Case Law Details
Syama Prasad Mookerjee Port Vs DCIT (ITAT Kolkata)
In the case of Syama Prasad Mookerjee Port versus Deputy Commissioner of Income Tax (ITAT Kolkata), the Income Tax Appellate Tribunal (ITAT) Kolkata ruled on two appeals filed by the assessee against the orders of the National Faceless Appeal Centre – Delhi for the assessment years 2018-19 and 2020-21.
For the assessment year 2018-19, the primary issue was the disallowance under section 14A read with rule 8D(2)(ii) of the Income Tax Act, 1961. The assessee argued that since it had no exempt income during the year and all investments were made using its own funds in port-related strategic entities, no disallowance should be made. The ITAT Kolkata referred to the precedent set in the case of PCIT Vs. Era Infrastructure (India) Ltd., where it was held that the amendment to section 14A by the Finance Act, 2022, would be applicable prospectively. Therefore, since the assessee had no exempt income during the year, no disallowance was warranted.
Regarding the assessment year 2020-21, another issue was raised concerning the addition under section 41(1) of the Act. The Assessing Officer had made an addition based on information suggesting that certain expenditures had been written off as bad debts by two companies, and the amounts were claimed to be irrecoverable from the assessee. However, the assessee contended that there was no liability standing in its books of accounts with these companies. The ITAT Kolkata observed that without any liability recorded in the books, section 41(1) could not be invoked. Therefore, the issue was remanded back to the Assessing Officer for fresh adjudication, with directions for the assessee to produce necessary documents and evidence in support of its claim.
In conclusion, the appeal for the assessment year 2018-19 was allowed, and for the assessment year 2020-21, it was partly allowed for statistical purposes, with the issue related to section 41(1) being remanded back to the Assessing Officer for fresh consideration.
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