Tribunal disallows Amritsar project expenses for AY 2012-13; directs deletion of disallowance under Section 14A.

Shourya Towers Pvt. Ltd. C/o M/s RRA Taxindia Versus DCIT Circle 23 (1), New Delhi

Shourya Towers Pvt. Ltd. C/o M/s RRA Taxindia Versus DCIT Circle 23 (1), New Delhi - Tmi Issues:
1. Disallowance of expenses related to Amritsar project.
2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules.

Issue 1: Disallowance of expenses related to Amritsar project:

The appeal challenged the assessment order disallowing expenses of Rs. 64,72,52,645 for the AY 2012-13. The assessee argued that the loss became irrecoverable only in 2012-13 due to ongoing disputes, justifying the write-off. However, the Revenue contended that rights and liabilities were settled in 2007, with subsequent events not affecting this. The High Court order in 2009 confirmed the settlement, and a compromise in 2012 was unrelated to the Amritsar project. The Tribunal concluded that no new events post-2010 impacted the write-off claim, upholding the disallowance as not pertaining to 2012-13.

Issue 2: Disallowance under Section 14A read with Rule 8D:

Regarding the addition of Rs. 2,84,430 under Section 14A read with Rule 8D, the assessee argued that no exempt income was earned during the relevant year, citing precedent. The Tribunal, following the cited decision, directed the AO to delete the addition as no exempt income was earned. Consequently, the appeal was partially allowed on this ground.

In summary, the Tribunal upheld the disallowance of expenses related to the Amritsar project, ruling that events post-2010 did not justify the write-off claim for the AY 2012-13. Additionally, the Tribunal directed the deletion of the disallowance under Section 14A read with Rule 8D due to the absence of exempt income during the relevant assessment year.