×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
14-01-2020, Pepsico India Holdings, Section 115JB, 14A, Tribunal Delhi
Aggrieved by the order dated 20/3/2015 in appeal No. 439/11-12 passed by the learned Commissioner of Income Tax (Appeals)-7, Delhi (“Ld. CIT(A)”), for the assessment year 2008-09, in the case of M/s PepsiCo India Holdings (P) Ltd (“the assessee”), both the assessee and Revenue preferred these appeals. Since these appeals emanate from the same order, we find it just and convenient to dispose of by way of this common order.
2. Brief facts of the case are that assessee is in the business of manufacturing and trading of snacks, aerated and non-aerated beverage products and export and trading of such products. For the assessment year 2008-09 it had filed its return of income on 30/9/2008 showing the total income as nil after setting off brought forward depreciation/loss of Rs. 1,01,40,76,789/-under the normal provisions of the Income Tax Act, 1961 (for short “the Act”) and Rs. Nil u der section 115 JB of the Act after setting off lower of the brought forward depreciation/business loss, profits. Assessee revised the return on 1/9/2009 declaring a total income of nil after setting off brought forward depreciation/loss of Rs.104,75,87,646/-and also nil under section 115JB of the Act. Assessment was complete by order dated 30/12/2011 under section 143(3) of the Act after making several additions which includes, for the pu pose of these appeals, Rs. 4,67,23,766/-under section 14A of the Act read with Rule 8D of the Income Tax Rules1962 (“the Rules”), disallowance on account of provision for leave encashment and provision for gratuity while computing the book profits u/s. 115JB of the Act, disallowance on account of furnishing expenses of Tropicana beverage merger, disallowance of excess depreciation on computer peripherals, disallowance of depreciation on non-compete fees under normal computation and the disallowance of depreciation on account of merger with the Tropicana beverage company under normal computation.
3. Aggrieved by such additions assessee preferred appeal before the Ld. CIT(A). Ld. CIT(A) by way of impugned order gave partial relief to the assessee while sustaining certain additions. Hence, both the assessee and the Revenue are in these appeals before us.
4. Though the assessee preferred several g ounds, at the time of arguments submitted that grounds No. 7 and 8 are not pressed. Grounds No. 1, 2, 4, 5 and 6 related to the disallowance under section 14A of the Act read with Rule 8D of the Rules under normal provisions of the Act; whereas ground No. 3 is the challenge to such a disallowance under section 14A of the Act read with Rule 8D of the Rules under section 115JB of the Act.
5. Insofar as the ddition under section 14A of the Act read with Rule 8D of the Rules under normal provisions of the Act is concerned, the submission on behalf of the assessee is that the assessee had not incurred any expenditure in relation to dividend income, but sue moto the assessee had disallowed a sum of Rs. 1,01,36,427/-under rule 8D(2)(iii) of the Rules, whereas the learned Assessing Officer made an addition under rule 8D(2)(ii) of the Rules also to the tune of Rs.4,49,72,528/-and under rule 8D(2)(iii) of the Rules to the tune of Rs.1,18,87,665/-which came to Rs. 5,68,60,193/-. By reducing such an amount by the sue moto disallowance of the assessee, learned Assessing Officer assessed the total disallowance to the tune of Rs. 4,67,23,766/-. It is further submitted that the Ld. CIT(A) in the impugned order deleted the disallowance under rule 8D(2)(ii) of the Rules but sustained the disallowance under rule 8D(2)(iii) of the Rules.
6. Ld. AR further submitted that during the year the total exempt income earned by the assessee was only Rs.37,13,348/-. According to the Ld. AR the disallowance cannot exceed the exempt income. For this proposition Ld. AR placed reliance on the decision of he Hon’ble jurisdictional High Court in the case of Joint Investments Private Limited vs. CIT (2015) 59 taxmann.com 295 (Delhi) and a so the Tribunal’s decision in assessee’s own case for the assessment year 2006-07 in ITA No. 3461/del/2013 by order dated 02/06/2016.
7. There is no dispute as to the quantum of the dividend earned during the year and it is Rs.37 13,348/-. In Joint Investments Private Limited (supra), Hon’ble jurisdictional High Court held that where the assessee declared tax-exempt income and voluntarily disallowed a certain expenditure under section 14A, in the absence of any reason why the assessee’ claim for disallowance under section 14A had to be rejected, learned Assessing Officer was not justified in computing the di allowance. It is further held that by no stretch of imagination can section 14A of the Act read with Rule 8D of the Rules be interpreted so as to mean that the entire tax exempt income is to be disallowed, the window for disallowance is indicated in section 14A and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”, and this proportion are portion of the tax exempt income surely cannot swallow the entire amount.