TaxTMI 
TaxTMI 
2020 (9) TMI 910
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....w.r. 8D of the Act. 2. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 8,35,560/- made on account of disallowance of prior period expenses. 3. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 2,36,63,532/- made u/s.41(1) of the Act on account of cessation of liability. 4. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 46,98,154/- considering the professional fees as revenue expenditure. On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. 3. The 1st issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 2,11,98,182 under section 14A read with rule 8D of Income Tax Rule. 4. ....
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....the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act." 7.1 The above provision requires to make the disallowance of the expenses in relation to the income which does not form part of the total income under this Act. The term used under section 14A of the Act "amount of expenditure incurred in relation to such income" implies that the expenditure cannot exceed the amount of exempted income. 7.2 In holding so we find support and guidance from the judgment of Hon'ble Delhi High Court in the case of Joint investments Private Ltd versus CIT reported in 372 ITR 694 wherein it was held as under: "By no stretch of imagination can s. 14A or r. 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in s. 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case." 7.3 We also note that in the identical facts and circumstances the Hon'ble jurisdic....
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....f the Rules amounting to Rs. 2,11,98,182/- which was restricted by the learned CIT (A) to the extent of exempted income i.e. 11,37,500/- only. In other words the addition of Rs. 2,00,60,682/- was deleted by the learned CIT (A). The grievance of the revenue is against the deletion of the addition made by the learned CIT (A) for Rs. 2,00,60,682/- only. But on perusal of the ground of appeal raised by the revenue, the revenue has registered grievance for amount of Rs. 2,11,98,182/- which is not the correct amount. It is because out of the total disallowance/addition made by the AO, a sum of Rs. 11,37,500/- was confirmed by the learned CIT (A). However, at the time of hearing neither the learned AR nor the learned DR has brought to our notice about such mistake in the amount mentioned in the ground of appeal raised by the revenue. Accordingly, we direct the AO to restrict the amount of disallowance for Rs. 11,37,500/- in giving effect order. Hence the ground of appeal of the Revenue is dismissed. 8. The 2nd issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 8,35,560/- on account of prior period expenses. 9. The assessee i....
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.... under section 43B of the Act whereas the issue on hand relates to the deduction of excise duty which is an allowable deduction under the provisions of section 43B of the Act. 13.2 In view of the above, we do not find any infirmity in the order of the learned CIT (A) and accordingly we decline to interfere in his order. Thus the ground of appeal of the revenue is dismissed. 14. The next issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 2,36,63,562/- under section 41(1) of the Act. 15. The AO during the assessment proceedings found that there are certain sundry creditors in the nature of trading liabilities shown by the assessee in its books of accounts which are outstanding for a period exceeding 3 years. Accordingly, the AO was of the view that such creditors in the nature of trading liability are not traceable and therefore liable to tax under the provisions of section 41(1) of the Act. Thus the AO treated the impugned liability of sundry creditors as ceased to exist which is deemed income under the provisions of section 41(1) of the Act. Thus the AO disallowed the same and added to the total income of the asses....
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.... whatsoever, any amount in respect of such ^16 loss or expenditure ^16 or some benefit in respect of such trading liability ^16 by way of remission or cessation thereof ^16, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained ^16, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof ^16, the amount obtained ^16 by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. 19.1 A plain reading of the aforesaid provisions reveals that it is applicable....
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....in its balance sheet, the same could not be treated as cessation of liabilities. Merely because the liabilities were outstanding for last many years, it could not be inferred that the said liabilities has ceased to exist. The Tribunal had rightly observed that the Assessing Officer would have to prove that the assessee had obtained the benefits in respect of such trading liabilities by way of remission or cessation thereof. Merely because the assessee obtained benefit of reduction in the earlier years and balance was carried forward in the subsequent year, it would not prove that the trading liabilities of the assessee had become non-existent. [Para 15] 19.4 In view of the above we do not find any infirmity in the order of learned CIT (A) and accordingly decline to interfere in his order. Hence the ground of appeal of the revenue is dismissed. 20. The last issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 46,98,154/- on account of professional fees. 21. The assessee in the year under consideration has claimed professional fees amounting to Rs. 46,98,154/- only. As per the assessee such professional fees was incurr....
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....cts and in the circumstances of the case, the CIT(A) erred in upholding the addition of Rs. 77,826 on account of disallowance of Employees contribution to Provident Fund. 2. On the facts and in the circumstances of the case, the CIT(A) erred in upholding disallowance of Rs. 11,37,500 out of the total disallowance of Rs. 2,11,98,182 made by the Assessing Officer u/s.14A read with section 115JB i.e the Book Profit. 3. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objection either before or during the course of hearing of the same. 27. The 1st issue raised by the assessee is that learned CIT (A) erred in confirming the disallowance Rs. 77,826/- on account of employees PF contribution. 28. At the outset, the learned AR for the assessee before us agreed that the issue stands covered against the assessee by virtue of the judgment of Hon'ble Gujarat High Court in the case of CIT versus GSRTC reported in 366 ITR 170 . On the other hand, the learned DR vehemently supported the order of the authorities below. 29. Heard the rival contentions of both the parties and perused the materials available on record. The deduc....
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....f the Act read with rule 8D cannot be imported while determining the income under the provisions of section 115 JB of the Act. 33. On the other hand the learned DR vehemently supported the order of the authorities below. 34. We have heard the rival contentions of both the parties and perused the materials available on record. The AO in the instant case has made the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules for Rs. 2,11,98,182/- 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. 2,11,98,182/- in pursuance to the clause (f) of explanation 1 to section 115JB of the Act which was restricted to Rs. 11,37,500/- by the ld. CIT-A. 34.1 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 cannot be the subject matter of disallowances ....