COASTAL MARINE CONSTRCUTION AND ENGINEERING LIMITED,MUMBAI vs. CIT (A)22, NFAC
What did the Tribunal hold?
The Tribunal held that for computing disallowance under Rule 8D(2)(iii), only investments yielding exempt income during the relevant assessment year should be considered, not all investments made during the year.
What were the facts?
The assessee claimed exempt income but made no disallowance under Section 14A. The Assessing Officer disallowed Rs. 27,66,041/- under Rule 8D, which was restricted to Rs. 25,45,061/- by the CIT(A).
What were the issues?
Whether investments not yielding exempt income should be included in the computation of average investment for disallowance under Section 14A.
Which sections of the Income-tax Act were involved?
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- Cargo Motors (P.) Ltd. v. DCIT46 citing145 Taxmann.com 641 · 2022 · HC
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
आदेश / O R D E R Per Amarjit Singh (AM):
This appeal filed by the assessee is directed against the order passed by the ld. CIT(A) NFAC, dated 27.04.2023 for A.Y. 2016-17. The assessee has raised the following grounds before us: “ The ld. CIT(A) erred in upholding the disallowance of Rs.25,45,061/- u/s 14A r.w. Rule 8D.”
The fact in brief is that return of income declaring total income of Rs.92,39,97,180/- was filed on 17.10.2016. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on18.09.2017. During the course of assessment on perusal of the computation of income the assessing officer noticed that assessee has P a g e | 2 Coastal Marine Construction and Engineearing Ltd. Vs. CIT(A) 22 shown an amount of Rs.50,39,975/- as exempt income, however, the assessee has not made any disallowance u/s 14A in the computation of income. On query, the assessee claimed that it has not debited any expenditure to profit and loss account including fees paid for managing port folio/investment advisory fees and STT, therefore, no disallowance u/s 14A was warranted. However, AO has not accepted the submission of the assessee and referred provisions of Sec. 14A and stated that for the purpose of computing the total income no deduction should be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. Therefore, the assessing officer has computed the disallowance u/s 14A in accordance with the provisions of Rule 8D of the I.T Rule to the amount of Rs.27,66,041/-.
The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has restricted the addition to the extent of Rs.25,45,061/- under Rule 8D(2)(iii) of the I.T. Rule. 4. Heard both the sides and perused the material on record. The assessing officer has made disallowance under Rule 8D(2)(iii) to the amount of Rs.25,45,061/- being administrative expenditure incurred for earning the exempt income. However, the ld. Counsel submitted that for the purpose of making disallowance of expenses u/s 14A as per Rule 8D only those investments were to be considered for computing average value of investment on which exempt income was earned during the year under consideration whereas the assessing officer has taken into consideration the whole investment including such investment from which interest income has not been received during the year. We consider that as per provision of Sec. 14A r.w.Rule 8D only those investment are to be considered for computing average value of investment which yielded exempt income during the year relevant
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