2020 (10) TMI 34 - AT - Income Tax

Tribunal decision on revenue and assessee appeals: Disallowed Section 14A re-computation, upheld Section 80IA(4) deduction.

The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal. The Assessing Officer was directed to re-compute the disallowance ... Entitlement of claim of deduction u/s 80IA - activities undertaken by the assessee would fall within the meaning of the term infrastructure facility as defined in Clause (d) of the ‘Explanation’ to Sec.80IA(4) ?- HELD THAT:- Tribunal while disposing off the appeal in the assessee’s own case for A.Y. 2013-14 [2019 (4) TMI 544 - ITAT MUMBAI] had after relying on the judgment of CIT Vs M/s Container Corporation of India Ltd. [2018 (5) TMI 359 - SUPREME COURT] concluded, that the CIT(A) was right in holding that the assessee was entitled for deduction under Sec.80IA(4) - the issue as regards the assessee’s entitlement for claim of deduction under Sec.80IA(4) is squarely covered by the aforesaid judicial pronouncements and also the orders passed in the assessee’s own case. Accordingly, finding no infirmity in the order of the CIT(A) who had rightly concluded that the assessee was duly entitled for claim of deduction u/s 80IA. Addition in Book Profit u/s 115JB on account of disallowance u/s 14A - HELD THAT:- As in the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] A.O while computing the ‘book profit’ under Sec.115JB of the Act shall not resort to the computation as contemplated under Sec.14A r.w. Rule 8D. As regards the claim of the ld. A.R that as the investment in the exempt yielding investments were made by the assessee out of its self-owned funds and no part of the interest bearing funds were therein utilised, therefore, no disallowance of any part of the interest expenditure was called for u/s 14A r.w Rule 8D(2)(iii), we find ourselves principally to be in agreement with the same proposition so canvassed by the ld. A.R. before us. But then, the said claim of the assessee would require verification of the factual position. If the aforesaid claim of the assessee that it had sufficient self-owned funds for making the investments in the exempt income yielding investments is found to be in order, then no disallowance u/s 14A of any part of the interest expenditure would be called for in its hands. Our aforesaid view is fortified by the order in the case of CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Addition in Book Profit under Section 115JB on account of disallowance under Section 14A of the Income Tax Act, 1961.2. Entitlement for deduction under Section 80IA(4) of the Income Tax Act, 1961.Detailed Analysis:1. Addition in Book Profit under Section 115JB on account of disallowance under Section 14A:The assessee had shown exempt income from dividends amounting to Rs. 6,91,66,120/- and had disallowed Rs. 1,00,055/- as expenses incurred to earn this income. The Assessing Officer (A.O) held that the disallowance should be computed under Section 14A read with Rule 8D, resulting in a disallowance of Rs. 19,16,309/-. Since the assessee had already offered Rs. 1,00,055/-, the A.O restricted the addition to Rs. 18,16,254/- and added this disallowance to the 'book profit' under Section 115JB.The CIT(A) observed that the computation of 'book profit' under Clause (f) of 'Explanation 1' to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D, as per the Special Bench of ITAT, Delhi in the case of ACIT Vs. Vireet Investment Pvt. Ltd. The CIT(A) directed the A.O to re-compute the disallowance under Section 14A after considering only those investments which had yielded exempt income during the year.The Tribunal upheld the CIT(A)'s reliance on the Special Bench decision in Vireet Investment Pvt. Ltd., confirming that the A.O should not resort to the computation under Section 14A read with Rule 8D while computing 'book profit' under Section 115JB. The Tribunal also agreed that if the assessee made investments from self-owned funds, no disallowance of interest expenditure under Section 14A read with Rule 8D(2)(iii) would be applicable, subject to verification of the factual position.2. Entitlement for deduction under Section 80IA(4):The assessee claimed a deduction of Rs. 87,96,80,010/- under Section 80IA(4) for operating a Container Freight Station (CFS). The A.O disallowed this claim, reasoning that the CFS was neither a port nor an Inland Port and thus not an eligible infrastructural facility as per the 'Explanation' to Section 80IA(4). The A.O also referred to previous assessments and CBDT clarifications which supported this view.The CIT(A) observed that the Tribunal in the assessee's own case for A.Y. 2012-13 had vacated the disallowance and that the Hon'ble Supreme Court in CIT Vs. Container Corporation of India Ltd. had held that ICDs were Inland ports eligible for deduction under Section 80IA. The CIT(A) relied on these decisions and vacated the disallowance.The Tribunal found that the issue was covered by the consolidated order of the Tribunal in the assessee's own case for A.Y. 2010-11 and A.Y. 2011-12, where it was concluded that CFS activities were infrastructure facilities as defined under Section 80IA(4). The Tribunal noted that the revenue had admitted before the Hon'ble High Court of Bombay that the activities undertaken by the assessee fell within the meaning of infrastructure facility as defined in Clause (d) of the 'Explanation' to Section 80IA(4). The Tribunal upheld the CIT(A)'s order, confirming the assessee's entitlement for deduction under Section 80IA(4).Conclusion:The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal. The A.O was directed to re-compute the disallowance under Section 14A without resorting to Rule 8D for 'book profit' under Section 115JB, and to verify the factual position regarding the use of self-owned funds for investments. The assessee's entitlement for deduction under Section 80IA(4) was upheld based on previous judicial pronouncements and orders in the assessee's own case.