DCIT, CORPORATE CIRCLE -2, MADURAI vs. TVS SUPPLY CHAIN SOLUTIONS LTD., MADURAI

These cross appeals filed by the assessee as well as Revenue are directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Madurai, dated 08.04.2019 relevant to the assessment year 2015-16. First, we shall take up the appeal filed by the assessee for adjudication. I.T.A. No. 1837/Chny/2019

When this appeal was taken up for hearing, the ld. Counsel for the assessee has submitted that in similar facts and circumstances of the case in assessee’s own case for the assessment year 2013-14 in vide order dated 09.08.2021, the issue has been remitted back to the file of the Assessing Officer to decide afresh in accordance with law and thus, prayed that the same may be followed.

On the other hand, the ld. DR has not raised any objection.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below and the case law relied on by the ld. Counsel for the assessee. The issue involved in this appeal is with regard to disallowance made under section 14A of the Income Tax Act, 1961 [“Act” in short]. In the earlier order in dated 09.08.2021 for the assessment year 2013-14 in assessee’s own case, the Tribunal has considered the issue and remitted the matter back to the file of the Assessing Officer to recompute the disallowance of expenses relatable to exempt income under section 14A of the Act in accordance with the directions given therein. For the sake of convenience, the relevant portion of the order is extracted hereunder: “13. We have gone through arguments of the assessee in light of working of disallowances u/s.14A and find that the assessee has paid interest on certain loans which are borrowed for specific purposes. Therefore, if the assessee is able to prove utilization of loans for specific purposes, then interest relatable to said loans cannot be included for computation of disallowances under Rule 8D(2)(ii) of Income Tax Rules, 1962. Similarly, the assessee claimed that while computing disallowance under Rule 8D(2)(iii), the Assessing Officer has included investments made in overseas subsidiaries and income from which is taxable under Indian laws. We find that it is a well settled principles of law that dividend earned from overseas investments is taxable in Indian law, therefore, for the purpose of computing other expenses under Rule 8D(2)(iii), those investments need to be excluded. Similarly, it is well settled principles of law by the decision of ITAT Special Bench in the case of ACIT Vs. Vireet Investments Pvt. Ltd. (165 ITD 27) (SB) that only those investments which yielded exempt income for the year needs to be considered for computation of disallowance of other expenses. The assessee has filed working explaining computation of disallowance u/s.14A r.w. Rule 8D of the Income Tax Rules, 1962. The said computation was not available to the Assessing Officer at the time of assessment proceedings. Therefore, we are of the considered view that the issue needs to go back to the file of the Assessing Officer for re-consideration in light of revised working filed by the assessee. Hence, we set aside the appeal to the file of Assessing Officer and direct him to recompute disallowance of expenses relatable to exempt income u/s.14A of the Act in accordance with our directions given herein above. 14. In the result, appeal filed by the assessee is treated as allowed for statistical purposes and appeal filed by the Revenue is dismissed as not maintainable.”

By considering the submissions of both the sides, keeping in view of the facts and circumstances and respectfully following the above decision of the Coordinate Benches of the Tribunal in assessee’s own case for the assessment year 2013-14, we remit the issue back to the file of the Assessing Officer to adjudicate the issue of 14A disallowance under normal computation and also under MAT afresh in line with the directions given by the Tribunal after affording an opportunity of being heard to the assessee.

When the appeal of the Revenue was taken up for hearing, the ld. Counsel for the assessee has submitted that the tax effect in the appeal filed by the Revenue is less than the monetary limit of ₹.50,00,000/- fixed by the CBDT to file an appeal by the Revenue before the Tribunal as per the CBDT Circular No. 17/2019, dated 08.08.2019. The ld. DR fairly conceded the submissions made by the ld. Counsel for the assessee. Being so, the Revenue authorities are precluded from filing the appeal before the Tribunal, since the tax effect is less than ₹.50,00,000/- in this appeal. Thus, the appeal filed by the Revenue is not maintainable and is liable to be dismissed. Accordingly, the appeal filed by the Revenue is dismissed.

In the result, the appeal filed by the assessee is allowed for statistical purposes and the appeal filed by the Revenue is dismissed.