Section 80IA Deduction to be allowed to single Industrial Unit, all Units can’t be taken together: Madras HC
FACT OF THE CASE
In the present case the assessee is engaged in the business of generation and distribution of power in more than one industrial undertakings apart from his regular business
The revenue assailed the order of the Income-Tax Appellate Tribunal wherein it was held that the assessee is entitled deduction under section 80IA of the Act, in the aforementioned issue .
Advocate T.R. Senthil Kumar, the Senior Standing Counsel appearing for the appellant-revenue, submitted that the substantial question of law arising for consideration in this appeal is covered against the revenue by a Judgment of the Division Bench of this Court reported in Commissioner of Income Tax, Coimbatore v. M/s.Bannari Amman Sugars Ltd.
Mr. R.Venkatnarayanan, counsel appearing for the respondent also submitted that in view of the Judgment of the Division Bench of this Court in the case of Commissioner of Income Tax, Coimbatore v. M/s.Bannari Amman Sugars Ltd., the appeal is liable to be dismissed.
DECISION OF THE CASE
The division bench of Justice M.Duraiswamy and Justice Hemalatha relied on the judgement in the case of Commissioner of Income Tax, Coimbatore v. M/s.Bannari Amman Sugars Ltd. wherein it was held that where the assessee deserves profits from multiple units, all being eligible for deduction under Chapter VIA, the profits or losses arising from the respective units have to be considered in totality and only if the resultant figure were positive, would the assessee be entitled to its claim.
The Madras High Court held that the deduction under Section 80IA of the Income Tax Act, 1961 to be allowed to single Industrial Unit, all Units can not be taken together. Disallowance of Interest can’t be made where Interest-Free Funds are sufficient to cover Interest-Free Investments
FACT OF THE CASE
The assessee, Nirshilp Securities Private Limited had earned exempt income in the form of dividends to the tune of Rs 2,03,57,802 /- and had made suo moto disallowance u/s 14A of the Act amounting to Rs 20,35,780/-, being 10% of dividend income while filing its return of income.
The AO recomputed the disallowance under section 14A of the Act by applying the computation mechanism provided in Rule 8D(2) of the Rules.
The CIT(A) had deleted the disallowance of interest made under Rule 8D(2)(ii) of the Rules on the ground that the assessee company is having sufficient interest-free funds in its kitty.
The assessee is having sufficient interest free funds in the form of share capital and reserves to the tune of Rs 218.14 crores as on 31.3.14 and Rs 250.02 crores which is evident from the bare perusal of the financial statements for the respective period and that the same is much more than the investments made by the assessee.
The revenue has challenged the deletion of disallowance under section 14A of the Act read with Rule 8D(2) of the Rules.
DECISION OF THE CASE
The coram of Judicial Member C.N.Prasad and Accountant Member M.Balaganesh by applying the ratio laid down by the High Court in the case of HDFC Bank Ltd reported in 366 ITR 505 and of the Supreme Court in the case of Reliance Industries Ltd reported in 410 ITR 466, held that no disallowance of interest needs to be made under Rule 8D(2)(ii) of the Rules.
Hence the Tribunal directs the AO not to make any disallowance under section 14A of the Act other than the suo moto disallowance already made by the assessee in the return of income, both under normal provisions of the Act as well as in the computation of book profits under section 115JB of the Act.