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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI KULDIP SINGH & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT (A)- 29, New Delhi dated 02.06.2015 for the Assessment Year 2012-13. 2. The revenue has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance u/s 14A read with Rule 8D of the Income tax Rules 1962, amounting to Rs.2,45,27,811/- made by the AO.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and oh facts in deleting the disallowance u/s 14A read with Rule 8D without considering the Circular No. No. 5/2014, dated 11.02.2014 and without appreciating the fact that the judgment of Hon'ble Delhi High Court given in case of Joint Investments Pvt. Ltd. v. CIT was not applicable in the instant case as facts and context were different.
3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance u/s 14A read with Rule 8D without following the judgment given by the Hon’ble Delhi High Court in case of Maxopp Investment Ltd. v. CIT 347 ITR 272 (Delhi)[2012j wherein the Hon’ble Court has held that once the correctness of claim of expenditure u/s 14A submitted by the Page | 1 assessee is rejected by the AO then the AO will have to follow the disallowance under rule 8D.
4. On the facts and in the circumstance of the case and in law, the CIT (A) has erred in deleting the disallowance of Rs.20,12,730/- being bogus sales/business promotion expenses without appreciating the fact that the onus was on the assessee to establish that the expenses have been incurred wholly and exclusively for the purpose of business u/s 37(1) which the assessee failed to discharge during the assessment proceeding as well as during the appellate proceeding.”
The brief facts of the case is that the assessee is a company which filed its return of income declaring income of INR 45 2396 200/– on 28th/9/2012. Assessment under section 143 (3) was passed on 27/1/2015 at a total income of INR 4 78936740/–. The learned assessing officer made the addition because of disallowance under section 14 A of the act of INR 2 4527811/– and sales promotion expenditure of INR 2 012730/– to the returned income. The assessee preferred appeal before the learned Commissioner of income tax appeals who deleted both the disallowance. Therefore the learned assessing officer is aggrieved has preferred an appeal before us. The 1st ground of appeal
is with respect to the disallowance deleted by 4. the learned Commissioner of income tax appeals under section 14. A of INR 2 4527811/– The assessee has received the dividend income of INR 20 906964, which is claimed as exempt under section 10. (34) of the act. Therefore, the assessee was asked to explain as to why the disallowance should not be made under section 14. A of the income tax act read with rule 8D of the IT rules 1962. The assessee submitted a calculation of disallowance of INR 6835265 and restricted the same to the dividend income of INR 2906964/–. The AO noted that assessee has not included the interest expenses of INR 52821884/- debited to the profit and loss account fully. As the assessee has reduced the car loan interest, service tax interest on tax deduction at source interest for the purpose of disallowance. He computed the disallowance of INR 2 7434775/– under rule 8D. From this, he reduced the original disallowance made by the assessee of INR 2 906964/– and made the addition of INR 2 4527811/–.
On appeal before the CIT appeal, the addition was deleted for the reason that disallowance cannot exceed the exempt income.
The learned departmental representative relied upon the order of the learned assessing officer.
The learned authorised representative submitted that it is held by so many judicial precedent and the decision of the jurisdictional High Court that disallowance under section 14 A, cannot exceed the exempt income. He further relied upon the synopsis submitted by him.
We have carefully considered the rival contention and find that the during the year the assessee has received the exempt income of INR 2 906964/. The above amount has been disallowed by the assessee himself in the computation of the total income. The learned Commissioner of income tax has deleted the disallowance computed by the learned assessing officer disregarding the above principle. The learned Commissioner of income tax appeals has following the decision of the honourable jurisdictional High Court in case of joint investments private limited vs. CIT (ITA number 117/2015 ) deleted the above addition. Even the honourable Delhi High Court in case of principal Commissioner of income tax vs. ILFS energy development Ltd 84 taxmann.com 186 has also reaffirmed the above view, even after considering the circular issued by the CBDT dated 11/05/2014. In view of this, we do not find any infirmity in the order of the learned Commissioner of income tax appeals holding that disallowance under section 14 A. Read with rule 8D cannot exceed the exempt income. Accordingly, ground number 1 to 3 of the appeal of the revenue is dismissed.
Ground number 4 of the appeal is with respect to the deletion of the disallowance of INR 2 012730/– being bogus sales and business promotion expenditure disallowed by the learned assessing officer. During the course of assessment proceedings the learned AO noted that the assessee has claimed business sales promotion expenses to the extent of INR 1 3677085/–. The assessee was asked to furnish the details of this expenditure. The assessee submitted that details and on examination of the same. It was found by the learned AO that some of Page | 3