Tribunal rules in favor of assessee on Section 14A & Rule 8D addition, allows river diversion expenses.

The Tribunal allowed the assessee's appeal regarding the addition under Section 14A read with Rule 8D, directing the Assessing Officer to re-compute the disallowance considering only investments yielding exempt income. Additionally, the Tribunal ruled in favor of the assessee regarding the treatment of river diversion and HT line shifting expenses as revenue expenditure, allowing the entire claim and deleting the addition. The Tribunal applied relevant case law and directed the re-computation and allowance of the claimed expenditures as per their observations.

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Issues Involved:
1. Addition under Section 14A read with Rule 8D regarding investments with no exempt income.
2. Treatment of river diversion and HT line shifting expenses as capital or revenue expenditure.

Issue-Wise Detailed Analysis:

Ground No. 1: Addition under Section 14A read with Rule 8D
Facts and Arguments:
- The assessee challenged the addition of Rs. 51,72,597/- under Section 14A read with Rule 8D, arguing that only investments yielding exempt income should be considered.
- The assessee had disallowed Rs. 59,05,592/- suo motu and provided a calculation method to the Assessing Officer (AO).
- The AO, finding the calculation unjustifiable, determined the disallowance at 0.5% of the average value of total investments, resulting in an additional Rs. 51,72,597/- added to the total income.
- The First Appellate Authority confirmed this addition.

Judgment:
- The Tribunal referred to the judgment in Corrtech Energy Private Limited and the Special Bench decision in ACIT vs. Vireet Investment Pvt. Ltd., which held that only investments yielding exempt income should be considered.
- The Tribunal found substance in the assessee's argument and restored the matter to the AO for re-computation as per the observations made, allowing the ground for statistical purposes.

Ground No. 2: Treatment of River Diversion and HT Line Shifting Expenses
Facts and Arguments:
- The assessee claimed Rs. 28,79,712/- as revenue expenditure under "Mining and Project Development" expenses, which included river diversion and HT line shifting costs.
- The AO disallowed 4/5th of the expenses, treating them as capital expenditure, following the previous year's assessment.
- The First Appellate Authority upheld this disallowance.

Judgment:
- The Tribunal considered the Supreme Court’s decisions in Bikaner Gypsums Ltd. vs. CIT and Taparia Tools Ltd. vs. JCIT.
- The Tribunal noted that the expenses were necessary for mining operations and did not provide any enduring benefit, thus qualifying as revenue expenditure.
- The Tribunal allowed the entire claim of the assessee and deleted the addition, stating that the expenditure should be allowed in the year it was incurred.

ITA No. 2278/Ahd/2018 A.Y. 2015-16:
Ground No. 1 and Ground No. 2:
- Both grounds were identical to those in ITA No. 2277/Ahd/2018 for A.Y. 2014-15.
- The Tribunal applied the same reasoning and judgments mutatis mutandis, allowing both grounds for statistical purposes.

Conclusion:
- The appeals were allowed for statistical purposes, with directions for re-computation and allowance of the claimed expenditures as per the Tribunal's observations.
- This Order pronounced in Open Court on 28/07/2019.

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