2022 (1) TMI 538 - AT - Income Tax

ITAT Decision: Allowance of Deduction under Section 80IA, Interest Expenditure, MAT Credit

The ITAT partly allowed Appeal ITA No. 608/Hyd/2020, dismissed Appeal ITA No. 609/Hyd/2020, and dismissed Appeals ITA Nos. 635 & 636/Hyd/2020. The ... Deduction under Chapter VI-A u/s 80IA - incurred towards sub-contract payments - HELD THAT:- As relying on own case [2022 (1) TMI 342 - ITAT HYDERABAD] we direct the AO to give/allow the deduction u/s 80IA(4) the expenditure of which was incurred towards sub-contract payments. In view of this, the ground is allowed. Disallowance u/s 14A read with rule 8D - HELD THAT:- CIT(A) after relying on various cases of ITAT as well as High Courts and Supreme Court, held that disallowance u/s 14A read with rule 8D cannot exceed the exempt income claimed by the assessee. He, therefore correctly restricted the disallowance to the extent of dividend received by the assessee i.e. ₹ 1,48,970/- and directed the AO to delete the balance amount of ₹ 50,25,20,230/-. MAT credit on deduction u/s 80IA - HELD THAT:- The finding of the CIT(A) that the MAT credit is held not to be eligible for deduction u/s 80IA as it is not directly linked to the eligible business but only comes into operation due to statutory provision. He relied on the decision of the Hon’ble Supreme Court in the case of Liberty India Vs. CIT [2009 (8) TMI 63 - SUPREME COURT] - Therefore, we find no reason to interfere with the decision and CIT(A) and upholding the same, we dismiss the grounds raised by the assessee on this count. Issues Involved:1. Disallowance of claim under Section 80IA.2. Disallowance of interest expenditure under Section 14A.3. Addition towards inflated expenditure by way of sub-contract payments.4. Eligibility of MAT credit for deduction under Section 80IA.Detailed Analysis:1. Disallowance of Claim under Section 80IA:- Facts: The assessee filed its return for AY 2012-13 declaring an income of Rs. 48,04,09,560/-. The AO disallowed the claim under Section 80IA amounting to Rs. 47,66,23,235/- due to lack of supporting details.- CIT(A) Decision: The CIT(A) allowed the claim, noting that the deduction under Section 80IA had been consistently allowed in preceding and succeeding years for the same infrastructural projects.- ITAT Decision: The ITAT upheld the CIT(A)'s decision, confirming that the projects were identical to those in previous years, and no contrary evidence was presented by the revenue.2. Disallowance of Interest Expenditure under Section 14A:- Facts: The AO disallowed Rs. 50,26,69,200/- under Section 14A, observing that the assessee had made substantial investments in equity shares and given interest-free loans to group companies while having interest-bearing loans.- CIT(A) Decision: The CIT(A) restricted the disallowance to the extent of dividend received by the assessee, i.e., Rs. 1,48,970/-, and directed the AO to delete the balance amount.- ITAT Decision: The ITAT found no infirmity in the CIT(A)'s order and upheld the decision, dismissing the ground raised by the assessee.3. Addition Towards Inflated Expenditure by Way of Sub-Contract Payments:- Facts: The AO made an addition of Rs. 5,45,60,000/- towards inflated expenditure by observing several discrepancies, including unexplained bank accounts, immediate cash withdrawals, and lack of books of accounts by subcontractors.- CIT(A) Decision: The CIT(A) upheld the addition, noting that the assessee used confidante persons and other concerns to make inflated sub-contract payments and withdrew surplus funds through trusted employees.- ITAT Decision: The ITAT directed the AO to allow the deduction under Section 80IA on the enhanced expenditure towards sub-contract payments, following a similar decision in the assessee's own case for earlier AYs. The ITAT noted that the disallowed expenditure related to the business activity and thus qualified for deduction under Section 80IA as per CBDT Circular No. 37/2016.4. Eligibility of MAT Credit for Deduction under Section 80IA:- Facts: For AY 2013-14, the AO restricted the claim of deduction under Section 80IA by Rs. 24,06,93,000/-, including MAT credit of Rs. 2,48,96,334/-.- CIT(A) Decision: The CIT(A) confirmed the disallowance of MAT credit for deduction under Section 80IA, citing that MAT credit is not directly linked to the eligible business but arises due to statutory provisions.- ITAT Decision: The ITAT upheld the CIT(A)'s decision, agreeing that MAT credit is not eligible for deduction under Section 80IA, relying on the Supreme Court decision in Liberty India vs. CIT.Conclusion:- Appeal ITA No. 608/Hyd/2020: Partly allowed.- Appeal ITA No. 609/Hyd/2020: Dismissed.- Appeals ITA Nos. 635 & 636/Hyd/2020: Dismissed.The ITAT's decisions were pronounced on January 11, 2022.