9911796707
TMI Blog2024 (2) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income tax (Appeals)-44, New Delhi ('the CIT(A)] has erred in upholding disallowance of Rs. 51,48,128/- u/s 14A of Income tax Act, 1961 (the Act'). 1.1 That on the facts and circumstances of the case and in law, the CIT(A) did not appreciate that in the absence of exempt income, no disallowance under section 14A was called for and that suo-moto disallowance made by the Appellant in the return was no impediment because there is no estoppel against law. 1.2 That on the facts and circumstances of the case and in law, the CIT(A) in exercise of appellate powers ought to have allowed the relief of Rs. 51,48,128/-, for the legal position is settled that Goetze (India) Ltd v. CIT [2006] 284 ITR 323 (SC) did not impi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at source and a refund of Rs. 99,51,200/- was claimed. The aforesaid Return Of Income was selected for scrutiny proceedings pursuant to which, the matter relating to the international transactions entered into by the Assessee with its Associated Enterprises was referred to the Transfer Pricing Officer ('TPO" for short). The Ld. TPO vide its order dated October 06, 2017, determined transfer pricing adjustment of Rs. 33,29,387/-. Subsequent to receipt of order from the TPO, the Assessing Officer ('AO') passed the draft assessment order dated December 22, 2017 and thereafter, final Assessment Order dated February 15, 2018 came to be passed, wherein the AO made the following adjustment to the returned income under the normal prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year, no disallowance u/s 14A deserves to be made and relied on the several reported Judgments. 6. Per contra, the Ld. Departmental Representative relied on the orders of the Lower Authorities. 7. Heard. The assessee had suo-moto disallowed Rs. 51,48,128/- u/s 14A of the Act. There was no exempt income was earned during the year which is evident from page No. 7 & 8 of the Assessment Order. Further in Assessee's own case for the Assessment Year 2016-17, vide order dated 27/09/2022 in ITA No. 9182/Del/2019, the disallowance made u/s 14A of the Act has been deleted by the Tribunal. Considering the settled position of law that in the absence of exempt income, no disallowance u/s 14A can be made, we find merit on the Ground No. 1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Gurgaon) and the details of the agreement are as under:- Lease Premises Name of Lessor Lease deed dated Initial lease period Renewal Clause with escalation Bangalore(Page 108-131) SRJ Infrastructure Pvt. Ltd. 25.03.2007 & 28.06.2012 5 years-lock in period 3 years Page 112-131 & Pg 105-107 Shimoga (Page 132-148) Xchanging Builders (India) Pvt. Ltd. 16.08.2013 4 years-lock in period 2 years Page 134 & 135 Shimoga (Page 149-173) Xchanging Builders (India) Pvt. Ltd. 01.02.2014 4 years -lock in period 2 years Page 151 & 153 Thane (Pg. 174-204 PJS Securities Pvt. Ltd. 27.07.2011 5 years-lock in period 3 years Pg. 177 & 178 12. During the assessment proceedings, it was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges from the lease rentals. In sum and substance, lease equalization charges "is a method of re- calibrating the depreciation claimed by the assessee in a given accounting period. The method employed by the assessee, therefore, over the full term of the lease period would result in the lease equalization amount being reduced to a naught, as the debit and credits in the profit and loss account would square off with each other." Therefore, the Revenue's contention that the amount is unknown to the Act - as held in the decision, is a mis-appreciation of what constitutes a lease equalization charge. Therefore, as long as the method of accounting follows some established principles, one of which. includes offering only Revenue income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authoirty has added a sum of Rs. 55,56,937/- to the Book Profits of the assessee on the ground that the transfer of lease equalization account was in the nature of reserve and hence needed to be adjusted to the Book Profits as per the requirement of Explanation to Section 115JA of the Act. 10. The 'lease equalization charges' is not one of the amounts which is covered under any of the clauses to Explanation to Section 115JA(2). It cannot be treated as a reserve. As the name suggest, this 'lease equalization charges' is nothing but the difference between the statutory depreciation on rentals and the recovery of cost of capital. Therefore, merely because the said amount entered in the P&L account, in effect, makes no differe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
