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Income Tax Appellate Tribunal, DELHI BENCH, ‘B’: NEW DELHI
Before: SHRI SHAMIM YAHYA & Ms. ASTHA CHANDRA
Date of Hearing 18.01.2023 Date of Pronouncement .01.2023 ORDER PER SHAMIM YAHYA, AM,
This appeal by the assessee is directed against the order of ld. CIT (Appeals)-03, New Delhi, dated 01.08.2018 for the Assessment Year 2013-14.
The grounds of appeal read as under:-
1. That the CIT(A) erred in not giving clear directions to the Assessing Officer to delete the disallowance of Rs.75 lacs made in the order of assessment on account of proportionate disallowance of interest in terms of Rule 8D(2)(ii) of Income-tax Rules inspite of recording the facts and also the decisions of this Hon'ble Tribunal in appeals for earlier years in case of the appellant.
2. That the CIT(A) also erred in not giving clear directions to the Assessing Officer that the disallowance in terms of Rule 8D(2) (iii) of Income-tax Rules on account of administrative expenses was to be restricted to Rs. 17,02,000/- being 0.5% of average investments of Rs.34.04 crores on which the appellant could receive the exempt income, instead of amount of Rs.24,26,8971- wrongly added by the appellant in the return of income calculating the same on the basis of average investments, including the investments on which income was 3. That the CIT(A) erred in upholding the addition of Rs.2.37 crores in income of the appellant on account of difference between the sale consideration of the land located at Bilaspur, U.P., and the value determined thereof by the Stamp Authorities without considering the submissions of the appellant company and also the facts and circumstances of the case.
4. That the CIT(A) also erred in not appreciating the fact that the basis for valuation adopted by the Stamp Authorities was not correct in the facts and circumstances of the case and no addition us 50C of the Act was warranted and in any case the actual sale consideration was duly supported by the Valuation Report of the Govt. approved valuer.
5. That the CIT(A) also erred in not appreciating the specific provisions of sub-section (2) of section 50C of the Act, according to which the Assessing Officer was mandatorily required to refer the matter to the valuation officer in case he was not accepting the explanation and submissions of the company and could not adopt the value adopted by the Stamp Authorities.
6. That the order passed by the CIT(A) is without considering the correct factual and legal position.” Apropos the issue relating to disallowance u/s 14A of the Act
3. In this case, the AO made disallowance u/s 14A of the Act with regard to interest computing the same at Rs.75 lakh. The AO rejected the assessee’s contention that the assessee has not sufficient own fund and in earlier year also, disallowance in this regard was disallowed. As regards disallowance with regard to Rule 8D(2)(iii), the AO accepted the assessee claim of Rs.24,26,897/-.
4. Upon assessee’s appeal, the Ld. CIT(A) considered the issue as regard the disallowance Rule 8D(2)(iii). He gave part relief and he upheld the disallowance with regard to interest u/s 14A of the Act.
Against this order, the assessee is in appeal before us.
We have heard both the parties and perused the records. The ld. Counsel for the assessee contended that this issue is squarely covered in favour of the assessee by a series of order of ITAT in earlier years. He submitted that it is not disputed that the assessee’s own funds are many times more than exempt income. In this regard, he referred to ITAT order in its own case in vide order dated 28.10.2021 for AY 2014-15, wherein para 50, the ITAT has observed as under:-
“50. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also considered the various judicial precedents cited before us. In fact undeniably the assessee has interest free funds available which are 12.82 times higher than the amount of investments. Thus Where assessee had its surplus fund against which investment was made, no question of making any disallowance of expenditure in respect of interest expenses under section 14A arose - Principal CIT v. Sintex Industries Ltd. [2017] 82 taxmann.com 171 (Guj.) [SLP dismissed in Principal CIT v. Sintex Industries Ltd. [2018] 93 taxmann.com 24/255 Taxman 171 (SC)]. Further for working out the portion of administrative expenditure, assessee has applied the factor of 0.5 % on the amount f investments which has yielded tax-free income during the year. We find that this stand of assessee is also in consonance with the decision of Honourable Delhi High court in ACB India limited V Act 314 ITR 108 [Del]. In view of this we direct the ld AO to retain the disallowance offered by assessee as disallowance u/s 14 A of the Act only to the extent of Rs. ₹ 6,399,219/– which is offered by the assessee itself and delete the balance. Accordingly Ground no 4 of the appeal is allowed.”
Per Contra, the Ld. DR did not dispute the above proposition that the issue stands covered in favour of the assessee.
Upon careful consideration, respectfully following the precedent in assessee’s own case, we direct the AO to delete the disallowance with regard to interest u/s 14A as it is not disputed that assessee’s own funds are many times more than exempt income. In this regard the assessee has filed addition ground that the disallowance with regard to section 14A cannot be imported in computation to book profit u/s 115JB of the Act. We find that this issue is also squarely covered in favour of the assessee by the decision of the Special Bench of the ITAT in ACIT Vs Vreet Investments Pvt. Ltd. in for the assessment year 2008-09 for disallowance u/s 14A r.w.r.8D, wherein it has been held that disallowance u/s 14A cannot be imported in section 115JB of the Act. Respectfully following the precedent from the Special Bench of the Tribunal, we direct the AO to follow the same.
Another issue raised is with regard to disallowance by invoking provisions of section 50C of the Act. On this issue, the AO noted the fact that the assessee company sold a land located in Bilaspur, UP. The land sale consideration was Rs.2.15 Crores. The stamp duty authorities determined the value of land at Rs.4.52 Crores. The assessee’s explanation in this regard was not accepted by the AO. He invoked the provisions of section 50C and made the impugned disallowance.
Upon assessee’s appeal, the Ld. CIT(A) confirmed the same.
Against this order, the assessee is in appeal before us.
We have heard both the parties and perused the records. The Ld. Counsel for the assessee pleaded that when the assessee has objected to the adoption of value of land of Stamp Authorities, it was incumbent upon the AO to send the matter to the DVO for verification as prescribed u/s 50C. Hence, he pleaded that the matter may be remitted back to the file of the AO to get valuation by the DVO.
Per Contra, the Ld. DR submitted that the assessee has not objected to the valuation by the Stamp Authorities. That separate mechanism for contesting the valuation of the land is at the office of Stamp Authorities. He submitted that the assessee has not followed the same.
We have carefully considered the submissions and perused the records. However, we do not find any cogency in the argument of the Ld. DR. Prescription as per section 50C is quite clear. It mandates that if the assessee objects to the value of the Stamp Authorities, the matter needs to be send to the DVO for valuation. Accordingly, we direct the AO to get the valuation done by DVO. Hence, the matter is remitted back to the file of the AO to get valuation done from the DVO.
In the result, this appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 23rd January, 2023.