M/S. KAKKAR COMPLEX STELS PVT. LTD,HOSHIARPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-III, CIRCLE-III, JALANDHAR
What did the Tribunal hold?
The tribunal held that the enhancement of disallowance from 0.5% to 1% by the CIT(A) was not sustainable as the relevant rule amendment was applicable from a later assessment year. The addition at 0.5% was also not sustained due to the Assessing Officer's failure to crystallize the expenditure.
What were the facts?
The assessee challenged an addition made under Rule 8D(2)(ii) of the Income Tax Rules. The Assessing Officer disallowed 0.5% of certain expenses, which was enhanced to 1% by the CIT(A) based on a rule amendment that came into effect later.
What were the issues?
Whether the amended Rule 8D(2)(ii) was applicable to the assessment year in question and whether the Assessing Officer had correctly determined the expenditure for disallowance under Section 14A.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. N.K.CHOUDHRY & SH. O.P.MEENA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N.K.CHOUDHRY, JUDICIAL MEMBER AND SH. O.P.MEENA, ACCOUNTANT MEMBER
ITA No. 149/Asr/2018 Assessment Year: 2014-15 M/s. Kakkar Complex Steels Asst. CIT, Pvt. Ltd. Circle-III, 7 km, Jalandhar Road, Vs. Jalandhar Hoshiarpur. [PAN:AAACK 9865A] (Appellant) (Respondent)
Appellant by: Sh. Ashwani Kalia (Ld. CA) Respondent by: Sh. Charan Dass (Ld. DR) Date of hearing: 20.12.2019 Date of pronouncement: 20.12.2019
ORDER PER N.K.CHOUDHRY, JM:
This appeal has been preferred by the Assessee against the
order dated 03.01.2018 passed by the Ld. CIT(A)-2, Jalandhar u/s
250(6) of the I.T. Act, 1961 (hereinafter called as ‘the Act’).
The assessee is aggrieved against the only addition of
Rs.18,52,896/- made under clause (ii) of Rule 8D (2) of the Income Tax (14th Amendment) Rules, 2016 confirmed by the Ld. CIT(A) .
ITA N0.149/Asr/ 2018 (A.Y.2014-15) 2 M/s Kakkar Complex Steels Pvt. Ltd. Vs. ACIT
In fact the Assessing Officer added the amount of
Rs.9,26,448/- on account of certain expenses incurred by the
assessee under Rule 8D of I T Rules 1962 (hereinafter called as the
Rules) read with section 14A of the Act @ 0.5.% which was
subsequently enhanced by the Ld. CIT(A) @ 1% by referring the sub- clause (ii) of Rule 8D(2) which came into effect from the 2nd June,
2016.
The assessee has challenged the said addition on two fold, first
that the Assessing Officer was not certain about the expenditure
incurred by the assessee for the investment made by the assessee
and therefore, on the basis of presumption the addition is not
sustainable even at the rate of 0.5%, because the assessee has not
incurred any expenditure on investment. Secondly, clause (ii) to sub- rule-2 of Rule 8D came into effect from 2nd June, 2016, therefore, the
addition enhanced from 0.5 % to 1% by the Ld. CIT(A) is also not
sustainable.
Having heard the parties at length and perused the material
available on record.
4.1 First we will decide the issue relating to enhancement of
addition qua expenditure on investment from 0.5% to 1% by the Ld.
CIT(A) under clause (ii) of Rule 8D(2) of Rules r.w. section 14A of
ITA N0.149/Asr/ 2018 (A.Y.2014-15) 3 M/s Kakkar Complex Steels Pvt. Ltd. Vs. ACIT
the Act. We are of the considered view that as it reflects from the
impugned order itself that sub-clause (ii) was made applicable in the Rule 8D(2) of the Income tax Rules from 2nd June, 2016 and
therefore that would be applicable from Asst. Year: 2016-17 onwards
and not applicable to the case in hand as it pertains to assessment
year 2014-15. Hence, we are unable to sustain the enhancement of
the disallowance from 0.5% to 1%. Consequently the decision of Ld.
CIT(A) for enhancement is set aside .
4.2 Coming to the second issue qua addition @ 0.5% under Rule
8D of I T Rules 1962 read with section 14A of the Act. From the
assessment order it reflects that the Assessing Officer made the
addition @ 0.5% under Rule 8D of the Rules read with section 14A
of the Act without determining the amount of expenditure incurred by
the assessee on the ground that the assessee has not been able to
substantiate its claim qua non-expenditure on the investment.
Therefore, in the absence of crystallization of expenditure by the
Assessing officer, we are unable to sustain the addition @ 0.5%,
however in the interest of justice and for determination of correct
income, we feel it appropriate to remand this issue to the file of the
Assessing Officer for decision afresh.
ITA N0.149/Asr/ 2018 (A.Y.2014-15) 4 M/s Kakkar Complex Steels Pvt. Ltd. Vs. ACIT
In the result, appeal filed by the assessee partly stands allowed for statistical purposes.
Order pronounced in the open Court on 20/12/2019.
Sd/- Sd/- (O.P.MEENA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20/12/2019. /PK/ Ps. Copy forwarded to: 1. The Appellant 2. The Respondent 3. The CIT 4. Then CIT(Appeals) 5. SR DR, I.T.A.T. Amritsar 6. Guard File True Copy By Order
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