2015 (12) TMI 460 - AT - Income Tax

Partial win for assessee in tax appeal, adjustments directed, losses upheld. Revenue appeal dismissed.

The tribunal allowed the assessee's appeal in part, reversing disallowances under Section 14A of the Income Tax Act and directing the AO to grant ... Disallowance u/s 14A - Held that:- It is uncontroverted fact that assessee did not have any exempt income during the year. Hon Delhi High court in case of Cheminvest Limited V CIT [2015 (9) TMI 238 - DELHI HIGH COURT] has held that where there is no exempt income there cannot be any disallowance u/s 14A of the Income Tax Act. Therefore respectfully following the decision of Honourable Delhi high court we reverse the order of CIT (A) confirming disallowance - Decided in favour of assessee. Disallowance being payments made under Voluntary retirement scheme - Held that:- The claim of the assessee is allowable u/s 35DDA of the act and no deduction u/s 37(1) is permitted for expenditure on voluntary retirement scheme. In none of the decision cited before us, Honourable courts were concerned about the allowability of claim of VRS expenditure u/s 35DDA of the act as well as u/s 37(1) of the act. Further all the cases cited pertains to AY prior to introduction of section 35DDA of the act except in case of CIT V KJS India Private Limited (2011 (9) TMI 667 - Delhi High Court ), however provision of section 35DDA was not brought to the notice of the court. Therefore these decisions render no help to the cause of the assessee. Thus we confirm the order of CIT (A) disallowing the claim of the assessee u/s 37(1) of the act on account of payment made under voluntary retirement scheme - Decided against assessee. Non granting adjustments of TDS - Held that:- CIT (A) is not justified in dismissing this ground of appeal. If the assessee has filed TDS certificates along with the return of income filed by the assessee and if the claim is according to the law , assessee should be granted the credit for such TDS certificate. In view of this we direct AO to grant credit of TDS certificates on merit after proper verification if the credit complies with the provision of section 199 of the Income Tax Act. - Decided in favour of assessee. Disallowance of carry forward of loss - Held that:- We direct that assessee should be allowed the carry forward of losses as shown by the return of income in view of press release of CBDT dated 22.12.2008 in No 402/92/2006-MC-(53 of 2008) where CBDT has accepted that returns filed electronically on 30.9.2008 where the acknowledgement date is 1.10.2008, shall be treated as having filed on 30.9.2008. Hence AO is directed to allow the claim of carry forward of losses as same is permissible according to the law. We reverse the finding of CIT (A) on this count.- Decided in favour of assessee. Disallowance on account of prior period expenses - Held that:- In fact there is no expenses debited by the company but there is a reversal of income by the assessee of interest income of ₹ 10,77,555/- out of interest income shown of ₹ 29,25,000/- in AY 2007-08 which was received only of ₹ 18,47,445/- and therefore the reversal of ₹ 10,77,555/- was made debiting the expenses account as tax has already been paid on the interest of ₹ 29,25,000/- in earlier years. Further an amount of bonus of ₹ 65092/- and gratuity of ₹ 1104478/- were already disallowed u/s 43B of the act. Thus no infirmity in the order of CIT (A) in deleting the disallowance - Decided against revenue Disallowance on account of loss on sales of stores and spares written off - Held that:- Identical claim of the assessee was allowed by AO himself for AY 2006-07 and Ld DR did not controverted this fact. We have perused the order of AO dated 28.3.2015 passed by AO for A Y 2006-07 where in as per Para no 12 AO has held that these expenditure are revenue in nature and allowable to the assessee. Both the parties agreed that there is no change in the facts of the case for this year also. In view of this we confirm the order of CIT (A) deleting disallowance - Decided against revenue Issues Involved:1. Disallowance under Section 14A of the Income Tax Act.2. Disallowance of payments made under the Voluntary Retirement Scheme.3. Adjustment/refund of Tax Deducted at Source (TDS).4. Carry forward of business loss.5. Disallowance of prior period expenses.6. Disallowance of loss on sales of stores and spares written off.Detailed Analysis:1. Disallowance under Section 14A of the Income Tax Act:The assessee contested the disallowance of Rs. 916 under Section 14A, arguing no expenditure was incurred for earning exempt income. The tribunal referenced the Delhi High Court's decision in Cheminvest Limited, which stated that no disallowance under Section 14A is permissible if there is no exempt income. Consequently, the tribunal reversed the CIT(A)'s order and allowed this ground of appeal.2. Disallowance of Payments Made under the Voluntary Retirement Scheme:The assessee claimed a deduction of Rs. 7,60,92,970 under the Voluntary Retirement Scheme, but the AO allowed only 20% of this amount under Section 35DDA, disallowing Rs. 6,08,74,376. The assessee argued that the entire amount should be deductible under Section 37(1). The tribunal noted that Section 35DDA specifically governs VRS payments, requiring the expense to be spread over five years. The tribunal upheld the CIT(A)'s decision, confirming the disallowance under Section 37(1) and dismissing this ground of appeal.3. Adjustment/Refund of Tax Deducted at Source (TDS):The assessee sought a refund/adjustment of Rs. 2,92,865 in TDS. The CIT(A) dismissed the claim, suggesting an alternative remedy. The tribunal directed the AO to verify the TDS certificates and grant credit if compliant with Section 199, thus allowing this ground of appeal.4. Carry Forward of Business Loss:The AO denied the carry forward of losses, citing the return was filed late due to a technical error. The assessee argued the return was filed on time, supported by a CBDT press release treating returns filed electronically on 30.09.2008 but acknowledged on 01.10.2008 as timely. The tribunal directed the AO to allow the carry forward of losses, reversing the CIT(A)'s decision.5. Disallowance of Prior Period Expenses:The AO disallowed Rs. 22,47,126 as prior period expenses, but the CIT(A) allowed the claim, noting that the expenses were not actually claimed during the year. The tribunal upheld the CIT(A)'s decision, confirming the deletion of the disallowance.6. Disallowance of Loss on Sales of Stores and Spares Written Off:The AO disallowed Rs. 4,18,611 and Rs. 13,20,959 for loss on sales of stores and spares written off. The CIT(A) allowed the claim, and the tribunal noted that similar claims were allowed for the previous assessment year. The tribunal upheld the CIT(A)'s decision, confirming the deletion of the disallowance.Conclusion:The assessee's appeal was partly allowed, with the tribunal reversing some disallowances and directing the AO to grant certain claims. The revenue's appeal was dismissed in its entirety. The order was pronounced in the open court on 02.12.2015.