2015 (6) TMI 646 - AT - Income Tax

Appellate Tribunal Decisions on Depreciation, Interest, and Disallowance under Income-tax Act

Wonderla Holidays Limited (Fomerly Veega Holidays & Parks P. Ltd) Versus Commissioner of Income-tax Officer, Bangalore - III, Bangalore

The Appellate Tribunal upheld the disallowance of depreciation on computers due to the inclusion of computer peripherals. The disallowance of interest ... Revision u/s 263 - interest expenditure claimed on a loan raised from State Bank of India was not allowable since the loan was intended for starting a new amusement park at Mumbai and assessee had dropped the plan - Held that:- In so far as the first issue viz., interest claimed on loan from SBI, used for acquiring the land in question was concerned, Ld. AR has admitted that the issue required a look by the AO, since it was not verified by him at the stage of the assessment proceedings. Hence, in so far as this particular claim of the assessee is concerned, we cannot find any fault in the order of the CIT. - Decided against assessee. Assessee had made an investment in M/s. Wonderla Holiday (P) Ltd, under the same management and on such investment Section 14A of the Act was applicable - Held that:- In so far as the issue relating to disallowance u/s.14A is concerned, there was no error in the assessment order, which could be considered as prejudicial to the interests of Revenue. As assessee did not have any exempt income. That a disallowance u/s.14A of the Act, can be made only if there is a claim of exempt income - Decided in favour of assessee. Issues:1. Disallowance of depreciation on computers.2. Disallowance of interest expenditure on a loan.3. Disallowance under Section 14A of the Income-tax Act.Analysis:Issue 1: Disallowance of Depreciation on ComputersThe assessee filed a return for A.Y. 2008-09 declaring income of Rs. 4,17,60,770, with an assessment completed under section 143(3) of the Income-tax Act, 1961. The assessment disallowed Rs. 16,896 related to the claim of depreciation on computers due to including computer peripherals. The Appellate Tribunal upheld this disallowance, considering the nature of the claim.Issue 2: Disallowance of Interest Expenditure on a LoanA notice under section 263 of the Act was issued citing reasons for disallowance of interest expenditure of Rs. 73,12,500 claimed on a loan of Rs. 6.5 crores from State Bank of India. The CIT contended that since the loan was intended for a project that was dropped, the interest was not allowable. The assessee argued that the loan was used for a project extension, justifying the interest claim. The Tribunal found merit in the CIT's view and upheld the disallowance of interest expenditure.Issue 3: Disallowance under Section 14A of the ActThe CIT also raised concerns about an investment of Rs. 4 crores in a company, suggesting applicability of Section 14A of the Act. The assessee clarified that no exempt dividend income was received from the investment during the relevant year. The Tribunal, citing various High Court judgments, emphasized that disallowance under Section 14A can only be made if there is a claim of exempt income. As no exempt income was received, the Tribunal held that the disallowance was not justified. The Tribunal referred to specific cases to support its decision, ultimately allowing the appeal partially and modifying the order to exclude the disallowance under Section 14A.In conclusion, the judgment addressed various issues related to income tax assessments, disallowances, and applicability of specific sections of the Income-tax Act. The Tribunal's decision was based on a thorough analysis of facts, legal provisions, and precedents, ensuring a fair and reasoned outcome for the parties involved.