ALCOM INVESTMENT PVT. LTD,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -1, AURANGABAD

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ITA 571/PUN/2020Status: DisposedITAT Pune11 August 2022AY 2016-174 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal rejected the assessee's argument that scrutiny under CASS did not warrant the disallowance. However, it found that the computation of proportionate expenditure and administrative expenses disallowance required fresh verification.

What were the facts?

The assessee challenged a disallowance of Rs. 16,54,398/- under Section 14A read with Rule 8D, which was restricted to Rs. 2,71,111/- by the lower authorities. The disallowance included proportionate interest and administrative expenses.

What were the issues?

Whether the disallowance under Section 14A r.w. Rule 8D was correctly computed, particularly concerning interest-free funds and the consideration of only exempt income-yielding investments.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, PUNE

For Appellant: Shri Deepak R. Shah (through virtual)
For Respondent: Shri M.G. Jasnani

This assessee’s appeal for A.Y. 2016-17 arises against the CIT(A)-12, Pune’s order dated 21-08-2020 passed in case No. ITBA/APL/S/250/2020- 21/1027767063(1), involving proceedings u/s 143(3) of the Income-tax Act, 1961, in short “the Act”.

Heard both the parties. Case file perused.

2.

The assessee’s sole substantive grievance raised in the instant appeal challenges correctness of both the lower authorities’ action making section 14A r.w. rule 8D disallowance of Rs. 16,54,398/- in the course of assessment dated 14-12-2018 as restricted to the extent of exempt income itself only amounting to Rs. 2,71,111/-; in the CIT(A)’s order.

3.

Learned counsel’s first and foremost argument is that this is a case of scrutiny under “CASS” not warranting an issue of assessed exempt income u/s 14A r.w. rule 8D of the I.T. Rules. The same hardly carries any substance as it is evident from the perusal of page 27 in the assessee’s paper book that its return had been picked up for scrutiny for the reason “whether deduction claimed on account of interest expenses is admissible”. There could be hardly

Alcom Investment Pvt. Ltd. A.Y. 2016-17 any denial of the fact that the impugned section 14A r.w. rule 8D disallowance also includes proportionate interest expenditure which is not allowable under the normal business head. The assessee’s instant first argument is rejected.

4.

Next comes assessee’s second argument that it had sufficient interest bearing funds as per as per CIT(A)’s detailed discussion in para 3.5 indicating figures of Rs. 2.29 crores followed by investment in shares at mutual funds of Rs. 9.85 crores. Learned Counsel submitted that both the lower authorities have wrongly picked up the corresponding value of stock in trade as well as involvement in light of Maxopp Investment Ltd. Vs. CIT (2018) 91 taxmann.com 154 (SC). It thus emerges that the instant issue of computation of proportionate expenditure prima facie requires fresh verification of the assessee’s interest free funds vis-à-vis the total value of its investments made in shares/mutual funds forming subject matter of the impugned disallowance. Faced with this situation, I deem it proper to appropriate this second argument back to the Assessing Officer to be adjudicated afresh as per law. Ordered accordingly.

5.

Next comes administrative expenses disallowance component. The assessee’s sole plea during the course of hearing in light of ACB India Ltd. Vs. CIT (2015) 374 ITR 108 and ACIT Vs. Vireet Investments (P) Ltd. (2017) 106 ITD 27 (Del) (SB) is that only exempt income yielding investments have to be considered. Mr. Jasnani fails to dispute that the foregoing settled legal proposition has nowhere been considered in the learned lower authorities’ respective orders. Faced with this situation, I restore the instant administrative expenditure disallowance(s) issue as well back to the Assessing Officer for his fresh computation. Ordered accordingly.

6.

No other arguments have been raised during the course of hearing.

Alcom Investment Pvt. Ltd. A.Y. 2016-17 This assessee’s appeal is partly allowed for statistical purposes in above terms.

Order pronounced in the open Court on this 11TH August 2022.

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