CIT(A) errs in not considering that section 14A provides for expenditure incurred for earning exempt income

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “A”: HYDERABAD
(THROUGH VIRTUAL CONFERENCE)
BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA Nos. 164, 165 & 166/H/2020
Assessment Years: 2013-14, 2014-15 & 2016-17

Dy. Commissioner of Income-tax,
Circle – 16(1), Hyderabad.

vs

NSL Renewable Power Pvt. Ltd., Hyderabad.
PAN – AABCN 6009L

Revenue by: Shri P. Chandra Sekhar
Assessee by: Shri Aliasgar Rampurwala
Date of hearing: 23/06/2021
Date of pronouncement: 03/09/2021

O R D E R

These three appeals filed by the Revenue are directed against CIT(A) - 4, Hyderabad’s separate orders, all dated 25/11/2019 for AYs 2-13-14, 2014-15 and 2015-16 involving proceedings u/s 143(3) of the Income- Tax Act, 1961; in short “the Act”.

2. During the course of assessment proceedings, the AO noticed from the profit & loss account that the assessee company had debited an amount of Rs. 68,75,000/- towards filing fees for increase of authorized capital.

3. As regards the principles of interpretation, the learned senior counsel for revenue has strongly relied upon the Constitution Bench decision in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co. and Ors: (2018) 9 SCC 1 to submit that it is now settled beyond doubt that taxing statutes are subject to the rule of strict interpretation, leaving no room for any intendment; and the benefit of ambiguity in case of an exemption notification or an exemption clause must go in favour of the revenue, as exemptions from taxation have a tendency to increase the burden on the unexempted class of tax payers.

4. The contention on behalf of the Revenue before us is that the Assessing Officer was right in holding that the deduction under Section 80-IA of the Act should be restricted to ‘business income’ only. Mr. Arijit Prasad, learned Senior Counsel appearing on behalf of the Revenue, submitted that Section 80AB of the Act contemplates deductions in respect of incomes against income of the nature specified in the relevant section. He further submitted that Section 80-IA(5) makes it clear that the determination of quantum of deduction under sub-section (1) of Section 80-IA should be on the basis that the source of income from the eligible business was the only source of income of an assessee and therefore, the deduction so determined should be allowed only against ‘business income’. According to him, the phrase ‘derived … from’ in sub-section (1) of Section 80-IA of the Act indicates that the computation of deduction is restricted only to the profits and gains from the eligible business. He relied upon the judgment of this Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT 2, followed in Synco Industries Ltd. v. Assessing Officer, Income Tax, Mumbai & Anr. 3 and Pandian Chemicals Ltd. v. Commissioner of Income Tax, Madurai4.

5. In the result, the appeals of the revenue are partly allowed for statistical purposes in above terms. A copy of this common order be placed in the respective case files. Pronounced in the open court on 3rd September, 2021.

Please find attached the enclosed file for the full judgement