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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI R.K. PANDA & SHRI K.NARASIMHA CHARY
Aggrieved by the order dated 10/08/2011 in appeal No. 173/10-11 passed by the learned Commissioner of Income Tax (Appeals)-1, New Delhi (“Ld. CIT(A)”) for assessment year 2008-09, M/s Sahara OneMedia &Entertainment Ltd (formerly known as Sahara India Mass communication Ltd), who is the assessee, filed this appeal challenging the computation of disallowance under section 14A of the Income Tax Act, 1961 (for short “the Act”) read with Rule 8D of the Income Tax Rules1962 (“the Rules”).
Facts on this aspect are that in the return of income the assessee declared a sum of Rs. 12,29,522/-as a dividend income from investment made in companies and simultaneously claimed the same as exemption under section 10 (34) of the Act. Learned Assessing Officer did not agree with the contention of the assessee that such an income was earned from the old investments for which no expenses was incurred and proceeded to apply the formula under rule the of the Rules. Learned Assessing Officer made an addition of Rs. 5,08,827/-on this score.
Assessee preferred appeal before the Ld. CIT(A) and contended that there was no justification for disallowing a sum of Rs. 5,08,827/-on account of expenses under section 14A of the Act and rule 8D of the Rules. Ld. CIT(A) held that in view of the decision of the Hon’ble Bombay High Court in the case of Godrej & Boyce Manufacturing Company Limited 328 ITR 81 Rule 8D of the Rules is applicable from assessment year 2008-09.
While challenging the impugned order only argument advanced before us is that in view of the decision of the Hon’ble jurisdictional High Court in the case of PCIT vs. CarafBuilders &Constructions (P) Ltd (2019) 414 ITR 122 (Delhi), the learned Assessing Officer committed an error in taking the total value of investment and not the investment that had yielded exempt income for computing the disallowance under section rule 8D (2) (ii) of the Rules.
Ld. DR placed reliance on the orders of the authorities below.
We have gone through the orders of the authorities below in the light of the submissions made on either side. It is evident from the assessment order that the learned Assessing Officer took into consideration the value of the entire investment while computing the disallowance under rule Rule 8D(2)(ii) of the Rules instead of the investment that had a yielded the exempt income. By now it is a fairly settled by the decisions of the Hon’ble jurisdictional High Court in cases including ACB India Ltd (2015) taxmann.com 71 etc which were noticed in the decision reported in Caraf Builders (supra), that numerical B in clause (ii) of Rule 8D (2) of the Rules refers to average value of the investment, income from which does not form part or shall not form part of the total income.
The SLP filed against decision in the case of Caraf Builders (supra) is dismissed by the Hon’ble Apex Court in Special Leave Petition (civil) diary No. 25130/2019 by order dated 30/08/2019. The principle laid cited as on the date does not admit of any doubt that the numerical B in clause (ii) of rule 8D (2) of the Rules refers to average value of investment, income from which does not form part or shall not form part of the total income and it would be an error to take the value of total investment in such place.
In view of this settled position of law, we are of the considered opinion that the learned Assessing Officer committed an error in computing the disallowance under Rule 8D(2)(ii) of the Rules. We accordingly, while allowing the contention of the assessee, direct the Assessing Officer to take the value of the investment that had yielded exempt income in the numerical B in clause (ii) of Rule 8D (2) of the Rules, and compute the disallowance under Section 14 A and Rule 8D of the Rules.
In the result, appeal of the assessee is accordingly allowed. Order pronounced in the Open Court on 18th December, 2019.