2021 (10) TMI 572 - AT - Income Tax

ITAT upholds CIT(A) orders, confirms full Section 80IA deduction, restricts Section 14A disallowance

The Income Tax Appellate Tribunal (ITAT) dismissed both appeals by the revenue, confirming the Commissioner of Income Tax (Appeals) [CIT(A)]'s orders. The ... Quantum of deduction allowed u/s 80IA - assessee has declared loss under the head “income from business” and it has earned interest income which was declared under the head Income from other sources - A.O. took the view that the deduction u/s 80IA of the Act has been allowed against interest income assessed under “Income from other sources” - HELD THAT:- The Hon’ble Supreme Court in the case of CIT vs. Reliance Energy Ltd (2021 (4) TMI 1237 - SUPREME COURT] held that there is no limitation on deduction admissible under Section 80-IA of the Act to income under the head ‘business’ only. Hence the view expressed by the AO in the instant case was not right and accordingly, we confirm the order passed by Ld CIT(A) on this issue. Disallowance made u/s 14A - CIT(A) restricted the disallowance to the amount of exempt income by following the decision rendered by Hon’ble Karnataka High Court in the case of Pragathi Krishna Grameena Bank [2018 (6) TMI 1283 - KARNATAKA HIGH COURT ] and also various Tribunal decisions - HELD THAT:- We notice that the Ld CIT(A) has decided this issue following the binding decision of Hon’ble jurisdictional Karnataka High Court. Hence we do not find any reason to interfere with his decision rendered on this issue. Issues Involved:1. Quantum of deduction allowed under Section 80IA of the Income-tax Act, 1961.2. Relief granted in respect of addition made under Section 14A of the Income-tax Act, 1961.Detailed Analysis:Issue 1: Quantum of Deduction Allowed Under Section 80IA of the Income-tax Act, 1961Assessment Year 2013-14:The assessee, engaged in the business of generating and transmitting electric power through Hydal and Solar Renewable energy sources, claimed a deduction under Section 80IA for Unit No.4. The Assessing Officer (AO) initially allowed this deduction but later reopened the assessment, contending that the deduction was wrongly allowed against interest income assessed under 'Income from other sources.' The AO disallowed the deduction by relying on the Supreme Court decision in Liberty India Vs. CIT, which was not applicable to the facts of this case as it dealt with duty drawback.The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the deduction, citing various judicial precedents including Jindal Aluminium Ltd., Canara Work Shops Pvt. Ltd., and Dewan Kraft System Pvt. Ltd., which supported the view that the loss of non-80IA units should not be adjusted against the profits of the 80IA unit. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s decision, referencing the Supreme Court's ruling in CIT vs. Reliance Energy Ltd, which stated that there is no limitation on deduction admissible under Section 80IA to income under the head 'business' only.Assessment Year 2014-15:The AO reduced the deduction under Section 80IA by excluding interest income, but the CIT(A) deleted the disallowance, consistent with the previous year’s decision. The ITAT confirmed the CIT(A)'s order, reiterating that the gross total income remains the same regardless of the classification of interest income, thus entitling the assessee to the full deduction as per the Supreme Court's decision in Reliance Energy Ltd.Issue 2: Relief Granted in Respect of Addition Made Under Section 14A of the Income-tax Act, 1961Assessment Year 2014-15:The AO disallowed Rs. 1,33,45,993 under Section 14A, while the assessee had declared exempt income of Rs. 3,32,140 and did not disallow any amount under Section 14A. The CIT(A) restricted the disallowance to the amount of exempt income by following the Karnataka High Court's decision in Pragathi Krishna Grameena Bank and various Tribunal decisions. The ITAT upheld the CIT(A)’s decision, noting that it was in line with the binding precedent of the jurisdictional High Court.Conclusion:Both appeals by the revenue were dismissed. The ITAT confirmed the CIT(A)'s orders, allowing the full deduction under Section 80IA without adjusting the losses of non-80IA units and restricting the disallowance under Section 14A to the amount of exempt income. The decisions were consistent with judicial precedents and the Supreme Court's rulings.