TaxTMI 
TaxTMI 
2020 (1) TMI 953
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....50,554/- out of Rs. 76,311/- made by ld.AO u/s14A r.w.r 8D of the Income-Tax Rules, 1962. 3. Alternatively and without prejudice to the above, learned CIT(A) ought to have appreciated that interest cannot be disallowed simultaneously u/s.36(1)(iii) and S.14A of the Act. 4. Alternatively and without prejudice to the above, learned CIT(A) has erred in law and on facts of the case in confirming the action of learned AO in adding back disallowance u/s14A r.w.r 8D amounting to Rs. 50,554/- to the book profits calculated u/s.115JB of the Act. 5. The ld.CIT(A) has erred in law and on the facts of the case in confirming the action of ld.AO in adding Rs. 1,70,127/- on account of income tax refund. 6. Both the power authorities have passed the orders without properly appreciating the facts and that they further erred in grossly ignoring various submission, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The Ld.CIT(A) has erred in law and in facts of the c....
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.... 6. The Ld. AR before us submitted that there was no extension in the business of the assessee for the purchase of the machinery. Therefore the interest expense is revenue in nature. 7. On the other hand, the Ld. DR vehemently supported the order of the authorities below. 8. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was the acquisition of the new machinery out of the borrowed fund which was not put to use during the year under consideration. But the question arises whether such acquisition of machinery amounts to the extension of the existing business. None of the authorities below has put some light on this aspect. As such the proviso to section 36(1)(iii) of the Act mandates to capitalize the amount of interest on the machine acquired out of the borrowed fund provided such acquisition results in the extension of the business. The relevant proviso to section 36(1)(iii) of the Act reads as under: 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (i)XXXXXXXXXXXXXXXXXXXXXXXXXX....
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....sagreed with the contention of the assessee and invoked the provisions of section 14A read with rule 8D of Income Tax Rule for the purpose of the disallowance as detailed under: Direct expenses Nil Interest Expenses Rs. 63,504.00 Administrative Expenses Rs. 12,807.00 Total Rs. 76,311.00 9.3. In view of the above, the AO disallowed the sum of Rs. 76,311.00 and added to the total income of the assessee. 9.4. Aggrieved assessee preferred an appeal to the Ld. CIT (A) who also confirmed the order of the AO in part by restricting the disallowance to the extent of exempt income. Being aggrieved by the order of the Ld. CIT-A, the assessee is in appeal before us. 10. The Ld. AR before us submitted that the amount of investment shown by it is less than the amount of own fund of the assessee. Therefore there cannot be any disallowance on account of interest expenses. 11. On the other hand, the Ld. DR vehemently supported the order of the authorities below. 12. We have heard the rival contentions of both the parties and perused the materials available on record. Indeed, the own fund of the assessee exceeds the amount of investment which is detailed as under: "Asst.YEAR INV....
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....re us submitted that there cannot be any application of the provisions for section 14A r.w.r.8D Rules while determining the income under section 115JB of the Act. On the contrary, the ld. DR vehemently supported the order of the aythorities below. 14. We have heard the rival contentions of both the parties and perused the materials available on record. Regarding the addition in the book profit under section 115JB of the Act, we note that the AO in the instant case has made the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules for Rs. 50,554/- while determining the income under normal computation of income. Further, the AO while determining the income under Minimum Alternate Tax (MAT) as per the provisions of section 115JB of the Act, has added the disallowance made under the normal computation of Income under section 14A r.w.r. 8D of Income Tax Rule for Rs. 50,554/- in pursuance to the clause (f) of explanation 1 to section 115JB of the Act. 14.1. However, we note that in the recent judgment of Special Bench of Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cann....
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....echanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts & circumstances, we feel that ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income under the clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the condition that the disallowanc....