×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.
Both these appeals filed by the revenue are directed against the orders o CIT(A) – 4, Hyderabad, both dated, 19/02//2018 for AYs 2013-14 and 2014-15. As identical issues are involved in both these appeals, the same were clubbed and heard together and therefore a common order is passed for the sake of convenience.
2. On perusal of record, we find that there was a delay of 11 days in filing these appeals. To this effect, the assessee filed an affidavit, affirming therein, that due to mix up the appeal papers pertaining to these appeals with other records , could not trace the same immediately, due to which, the said delay occurred, which may kindly be condoned. As the assessee was prevented by sufficient reason in not filing these appeals within the stipulated time, we condone the said delay and admit the appeals for hearing and adjudication.
3. Brief facts of the case, as taken from AY 2013-14 are, the assessee, a HUF, filed its return of income for the AY 2013-14 on 30/11/2013 declaring total income of Rs. 3,47,41,356/- and the same was processed u/s 143(1) of the Income-tax Act, 1961 ( in short ‘the Act’) Subsequently, the case was selected for scrutiny and accordingly, notices u/s 143(2) and 142(1) were issued, in response to which, the AR of the assessee filed the information as called for. The AO after verification of the information filed, completed the assessment u/s 143(3) of the Act by making the following disallowances:
1. Disallowance of expenditure u/s 14A of the Act – Rs. 1,20,53,646/-
2. Disallowance of drawings and interest on drawings used for personal purposes - Rs. 45,41,244/-
3. Disallowance of expenditure debited in the HUF Unit of Ushakiron Properties - Rs. 75,92,998/-
4. When the assessee preferred an appeal against the order of CIT(A), the CIT(A) restricted the disallowance of expenditure u/s 1 A deleted the disallowance of drawings and as regards the disallowance of expenditure debited in the HUF unit, he observed that the same was accepted by the assessee and did not contest the same before him.
5. Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds of appeal:
“1. The CIT(A) erred in restricting the disallowance u/s 14A from Rs. 1,20,53,646/ - to Rs. 33,282/.
2. The CIT(A) erred in deleting the disallowance of interest on drawings.
3. Any other ground that may be urged at the time of hearing.”
6. As regards ground No. 1 relating to disallowance u/s 14A, during the course of assessment proceedings, the Assessing Officer observed that the assessee HUF has borrowed funds from the public, through various deposit schemes on which the HUF is claiming interest expenditure. The Assessing Officer further observed that during the financial year 2012-13 relevant to assessment year 2013-14, HUF claimed interest on borrowed funds at Rs. 21,78,230/- in its profit and loss account and the funds borrowed were utilized by the HUF for investment in mutual funds share application money deposit, investment in intra units,
investment in landed properties & residential buildings and for HUF drawings. The Assessing Officer further observed that the HUF is running on borrowed funds and has no capital of its own and the HUF is incurring losses year after year for the reason that the borrowed funds are invested in non-income yielding assets and interest has to be paid on not only on these borrowed funds but also on fresh borrowings year after year. Thus, the Assessing Officer concluded that compounding interest has to be disallowed on the investments made in nonincome yielding assets u/s 14A of the I.T. Act, 1961 to arrive at the correct income of the assessee. The Assessing Officer also observed that the assessee has made investment in intra units of HUF towards capital and grouped under investments in intra units out of borrowed funds and no income is generated out of above investment. The Assessing Officer further observed that the assessee has not only invested in share application money but also on lands, construction of residence for family occupation and personal withdrawals. Regarding the assessee's submission that part of the investments are from borrowed funds and the balance is met out of internal generation of other divisions of HUF units is not accepted by the Assessing Officer on the ground that each