2020 (6) TMI 582 - AT - Income Tax

ITAT affirms CIT(A)'s decision, dismissing Revenue's appeal on unabsorbed investment allowance. Assessee meets conditions for section 32A(6) claim. (A)

The DCIT, Circle-9 (1), New Delhi. Versus SRF Ltd.

The ITAT upheld the CIT(A)'s decision and dismissed the Revenue's appeal against the deletion of the addition made on account of unabsorbed investment ... Unabsorbed investment allowance - allowance u/s 32A (6) - HELD THAT:- In view of the provisions of section 32A(6) of the Act, the matter travelled back to the AO as per the directions of the Tribunal. The AO had to see whether the assessee had fulfilled the conditions of section 32A(6) but he laid emphasis on the provisions of section 72A of the Act, which is misplaced. AO (the incumbent who has submitted the remand-report) completely went beyond the directions of Hon’ble ITAT and repeated the provisions of section 72A of the Act which the AO had relied upon in the original assessment order and which were adjudicated upon by the Hon’ble ITAT. The specific issue which remained to be decided was whether various conditions as specified in section 32A(6) and the section 32A(4), 32A(3) as referred in section 32A(6) of the Act are fulfilled in the appellant’s case. The appellant has elaborately shown that the conditions specified in section 32A(6) of the Act are fulfilled by it. Therefore, the claim of the appellant is fully justified. Revenue has failed to controvert the findings of the CIT(A). Once the assessee has fulfilled the conditions of section 32A(6) of the Act, the claim merits to be allowed in the hands of the assessee. Accordingly, we find no merit in the present appeal filed by the Revenue. Issues:Appeal against deletion of addition made on account of unabsorbed investment allowance.Analysis:The appeal pertains to the deletion of an addition of Rs. 4,18,31,075 on account of unabsorbed investment allowance for the assessment year 1995-96. Initially, the Assessing Officer disallowed the claim, which was upheld by the CIT(A). However, the Tribunal directed the AO to allow the benefit of unabsorbed investment allowance in accordance with section 32A(6) of the Income-tax Act, 1961. The AO issued a show cause notice to the assessee to substantiate compliance with the conditions specified in section 32A(6). The assessee responded by referring to the order of the AO for the year 1989 in the case of Flowmore Polyester Limited. Despite the assessee's explanations, the AO disallowed the claim due to insufficient evidence regarding compliance with the specified conditions.Subsequently, the matter reached the CIT(A), where the assessee contended that it had fulfilled the conditions of section 32A(6) and provided proper evidence. The CIT(A) observed that the AO had erroneously focused on section 72A instead of section 32A(6) and allowed the claim of the assessee. The Revenue challenged this decision before the ITAT.During the hearing, the Revenue failed to counter the CIT(A)'s findings. The ITAT noted that once the assessee had satisfied the conditions of section 32A(6), the claim deserved to be allowed. Therefore, the ITAT found no merit in the Revenue's appeal and dismissed it.In conclusion, the ITAT upheld the CIT(A)'s decision and dismissed the Revenue's appeal against the deletion of the addition made on account of unabsorbed investment allowance.