Tribunal dismisses revenue appeal on interest deletion, allows assessee's objection on legal expenses disallowance.

The Tribunal dismissed the revenue's appeal regarding the deletion of interest and disallowance under section 14A due to the low tax effect. The appeal was rejected without addressing the merits, in line with the CBDT circular and precedent. However, the Tribunal allowed the assessee's cross objection, leading to the deletion of the disallowance of legal expenses. The decision was pronounced on 13.09.2019.

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Issues Involved:
1. Deletion of disallowance of interest of Rs. 81,02,506.
2. Deletion of disallowance of Rs. 1,62,000 made under section 14A of the I.T. Act, 1961.
3. Disallowance of legal expenses of Rs. 1,00,000.

Issue-wise Detailed Analysis:

1. Deletion of disallowance of interest of Rs. 81,02,506:
The revenue contested the CIT(A)'s decision to delete the disallowance of interest amounting to Rs. 81,02,506, arguing that the assessee had used interest-bearing funds to advance to associate concerns without charging any interest. However, the Tribunal noted that the tax effect in this appeal was below the monetary threshold of Rs. 50 lakhs as prescribed by the CBDT circular No. 3/2018 dated 8th August 2019. Consequently, the Tribunal dismissed the appeal in limine without addressing the merits, following the precedent set by the coordinate bench in the case of ITO Vs. Dinesh Madhavlal Patel.

2. Deletion of disallowance of Rs. 1,62,000 made under section 14A of the I.T. Act, 1961:
Similar to the first issue, the revenue also contested the deletion of the disallowance of Rs. 1,62,000 made under section 14A of the I.T. Act, 1961. The Tribunal again noted that the tax effect was below the prescribed monetary limit and dismissed the appeal without delving into the merits, adhering to the CBDT circular and the decision in ITO Vs. Dinesh Madhavlal Patel.

3. Disallowance of legal expenses of Rs. 1,00,000:
The assessee filed a cross objection against the CIT(A)'s order sustaining the disallowance of Rs. 1,00,000 on account of legal expenses. The case was picked up for scrutiny, and the A.O. made several additions, including the disallowance of legal expenses due to a lack of relevant evidence. The assessee contended that the relevant evidence had been misplaced but was now available, supporting the claim of expenditure related to proceedings in the Debts Recovery Tribunal (DRT). The Tribunal reviewed the evidence, which included court fees for a case titled CPI Industrial Products Pvt. Ltd. Vs. SBI, and concluded that the expenditure was allowable. Consequently, the Tribunal directed the A.O. to delete the disallowance of Rs. 1,00,000.

Conclusion:
The Tribunal dismissed the revenue's appeal due to the low tax effect, following the CBDT circular and the coordinate bench's decision. The cross objection by the assessee was allowed, resulting in the deletion of the disallowance of legal expenses. The order was pronounced in the open court on 13.09.2019.

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