2020 (4) TMI 624 - AT - Income Tax

Tribunal instructs reassessment of tax issues, including repair expenses and MAT credit eligibility.

Century Link Technologies India Pvt. Ltd. Versus Deputy Commissioner of Income-tax Circle-2 (1) (1) Bengaluru

The Tribunal set aside the Commissioner of Income Tax (Appeals) order, directing the Assessing Officer to reevaluate the eligibility under section 80JJAA ... Disallowance of deduction claimed u/s 80JJAA - business of developing computer software - HELD THAT:- A.O. has incorporated the provisions of section 80JJAA of the Act relating to assessment year 2014-15 and has applied the same to both the years under consideration. It is pertinent to note that sub-section (3) of section 80JJAA as amended by Finance Act 2016 makes it clear that the provisions that existed before 1st day of April, 2016 shall apply to the earlier years, meaning thereby, the provisions, which are applicable to a particular year, should be applied for determining the eligibility of the assessee to claim this deduction. Accordingly, we set aside the order passed by CIT(A) on this issue and restore the same to the file of the A.O. with the direction to apply with the provisions of section 80JJAA of the Act as applicable to the years under consideration. Nature of expenditure - claim of repair expenses incurred on lease hold building - revenue or capital expenditure - HELD THAT:- As rightly pointed out by A.R., in order to invoke the provisions of Explanation 1 to sec. 32(1), a finding has to be given first as to the nature of expenditure incurred by the assessee. If the nature of expenditure is capital in nature, then the provisions of explanation 1 to section 32(1) of the Act shall apply. It is the case of the assessee that most of the expenditure incurred by it on lease hold premises are revenue in nature. Tax authorities have not examined the nature of expenditure incurred by the assessee. As furnished the various details of expenditure incurred by it on lease hold premises. This issue requires fresh examination at the end of the A.O., since the nature of expenditure incurred by the assessee is required to be examined in order to apply the provisions of Explanation 1 to section 32(1) of the Act. We set aside the order passed by the Ld. CIT(A) on this issue and restore the same to the file of the A.O. for examining it afresh. Credit of MAT as per provisions of section 115JAA - Since the claim of the assessee requires examination at the end of the A.O., we restore this issue to the file of the A.O. Issues Involved:1. Addition made u/s 80JJAA of the Income Tax Act, 19612. Disallowance of expenditure incurred in leasehold premises as capital expenditure3. Claim of MAT credit4. Assessment of interest u/s 244A of the Act and non-granting of TDS creditAnalysis:Issue 1: Addition made u/s 80JJAA of the Income Tax Act, 1961The appellant contested the disallowance of deduction claimed u/s 80JJAA, citing incorrect application of amended provisions by the Assessing Officer (AO) for the years under consideration. The contention was that the provisions applicable to the specific years should have been applied. The Tribunal noted that the AO had applied provisions for a subsequent year and ruled that the correct provisions should be applied for determining eligibility. Consequently, the order of the Commissioner of Income Tax (Appeals) was set aside, directing the AO to reevaluate the issue with the correct provisions.Issue 2: Disallowance of expenditure incurred in leasehold premises as capital expenditureThe appellant argued against the disallowance of repair expenses on leasehold premises treated as capital expenditure, emphasizing that most expenses did not result in capital assets. The Tribunal observed that the nature of expenditure needed examination to apply relevant provisions, which had not been done by tax authorities. As the details provided were not critically reviewed, the Tribunal directed the issue to be reconsidered by the AO to determine the nature of the expenditure accurately.Issue 3: Claim of MAT creditThe claim for credit of Minimum Alternate Tax (MAT) under section 115JAA required further examination at the AO's end. Consequently, the issue was remanded to the AO for proper assessment in line with the law.Issue 4: Assessment of interest u/s 244A of the Act and non-granting of TDS creditRegarding the assessment of interest on income tax refund u/s 244A and non-credit of Tax Deducted at Source (TDS) amount for the assessment year 2012-13, both claims necessitated scrutiny by the AO. The Tribunal directed these issues to be reviewed by the AO in accordance with legal provisions.In conclusion, the Tribunal allowed the appeals for statistical purposes, emphasizing the need for proper examination and application of relevant provisions by the Assessing Officer for the issues raised in the appeals.