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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SHRI SAKTIJIT DEY & PRADIP KUMAR KEDIA
ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: This is an appeal by the assessee against order dated 29.10.2018 of learned Commissioner of Income-Tax(Appeals)-7, New Delhi for the assessment year 2015-16.
The dispute in the present appeal is confined to the disallowance made under Section 14A read with Rule 8D.
Briefly, the facts are, the assessee is a resident company registered as a Non-Banking Financial Company (NBFC). For the assessment year under dispute, assessee had filed its return of income on 28.09.2015, declaring income of Rs.2,78,30,426. In course of assessment proceedings, Assessing Officer noticed that assessee had voluntarily disallowed expenses of Rs.94,549 under Section 14A of the Act read with Rule 8D. From the material on record, Assessing Officer noticed that the closing balance of investment stands at Rs.3,96,49,058. Thus, the Assessing Officer was of the view that disallowance made by the assessee was not in accordance with Rule 8D read with Section 14A of the Act. Accordingly, he proceeded to compute disallowance by applying the provisions of Rule 8D. In the process, he disallowed an amount of Rs.3,81,231 towards interest expenditure under Rule 8D(2)(ii) and Rs.99,123 towards administrative expenditure under Rule 8D(2)(iii) Act. Thus, he computed the aggregate disallowance at Rs.4,80,354. After reducing the suo motu disallowance made by the assessee, he made a net disallowance of Rs.3,85,805. The aforesaid disallowance made by the Assessing Officer was also sustained by learned Commissioner (Appeals).
Before us, learned counsel for the assessee submitted, assessee had sufficient interest free fund available with it to take care of the investments.
Therefore, no disallowance of interest expenditure can be made under Rule 8D(2)(ii). As regards, disallowance of administrative expenditure under Rule 8D(2)(iii), learned counsel submitted, let such disallowance be made by considering only those investments which have yielded exempt income during the year under consideration.
Learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).
We have considered rival submissions and perused the material available on record. On perusal of the balance sheet of the assessee as at 31st March 2015, it is 7. observed that interest free fund available with the assessee is much more than the investment made in exempt income yielding assets. Therefore, as per the settled legal principles, no disallowance of interest expenditure can be made under Rule 8D(2)(ii), as, the presumption would be that interest free fund has been utilized for making the investment. Therefore, we delete the disallowance of Rs.3,81,231 made under Rule 8D(2)(ii).
As regards, the disallowance of Rs.99,123 made under Rule 8D(2)(ii), it is a fact on record that the assessee itself has voluntarily disallowed an amount of Rs.94,549. Therefore, in our considered opinion, no further disallowance under Rule 8D(2)(iii) should be made. Accordingly, we direct the Assessing Officer to restrict the disallowance under Section 14A read with Rule 8D to the amount already disallowed by the assessee. Grounds are allowed.
In the result, appeal is allowed. 9.
Order pronounced in the open court on 19th May, 2022.