2015 (2) TMI 1234 - AT - Income Tax

Tribunal Upholds 80-IB(10) Disallowance, Overturns 14A, Remands Interest Issue

The Tribunal upheld the Assessing Officer's disallowance of the deduction under section 80-IB(10) of the Income-tax Act due to the late filing of the ... Disallowance u/s 14A - Held that:- In the absence of exempt income earned by the assessee, the provisions of sec.14A cannot be invoked. - Decided in favour of assessee. Issues Involved:1. Eligibility for deduction u/s 80-IB(10) of the Income-tax Act, 1961.2. Disallowance made by the Assessing Officer u/s 14A of the Act.3. Interest u/ss. 234A, 234B, and 234C of the Act.Eligibility for Deduction u/s 80-IB(10) of the Income-tax Act, 1961:The appeal involved the issue of the assessee's eligibility for deduction u/s 80-IB(10) of the Income-tax Act, 1961. The Assessing Officer disallowed the claim as the return was not filed within the due date specified u/s 139(1) of the Act. The CIT(A) confirmed this disallowance, citing various judicial precedents. The Special Bench decision in the case of Saffire Garments was referred to, emphasizing the mandatory nature of filing the return within the due date for claiming the deduction. The Tribunal confirmed the order of the CIT(A) based on this precedent, rejecting grounds No.2 to 6.Disallowance u/s 14A of the Act:Another issue involved the disallowance made by the Assessing Officer u/s 14A of the Act. The assessee contended that no claim of exempt income was made in the return, hence no disallowance could be justified. The CIT(A) upheld the disallowance, considering an increase in investment leading to interest on loans and disallowing proportionate interest on investments earning exempt income. The assessee relied on the decision in the case of Bhuwalka Steel Industries Ltd., arguing that in the absence of exempt income, sec.14A cannot be invoked. The Tribunal, following the precedent, allowed grounds No.7 to 9, deleting the disallowance made u/s 14A of the Act.Interest u/ss. 234A, 234B, and 234C of the Act:The issue of interest u/ss. 234A, 234B, and 234C of the Act was remanded to the AO for giving consequential relief to the assessee, if any. This ground was allowed for statistical purposes. The appeal was partly allowed by the Tribunal, with the decision pronounced on 20th February 2015.