Huhtamaki India Limited Vs DCIT (ITAT Mumbai)
Capital Subsidy for Industrial Expansion Held Non-Taxable Due to Purpose of Scheme; ITAT Removes MAT Addition Because Section 14A Formula Cannot Be Imported into Section 115JB; Subsidy Linked to Plant and Machinery Investment Treated as Capital Receipt by ITAT; ITAT Grants Relief on Section 14A Addition Because No Dividend Was Earned from Subsidiary Investment.
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee concerning Assessment Year 2014-15 and adjudicated multiple issues relating to disallowance under Section 14A, treatment of subsidy received under a government incentive scheme, and an additional claim regarding Dividend Distribution Tax (DDT).
On the issue of disallowance under Section 14A read with Rule 8D, the assessee had earned exempt dividend income from mutual funds and had voluntarily made a disallowance by considering only those investments that had actually yielded exempt income during the relevant year. The Assessing Officer, however, included non-current investments made in the assessee’s subsidiary company while computing the disallowance, despite no exempt income having arisen from those investments during the year. The Tribunal observed that the factual position regarding the absence of exempt income from the subsidiary investment remained undisputed. Relying on the Special Bench decision in Vireet Investment, it held that only investments generating exempt income during the year should be considered while computing disallowance under Rule 8D. Consequently, the additional disallowance made by the Assessing Officer was deleted.
