KDDL LTD.,CHANDIGARH vs. DCIT, CIRCLE- 5(1), NEW DELHI

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ITA 3982/DEL/2017Status: DisposedITAT Delhi10 January 2020AY 2010-115 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that only the average value of investments yielding exempt income should be considered for disallowance under Rule 8D. The matter was remitted back to the Assessing Officer for fresh computation.

What were the facts?

The Assessing Officer disallowed Rs. 61,81,775/- under Section 14A read with Rule 8D, considering dividend income of Rs. 1.20 lakhs as exempt. The assessee argued that the disallowance was wrongly computed, and only investments generating exempt income should be considered.

What were the issues?

Whether the disallowance under Section 14A read with Rule 8D should consider only investments that generate 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, DELHI ‘A’ BENCH,

Before: SHRI BHAVNESH SAINI, & SHRI N.K. BILLAIYA

For Appellant: Shri Abhishek Agarwal, CA
Hearing: 09.01.2020Pronounced: 10.01.2020

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] - 44, New Delhi dated 16.12.2016 pertaining to Assessment Year 2010-11.

2.

The sum and substance of the grievance of the assessee is that the CIT(A) erred in sustaining the disallowance of Rs. 61,81,775/- made by the Assessing Officer by invoking provisions of section 14A of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] r.w.r 8D of the I.T. Rules, 1962.

3.

Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown dividend income of Rs. 1.20 lakhs and claimed the same to be exempt. The Assessing Officer was of the firm belief that provisions of section 14A r.w.r 8D squarely apply. Invoking the provisions of the said rule, the Assessing Officer computed disallowance at Rs. 6,22,948/-.

4.

The assessee carried the matter before the ld. CIT(A) but without any success.

5.

Before us, the ld. counsel for the assessee vehemently stated that the Assessing Officer has wrongly computed the disallowance u/r 8D in as much as the Assessing Officer should have taken into consideration only those investments which generated exempt income. The ld. counsel for the assessee furnished correct calculation as per Rule 8D which is as under:

Particulars Amount ('Rs.) Direct expenditure 1 - Interest expenditure 2 = (A*B)/C 45,626 0.5% of value of investment 3 = 10,00,000*0.5% 5,000 Total disallowance as per Rule 8D 1+2+3 50,626

Working for 2: Interest expenses A 393,26,783 Average value of investment B 10,00,000 [(10,00,000+10,00,000)/2] Average value of assets C 8619,29,914 [(89,35,05,064+83,03,54,764)7 2]

6.

The ld. DR supported the findings of the Assessing Officer.

7.

We have given thoughtful consideration to the orders of the authorities below and have perused the computation of disallowance furnished by the assessee as mentioned hereinabove. We find force in the contention of the ld. counsel for the assessee. Only that average value of investment has to be taken into consideration which results into exempt income. We, accordingly, remit the matter to the file of the Assessing Officer. The Assessing Officer is directed to examine the computation of disallowance as mentioned hereinabove and decide the issue afresh after giving reasonable opportunity of being heard to the assessee.

8.

In the result, the appeal filed by the assessee in is treated as allowed for statistical purposes.

The order is pronounced in the open court on 10.01.2020.

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