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of <h1>Appeal success for assessee on Section 14A disallowance & FSI sale issue remanded. Revenue's appeal dismissed.</h1> <h3>National Textile Corporation Ltd. Versus Addl. CIT, Special Range-6, New Delhi</h3> National Textile Corporation Ltd. Versus Addl. CIT, Special Range-6, New Delhi - TMI Issues Involved:1. Disallowance under Section 14A read with Rule 8D.2. Claim for additional depreciation under Section 32(1)(iia).3. Raising of demand ignoring BIFR order.4. Taxability of income from the sale of FSI.5. Disallowance of prior period expenditure.Detailed Analysis:Disallowance under Section 14A read with Rule 8D:The AO disallowed Rs. 30,84,050/- under Section 14A read with Rule 8D, attributing interest expenditure to income not forming part of total income. The assessee had received dividend income of Rs. 7,02,91,580/- and disallowed Rs. 905,915/- suo moto under Section 14A. The AO's disallowance included interest expenditure of Rs. 29,20,847/-. The CIT(A) was provided with detailed interest expenses totaling Rs. 48,67,65,130/-. The provisions of Rule 8D were discussed, and the AO was directed to consider 'dividend yielding investments' while computing the disallowance. The appeal on this ground was allowed for statistical purposes.Claim for Additional Depreciation under Section 32(1)(iia):The assessee claimed additional depreciation on new plant and machinery installed during the year. The AO found that the machinery was used for less than 180 days, allowing only 50% of the allowable depreciation. The Tribunal held that the assessee is eligible for 50% of depreciation allowance and additional depreciation on the plant and machinery procured, as per Section 32(1) and 32(1)(iia).Raising of Demand Ignoring BIFR Order:The issue of raising a demand of Rs. 36,41,59,287/- against the assessee while ignoring the BIFR order was not elaborated upon in the judgment. Therefore, no specific analysis was provided.Taxability of Income from the Sale of FSI:The assessee argued that the capital gains from the sale of FSI amounting to Rs. 2,24,00,00,000/- should not be taxable, citing the Bombay High Court's decision in CIT Vs. Sambhaji Nagar Coop Hsg Society Ltd., which held that the sale of FSI is not taxable. The CIT(A) noted that the Bombay High Court's order did not lay down any principle that would help the assessee's case. The Tribunal remanded the matter back to the CIT(A) for fresh adjudication, allowing the assessee another opportunity to present their case.Disallowance of Prior Period Expenditure:The revenue's appeal pertained to the disallowance of prior period expenses amounting to Rs. 2,85,98,000/-. The Tribunal found that this issue was consistently decided in favor of the assessee in earlier assessment years (2008-09, 2009-10). The assessee had a practice of netting prior period income with prior period expenses, which was accepted by the department in previous years. The Tribunal upheld the CIT(A)'s decision, based on the principle of consistency, and dismissed the revenue's appeal.Conclusion:The appeal of the assessee was partly allowed, specifically on the issue of disallowance under Section 14A for statistical purposes and the remand of the FSI sale issue. The appeal of the revenue was dismissed, upholding the CIT(A)'s decision on the disallowance of prior period expenses. The order was pronounced in the open court on 07/02/2023.
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