2019 (6) TMI 1294 - AT - Income Tax

Revenue's Appeals Dismissed, CIT(A) Decisions Upheld. Tribunal Finds in Favor of Taxpayer.

The Tribunal dismissed the Revenue's appeals for all assessment years, upholding the CIT(A)'s decisions on all issues. The Tribunal found that the CIT(A) ... Deduction u/s. 80IB(4) in respect of Unit - II - assessee had obtained factory licence on 22.04.2004 i.e. after 31.03.2004 and hence the conditions prescribed for claiming deduction were not fulfilled by the assessee - HELD THAT:- The claim of the exemption of the assessee u/s 80IB has been accepted in A.Y. 2004-05, therefore, in the said circumstances, the exemption is not liable to be declined in subsequent year and in this regard we also find support in law settled in CIT Vs. Wester Outdoor Interactive (P) Ltd. [2012 (8) TMI 709 - BOMBAY HIGH COURT] & CIT Vs. Paul Brothers [1992 (10) TMI 5 - BOMBAY HIGH COURT] Claim of the assessee was also declined on account of this fact that the factory licence was taken on 22.04.2004 but it cannot ground to deny the exemption u/s 80IB and in this regard, we also find support in the decision of Bombay High Court in the case of M/s. Jolly Polymers Vs. CIT [2015 (6) TMI 610 - BOMBAY HIGH COURT] - Thus the finding of the CIT(A) on the issues is quite correct which is not liable to be interfere with at this appellate stage. - Decided against revenue Addition u/s 14A - CIT(A) restricted the expenditure to earn the exempt income to the extent of 10% dividend income - HELD THAT:- It is not in dispute that the provisions of Section 14A r.w. Rule 8D of the Act is applicable subsequent to the A.Y. 2008-09. The present case is in connection with the A.Y. 2006-07. The assessee earned the exempt income in sum of ₹ 3,93,753/-. CIT(A) has restricted the expenditure to earn the exempt income to the extent of 10% dividend income which nowhere seems unjustifiable. Earlier to the period 2008-09 it was justifiable to earn the exempt income on reasonable basis unless satisfaction has been recorded by AO in the order. We also find support of law settled in case titled as CIT Vs. Essar Technology Ltd. [2018 (2) TMI 115 - SUPREME COURT] & Godrej & Boyce [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided against revenue Delayed payment of employee’s provident fund - disallowance u/s 36(1)(va) - assessee deposited the said amount before filing the return of income - HELD THAT:- AO has noticed that the assessee has not made the payment earlier to filing the return of income, therefore, the said amount was added to the income of the assessee. It is also not in dispute that the assessee deposited the said amount before filing the return of income. In this regard, the law has now been settled in CIT Vs. Ghatge Patil Transports Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] . If the assessee deposit employee’s contribution funds before due date of filing the return, therefore, in the said circumstances, the claim of the assessee is not liable to be disallowed. - Decided in favour of the assessee against the revenue. Addition u/s 14A r.w. Rule 8D(2) - own fund more than investment - HELD THAT:- The presumption lies in favour of the assessee if the assessee have own fund more than investment than the assessee’s investment would be treated from his own fund to earn the exempt income. The CIT(A) has also relied upon the decision in the case of Reliance Industries [2009 (1) TMI 4 - BOMBAY HIGH COURT] therefore, we are of the view that the finding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. Issues Involved:1. Deduction under Section 80IB(4) concerning factory license.2. Disallowance under Section 14A read with Rule 8D.3. Disallowance under Section 36(1)(va) concerning employees' provident fund contributions.Issue-wise Detailed Analysis:Issue Nos. 1 & 2: Deduction under Section 80IB(4) concerning factory licenseThe Revenue challenged the allowance of the assessee's claim of Rs. 1,20,20,832/- under Section 80IB(4) for Unit-II, arguing that the factory license was obtained on 22.04.2004, after the cutoff date of 31.03.2004. The CIT(A) allowed the claim, referencing a previous decision for A.Y. 2005-06 and emphasizing that the claim had been accepted for A.Y. 2004-05. The Tribunal upheld the CIT(A)'s decision, citing precedents such as CIT Vs. Western Outdoor Interactive (P) Ltd. and CIT Vs. Paul Brothers, and concluded that obtaining the factory license after the cutoff date does not disqualify the claim under Section 80IB. The Tribunal found the CIT(A)'s decision correct and not subject to interference.Issue Nos. 3, 4, & 5: Disallowance under Section 14A read with Rule 8DThe Revenue contested the CIT(A)'s restriction of the disallowance under Section 14A read with Rule 8D to 10% of exempt income, arguing that Rule 8D is clarificatory and retrospective, thus applicable before A.Y. 2008-09. The CIT(A) noted that Rule 8D was not applicable for A.Y. 2006-07 but applied Section 14A, disallowing 10% of the total exempt income due to the lack of documentary evidence from the assessee. The Tribunal upheld this decision, referencing CIT Vs. Essar Technology Ltd. and Godrej & Boyce, affirming that the CIT(A) acted judiciously and correctly.Issue Nos. 3 & 4: Disallowance under Section 36(1)(va) concerning employees' provident fund contributionsFor A.Y. 2007-08, the Revenue challenged the deletion of a disallowance of Rs. 14,04,536/- under Section 36(1)(va), arguing that the payments were made after the due date under the relevant act. The CIT(A) found that the payments were made before the due date for filing the return of income and referenced the Bombay High Court decision in CIT Vs. Ghatge Patil Transports Ltd., which allows such payments if made before the return filing date. The Tribunal upheld the CIT(A)'s decision, finding it consistent with established law.Issue Nos. 5, 6 & 7: Disallowance under Section 14A read with Rule 8D for A.Y. 2007-08The Revenue challenged the restriction of the disallowance to 10% of exempt income under Section 14A read with Rule 8D. The CIT(A) applied the same reasoning as for A.Y. 2006-07, restricting the disallowance to 10% of exempt income. The Tribunal upheld this decision, referencing the same legal precedents and affirming that the CIT(A) acted judiciously and correctly.Issue Nos. 1 & 2: Deduction under Section 80IB(4) for A.Y. 2008-09For A.Y. 2008-09, the Revenue raised similar issues regarding the factory license and Section 80IB(4). The Tribunal applied the same reasoning and precedents as for previous years, upholding the CIT(A)'s decision in favor of the assessee.Issue Nos. 3 & 4: Disallowance under Section 14A read with Rule 8D for A.Y. 2008-09The Revenue challenged the deletion of a disallowance of Rs. 2,50,638/- under Section 14A read with Rule 8D(2). The CIT(A) found that the assessee's own funds exceeded the investment and thus no disallowance under Rule 8D(2)(ii) was warranted. The Tribunal upheld this decision, referencing CIT Vs. Reliance Utilities Power Ltd. and affirming that the CIT(A)'s decision was correct and not subject to interference.Conclusion:The Tribunal dismissed the Revenue's appeals for all assessment years, upholding the CIT(A)'s decisions on all issues. The Tribunal found that the CIT(A) had acted judiciously and correctly, and the decisions were consistent with established legal precedents.