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Income Tax Appellate Tribunal, ‘C ‘ BENCH
Before: SHRI MAHAVIR SINGH & SHRI M.BALAGANESH
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in CO No.77/Mum/2020 for A.Y. 2010-11 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-16, Mumbai in appeal No.CIT(A)-16/IT-10085/DCIT- 8(1)/2013-14 dated 20/03/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 19/02/2013 by the ld. Dy. Commissioner of Income Tax-8(1), Mumbai (hereinafter referred to as ld. AO).
At the outset we find that cross objection of the assessee is delayed by 23 days. The ld. AR stated that because of Covid-19 Pandemic, the cross objection could not be preferred within time and accordingly, the same was filed with a delay of 23 days. He also placed reliance on the provisions of THE TAXATION AND OTHER LAWS (RELAXATION OF CERTAIN PROVISIONS) ORDINANCE, 2020 No.2 OF 2020 dated 31/03/2021 issued by Ministry of Law and Justice wherein time limits were extended by the Government granting relaxation, in support of his condonation petition. Respectfully following the same, we are inclined to condone the delay of 23 days in preferring cross objection before us and admit the same for our adjudication.
The only common issue to be adjudicated in the appeal of the Revenue and the Cross Objection of the assessee is with regard to disallowance made u/s.14A of the Act r.w.r. 8D(2) of the Income Tax Rules, 1962 (hereinafter referred to as the ‘Rules’).
CO No.77/Mum/2020 M/s. IDFC First Bank Ltd
We have heard rival submissions and perused the materials available on record. We find that assessee is a Non-Banking Financial Company (NBFC) incorporated on 18/10/2005 engaged in investment advisory activities, treasury and wholesale credit activities and retail financial services. The return of income for the A.Y.2010-11 was filed by the assessee company on 30/09/2010 declaring total income of Rs.10,33,02,250/- which was duly processed u/s.143(1) of the Act. The original assessment was completed u/s.143(3) of the Act on 19/02/2013 determining total income of the assessee under normal provisions of the Act at Rs.13,61,71,400/- and book profit u/s.115JB of the Act at Rs.21,87,01,860/-. Against this assessment order, the assessee preferred appeal before the ld. CIT(A) who vide order dated 21/03/2014 partly allowed the assessee’s appeal. Against the said order of the ld. CIT(A), both the assessee as well as the Revenue preferred cross appeals before this Tribunal. This Tribunal in 122/Mum/2013 and 4429/Mum/2014 dated 24/05/2017 had set aside to the file of the ld. CIT(A) for denovo adjudication on the issue of disallowance made u/s.14A of the Act.
4.1. The ld. CIT(A) in second round of proceedings observed that exempt income earned by the assessee during the year was Rs.34,39,162/- and restricted the total disallowance to the extent of such exempt income. Hence, this is effectively second round of proceedings before us.
4.2. We find that there are certain factual discrepancies in the order of the ld. CIT(A) in consideration of figures. Factually, we find that assessee had earned exempt income of Rs.2,33,67,537/- towards dividend. We find that assessee has voluntarily made disallowance u/s.14A of the Act in the CO No.77/Mum/2020 M/s. IDFC First Bank Ltd sum of Rs.12 lakhs. We find that the ld. AO had made the following disallowances u/s.14A of the Act r.w.r. 8D(2) of the Rules as under:-
(i) Under Rule 8D(2)(i) - Rs. 12,00,000/- (ii) Under Rule 8D(2)(ii) - Rs.1,49,62,923/- (iii) Under Rule 8D(2)(iii) - Rs.1,67,06,234/- Total - Rs.3,28,69,157/- ========== 4.3. While doing so we find that the ld. AO had not even reduced the voluntary disallowance made by the assessee in the sum of Rs. 12 lakhs. We find that assessee is having sufficient own funds to the extent of Rs.753.50 Crores which is evident from the audited financial statements enclosed in the paper book filed before us. This figure of own funds is much more than the investments made by the assessee. Hence by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of HDFC Bank Ltd., reported in 366 ITR 505, we hereby direct the ld. AO to delete the disallowance of interest under Rule 8D(2)(ii) of the Rules.
4.4. We find that the ld. AO had taken the disallowance of Rs.12 lakhs under Rule 8D(2)(i) of the Rules from the voluntary disallowance figure made by the assessee itself. No such direct nexus was identified by the ld AO towards incurrence of such direct expenses vis a vis the earning of exempt income to make this disallowance. Hence, we hereby direct the ld. AO to delete the disallowance made u/s.8D(2)(i) of the Rules.
4.5. With regard to disallowance of administrative expenses under Rule 8D(2)(iii) of the Rules, we direct the ld. AO to consider only those
CO No.77/Mum/2020 M/s. IDFC First Bank Ltd investments which had actually yielded exempt income to the assessee and re-compute the disallowance accordingly. This would be in line with the decision of Special Bench of Delhi Tribunal in the case of ACIT vs Vireet Investments reported in 165 ITD 27.
4.6. Accordingly, we deem it fit to restore this issue to the file of the ld. AO to decide the issue of disallowance in the light of the above mentioned directions. The ld. AO is also directed to reduce Rs.12 lakhs being the voluntary disallowance made by the assessee from the amount of disallowance recomputed as above.
In the result, appeal of the Revenue and Cross Objection of the assessee is allowed for statistical purposes.
Order pronounced on 01/07/2021 by way of proper mentioning in the notice board.