the appellant before the Department alongwith copy of Return of Income filed was submitted to the Bench to demonstrate its case. After going through the same the Bench is satisfied and hence decided that when the appellant has already disallowed the said amount adding to the Taxable Income amounts to double disallowance. Hence the addition made by the Ld. AO towards this disallowance is deleted. Company itself disallowed the amount which can be evidenced from the Computation of Income - Since the amount was disallowed by the appellant company there is no need of making same addition and hence addition is deleted. Disallowance of amortization of premium paid for leasehold land - Since this amount was disallowed by appellant company the Ld. AO cannot make same addition and hence the same is deleted. MAT computation of book profit u/s 115JB - Prima facie all the disallowances/additions made by the CPC/Ld. AO were already done by the appellant in the Return of Income itself. But the Ld. AO is directed to go through the copy of Return of Income and Computation of Income and if the appellant itself had disallowed them then all the additions made by Department should be deleted. This direction is given to Ld. AO as the same were not verified by Revenue and due to this limited extent the issues are remitted to the file of the AO.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in the appeals relate to:
Of these, only the issues concerning double disallowance of ICDS adjustments (forex loss on ECB and creditors, interest on capital work in progress), amortization of premium on leasehold land, and deferred tax adjustment under section 115JB were pressed and adjudicated by the Tribunal. Other grounds were either not pressed or dismissed without merit. 2. ISSUE-WISE DETAILED ANALYSIS a) Double Disallowance of ICDS Adjustments (Forex Loss on ECB and Creditors, Interest on Capital Work in Progress) Relevant Legal Framework and Precedents: The Income Tax Act permits disallowance of expenses under sections 36 and 37 if such expenses are not allowable or are inconsistent with accounting standards or ICDS (Income Computation and Disclosure Standards). However, double disallowance of the same expense is impermissible. The principle of consistency and avoidance of double taxation is well recognized. Court's Interpretation and Reasoning: The appellant submitted that the amounts disallowed by the AO under sections 36 and 37 were already disallowed by the appellant itself in the ROI and the Computation of Income filed with the Department. The Tribunal examined the documents submitted, including the Computation of Income and ROI, and found that the appellant had indeed disallowed these amounts voluntarily. Key Evidence and Findings: The appellant produced copies of the Computation of Income and ROI showing the disallowance of forex loss on ECB and creditors amounting to INR 8,44,04,626, and interest relating to capital work in progress amounting to INR 14,22,381. Application of Law to Facts: Since the appellant had already disallowed these amounts, the additions made by the AO and CPC amounted to double disallowance, which is contrary to the principles of tax computation. Treatment of Competing Arguments: The Revenue did not demonstrate that these amounts were not disallowed in the ROI or that the disallowance by the appellant was not genuine. The Tribunal relied on the appellant's submissions and documentary evidence. Conclusions: The Tribunal directed the AO to delete these additions after verifying the appellant's ROI and Computation of Income, since the disallowances were already accounted for by the appellant. b) Amortization of Premium Paid for Leasehold Land Relevant Legal Framework and Precedents: Amortization of premium paid for acquiring leasehold rights is generally allowable as a deduction under section 37 of the Income Tax Act, provided it is claimed properly and not disallowed under any specific provisions. Court's Interpretation and Reasoning: The appellant contended that the amortization amount of INR 20,39,318 was also disallowed by the appellant itself and disclosed in clause 21(a) of Form 3CD filed with the Department, indicating the appellant's acknowledgment of the disallowance. Key Evidence and Findings: The appellant submitted Form 3CD and the ROI showing the disallowance of this amortization amount. Application of Law to Facts: Since the appellant had already disallowed this amount in its return, the AO's addition of the same amount was a double disallowance and hence unjustified. Treatment of Competing Arguments: The Revenue did not provide evidence to counter the appellant's claim that this amount was already disallowed. Conclusions: The Tribunal directed the deletion of the disallowance of amortization of premium paid for leasehold land after verification by the AO. c) Deferred Tax Adjustment in Computation of Book Profit under Section 115JB Relevant Legal Framework and Precedents: Section 115JB of the Income Tax Act prescribes the computation of book profit for Minimum Alternate Tax (MAT) purposes. Explanation (1)(viii) to section 115JB, amended retrospectively by the Finance Act, 2008, requires that any amount of deferred tax credited to the profit and loss account be reduced from the book profit. Court's Interpretation and Reasoning: The appellant submitted that the deferred tax credit of INR 5,45,86,490 was credited to the profit and loss account, but the AO and CIT(A) failed to reduce this amount while computing book profit under section 115JB. The appellant argued that the current tax of the same amount was debited to the profit and loss account, and thus, the net effect should be considered. Key Evidence and Findings: The appellant produced the profit and loss account and computation of book profit documents demonstrating the deferred tax credit and current tax debit entries. Application of Law to Facts: The Tribunal noted that the relevant amendment mandates reduction of deferred tax credited to profit and loss from book profit. However, neither the AO nor CIT(A) verified these entries in the accounts. The Tribunal directed the AO to verify these facts and adjust the book profit accordingly. Treatment of Competing Arguments: The Revenue did not dispute the presence of deferred tax credit in the profit and loss account but failed to verify or consider it in the computation of book profit. Conclusions: The Tribunal remitted the issue to the AO for verification and consequential adjustment of book profit under section 115JB in accordance with the law. d) Other Issues Not Pressed or Adjudicated Grounds relating to dismissal of appeal on the doctrine of merger, violation of natural justice due to non-grant of opportunity of hearing by virtual conference, disallowance of depreciation on additions to fixed assets, excess levy of interest under section 234C, and disallowance of donation, CSR expenditure, and penal interest on TDS were not pressed by the appellant or not adjudicated by the Tribunal, and hence remain unaddressed. 3. SIGNIFICANT HOLDINGS The Tribunal established the following core principles and made key determinations:
The Tribunal's final determination was to allow the appeal for statistical purposes and remit the matters to the AO for verification and appropriate action consistent with the findings.
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