2015 (6) TMI 647 - AT - Income Tax

Tribunal dismisses appeals, upholds CIT(A)'s decisions. Disallowance under Proviso to Sec.36(1)(iii) deleted for lack of evidence.

Asst. CIT Circle-5, Ahmedabad and others Versus Raajratna Metal Industries Ltd. and others

The Tribunal dismissed both the Revenue's and Assessee's appeals, upholding the CIT(A)'s decisions. The disallowance of interest under Proviso to ... Disallowance of interest under Proviso to Sec.36(1)(iii) - CIT(A) deleted addition - Held that:- AO has not brought anything on record to indicate that capital was borrowed for capital work-in-progress. This finding on fact is not rebutted by the Revenue by placing any material on record. Therefore, we do not see any infirmity in the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Disallowance of depreciation - CIT(A) deleted addition - Held that:- The Revenue has not brought any material on record as to how the facts in the present case are different from the facts in the earlier years. The Revenue has not placed any material on record suggesting that the order of the ld.CIT(A) in the earlier assessment year has been reversed by this Tribunal or by the Hon’ble Jurisdictional High Court. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld.- Decided against revenue. Disallowances u/s.14A - investment in shares of companies other than 2 foreign subsidiary companies - Held that:- There is no dispute with regard to the fact that the provisions of Rule 8D would be applicable in the year under consideration. The ld.CIT(A) has decided this issue in accordance with Rule 8D of the IT Rules, 1962, therefore we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against assessee. Issues:- Disallowance of interest under Proviso to Sec.36(1)(iii) of the Income Tax Act.- Deletion of addition on account of depreciation.- Disallowance made under section 14A of the Act.Analysis:1. Disallowance of Interest under Proviso to Sec.36(1)(iii) of the Income Tax Act:- The Revenue appealed against the deletion of interest disallowance of Rs. 3,49,522. The AO disallowed the interest under Proviso to Sec.36(1)(iii) during the assessment. The CIT(A) partly allowed the appeal, deleting the disallowance. The CIT(A) observed that the AO failed to show evidence of capital borrowed for capital work-in-progress, a prerequisite for capitalizing interest. The Revenue argued against the CIT(A)'s decision, but the Tribunal upheld the CIT(A)'s order, citing lack of evidence supporting the disallowance.2. Deletion of Addition on Account of Depreciation:- The Revenue contested the deletion of the addition on account of depreciation amounting to Rs. 13,56,853. The CIT(A) had followed the decision of the previous year and directed the AO to allow depreciation. The Revenue did not provide any material to show differences from the earlier years. Consequently, the Tribunal upheld the CIT(A)'s order, stating that the facts were identical to the previous year, and rejected the Revenue's appeal.3. Disallowance Made under Section 14A of the Act:- The Assessee appealed against the confirmation of disallowance under section 14A of the Act concerning investments in shares of companies other than foreign subsidiaries. The CIT(A) upheld the disallowance as per Rule 8D of the IT Rules, 1962. The Tribunal found the application of Rule 8D appropriate and upheld the CIT(A)'s decision, resulting in the dismissal of the Assessee's appeal.In conclusion, both the Revenue's and Assessee's appeals were dismissed by the Tribunal, maintaining the CIT(A)'s decisions on the issues of interest disallowance, depreciation addition, and disallowance under section 14A of the Act. The Tribunal's detailed analysis and adherence to legal provisions ensured a comprehensive and fair resolution of the appeals.