2018 (4) TMI 1972 - AT - Income Tax

Tribunal Partially Allows Appeal: Disallows Section 14A Addition, Orders Fresh Review on Leasehold Land Amortization.

The appellate tribunal allowed the appeal in part, ruling in favor of the assessee on the first issue by disallowing the addition under section 14A, as no ... Disallowance u/s 14A - assessee has earned exempt income or not? - HELD THAT:- We find that the assessee has not earned any dividend income during the year. As the assessee has not earned income which is exempt from tax during the year, no disallowance can be made u/s 14A as held by the Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] Therefore, Ground No.1 is allowed. Nature of expenses - expenditure on amortization of leasehold land - revenue or capital expenditure - HELD THAT:- Assessee issue is covered by the decision of assessee’s own case [2017 (8) TMI 77 - ITAT DELHI] wherein the issue has been set aside to the file of the AO for denovo adjudication as there is no material on record to show that assessee has made these payments as advance rent for future years to secure any reduction in rent payable for future years or for any other business consideration. We are, therefore, unable to appreciate arguments advanced by Ld. Counsel that these advances paid are towards advance rent. Even from the terms of agreements, it is not clear as to whether advances paid has been adjusted against future rent or whether these are in the nature of security deposits which are refundable in nature on termination of agreements. Both parties before us have expressed their intention regarding issue being re-adjudicated by assessing officer de novo. Ground allowed for statistical purposes. Issues:1. Disallowance of addition under section 14A read with Rule 8D of the Income Tax Rules.2. Disallowance of expenditure on amortization of leasehold land under section 37(1) of the Income Tax Act.3. Demand of tax and interest attributable to additions.Analysis:1. The first issue pertains to the disallowance of an addition under section 14A read with Rule 8D of the Income Tax Rules. The appellate tribunal found that the assessee did not earn any dividend income during the year, making no disallowance applicable under section 14A of the Income Tax Act, 1961. The tribunal cited the decision of the Hon'ble Jurisdictional High Court in the case of Cheminvest Ltd. v. CIT to support this conclusion. Therefore, Ground No.1 was allowed in favor of the assessee.2. The second issue concerns the disallowance of expenditure on the amortization of leasehold land under section 37(1) of the Income Tax Act. The tribunal referred to a decision by a Co-ordinate Bench of the Tribunal in the assessee's own case, where the issue was set aside to the file of the Assessing Officer for fresh adjudication. The tribunal directed the Assessing Officer to investigate and ascertain the true nature of the alleged lease premium paid by the assessee in accordance with the law. Ground No.2 was set aside for fresh adjudication based on this decision.3. The third issue involves the demand of tax and interest attributable to the additions. The tribunal noted that Ground No.3 was general in nature and did not provide specific details. As a result, the appeal of the assessee was allowed only in part. The tribunal pronounced the decision on 04.04.2018, setting aside the second issue for fresh adjudication and allowing the appeal in part.