TAKE SOLUTIONS LIMITED,CHENNAI vs. ACIT CORPORATE CIRCLE 3(1), CHENNAI

PDF · subscribers
ITA 1367/CHNY/2019Status: DisposedITAT Chennai29 November 2022AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that interest disallowance was not justified as the assessee's own funds exceeded investments and no nexus of interest-bearing funds was established. Indirect disallowance should be computed considering only investments yielding exempt income.

What were the facts?

The assessee's appeal for AY 2012-13 concerned disallowance under Section 14A read with Rule 8D. The Assessing Officer had made an aggregate disallowance of Rs. 92.42 Lacs, which was confirmed by the CIT(A).

What were the issues?

Whether interest disallowance under Rule 8D(2)(ii) is justified when own funds exceed investments and whether indirect expense disallowance under Rule 8D(2)(iii) should consider only investments yielding 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, ‘A’ BENCH, CHENNAI

Before: HON’BLE SHRI V. DURGA RAO & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of the order of learned Commissioner of Income Tax (Appeals)-11, Chennai [CIT(A)] dated 15-02-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s. 254 of the Act on 17-12-2018. This is a second round of appeal since the matter, in the first round, was remitted back by the Tribunal vide order dated 05-12-2017 to the file of Ld. AO for fresh 2 - adjudication. The sole subject matter of the appeal is disallowance u/s 14A read with Rule 8D.

2.

The Ld. AR submitted that own funds far exceed the investments made by the assessee and all the investments were made in earlier years. Therefore, interest disallowance would not be justified. The Ld. AR also submitted that indirect expense disallowance may be computed by considering only those investments which have actually yielded any exempt income during the year. The Ld. Sr. DR controverted the arguments of Ld. AR. Having heard rival submissions, the appeal is disposed-off as under.

3.

Upon perusal of assessment order, it could be seen that Ld. AO has computed aggregate disallowance of Rs.92.42 Lacs u/r 8D(2) which include interest disallowance u/r 8D(2)(ii) for Rs.65.71 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.26.70 Lacs. The Ld. CIT(A) has confirmed the same against which the assessee is in further appeal before us.

4.

Upon perusal of assessment order, it could be seen that opening value of investments as well as closing value of investments as taken by Ld. AO to compute the disallowance is same which would show that no fresh investment has been made by the assessee during this year. The perusal of financial statements for this year, as placed, on record, would show that own funds in the shape of share capital and Reserves far exceed the investments made by the assessee and therefore, a presumption would arise in assessee’s’ favor that the investments were sourced out of own funds since no nexus of interest-bearing funds vis- à-vis investments made by the assessee has been established by Ld. AO. Therefore, in our considered opinion, interest disallowance is not 3 - justified. The indirect disallowance may be computed by Ld. AO u/r 8D(2)(iii) by considering only those investments which have actually yielded exempt income during the year. The assessee is directed to provide the requisite details.

5.

The appeal stands partly allowed. Order pronounced on 29th November, 2022.

More judgments on Section 14A

All 15,875 judgments and leading authorities on Section 14A →

Recent GST High Court judgments

Search GST case law →