2023 (2) TMI 342 - AT - Income Tax

Tribunal rules for assessee on foreign income tax, upholds CIT(A)'s decision on Section 80-IA deduction.

The Tribunal partially allowed the assessee's appeal by ruling in favor of the assessee on the taxability of foreign income and disallowance under Section ... Taxing of foreign income as taxable in India - Income earned from Malaysia and Sri Lanka - AO was of the view that in case of a resident person as per the provision of Income Tax Act, global income is taxable in India - Benefit of Double Taxation Avoidance Agreement (DTAA) entered into by India with Malaysia and Sri Lanka - HELD THAT:- We following the reasoning of the co-ordinate Bench while deciding the appeal in assessee’s own case for A.Y. 2014-15 [2022 (9) TMI 1414 - ITAT DELHI] and for similar reasons hold that A.O. was not justified in including the income earned in Malaysia and Sri Lanka as income of the assessee. We therefore direct the setting aside of the addition made by A.O and thus this ground of the assessee is allowed and Revenue is dismissed. Disallowance u/s. 14A r.w.r 8D - HELD THAT:- We find identical issue arose before the co-ordinate bench of Tribunal in assessee’s own case for A.Y. 2014-15 [2022 (9) TMI 1414 - ITAT DELHI] wherein held the average investments, the disallowance made by the Revenue u/r 8D(2)(iii) by considering 0.5% of the average investment is hereby sustained. Addition on account of advances written off - HELD THAT:- On the ground that, no details regarding advances written off has been filed by the assessee before the AO. CIT(A) held that the expenditure was already allowed in the year in which the material was purchased and the same cannot be allowed twice when the same has been returned by the sub-contractor. Ongoing through the facts, we decline to interfere with the ratio of the ld. CIT(A). The appeal of the assessee on this ground is dismissed. Before us distinguishing feature in the facts of the present case at that of A.Y. 2014-15 has been pointed out by learned AR. In such a situation we find no reason to interfere with the order of Ld. CIT(A) on this ground. Thus this ground of the assessee is dismissed. Deduction u/s. 80-IA - CIT(A) held Deduction to be allowable to the assessee - HELD THAT:- We find that identical issue arose in assessee’s own case for A.Y. 2014-15 and the co-ordinate bench of the Tribunal in [2022 (9) TMI 1414 - ITAT DELHI] has decided the issue in favour of the assessee and held appellant is entitled to claim deduction 80IA, which was wrongly denied - This ground of the Revenue is dismissed. Addition on account of provision for maintenance - CIT- A deleted the addition - HELD THAT:- We find that on identical issue the co-ordinate Bench of Tribunal in A.Y. 2014-15 [2022 (9) TMI 1414 - ITAT DELHI] has decided the issue stating that assessee has been providing for expenses to b e incurred on demobilization, maintenance and other expenses since by inception of the Company. The same has been allowed by the Department all along excep t in the Assessment Years 1985-86, 1995-96 & 2001-02, 2002-03, 2003-04, 2004- 05 and 2005-06. In these years, the A.O. disallowed the aforesaid provisions. Further, in appeal before the Ld. C IT(A), in the assessment year 1985-86, 1995-96 and 2001-02 and 2002-03, these were allowed on the basis of the aforesaid judicial analysis. Since, the decision of the ld. CIT(A) is based on the decision of the earlier years which stands upheld, we decline to interfere with the order of the ld. CIT(A) on this issue - case in the year under consideration and that of earlier years nor has placed any material on the record demonstrate that the order of the coordinate bench in assessee’s own case for earlier years has been set aside/overruled/stayed by higher judicial forum. We therefore find no reason to interfere with the order of Ld. CIT(A) - Decided against revenue. Issues Involved:1. Taxability of Foreign Income2. Disallowance under Section 14A read with Rule 8D3. Addition on Account of Advances Written Off4. Deduction under Section 80-IA5. Disallowance on Account of Provision for MaintenanceDetailed Analysis:1. Taxability of Foreign Income:- The AO included the foreign income earned in Malaysia and Sri Lanka amounting to Rs. 159,62,39,471/- in the taxable income of the assessee, based on the global income taxability provision under the Income Tax Act.- The assessee argued that the income was exempt under the Double Taxation Avoidance Agreement (DTAA) and had already paid taxes in the host countries.- The CIT(A) upheld the AO's decision to include the foreign income under normal provisions but directed deletion under MAT provisions.- The Tribunal, following its own precedent in the assessee's case for earlier years, held that the foreign income should not be included in the taxable income under both normal provisions and MAT, allowing the assessee's appeal and dismissing the Revenue's appeal.2. Disallowance under Section 14A read with Rule 8D:- The AO disallowed Rs. 4,30,42,385/- under Section 14A read with Rule 8D, stating that the assessee's suo moto disallowance of Rs. 14,58,115/- was insufficient.- The CIT(A) restricted the disallowance to Rs. 1,49,31,635/- following the Delhi High Court's decision in ACB India vs. ACIT and directed that disallowance under Section 14A cannot be added for computing book profit.- The Tribunal, referencing its earlier decision in the assessee's case for A.Y. 2014-15, upheld the CIT(A)'s decision, allowing the assessee's appeal.3. Addition on Account of Advances Written Off:- The AO disallowed Rs. 58,91,399/- on the grounds that the advances written off were not previously booked as revenue and were of a capital nature.- The CIT(A) upheld the AO's decision, noting that the advances were capital in nature.- The Tribunal, following its earlier decision in the assessee's case for A.Y. 2014-15, upheld the disallowance, dismissing the assessee's appeal.4. Deduction under Section 80-IA:- The AO denied the deduction of Rs. 33,71,10,185/- under Section 80-IA, asserting that the assessee was a contractor, not a developer.- The CIT(A), following the Tribunal's earlier decision in the assessee's case for A.Y. 2000-01 and subsequent years, allowed the deduction.- The Tribunal, referencing its earlier decision in the assessee's case for A.Y. 2014-15, upheld the CIT(A)'s decision, dismissing the Revenue's appeal.5. Disallowance on Account of Provision for Maintenance:- The AO disallowed Rs. 33,73,74,583/- for provision for maintenance, considering it unsubstantiated and an unascertained liability.- The CIT(A) deleted the disallowance, following the Tribunal's decisions in the assessee's case for earlier years.- The Tribunal, referencing its earlier decision in the assessee's case for A.Y. 2014-15, upheld the CIT(A)'s decision, dismissing the Revenue's appeal.Conclusion:- The Tribunal allowed the appeal of the assessee partially, granting relief on the issues of foreign income taxability and disallowance under Section 14A.- The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on the deduction under Section 80-IA and disallowance on account of provision for maintenance.