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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI PAVAN KUMAR GADALE
O R D E R Per A. K. GARODIA, A. M.: This appeal is filed by the assessee and the same is directed against the order of ld. CIT (A) – 4, Bangalore dated 22.03.2018 for A. Y. 2014 - 15.
The assessee has raised as many as six grounds of appeal but the grievance is only one i.e. regarding disallowance of Rs. 16,17,433/- made by the AO u/s 14A r.w.r. 8D (2) (iii).
3. Learned AR of the assessee submitted that the disallowance u/s 14A r.w.r. 8D (2) (iii) cannot exceed the amount of actual expenditure debited by the assessee to the Profit & Loss Account which has a nexus direct or indirect) for earning of exempt income. In support of this submission, he placed reliance on a tribunal order rendered in the case of Vision EL Tech and Services Pvt. Ltd. vs. DCIT in dated 31.05.2017, copy available on pages 40
Page 2 of 3 to 47 of the paper book. He submitted that Para No. 3.5.1 of this tribunal order is relevant. Learned DR of the revenue supported the order of CIT (A). He also submitted that even those expenses should be considered which have indirect nexus with earning of exempt income.
We have considered the rival submissions. We find that the disallowance made by the AO is @ 0.5% of Average Investment as per Rule 8D (2) (iii) but this is not coming out from the assessment order as to how much is the amount of administrative expenditure debited by the assessee to P & L account. This is a settled law by now that the disallowance u/s 14A r.w.r. 8D (2) (iii) cannot exceed the amount of administrative expenses debited to P & L Account because section 14A is for disallowance and not addition. But in the absence of any noting by the AO or CIT (A) as to how much is the amount of administrative expenditure debited by the assessee to P & L account, we cannot quantify the disallowance. Moreover, in the paper book also, the assessee has submitted the balance Sheet but not submitted the Profit & Loss Account. As per the tribunal order cited by the learned AR of the assessee as noted above, it was held that the issue of disallowance u/s 14A r.w.r. 8D (2) (iii) requires proper examination of the facts on the aspect of identifying the expenditure attributable there under. In that case, the tribunal restored the matter back to AO for examination and computation of administrative Expenditure incurred for earning the exempt income for making the disallowance u/r 8D (2) (iii) and it was clarified that the disallowance u/r 8D (2) (iii) cannot exceed the actual expenditure debited by the assessee to the P & L Account which has a nexus for earning of exempt income. Respectfully following this tribunal order, we remit this issue o the AO for a fresh decision with same direction after providing adequate opportunity of being heard to the assessee. We make it clear that the disallowance so made should not exceed the actual expenditure debited by the assessee to the P & L Account which has a nexus (direct or indirect) with earning of exempt income
Page 3 of 3 5. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.