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2024 Supreme(Online)(ITAT) 1717
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
MAKARAND V. MAHADEOKAR, AM
THE DY.COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1) AHMEDABAD – Appellant
Versus
M/S. ANANYA FINANCE FOR INCLUSIVE GROWTH PVT. LTD. AHMEDABAD – Respondent
Income Tax Appeal | ITA No.960/Ahd/2016 | ITA No.1186/Ahd/2016 | ITA No.2275/Ahd/2017 | ITA No.2276/Ahd/2017 | ITA No.1744/Ahd/2019
For the Appellants/Petitioners: Not listed
For the Respondents: Not listed
Taxpayers must substantiate claims with adequate evidence; sufficient interest-free funds prevent disallowance under Section 14A.
Headnote:(A) Income Tax Act, 1961 - Section 250 - Appeals concerning disallowance of depreciation on intangible assets and disallowances under Section 14A - The tribunal upheld the disallowance of depreciation claims due to failure to substantiate the existence and valuation of intangible assets, deeming the transactions as aims at tax avoidance. Further, the tribunal allowed the claim under Section 14A by affirming that sufficient interest-free funds negate disallowance. (Paras 10, 17, 23, 47)
(B) Taxation - Burden of Proof - The onus is on the taxpayer to substantiate claims for deductions and provide adequate evidence to support valuations of assets. (Paras 10, 11)
(C) Assessment Process - Consistency in application of rules regarding deduction claims must align with the factual circumstances of each assessment year rather than relying solely on precedents. (Paras 10, 34)
Facts of the case:
The appeals arise from the actions of the CIT(A) that upheld the disallowance of substantial depreciation claims made by the appellant company, which was engaged in microfinance, and disputed the application of Section 14A concerning disallowed expenses related to generating exempt income.
Findings of Court:
The tribunal dismisses the grounds regarding depreciation but allows the claim under Section 14A, determining prior rulings aligned with sufficient interest-free funds.
Issues: Determination of valid claims for depreciation, valuation of intangible assets, and proper application of Section 14A.
Ratio Decidendi: The tribunal ruled that claims for intangible assets were not substantiated adequately, and a sufficient existence of interest-free funds negated disallowance under Section 14A.
Result: Appeals partly allowed.
| Table of Content |
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| 1. facts of the case and assessment years involved. (Para 2 , 3 , 4) |
आदेश/O R D E R
PER MAKARAND V. MAHADEOKAR, AM:
The present appeals have been filed by both assessee and revenue against the orders of the Commissioner of Income Tax (Appeals)-1, Ahmedabad [hereinafter referred to as 'CIT(A)'] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] for the respective Assessment Years (A.Y.). Since the issues involved are common, they are decided through a common order.
Facts of the case
2. The assessee is a closely held company and engaged in providing micro credit finance. It was incorporated on 22-04-2009. On 01-04-2010, the micro finance activity Friends of WWB (FWWB), India, a 12A registered trust was transferred to the assessee company. Post such transfer, A.Y. 2011-12 was the first assessment year and the primary and substantial issue in that appeal before Tribunal related to denial of depreciation goodwill/intangible assets. In subsequent years i.e. years considered in this appeal the issues are identical and both assessee and revenue used A.Y. 2011-12 as a reference year in assessment and appellate proceedings.
3. The assessee company filed its return of income for the respective years under consideration as per the dates detailed below. Later the cases were selected for scrutiny and the assessment orders were passed by the Assessing Officer (AO) u/s 143(3) of the Act. The AO disallowed certain claims as detailed below and the assessee preferred appeal before CIT(A) who decided on each issue as detailed below.
Details of returned income, assessment and appeal before CIT(A) are tabulated below:
4. Aggrieved by the orders of CIT(A), both assessee and revenue are in appeal against the orders of CIT(A) with following grounds of appeal:
A.Y. 2012-13 - Assessee’s Grounds in ITA No.960/Ahd/2016
1.1 The order passed u/s.250 on 29.02.2016 for A.Y.2012-13 by CIT(A)-1, Abad upholding the disallowance of claim of depreciation of Rs.5,68,50,000/- and Rs.9,12,638/- u/s.14A of the Act made by AO is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowances/additions.
2.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming the following additions/disallowances:
(iii) Depreciation on intangible assets Rs. 5,68,50,000/-
(iv) Disallowance u/s.14A Rs. 9,12,638/-
2.2 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld the above said disallowances/additions.
3.1 The Ld.CIT(A) has erred in upholding that valuation of intangibles was made higher so as to get the benefit of higher depreciation by the appellant. The observations made and conclusion reached by CIT(A) for upholding the disallowance of depreciation of Rs.5,68,50,000/- on intangible assets are not admitted by the appellant to the extent the same are contrary to the facts on record.
4.1 The Ld.CIT(A) has erred in upholding that the provisions of section 14A were attracted on account of exempt dividend income of Rs. 9,12,638/- earned by the appellant and further holding the disallowance as computer under Rule- 8D
It is, therefore, prayed that the additions/disallowances upheld by the CIT(A) may kindly be deleted.
A.Y. 2012-13 - Revenue’s Grounds ITA No.1186/Ahd/2016
1. The Ld. CIT(A) has erred in facts and in law in deleting the disallowance made u/s.14A r.w. Rule 8D of the Act of Rs.11,63,400/- out of the total disallowance of Rs.20,76,038/-.
2. The ld.CIT(A) has erred in facts and in law in deleting the disallowance of depreciation on fixed assets of Rs.12,07,598/-.
3. The Ld.CIT(A) has erred in facts and in law in deleting the disallowance of rent expenses of Rs.24,22,188/- out of the total disallowance made of Rs.39,17,868/-
4. The Ld.CIT(A) has erred in facts and in law
