Tungabhadra Minerals Pvt. Ltd. Vs JCIT (ITAT Panaji Bench)
Rule 8D Cannot Average Two Zeros Into A Disallowance—Afforestation Is Revenue, Old Creditors Are Not Dead & Temporary Sheds Get 100% Depreciation
Mining company contests four additions
The assessee was engaged in mining, processing, trading & export of minerals and ores, with mining leases in Karnataka.
For AY 2011-12, it declared income of ₹62.34 crore. The AO completed scrutiny assessment after making, among others, disallowances u/s 14A, disallowance of afforestation expenditure, addition u/s 41(1) & denial of 100% depreciation on temporary mine sheds.
Similar disputes concerning sections 14A & 41(1) arose for AY 2012-13.
The CIT(A) confirmed the additions, leading to the appeals before the ITAT.
Rule 8D cannot replace the first & last day
For AY 2011-12, the AO made a disallowance of ₹14,93,750 u/s 14A r/w Rule 8D. For AY 2012-13, the corresponding disallowance was ₹19,22,548.
The assessee argued that no valid dissatisfaction had been recorded regarding its claim. It also pointed out that there was no investment appearing either on the first or last day of the previous year. Investments in mutual funds were made & redeemed during the year itself.
Under the then applicable Rule 8D(2)(iii), administrative expenditure had to be computed at 0.5% of the average value of investments appearing in the balance sheet on the first & last day of the previous year.
