2014 (9) TMI 546 - HC - Income Tax

Court affirms disallowance under section 14A, allows expenditure under section 36(1)(iii). Appeal dismissed.

The Commissioner of Income Tax-5, Mumbai Versus M/s. Essar Investments Ltd.

The court upheld the decision to remand the matter for calculating disallowance under section 14A, citing a previous High Court order on a similar issue. ... Disallowance u/s 14A(1) – Expenses on interest free advances u/s 36(1)(iii) – Held that:- The Tribunal had rightly followed the decision in SA BUILDERS LTD. Versus COMMISSIONER OF INCOME-TAX [2006 (12) TMI 82 - SUPREME COURT] - Assessee had advanced loans to the group concerns and interest on such advances was disallowed – it has been decided in assessee’s own case for the earlier assessment year’s also, thus, the order of the Tribunal is upheld – Decided against revenue. Issues:1. Remand of matter for calculating disallowance under section 14A2. Allowance of expenditure under section 36(1)(iii) in relation to interest-free advanceAnalysis:1. The first issue concerns the remand of the matter for calculating disallowance under section 14A. The appellant argued that the ITAT's decision to remand the matter was incorrect as the AO had already disallowed the expenditure on a prorate basis. However, the court found that a similar issue had been addressed in a previous order by a Division Bench of the High Court, which rendered the question not substantial. The court concluded that the ITAT's decision to remand the matter was not erroneous, and therefore, this issue was dismissed.2. The second issue pertains to the allowance of expenditure under section 36(1)(iii) concerning an interest-free advance made by the assessee to another company. The appellant contended that the Tribunal's reliance on a Supreme Court judgment required reconsideration as per a subsequent Supreme Court order. However, the court examined the Tribunal's order and found that the factual findings were consistent with previous decisions in the assessee's case. The court determined that the Tribunal's decision was based on factual evidence and not legally flawed, therefore not constituting a substantial question of law. The court held that the Tribunal's order was valid, as it was supported by factual findings and did not exhibit any legal errors. Consequently, the appeal was dismissed, and no costs were awarded.