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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: MS SUCHITRA KAMBLE & DR. B. R. R. KUMAR
PER SUCHITRA KAMBLE, JM
This appeals is filed by the assessee against the order dated 26/02/2018 passed by CIT(A)-1, New Delhi for Assessment Year 2014-15.
The grounds of appeal
are as under:-
1. On the facts and circumstances of the case, the order passed by the Id. CIT(A) (Appeals) is bad & erroneous in law. a) On the facts and circumstances of the case and in law, the Id. CIT(A), has erred in confirming the disallowance of Rs.53,36,753/- u/s 14A read with Rule 8D as against receipt of total exempted income of Rs4,,77,220 (being dividend income of Rs.4,42,693/- and exempted long term capital gain of Rs.34,5271- made by the Id. AO. b) That Id. CIT(A) erred in law and on facts of the case in not giving the directions to compute disallowance u/r 8D by considering the average of only those investments on which the exempted income was received by the appellant company instead of total investments. Directions be given to compute disallowance u/r 8D by taking into account of only those investments on which the exempted income was received as held by Hon’ble Jurisdictional High Court of Delhi and other Courts. c) That Id. CIT(A) erred in law and on facts in not directing the Assessing Officer to compute disallowance u/r 8D by considering the net interest paid after reducing the amount of interest income. d) That Id. CIT(A) further, erred in law and on facts in not restricting the disallowance u/r 8D read with section 14A of the Act, to the extent of exempted income of Rs. 4,77,220/- received by the Company. Directions be given to restrict the disallowance u/r 8D to the extent of exempted income of Rs 4,77,220/- received by the appellant.
The assessee Company is Non-Banking Financial Corporation engaged in the business of investment in shares, securities as well as advancing of loans. Return of income was filed on 22/9/2016 declaring loss of Rs.57,85,128/-. Assessment u/s 143(3) was passed on 28/12/2015 determining total loss at Rs. 4,03,500/-. The Assessing Officer added Rs. 39,04,820/- on account of expenses incurred for earning exempt income u/s 14A read with Rule 8D of the Income Tax Rules, 1962. The Assessing Officer further added notional interest of Rs. 14,77,258/- on loans/advances to one of the party.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. AR submitted that the CIT(A) erred in confirming the disallowance of Rs. 53,36,753/- u/s 14A read with Rule 8D as against receipt of total exempt income of Rs. 4,77,220/- (being dividend income of Rs. 4,42,693/- and exempt long term capital gain of Rs. 34,527/-) made by the Assessing Officer. The Ld. AR submitted that the Revenue should have computed disallowance under Rule 8D by considering the average of only those investment on which the exempt income was received by the assessee company instead of total investments. The Ld. AR relied upon the Jurisdictional High Court decisions in case of Cheminvestment Ltd. Vs. CIT 61 Taxman.com 118 and ACB India Pvt. Ltd. Vs. ACIT (ITA 615/2014 Decided on 24th March, 2015). The Ld. AR submitted that the assessee has received only Rs. 4,77,220/- as exempt income. Therefore, the disallowance should have been as per that amount itself.
The Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused the material available on record. It is pertinent to note that the assessee has received the exempt income to the extent of Rs. 4,77,220/- being dividend income and exempt long term capital gain. This fact was not disputed by the Revenue Authorities. Therefore, the applicability of Rule 8D should have been restricted to that extent only. Hence, we direct the Assessing Officer to restrict the disallowance on the amount of Rs. 4,77,220/- as per Section 14A read with Rule 8D. The appeal of the assessee is partly allowed.