2022 (5) TMI 1272 - AT - Income Tax

Appeals dismissed, CIT(A) decisions upheld on various issues incl. salary, deductions, interest, & expenses

The Tribunal dismissed both appeals, upholding the CIT(A)'s decision on all contested issues, including disallowance of unpaid leave salary, education ... Disallowance of education and secondary and higher secondary cess u/s. 40(a)(ii) - HELD THAT:- D.R. appearing for the Revenue has fairly conceded that this issue is being squarely covered by CBDT Circular No. 91/58/66 – ITJ(19) dated May 18, 1967 operative w.e.f. 1962-63 wherein it is categorically held that “when the matter came up before the Select Committee, it was decided to omit the word “cess” from the clause. The effect of the omission of the word “cess” is that only taxes paid are to be disallowed in the assessments for the years 1962-63 onwards”. Following the above submission of the Ld. D.R. Ground No. 1 is hereby dismissed. Deduction under Section 80IA being profit from power generating unit - Claim rejected as not been made in the original return filed by the assessee, but only in the revised return filed by the assessee, therefore, invoking Section 80AC of the Act, the AO denied the benefit to the assessee - HELD THAT:- CIT(A) has observed that the claim of deduction under Section 80IA was allowed by the AO for the subsequent A.Y. 2013-14 and copy of the said assessment order was placed before the Ld. CIT(A), wherein the AO has not disputed the deduction of claim under Section 80IA of the Act. Even assuming the major claim has been made only during the revised return of income that issue is also answered in favour of the assessee by the Coordinate Bench of this Tribunal in the case of Parameshwar Cold Storage Pvt. Ltd. [2009 (7) TMI 878 - ITAT, AHMEDABAD] In the above circumstances we have no hesitation in confirming the order passed by the Ld. CIT(A) and the ground raised by the Revenue is hereby rejected. Disallowance of claim of deduction under Section 80JJA - AO hold that the claim of deduction under Section 80JJA was not made in the original return of income, but only in the revised return of income, therefore, denying the benefit of the deduction - CIT-A allowed the claim - HELD THAT:- A.R. appearing for the assessee supported the order of the CIT(A) and also submitted that the Revised return were been filed within the prescribed time limit and also before completion of the regular assessment. Therefore, the assessee is eligible for deduction under 80JJA. We do not find any infirmity in the order passed by the Ld. CIT(A) and this issues also like the 80IA claim made by the assessee in the revised return, which will be squarely applicable to this deduction made under Section 80JJA. Thus, we reject the ground raised by the Revenue and hence, dismissed. Addition of interest income tax refund - AO hold that the assessee received interest during the Financial Year, however, the same was not offered as income by the assessee - HELD THAT:- D.R. appearing for the Revenue fairly accepted that the CIT(A) has not deleted the interest amount, however, directions are being given to verify the refund status of the assessee. We do not find any infirmity in the direction given by the Ld. CIT(A). Thus, the ground no. 4 raised by the Revenue is hereby dismissed. Disallowance of interest expenses as per computation u/s 14A r.w.r. 8D - suo moto addition made by assessee - HELD THAT:- We do not labour our self in adjudicating the issue, since the same has been settled by Hon’ble Supreme Court of India in the case of Maxop Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] and PCIT vs. State Bank of Patiala,[2018 (11) TMI 1565 - SC ORDER] This ground raised by the Revenue is hereby dismissed. Issues Involved:1. Disallowance of unpaid leave salary.2. Disallowance of education cess.3. Disallowance of deduction under Section 80IA.4. Disallowance of deduction under Section 80JJA.5. Addition of interest on income tax refund.6. Disallowance of interest expenses under Section 14A r.w.r. 8D.Detailed Analysis:1. Disallowance of unpaid leave salary:The assessee withdrew the appeal concerning the disallowance of unpaid leave salary of Rs. 26,62,000/-. Consequently, the appeal filed by the assessee was dismissed.2. Disallowance of education cess:The Revenue challenged the deletion of the disallowance of education and secondary and higher secondary cess of Rs. 21,25,000/- under Section 40(a)(ii). The Tribunal noted that this issue was covered by CBDT Circular No. 91/58/66-ITJ(19) dated May 18, 1967, which clarified that only taxes paid are to be disallowed, not cess. Therefore, the Tribunal dismissed this ground of appeal.3. Disallowance of deduction under Section 80IA:The Revenue contested the deletion of the disallowance of deduction under Section 80IA amounting to Rs. 86,04,245/-. The AO had denied this deduction because it was claimed in the revised return and not in the original return, invoking Section 80AC. However, the CIT(A) allowed the claim, noting that the AO had accepted similar claims in subsequent years and that the revised return was filed within the permissible time. The Tribunal upheld the CIT(A)'s decision, referencing the Coordinate Bench judgment in the case of Parameshwar Cold Storage Pvt. Ltd. vs. ACIT, which held that claims could be made in revised returns if the original return was timely filed. Thus, this ground was rejected.4. Disallowance of deduction under Section 80JJA:The Revenue also contested the deletion of the disallowance of deduction under Section 80JJA amounting to Rs. 48,18,503/-. The AO had denied this deduction on the same grounds as the Section 80IA claim. The CIT(A) allowed the deduction, stating that the revised return filed within the prescribed time limit was valid. The Tribunal found no infirmity in the CIT(A)'s order and dismissed this ground, applying the same rationale as for the Section 80IA deduction.5. Addition of interest on income tax refund:The AO added Rs. 15,32,971/- as interest on income tax refund, which the assessee had not offered as income, claiming no such interest was received. The CIT(A) directed the AO to verify the details of the interest received and its subsequent status. The Tribunal upheld this direction, finding no infirmity in the CIT(A)'s approach, and dismissed this ground.6. Disallowance of interest expenses under Section 14A r.w.r. 8D:The AO disallowed Rs. 5,68,926/- under Section 14A r.w.r. 8D, while the assessee had already disallowed Rs. 3,35,877/- suo-moto. The CIT(A) confined the disallowance to the amount self-assessed by the assessee, noting that the AO did not record satisfaction as required under Section 14A(2) and that the interest expenses were not directly attributable to earning exempt income. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court rulings in Maxop Investment Ltd. vs. CIT and PCIT vs. State Bank of Patiala, and dismissed this ground.Conclusion:The Tribunal dismissed both the appeals filed by the assessee and the Revenue, upholding the CIT(A)'s order on all contested grounds.