ADDL. CIT., SPECIAL RANGE- 9, NEW DELHI vs. TOURISM FINANCE CORPORATION OF INDIA LTD., NEW DELHI

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ITA 6837/DEL/2017Status: DisposedITAT Delhi28 February 2022AY 2012-135 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer failed to record proper satisfaction as required by Section 14A(2) and that the disallowance made by the AO was excessive and lacked nexus with the expenditure incurred. The CIT(A)'s order was upheld.

What were the facts?

The assessee company earned exempt dividend income of Rs. 69,85,231. The Assessing Officer disallowed Rs. 2,17,65,423 under Section 14A read with Rule 8D, rejecting the assessee's suo-motu disallowance. The CIT(A) restricted the disallowance to Rs. 4,82,053.

What were the issues?

Whether the Assessing Officer properly recorded satisfaction for disallowance under Section 14A, and if the disallowance made was reasonable and linked to exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI

Before: SHRI SAKTIJIT DEY & DR. BRR KUMAR

For Respondent: Shri Umesh Takyar, Sr. DR, Shri Sanjay Aggarwal, CA
Hearing: 28.02.2022Pronounced: 28.02.2022

Date of hearing 28.02.2022 Date of pronouncement 28.02.2022 ORDER

PER SAKTIJIT DEY : JUDICIAL MEMBER

1.

This is an appeal by the Revenue against the order dated 22.12.2016 of learned Commissioner of Income-Tax(Appeals)-39, New Delhi for the assessment year 2012-13.

2.

The only effective ground raised by the Revenue is as under:

“1. The on the facts and circumstances of the case, the Ld.CIT(A) has erred in not appreciating the fact that A.O made the disallowance with sec. 14A r.w.r. 8D of the IT Act.”

3.

Briefly, the facts are that the assessee is a resident company stated to be engaged in long term financing and financial advisory services. For the assessment year under dispute, the assessee filed its return of income on 27.9.2012 declaring total income of Rs.37,96,56,070. In course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee had earned exempt income by way of dividend amounting to Rs.69,85,231. Noticing this, the Assessing Officer called upon the assessee to explain why disallowance should not be made in terms of Rule 8D. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the submissions of the assessee proceeded to compute disallowance under Section 14A read with Rule 8D at Rs.2,17,65,423. The assessee contested the aforesaid disallowance before learned Commissioner(Appeals).

4.

Being convinced with the submissions of the assessee, learned Commissioner(Appeals) restricted the total disallowance to be made under Section 14A to Rs.4,82,053.

5.

We have heard Shri Sanjay Aggarwal, learned counsel for the assessee and Shri Umesh Takyar, learned Senior Departmental Representative. As could be seen from the facts on record, as against dividend income earned of Rs.69,85,231, the assessee initially had disallowed an amount of Rs. 1 lac suo-motu under Section 14A of the Act. Subsequently, in course of assessment proceedings, the assessee filed a revised computation making disallowance of Rs.4,82,053 under Section 14A of the Act.

The Assessing Officer, however, by completely dismissing the claim of the assessee proceeded to disallow expenses by applying Rule 8D. As rightly observed by the learned Commissioner(Appeals), the Assessing Officer has not recorded a proper satisfaction in terms of Section 14A(2) of the Act as to why the disallowance made by the assessee is incorrect having regard to its books of accounts. On the contrary, the assessee has fully justified the suo-motu disallowance made by it through detailed submissions furnished, both, before the Assessing Officer as well as learned Commissioner(Appeals). Moreover, considering the quantum of exempt income earned by the assessee, the disallowance made by the Assessing Officer is unreasonably excessive and has no nexus with the actual expenditure incurred by the assessee for earning the dividend income.

6.

In view of the aforesaid, we do not find any infirmity in the order of learned Commissioner (Appeals). Accordingly, we uphold the same by dismissing the ground raised.

7.

In the result, the appeal is dismissed.

Order pronounced in the open court on 28.02.2022.

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