2011 (7) TMI 1168 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Tax Benefits and Interest Disallowance

The Deputy Commissioner of Income Tax Cen. Cir 38 Mumbai Versus Excel Industries Ltd

The Tribunal upheld the CIT(A)'s decision regarding the non-taxability of advance license benefit, pass book benefit, and DFRC benefit, following the ... - Issues Involved:1. Taxability of advance license benefit receivable, pass book benefit receivable, and DFRC benefit.2. Disallowance of expenditure u/s 14A.3. Disallowance of interest paid attributable to loans to subsidiaries and other loans.4. Deduction in respect of wealth tax paid.5. Deduction in respect of deferred sales tax liability written back.6. Grant of interest u/s 244A.Summary:1. Taxability of Advance License Benefit Receivable, Pass Book Benefit Receivable, and DFRC Benefit:The CIT(A) deleted the additions made by the Assessing Officer (AO) regarding advance license benefit, pass book benefit, and DFRC benefit. The Tribunal upheld the CIT(A)'s decision, referencing the Hon'ble Bombay High Court's judgment in CIT vs. Kalpataru Colours and Chemicals (2010) 328 ITR 451 (Bom), which reversed the Special Bench's decision. The Tribunal affirmed that these benefits are not taxable in the year of export but in the year they are actually availed by the assessee.2. Disallowance of Expenditure u/s 14A:The AO disallowed interest expenditure u/s 14A, considering it incurred for earning tax-free income. The CIT(A) directed the AO to apply Rule 8D and re-compute the disallowance. The Tribunal, referencing the jurisdictional High Court's decision in Godrej & Boyce Mfg P Ltd vs ACIT (328 ITR 81), remanded the issue back to the AO for fresh adjudication, as Rule 8D was not applicable for the assessment year under consideration.3. Disallowance of Interest Paid Attributable to Loans to Subsidiaries and Other Loans:The AO disallowed interest paid on loans to subsidiaries and other entities. The CIT(A) confirmed this disallowance. The Tribunal, following its earlier orders for AY 1996-97 and 1997-98, remanded the issue back to the AO for fresh consideration in light of the Hon'ble Supreme Court's decisions in SA Builders vs CIT (288 ITR 1) and Munjal Sales Corporation vs CIT (298 ITR 298).4. Deduction in Respect of Wealth Tax Paid:The CIT(A) dismissed the assessee's claim for deduction of wealth tax paid, following appellate orders for previous years. The Tribunal upheld this decision, referencing its own order in Bachhraj Factories Ltd vs ACIT (56 ITD 225).5. Deduction in Respect of Deferred Sales Tax Liability Written Back:The assessee claimed that the deferred sales tax liability written back should be excluded from taxable income. The CIT(A) rejected this claim, following the Tribunal's order in Schenectady Specialities Asia Pvt Ltd vs ACIT. The Tribunal remanded the issue back to the AO for fresh adjudication, as the necessary material to conclusively decide the issue was not available.6. Grant of Interest u/s 244A:The AO granted interest u/s 244A only up to the date of intimation, not the date of the refund order. The CIT(A) upheld this decision. The Tribunal, referencing its decision in Jay Bros Investment and Trading Co P Ltd, allowed the assessee's claim for interest up to the date of the refund order.Conclusion:The appeal filed by the revenue and the Cross Objection of the assessee were dismissed, while the appeal filed by the assessee was partly allowed for statistical purposes. The order was pronounced on the 13th day of July 2011.