2019 (2) TMI 1901 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on disallowance, book profit, depreciation, bad debts

D.C.I. T-3 (2) (2), Mumbai Versus M/s Premier Ltd., Mumbai

D.C.I. T-3 (2) (2), Mumbai Versus M/s Premier Ltd., Mumbai - TMI Issues Involved:1. Disallowance under Section 14A of the Income Tax Act, 1961.2. Adjustment to Book Profit under Section 115JB of the Income Tax Act.3. Additional Depreciation under Section 32(1)(iia) of the Income Tax Act.4. Claim of Bad Debts not made in the original return of income.Issue-wise Detailed Analysis:1. Disallowance under Section 14A of the Income Tax Act, 1961:The revenue challenged the CIT(A)'s decision to restrict the disallowance under Section 14A to 2% of the exempt income based on previous years' appeal orders. The CIT(A) had restricted the disallowance to Rs. 1,81,485/- as offered by the assessee in its return of income. The tribunal upheld the CIT(A)'s decision, citing that disallowance under Section 14A cannot exceed the exempt income itself, as supported by the judgments of the Delhi High Court in Joint Investments Pvt. Ltd. vs. CIT and Cheminvest Limited vs. CIT. Thus, the grounds of appeal No. 1 and 2 raised by the revenue were dismissed.2. Adjustment to Book Profit under Section 115JB of the Income Tax Act:The revenue contended that the CIT(A) erred in deleting the adjustment made to book profit under Section 115JB on account of expenses related to exempt income under Section 14A. The tribunal referred to the Special Bench decision in Vireet Investment Pvt. Ltd., which held that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. Therefore, the tribunal upheld the CIT(A)'s decision, dismissing the ground of appeal No. 3.3. Additional Depreciation under Section 32(1)(iia) of the Income Tax Act:The revenue argued that additional depreciation should only be claimed in the year the new machinery was acquired and installed. The CIT(A) allowed the assessee's claim for additional depreciation of 10% in the subsequent year, as the machinery was used for less than 180 days in the previous year. The tribunal agreed with the CIT(A), citing that there is no statutory restriction preventing the balance 10% of additional depreciation from being claimed in the succeeding year. This view was supported by the judgments of the Madras High Court in CIT vs. T.P. Textiles (P) Ltd. and the Karnataka High Court in CIT vs. Rittal India Pvt. Ltd. Thus, the ground of appeal No. 4 was dismissed.4. Claim of Bad Debts not made in the original return of income:The revenue objected to the CIT(A)'s direction to consider the assessee's second revised claim for bad debts amounting to Rs. 544.20 lakhs, arguing it was not made in the original return and citing the Supreme Court's judgment in Goetze (India) Ltd. vs. CIT. The CIT(A) allowed the claim, referencing the Bombay High Court's decision in CIT vs. Pruthvi Brokers & Shareholders (P) Ltd., which permits appellate authorities to consider new claims not made in the original return. The tribunal upheld the CIT(A)'s decision, noting that the claim was based on facts already on record and should be considered in light of the Supreme Court's judgment in TRF Ltd. vs. CIT and CBDT Circular No. 12/2016. Thus, the grounds of appeal No. 5 and 6 were dismissed.Conclusion:The appeals for both A.Y. 2012-13 and A.Y. 2013-14 were dismissed, with the tribunal upholding the CIT(A)'s decisions on all contested issues. The tribunal emphasized adherence to legal precedents and statutory interpretations in its rulings.