2020 (12) TMI 188 - AT - Income Tax

Tribunal upholds deductions for scrap sales and disallows Rule 8D for lack of objective satisfaction.

The Tribunal upheld the Commissioner of Income Tax (Appeals) [CIT(A)] decision in favor of the assessee regarding the deduction under Section 80IC for ... Deduction u/s 80IC - income earned from sale of scrap - assessee in the present case is a company which is engaged in manufacture and sale of insulated wires, cables, etc - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to the earlier years including A.Y. 2014-15, we respectfully follow the orders of Tribunal for the said years and uphold the order of ld. CIT(A) directing the Assessing Officer to allow the claim of assessee for deduction u/s 80IC of the Act in respect of sale of scrap. The appeal of the Revenue dismissed. Disallowance u/s 14A read with rule 8D - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relating thereto are similar to A.Ys.2008-09 to 2011-12, we respectfully follow the common order of the Tribunal [2017 (11) TMI 1929 - ITAT PUNE] deciding a similar issue in favour of the assessee for the said years by relying inter-alia, on the decision of the Hon‟ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Ultra Tech Cement Ltd. [2017 (2) TMI 1005 - BOMBAY HIGH COURT] and delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) u/s 14A of the Act read with Rule 8D of the Rules. - Decided in favour of assessee. Issues Involved:1. Deduction under Section 80IC of the Income-tax Act, 1961 for income from the sale of scrap.2. Disallowance under Section 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962.Detailed Analysis:Issue 1: Deduction under Section 80IC for Income from Sale of Scrap- Background: The assessee, a company engaged in the manufacture and sale of insulated wires and cables, claimed a deduction under Section 80IC of the Income-tax Act, 1961, including income from the sale of scrap amounting to Rs. 2,97,84,396/- for the assessment year (A.Y.) 2012-13. The Assessing Officer disallowed this claim, arguing that scrap generated during manufacturing was not a by-product and thus not eligible for deduction.- CIT(A) Decision: The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the disallowance by following previous Tribunal orders in the assessee's own case for earlier years (A.Ys. 2002-03, 2003-04, and 2004-05), where a similar deduction under Section 80IB was allowed.- Tribunal Decision: The Tribunal upheld the CIT(A)’s decision, noting that the issue was covered in favor of the assessee by various Tribunal decisions, including the latest for A.Y. 2014-15. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the Revenue’s appeal for A.Y. 2012-13.Issue 2: Disallowance under Section 14A read with Rule 8D- Background: For A.Y. 2012-13, the assessee claimed exemption on dividend income of Rs. 12.52 crores and offered a disallowance of Rs. 3,47,208/- for expenses related to earning this income. The Assessing Officer, applying Rule 8D, computed the disallowance at Rs. 1,16,92,175/-, leading to an additional disallowance of Rs. 1,13,44,967/-.- CIT(A) Decision: The CIT(A) confirmed the disallowance made by the Assessing Officer.- Tribunal Decision: The Tribunal noted that in the assessee's own case for earlier years (A.Ys. 2008-09 to 2011-12), a similar disallowance was deleted by the Tribunal. The Tribunal emphasized that the Assessing Officer must record objective satisfaction regarding the incorrectness of the assessee’s claim before invoking Rule 8D, which was not done in this case. Citing the Hon’ble Bombay High Court’s decision in the case of Ultra Tech Cement Ltd., the Tribunal deleted the disallowance for A.Y. 2012-13 and similarly for A.Y. 2014-15, as the facts were identical.Conclusion:- The appeal of the Revenue for A.Y. 2012-13 was dismissed.- The appeals of the assessee for A.Ys. 2012-13 and 2014-15 were allowed.Order Pronounced: The order was pronounced in the open Court on 2nd December 2020.