M/S. MYSORE HOLDINGS PRIVATE LIMITED,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 4(1)(2), BANGALORE

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ITA 2479/BANG/2019Status: DisposedITAT Bangalore20 February 2020AY 2016-173 pages
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What did the Tribunal hold?

The Tribunal deleted the disallowance made under Rule 8D(2)(ii) based on the Karnataka High Court's decision in CIT vs. Microlabs Ltd. For disallowance under Rule 8D(2)(iii), the matter was restored to the AO for fresh decision.

What were the facts?

The assessee company had significant share capital and reserves. The Assessing Officer (AO) made a disallowance of Rs. 14.22 lacs under Section 14A, which was upheld by the CIT(A). The assessee appealed this disallowance.

What were the issues?

Whether disallowance under Section 14A read with Rule 8D is justified, particularly concerning interest expenditure and administrative expenses in relation to investments.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ A ’

Before: SHRI N. V. VASUDEVAN & SHRI A. K. GARODIA

For Appellant: Shri Sudheendra B. R., C. A
For Respondent: Shri Manjeet Singh, Addl. CIT DR

O R D E R Per A. K. Garodia, A.M. : This appeal is filed by the assessee and it is directed against the order passed by the CIT(A) – 4, Bangalore dt. 03.09.2019.

2.

Although the assessee has raised as several grounds but the grievance is only one about disallowance of Rs. 14.22 lacs u/s 14A.

3.

In course of hearing, learned AR of the assessee submitted that the as per page 4 of the assessment order, the total investment by the assessee is of Rs. 493.10 Lacs and as per the balance Sheet of the assessee available on page 44 of the paper book, the assessee was having Share Capital of Rs. 2288.43 Lacs at the beginning of the present year and Rs. 4443.43 Lacs at the end of the present year in addition to Reserves and Surplus of Rs. 2019.43 Lacs as on 31.03.2016. He placed reliance on the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Microlabs Ltd., 383 ITR 490 and submitted that as per this judgment, in the facts of the present case, no disallowance is called for out of interest expenditure under Rule 8D (2) (ii). Regarding disallowance under Rule 8D (2) (iii) out of administrative expenses to the extent of 0.5% of average investments, he placed reliance on the decision of the special bench of the tribunal rendered in the case of ACIT vs. Vireet Investment Pvt. Ltd., 165 ITD 27 and submitted that as per this, the disallowance under Rule 8D (2) (iii), only those investments should be considered for considering average value of investment which yielded exempt income during the year. He submitted that to compute the amount of disallowance under Rule 8D (2) (iii), the matter may be restored to AO for fresh decision in the light of this tribunal order. Learned DR of the revenue supported the orders of the lower authorities.

4.

We have considered the rival submissions. We find force in the submissions of the learned AR of the assessee and accordingly, we delete the disallowance made by the AO under Rule 8D (2) (ii) and for disallowance under Rule 8D (2) (iii), we restore the matter to the AO for fresh decision in the light of this tribunal order rendered in the case of ACIT vs. Vireet Investment Pvt. Ltd. (Supra).

5.

In the result, Assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.

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