Loading judgment…
Facts
The appeal was filed by the assessee against the order of the CIT(A) confirming the disallowance of Rs.1,59,29,648/- made under Section 14A by the Assessing Officer for AY 2010-11. The issue was similar to the assessee's own case for AY 2008-09.
Held
The Tribunal held that the disallowance under Section 14A read with Rule 8D cannot exceed the amount of exempt income. While upholding the principle of disallowance, it directed the Assessing Officer to restrict the impugned Section 14A disallowance to the extent of exempt income, which was Rs.1,89,42,065/-.
Key Issues
Whether disallowance under Section 14A read with Rule 8D can exceed the exempt income amount? Whether a direct nexus was established between interest-bearing funds and tax-free investments?
Sections Cited
14A, 8D
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR.BRR KUMARSHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2010-11) Gruh Finance Ltd., Vs. Deputy Commissioner of “GRUH” Netaji Marg, Income Tax, Mithakali Six Roads, Circle-2(1)(1), Ellisbridge, Ahmedabad Ahmedabad-380007 [PAN No.AAACG7010K] (Appellant) .. (Respondent) Appellant by : Ms Arti N Shah, A.R. Respondent by: Shri B P Srivastava, Sr. DR 17.12.2024 Date of Hearing Date of Pronouncement 03.01.2025 O R D E R PER: DR. BRR KUMAR, VICE PRESIDENT: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-2, Ahmedabad vide order dated 15.09.2017 passed for the Assessment Year 2010-11.
The Assessee has taken the following grounds of appeal:-
[1] The Learned Commissioner of Income Tax, (Appeals)-2, has erred in law as well as on facts of the case by confirming the disallowance of Rs.1,59,29,648/- made u/s.14A by the Assessing Officer. [2] Your appellant reserves the right to add, alter, amend and/or withdraw any of the above grounds of appeal.
At the outset, both the parties fairly submitted that the issue taken up by the assessee in the appeal before us has been stands Gruh Finance Ltd. vs. DCIT Asst.Year –2010-11 - 2– covered by the order of the Tribunal in the assessee’s own case in for AY 2008-09 dated 30.09.2016. For the sake of ready reference, the operative portion of this order is reproduced as under:
‘’…7. We have heard both the parties. There is no dispute about the relevant facts and figure involved in assessee's exempt income, tax free investments and availability of interest free funds. There is further no quarrel that the Assessing Officer had not disallowed any direct expenditure relating to exempt income. The factual position in the lower appellate proceedings is that the CIT(A) has dealt with each and every aspect of assessee's exempt income and corresponding investment to establish a direct nexus between the latter and its interest bearing funds avail from NHB. He has further arrived at a conclusion that the assessee has been maintaining separate accounts (supra). The assessee is unable to rebut this factual position. We thus find no reason to interfere in the lower appellate order so far as first two direct expenditure disallowances of Rs.1,10,75,570/- for interest bearing funds withdrawn from IDBI account and Rs.1,15,75,905/ drawn from HDFC Bank account; both invested in mutual funds are concern…”
We proceed to deal with the third figure of Rs.1,02,00,589/- stated to be involving balance funds utilized in mutual funds investment. We repeat that we are dealing with a case falling under direct expenditure disallowance covered by Rule 8D (2) (i) of the Income Tax Rules. The CIT(A) has no where establish a direct link between assessee's interest bearing fund vis-a-vis its impugned tax free investment. It has further come on record that assessee's interest free funds far exceed its tax free investment. We observe in these facts that an inference as per Hon'ble jurisdictional decision (2015) 376 ITR 553 (Guj) PCIT vs. India Gelatine and Chemicals Ltd. can safely withdrawn that the impugned tax free funds have been made from non interest We thus delete this third item of disallowance. Accordingly uphold CIT(A)’s enhancement action under challenge in principle.
We now come to an equally important aspect as to Whether Section 14A r.w. Rule 8D disallowance could exceed the exempt income amount or not. A coordinate bench of this tribunal as well as Delhi high court (supra) have already held that the same cannot in any case be computed beyond the exempt income amount. We thus direct the assessing authority to frame consequential computation restricting the impugned Section 14A disallowance to the extent of exempt of Rs.1,89,42,065/- only. Thus substantive ground as well as the main appeal for AY 2008-09 is partly allowed…”
In the absence of any change in factual matrix and legal proposition brought to our notice, the appeal of the assessee is hereby dismissed.
In the result, the appeal of the assessee is dismissed.
This Order pronounced in Open Court on 03.01.2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. BRR KUMAR) JUDICIAL MEMBER VICE PRESIDENT (True Copy) Ahmedabad; Dated 03.01.2025 Manish, Sr. PS TRUE COPY आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,