×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.
These two appeals are filed by the assessee as well as by the Revenue against the order dated 01/03/2016 passed by CIT(A)-22, New Delhi for Assessment Year 2011-12.
2. The grounds of appeal are as under:-
ITA No. 2368/DEL/2016
“1. On the facts and in the circumstances of the case, the order passed by the Ld.CIT(A) is bad, both in the eyes of law and on facts.
2. (i) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred, both the facts and in law, in confirming the disallowance of Rs. 2,51,04,875/- made by the A.O u/s 14A of the Act.
(ii) That the Ld.CIT(A) has erred in confirming the said disallowance made as per Rule 8D(2)(iii), despite the fact that no administrative expenses were incurred in connection with the investments made.
3. (i) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred, both on facts and in law, in confirming the proportionate disallowance of interest of Rs.5,17,566/- in respect of security deposit of Rs. 47,00,872/-.
(ii) That the Ld.CIT(A) as erred, both the facts and in law, in ignoring the fact that the assessee being a Public Sector Company, the entire security deposit held by it is of the customers, and the interest thereon cannot be disallowed merely on the surmise that the security deposit is an unexplained deposit.
4. (i) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred, both on facts and in law in confirming the addition of Rs. 3,36,80,000/- made by the A.O on account of prior period income.
(ii) That the Ld.CIT(A) has erred in confirming the addition despite the fact that ]the said amount pertains to income or expenditure of earlier years which has been crystallized during the year under consideration.”
ITA No. 3299/DEL/2016
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in restricting the disallowance to only 0.5% of average investment income of Rs 1,33,74,000/- as against Rs 9,69,57,875/-.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in restricting the disallowance of interest on customer’s deposit account to Rs. 5,17,566/-, as against disallowance of Rs.47,00,872/-, and in allowing relief in respect of the balance amount of Rs. 41,83,306/-.”
3. During the year under consideration, the assessee was engaged in the business of providing basic telephone and mobile services in the city of Delhi and Mumbai, as in the earlier years. The assessee company is Government of India PSU and a major player in the country in Telephone Services. Further it has also host of services like Internet Service Provider Services, IN Services, Integrated Service Digital Network Services, Multimedia Services, Paging Services and other value added services, and to carry on the business of telephone, telegraph cable and wireless company etc. MTNL is also engaged in providing Telecommunication services like internet, e-tendering, Cyber Café Services and sale of ISP Packs & Anmol Cards. There has been no change in the business activities of the assessee from the preceding year. The assessee had filed e-return declaring total loss of Rs 14,76,94,22,781/- on 29.09.2011. The case was processed u/s 143(1) of the Income Tax Act, 1961 and subsequently selected for scrutiny. Notice u/s 143(2) dated 07.08.2012 was issued and served on the assessee The assessee vide letter dated 14.11.2013 was asked to file the hard copy of e-filed return, profit & loss account, balance sheet with schedules and the audit reports etc. A detailed case specific questionnaire dated 20.12.2013 u/s 142(1) was issued and served on the assessee. In response to the statutory notices, DGM Cash & Tax, Dy. Manager Tax from the assessee company and FCA-authorized representatives attended the assessment proceedings from time to time and furnished requisite details and explanations which was taken on record by the Assessing Officer. The Assessing Officer made disallowance under Section 14A read with Rule 8D amounting to Rs. 9,69,57,875/- and made addition accordingly. Besides this, the Assessing Officer also made addition of Rs. 47,00,872/- regarding interest on customer’s deposit accounts, addition in regard to prior period income amounting to Rs. 3,36,80,000/-, short deduction and payment of tax amounting to 15,12,06,000/-. Thereby making total loss assessed at Rs. (1448,28,78,030/-) by the Assessing Officer.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A)partly allowed the appeal of the assessee.
5. As regards Ground No. 1 of Department’s appeal, relating to addition u/s 14A read with Rule 8D amounting to Rs.9,69,57,875/- made by the Assessing Officer, the Ld. DR submitted that the CIT(A) erred in restricting the disallowance to only 0.5% of average investment income of Rs. 1,33,74,000/- as against Rs.9,69,57,875/-.
6. The Ld. AR submitted that during the year under consideration, assessee company has earned dividend income of Rs.3,41,50 000/- on its investment made in LIC Mutual Funds. This fact is evident from Schedule - O in respect of Other Income mentioned in the Balance Sheet. The details of investments held by the assessee company are in Schedule - F of the Balance Sheet. The Ld. AR submitted that the own funds available with the assessee are much more than the investments made during the year. This fact was before the Assessing Officer as well as before the CIT(A). The details of own funds available with the assessee company were a so produced at the time of hearing by the Ld. AR. The Ld. AR submitted that the fact that the own funds available with the assessee company were sufficient for the assessee to make the investment has also been appreciated by the CIT(A) in Para 6.1 at Page 4 of its order. Therefore, the CIT(A) has deleted the impugned addition of Rs.7,18,53,000/- made by the Assessing Officer on account of interest. In this regard, the Ld. AR submitted that similar disallowance was made by the Assessing Officer in the case of assessee company for A.Y. 2008-09 and 2009-10, which has been deleted by this Tribunal vide its order dated 31.07.2017 in ITA Nos. 147, 148/Del/2014, whereby it has been categorically held that sufficient funds were available with the assessee, which were much more than the investments made during the year, and therefore, no disallowance u/s 14A was called for. The Ld. AR further