Petronet LNG Ltd Vs DCIT (ITAT Delhi)
Conclusion: Where assessee had existing brought forward losses which were either could not be set off against the profits and if the assessee considered any year as the initial assessment year for the benefit of Section 80IA in such cases, the eligible profits would be determined only after setting off of the losses/ unabsorbed depreciation carried forward in the year the deduction was claimed.
Held: Assessee was a company engaged in the business of operation of port, purchase of LNG etc having port at Dahej in Gujarat. The port undertaking of assessee commenced operations from the F.Y. 2004-05. In the first year of operation, assessee incurred substantial losses. In A.Y.’s 2006-07, 2007-08 & 2008-09, the assessee made profits and the profits were set off against the losses. In the relevant A.Y. 2009-10, assessee also had profits and claimed a deduction u/s 80IA. AO disallowed deduction claimed stating that assessee did not have any profits available for claiming deduction. The business losses/deprecation of earlier years, which had been set off against the income had been notionally brought forward and set off against the profits for the relevant assessment year thereby reducing the profits. Assessee stated that for the purpose of computing deduction u/s 80IA, unabsorbed depreciation of earlier years already set off against income of assessee in the preceding years should not be notionally brought forward and set off under section 80IA(5) for determining claim of deduction. It was held that on a concurrent reading of what constitutes on initial assessment year and the provision for brought forward of losses, the eventual conclusion derived from such reading was that in case assessee had existing brought forward losses which were either could not be set off against the profits and if the assessee considered any year as the initial assessment year for the benefit of Section 80IA in such cases, the eligible profits would be determined only after setting off of the losses/ unabsorbed depreciation carried forward in the year the deduction was claimed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeals have been filed by the assessee and the revenue against the orders of the ld. CIT(A)-7, New Delhi dated 29.05.2015.
2. In ITA No. 5230/Del/2015, following grounds have been raised by the assessee:
“1. That on the facts and circumstances of the case and in law, the CIT(A) has erred in arbitrarily sustaining the disallowance under section 14A of the Act, made by the Assessing Officer (“A O”) by applying the provisions of Rule 8D(2)(iii) of the Income tax Rules, 1962 (“the Rules”), alleging that certain expenditure would have to be incurred by the Appellant to earn the exempt income.
1.1 That on the facts and circumstances of the case and in law, the CIT(A) has erred in not accepting the claim of the Appellant that only expenditure of Rs.2,30,000 can be said to be incurred for earning the dividend income and in the absence of any nexus existing between the dividend earned and other expenditure claimed by the Appellant, disallowance under section 14A of the Act was not warranted.
1.2 That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding, the disallowance made by the AO applying sub-rule (2) of Rule 8D of the Rules without recording any cogent reason regarding his dissatisfaction, on disallowance of Rs.2,30,000/- suo-moto computed by the appellant and offered for taxation, as required by section 14A of the Act read with sub-rule (1) of Rule 8D of the Rules.
1.3 That, without prejudice to the above, the CIT(A) has erred on facts and in law in upholding the computation of the AO wherein investments held by the Appellant in shares of India LNG Transport Company (No. 3) Limited, Malta has been included while computing the average of value of investment, income from which does not or shall
1.4 That, without prejudice to the above, the CIT(A) has erred on facts and in law in not considering the allocation of disallowance made under section 14A of the Act towards port, power and regasification undertakings.
2. That on the facts and circumstances of the case and in law, the AO has erred in charging interest under section 234C of the Act.”
3 ITA Nos. 5230, 5231 & 5232/Del/2015 following grounds have been raised by the assessee:
“1. That on the facts and circumstances of the case and in law, the CIT(A) has erred in arbitrarily sustaining the disallowance under section 14A of the Act, made by the Assessing Officer (“AO”) by applying the provisions of Rule 8D(2)(iii) of the Income tax Rules, 1962 (“the Rules”), alleging that certain expenditure would have to be incurred by the Appellant to earn the exempt income.
1.1 That on the facts and circumstances of the case and in law, the CIT(A) has erred in not accepting the claim of the Appellant that no expenditure was incurred for earning the dividend income and in absence of any nexus existing between the dividend earned and other expenditure claimed by the Appellant, disallowance under section 14A of the Act was not warranted.
1.2 That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding, the disallowance made by the AO applying sub-rule (2) of Rule 8D of the Rules without recording any cogent reason regarding his dissatisfaction on the claim of the Appellant, that no expenditure was incurred in earning the dividend income, as required by section 14A of the Act read with sub-rule (1) of Rule 8D of the Rules.”
1.3 That, without prejudice to the above, the CIT(A) has erred on facts and in law in upholding the computation of the AO wherein investments held by the Appellant in Central Government securities and shares of India LNG Transport Company (No. 3) Limited, Malta has been included while computing the average of value of investment, income from which does not or shall not form part of the total income, for the purpose of disallowance under Rule 8D(2)(iii) of the Rules.
1.4 That, without prejudice to the above, the CIT(A) has erred on facts and in law in not considering the allocation of disallowance made under section 14A of the Act towards port, power and regasification undertakings
4 ITA Nos. 5230, 5231 & 5232/Del/2015 & following grounds have been raised by the assessee:
“1. That on the facts and circumstances of the case and in law, the CIT(A) has erred in arbitrarily sustaining the disallowance under section 14A of the Act, made by the Assessing Officer (“AO”) by applying the provisions of Rule 8D(2)(iii) of the Income tax Rules, 1962 (“the Rules”), alleging that certain expenditure would have to be incurred by the Appellant to earn the exempt income.
1.1 That on the facts and circumstances of the case and in law, the CIT(A) has erred in not accepting the claim of the Appellant that only expenditure of Rs 3,69,800 can be said to be incurred for earning the dividend income and in the absence of any nexus existing between the dividend earned and other expenditure claimed by the Appellant, disallowance under section 14A of the Act was not warranted.
1.2 That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding, the disallowance made by the AO applying sub-rule (2) of Rule 8D of the Rules without recording any cogent reason regarding his dissatisfaction, on the suo-moto disallowance of Rs 3,69,800 made by the appellant in the return of income, as required by section 14Aof the Act read with sub-rule (1) of Rule 8D of the Rules.
1.3 That, without prejudice to the above, the CIT(A) has erred on facts and in law in upholding the computation of the AO wherein investments held by the Appellant in shares of India LNG Transport Company (No. 3) Limited, Malta has been included while computing the average of value of investment, income from which does not or shall not form part of the total income, for the purpose of disallowance under Rule 8D(2)(iii) of the Rules.
1.4 That, without prejudice to the above, the CIT(A) has erred on facts and in law in not considering the allocation of disallowance made under section 14A of the Act towards port, power and regasification undertakings.
2. That on the facts and circumstances of the case and in law, the CIT(A) has erred in arbitrarily upholding the disallowance of expenditure on account of Corporate Social Responsibility (“CSR”) amounting to Rs 51,05,000 incurred by the Appellant, under section 37 of the Act, alleging that the same has not been incurred for the purposes of business.
2.1 That on the facts and circumstances of the case and in law, the CIT(A) has erred in not accepting the contention of the Appellant that undertaking public welfare activities and socio-economic development activities is one of the business objects of the Appellant and is clearly articulated in its Memorandum of Association and forms an integral part of its business operations.
3. That on the facts and circumstances of the case and in law, the AO has erred in charging interest under section 234C of the Act.”
ITA Nos. 4902, 4903 & 4904/Del/2015 (Revenue’s appeal)
