2021 (3) TMI 1343 - HC - Income Tax

High Court grants indexation benefit, disallows Rule 8D, allows CM Relief Fund deduction under Income Tax Act

The High Court ruled in favor of the assessee on all three issues: granting indexation benefit for calculating long-term capital gain under Section 115JB, ... Deduction for payment u/s 37 of the Act towards donation to CM Relief Fund - Disallowance of claim as it cannot be treated as business expenditure and not even coincidental to the business carried on by the assessee - benefit of indexation while calculating long term capital gain - HELD THAT:- The substantial questions of law involved are covered by the decision of the Supreme Court in the case of Sri Venkata Satyanarayana Rice Mill Contractors [1996 (10) TMI 2 - SUPREME COURT] Disallowance under Section 14A read with Rule 8D - HELD THAT:- Substantial question of law involved is covered by the decision of this Court in the case of CIT –v- Karnataka State Industries and Infrastructure Development Corpn. Ltd. [2015 (11) TMI 1631 - KARNATAKA HIGH COURT] Entitled to the benefit of indexation while calculating long term capital gain which are to be considered for the purpose of computing tax liability under Section 115JB - HELD THAT:- Substantial question of law involved is covered by the decision of this Court in the case of Best Trading and Agencies Ltd. [2020 (9) TMI 94 - KARNATAKA HIGH COURT] and decision of this Court in the case of MSR and Sons Investments Ltd. [2011 (9) TMI 1127 - KARNATAKA HIGH COURT] Issues Involved:1. Indexation benefit for calculating long-term capital gain under Section 115JB of the Income Tax Act.2. Disallowance under Section 14A read with Rule 8D of the Act.3. Deduction for payment under Section 37 of the Act towards donation to CM Relief Fund.Indexation Benefit for Calculating Long-Term Capital Gain:The High Court considered whether the assessee-company is entitled to the benefit of indexation while calculating long-term capital gain for computing tax liability under Section 115JB of the Act. The Court analyzed if the decision in a specific case, which had not reached finality, could be relied upon by the assessee. The Court examined the correctness of the computation made by the assessee in this regard. The judgment referred to previous decisions to determine the applicability of indexation benefit in the given scenario. Ultimately, the Court ruled in favor of the assessee based on the legal precedents cited and answered the substantial questions of law against the Revenue.Disallowance under Section 14A read with Rule 8D of the Act:The Court deliberated on whether the Tribunal was correct in setting aside the disallowance under Section 14A read with Rule 8D of the Act based on a specific decision that had not reached finality. The judgment discussed the facts of the case, including the additions made by the assessing authority and subsequent deletions by the Commissioner of Income Tax. The Court examined the arguments presented by both the revenue and the assessee regarding the connection between the contribution made by the assessee and its business activities. By referencing relevant legal cases, the Court concluded that the substantial questions of law were covered by previous decisions and ruled in favor of the assessee, dismissing the appeals filed by the Revenue.Deduction for Payment towards CM Relief Fund:The Court addressed whether the Tribunal was correct in allowing a deduction for payment under Section 37 of the Act towards donation to CM Relief Fund, even if it was not considered as business expenditure directly related to the assessee's business activities. The judgment highlighted the arguments put forth by both parties regarding the nature of the donation and its relevance to the business carried out by the assessee. By citing specific legal cases, the Court provided a legal framework to determine the eligibility of such deductions. Ultimately, the Court relied on previous decisions to answer the substantial questions of law against the Revenue and in favor of the assessee, leading to the dismissal of the appeals.This detailed analysis of the judgment showcases the Court's thorough examination of each issue involved, the legal arguments presented by both parties, and the application of relevant legal precedents to arrive at a reasoned decision in each aspect of the case.