2017 (1) TMI 1612 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Disallowance, Rules in Assessee's Favor

The Tribunal upheld the CIT(A)'s decision to delete the disallowance under section 14A r.w. Rule 8D of the I.T. Rules, emphasizing the absence of ... Disallowance u/s 14A r.w. rule 8D - Disallowance towards delayed payment of employee contribution of ESI and PF. - Held that:- We have considered the rival submissions and perused the material available on record including the orders passed by the Coordinate Benches in earlier years. Admittedly, there are no changes in the facts and circumstances of the case nor is there any change in the legal position. No contrary authority has been brought to the notice of the Bench other than what have been considered by the Coordinate Benches in earlier years. Further, the decisions of the Coordinate Benches against which the Revenue is in further appeal before the Hon’ble Rajasthan High Court has not been stayed by the Hon’ble Rajasthan High Court. Hence, following the decision for earlier years, decided in favor of assessee. Issues:- Disallowance under section 14A r.w. Rule 8D of the I.T. Rules- Disallowance of delayed payment of employee contribution of ESI and PF- Disallowance of deduction u/s 80IA(4) of the ActIssue 1: Disallowance under section 14A r.w. Rule 8D of the I.T. Rules:The Appellate Tribunal, in a series of appeals by the Revenue against the orders of Ld. CIT(A)-1, Jaipur, addressed the disallowance under section 14A r.w. Rule 8D of the I.T. Rules for multiple assessment years. The Tribunal observed that the investments generating exempt income were made from the assessee's own capital and reserves, not borrowed funds. The AO's approach of including interest-free own funds as borrowed funds was deemed impermissible and self-contradictory. Additionally, the Tribunal noted the lack of nexus between exempt income and expenses incurred, leading to no basis for apportionment of expenses. Citing relevant judicial precedents, the Tribunal upheld the CIT(A)'s decision to delete the disallowance, emphasizing the absence of inconsistency or infirmity in the CIT(A)'s orders.Issue 2: Disallowance of delayed payment of employee contribution of ESI and PF:Regarding the disallowance of employee contribution towards ESI & PF, the Tribunal referred to a judgment by the Hon'ble Rajasthan High Court, which supported the timely payment made by the assessee within the prescribed due date. Relying on this precedent, the Tribunal dismissed the ground raised by the Revenue concerning the contribution of Employees PF, emphasizing the adherence to the High Court's decision.Issue 3: Disallowance of deduction u/s 80IA(4) of the Act:For the deduction u/s 80IA(4) of the I.T. Act relevant for a specific assessment year, the Tribunal referred to a previous order by the Coordinate Bench, which had ruled in favor of the assessee being eligible for the deduction under Section 80IA(4). Considering the facts, circumstances, and legal interpretations, the Tribunal upheld the assessee's eligibility for the deduction under Section 80IA(4) based on the existing judicial pronouncements and directed the department to allow the deduction to the assessee.In conclusion, the Tribunal dismissed all grounds raised by the Revenue across the three years, citing consistency with previous decisions by Coordinate Benches and the absence of any new legal positions or contrary authorities. The Tribunal's decision was based on detailed arguments, legal precedents, and the lack of stay by the Hon'ble Rajasthan High Court on the Coordinate Benches' previous orders, leading to the dismissal of the Revenue's appeals for all three years.