HOLTEC CONSULTING PVT. LTD.,NEW DELHI vs. ADDL. CIT, SPECIAL RANGE - 4, NEW DELHI

The dispute in the present appeal is confined to disallowance made of Rs.25,48,011/- under section 14A of the Income-tax Act, 1961 (for short ‘the Act’) read with Rule 8D of the Income-tax Rules, 1962.

Briefly the facts are, the assessee is a resident company. For the assessment year under dispute, the assessee had filed its return of income on 29.09.2009 declaring total income of Rs.34,61,22,857/-. In course of assessment proceeding, the Assessing Officer noticed that the assessee, in the year under consideration, has earned exempt income amounting to Rs.30,47,986/-. Being of the view that the assessee has not computed disallowance of expenditure attributable to earning of exempt income in accordance with Rule 8D, the Assessing Officer proceeded to compute disallowance by applying the said provision. The assessee disputed the disallowance made before learned Commissioner (Appeals) and, thereafter, before the Tribunal. While deciding the issue, the Tribunal restored it back to the Assessing Officer for deciding afresh in accordance with law. While completing the assessment in pursuance to the direction of the Tribunal, the Assessing Officer again made disallowance under section 14A read with Rule 8D at Rs.25,48,011/-. The disallowance so made, was also upheld by learned Commissioner (Appeals). 2 | P a g e

The only submission made before us by learned counsel for the assessee is to the effect that the Assessing Officer may be directed to compute disallowance under Rule 8D(2)(iii) by considering only those investments which have yielded exempt income during the year. In this context, the assessee has furnished the following working to demonstrate the quantum of investment which yielded exempt income during the year:

In support of his contention, learned counsel for the assessee relied upon the decision of the Hon’ble Delhi High Court in case of Pr. CIT Vs. Caraf Builders & Constructions (P.) Ltd. [2019] 101 taxmann.com 167 (Delhi).

Learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 3 | P a g e

We have considered rival submissions and perused the materials on record. Specific contention of learned counsel for the assessee before us is, the disallowance under Rule 8D(2)(iii) should be computed by considering only those investments which have yielded exempt income during the year. In this regard, the assessee has furnished a working which has been reproduced elsewhere in the order.

As could be seen from the working furnished by the assessee, the income from some investments are taxable.

Thus, keeping in view the ratio laid down by the Hon’ble Delhi High Court, as referred to above, we direct the Assessing Officer to factually verify assessee’s claim with reference to the working of the investments which have either yielded taxable income or not yielded any income and, thereafter, compute the disallowance by considering only those investments which have yielded exempt income during the year.

In the result, the appeal is partly allowed.