TaxTMI 
TaxTMI 
2019 (2) TMI 1977
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....on of the Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore (hereinafter referred to as AO) in disallowingthe claim of contract expenses of Rs. 2.55 Cr by treating the same as capitalloss of the prior period. 2. On the facts and circumstance of the case and in law, the learned CIT(A)has failed to appreciate and ought to have held that the appellant had incurred said project expenses in the course of its business and in terms of the EPC contract and had incurred loss in the said project due to substantial increasein material cost, subcontractors cost, etc. 3. On the facts and circumstance of the case and in law, the learned CIT(A) has failed to appreciate and ought to have held that the appellant had earned /received the contract receipt from the said Project contract in the earlier years and had offered the same for tax in those earlier years and the appellant hadto bear the additional cost and complete the projects to avoid liquidateddamages. 4. On the facts and circumstance of the case and in law, the learned CIT(A) haserred in not considering that the Appellant had made a provision of Rs. 3.10Crores in the books of account of Assessment Year 2009-10 for pen....
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....he case and in law, the Appellant prays that AO be directed to restrict the disallowance U/s 14A of Rs. 25,86,000/-being to the amount of exempt income earned during the year. Ground II: The Appellant craves leave to add, alter and/or amend all or any of the foregoing grounds of appeal." 5. In this year also, the assessee has raised two additional grounds but it was submitted by ld. AR of assessee that these additional grounds are not pressed and accordingly, these additional grounds are rejected as not pressed and we are not reproducing the additional grounds. 6. The grounds raised by the assessee for Assessment Year 2013-14 in ITA No. 2148/Bang/2016 are as under. "Ground I : Disallowance u/s 14A 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance of Rs. 31,32,540/- u/s.14A as expenses incurred for earning exempt income of Rs.Nil. 2. On the facts and circumstance of the case and in law, the learned CIT(A) failed to appreciate and ought to have held that the Appellant had in the course of assessment proceedings by way of revised computation of income has claimed that disallowance U/s 14A of the Act should be....
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....entirely different from the old provisions. A notice under sub-section (2), which will be issued only in cases picked up for scrutiny, is now issued only to ensure that the assessee has not understated his income or has not computed excessive loss or has not underpaid the tax in any manner while furnishing his return of income." 10. On this aspect of the matter, the ld. AR of assessee has placed reliance on various judicial pronouncements including judgement of Hon'ble Gujarat High Court rendered in the case of CIT Vs. UTI Bank Ltd. as reported in [2014] 223 Taxman 157 (Gujarat) and reliance was also placed on the Tribunal order rendered in the case of Rupee Finance & Management (P.) Ltd. Vs. DCIT as reported in [2017] 81 taxmann.com 249 (Mumbai-Trib.). For the sake of ready reference, we reproduce para no. 9 of the Tribunal order rendered in the case of Rupee Finance & Management (P.) Ltd. Vs. DCIT (supra). The same is as under. "9. We have gone through the orders passed by lower authorities and submissions made by both the sides before us. It is well settled and has been echoed so at number of occasions by Hon'ble Supreme Court and many other courts of our country that obj....
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....e u/s 14A is not in accordance with law." 11. As per this para of the Tribunal order in which the Tribunal has considered various judgements of Hon'ble Apex Court and Hon'ble Delhi High Court, we feel that there is no merit in this argument of ld. DR of revenue that disallowance u/s. 14A cannot be lower than the amount disallowed by the assessee while filing the return of income if as per law, lower disallowance is justified. This argument of ld. DR of revenue is rejected. 12. Now we examine the applicability of the Tribunal order cited by ld. AR of assessee having been rendered in the case of ACIT Vs. Vireet Investment (P.) Ltd. (supra). As per this order of the Special Bench of the Tribunal, it was held as per Para 11.16 of this order of Special Bench of the Tribunal that only those investments are to be considered for computing average value of investment which yielded exempt income during the relevant year. Respectfully following this order of Special Bench of the Tribunal, we direct the AO to determine the amount of disallowance to be made u/s. 14A on this basis. 13. In the result, both the appeals field by the assessee for Assessment Years 2010-11 and 2011-12 are partly al....