INDAG RUBBER LTD.,NEW DELHI vs. DCIT, CIRCLE 10(1), NEW DELHI

ITA 3106/DEL/2026Status: DisposedITAT Delhi29 September 2026AY 2017-186 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the directions of the Ld. CIT(A) on both issues. Regarding the disallowance under Section 14A, the Tribunal observed that the AO had recorded satisfaction that the assessee had not made the disallowance in accordance with law and Rule 8D. The Ld. CIT(A) had directed the AO to re-compute the disallowance considering investments yielding exempt income and reducing the suo-motto disallowance. The Tribunal found no error in this direction, stating that the assessee's suo-motto disallowance of INR 11,45,517/- was for directly relatable expenses, but sub-Rule (2) of Rule 8D required an additional 1% of the average value of investment, which the assessee had not done. The judgments relied upon by the assessee were deemed not applicable. Therefore, grounds of appeal 1 to 3 were dismissed. Regarding the disallowance under Section 36(1)(va), the Tribunal found no error in the Ld. CIT(A)'s direction to the AO to verify if the delay in payment of INR 1,58,077/- was due to the loss of a cheque and subsequent stop payment, as claimed by the assessee. If the contention was found correct, the disallowance was to be deleted. The Tribunal found no reason to interfere with these directions, and grounds of appeal 4 & 5 were dismissed.

What were the facts?

The assessee, Indag Rubber Ltd., filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the order dated 28.01.2016 passed by the Ld. Commissioner of Income Tax (A) concerning Assessment Year 2017-18. The original assessment order dated 19.12.2019, passed under Section 143(3) of the Income Tax Act, 1961, had made an addition of INR 57,66,000/- under Section 14A read with Rule 8D of the Income Tax Rules, 1962, and a disallowance of INR 1,58,077/- under Section 36(1)(va) for delayed payment of employees' contribution to PF & ESI. The Ld. CIT(A) had partly allowed the appeal, remanding both issues to the Assessing Officer (AO) for limited verification regarding the computation of disallowance under Section 14A and the circumstances leading to the delay in PF payment.

What were the issues?

1. Whether the AO correctly made the disallowance under Section 14A of the Act read with Rule 8D of the Rules, considering the assessee's suo-motto disallowance and the requirement of AO's satisfaction. 2. Whether the disallowance of INR 1,58,077/- under Section 36(1)(va) for delayed payment of employees' contribution to PF & ESI is justified, considering the circumstances of the delay. Assessee's contentions: Regarding Issue 1, the assessee argued that the AO failed to record the requisite satisfaction before making the disallowance. The assessee had already made a suo-motto disallowance of INR 11,45,517/- representing expenses directly attributable to earning exempt income, and no further disallowance was warranted. The AO could only invoke sub-Rule (2) of Rule 8D if not satisfied with the assessee's claim. Reliance was placed on Supreme Court judgments in Maxopp Investment Ltd. vs CIT and Godrej & Boyce Mfg. Co. Ltd. vs DCIT, and Delhi High Court judgments in PCIT vs Vedanta Ltd. and Eicher Motors Ltd. Revenue's contentions: The Revenue's representative vehemently supported the orders of the lower authorities and requested their confirmation.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(va),Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “G” BENCHES, NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL

For Respondent: Ms. Beenu, Sr. DR

PER MANISH AGARWAL, A.M.: The present appeal is filed by assessee against the order dated 28.01.2026 passed by Ld. Commissioner of Income Tax (A)/ADDL/JCIT(A)-2, Chennai [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-4/10658/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 19.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18. 2. Brief facts of the case are that assessee company is engaged in manufacturing of tyre retreading material an

The order continues below.

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