ITAT ruling: Disallowance under sec 14A, 115JB upheld; issue under sec 37(1) for review

The ITAT partially allowed the revenue's appeal, upholding decisions on disallowance under section 14A and adjustment to book profit under section 115JB based on precedents. It also upheld the deletion of disallowance of additional depreciation but set aside the issue of disallowance of expenditure under section 37(1) for further review by the Assessing Officer. The judgment was pronounced on 12th January 2021.

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Issues:
1. Disallowance under section 14A of the Act r.w.r 8D of the Income Tax Rules, 1962.
2. Adjustment made to the book profit under section 115JB of the Act on account of expenses relatable to exempt income.
3. Disallowance of additional depreciation claimed by assessee under section 32(1)(iia) of the Act.
4. Disallowance of expenditure on account of sales and services under section 37(1) of the Act.

Issue 1 - Disallowance under section 14A:
The revenue appealed the order of CIT(A) restricting the disallowance under section 14A to the extent of exempt income. The Assessing Officer disallowed &8377; 29.01 lakh, but CIT(A) restricted it to &8377; 3,000 based on the decision of the Supreme Court in Maxopp Investment Ltd. case. The ITAT confirmed CIT(A)'s decision, citing the same case law, and dismissed the revenue's appeal.

Issue 2 - Adjustment to book profit under section 115JB:
The revenue challenged the CIT(A)'s deletion of the adjustment made to the book profit under section 115JB due to expenses related to exempt income. CIT(A) had already deleted the disallowance citing precedents and the decision of a Special Bench. The ITAT upheld CIT(A)'s decision, stating it was covered by the Special Bench ruling, and dismissed the revenue's appeal.

Issue 3 - Disallowance of additional depreciation:
The revenue disputed the CIT(A)'s deletion of the disallowance of additional depreciation claimed under section 32(1)(iia) of the Act. The ITAT upheld CIT(A)'s decision based on a previous Tribunal ruling in the assessee's case for AY 2013-14, allowing the additional depreciation, and dismissed the revenue's appeal.

Issue 4 - Disallowance of expenditure under section 37(1):
The revenue contested the CIT(A)'s deletion of the disallowance of expenditure on sales and services under section 37(1) of the Act. CIT(A had set aside the issue for fresh consideration by the Assessing Officer, who was directed to verify the nature of the expenses. The ITAT found no fault in CIT(A)'s decision but directed the AO to verify the expenses before making a final determination. Hence, this issue was set aside for further review.

In conclusion, the ITAT partly allowed the revenue's appeal for statistical purposes, confirming some decisions while setting aside one issue for further examination. The judgment was pronounced on 12th January 2021.

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