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1.  ACIT Vs. M/s Indian Farmers Fertiliser Cooperative Ltd., I.T.A. No. 5157/Del/2015, Date of Pronouncement: 07.06.2018. ITAT – Delhi

Issue
Whether the investments on whom dividend received, though chargeable to tax but allowed as rebate in view of DTAAA agreement be included for the purpose of computing disallowance u/s 14A of Income Tax Act.

Held: - No

Brief Facts
Assessee filed its return of income for AY 2006-07 declaring total income of Rs.323,56,23,021. Assessment u/s 143(3) was completed on 30.11.2009 at an income of Rs. 355,10,00,239 comprising dividend received on investments in OMIFCO, Oman.  On appeal, the first appellate confirmed the addition but the Hon’ble ITAT restored the mater back to the file of AO for re-examination of claim of assessee. The Ld.AO after considering the submissions of assessee again confirmed the addition which was deleted by first appellate. Being aggrieved, the revenue has filed an appeal before the Hon’ble ITAT.

Held
The Hon’ble ITAT by placing reliance on judgement of Hon’ble Delhi ITAT in the case of Krishak Bharti Cooperative Limited vs. ACIT held that dividend received by assessee from OMIFCO, Oman though allowed as rebate in view of Article 25 of the Indian-Oman DTAA but is chargeable to tax at the first instance under “Income u/h Other Sources” and forms part of the total income therefore, provisions of Sec 14A are not applicable. Any Consequent exemption provided under any DTAA doesn’t itself make the investment liable to be included for computing disallowance u/s 14A of the Act.
Therefore, the appeal was held in favour of assessee and against the revenue.

Cases Referred
1.    Krishak Bharti Cooperative Limited vs. ACIT, 158 ITD 77 (Delhi ITAT).
2.  Godrej Boyce Manufacturing Company Ltd. vs. DCIT in ITA No. 626 of 2010,234 CTR. (Bombay HC).

(Please click here for judgment)

2.  DCIT Vs. SMS Paryavaran (P) Ltd., I.T.A. No. 205/DEL/2013, Date of Pronouncement: 05.06.2018. ITAT - Delhi

Issue
Whether interest earned on FDR by a company engaged in providing infrastructure facilities eligible for deduction u/s 80IA of Income Tax Act’1961.

Held:- No

Brief Facts
The assessee company was engaged in the business of Developing, Maintaining and Operating of Infrastructure Facilities. During AY 2009-10 the assessee claimed deduction u/s 80-IA for profit earned of Rs.5,26,17,182. The Ld.AO on perusal of the P&L account observed that assessee has earned income in the form of interest from FDR of Rs.49,25,706 which was claimed as deduction. The Ld.AO held that such interest income can’t be held to be derived from business of providing infrastructural facilities and consequently made the addition of Rs.49,25,706. The Ld. CIT(A) partly allowed the appeal of assessee. Being aggrieved, the revenue has filed an appeal before the Hon’ble ITAT.

Held
The Hon’ble ITAT while placing reliance on the judgement of Hon’ble Apex Court in case of Conventional Fastners vs. CIT held that interest earned on FDR maintained with the bank for obtaining bank guarantee (as stood in the case of assessee) for performance of any business activity even if related to any govt infrastructure  project can’t override the basic structure of Sec 80IA which intends to provide deduction only in respect of activities directly related to the process of providing infrastructure facilities. Income cannot be said to be derived from an activity merely by reason of the fact that activity was performed to earn the said income in an indirect, incidental or remote manner.
Therefore, the appeal was held in favour of revenue and against the assessee.

Cases Referred
1.    Conventional Fastners Vs. CIT 2018-TIOL-2002. (SC).
2.    CIT vs. Pandian Chemicals Ltd. 233 ITR 497 (Madras HC)
3.    Kirpa Chemicals (P) Ltd. Vs. Deputy Commissioner of Income-tax
(88 ITD 200) (ITAT Pune).

(Please click here for judgment)

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  Team

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