SRI NORATANMAL CHORARIA,BANGALORE vs. THE INCOME TAX OFFICER WARD-2(2)(5), BANGALORE

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ITA 3178/BANG/2018Status: DisposedITAT Bangalore25 January 2019AY 2013-142 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the AO had not computed the disallowance under Section 14A in accordance with Rule 8D. Therefore, the order of the CIT(A) was set aside, and the matter was restored to the AO for a fresh decision following Rule 8D.

What were the facts?

The assessee's appeal challenges the disallowance of expenses under Section 14A. The Assessing Officer (AO) did not follow Rule 8D for computing the disallowance, which the assessee argued was incorrect. The assessee requested the matter be restored to the AO for a fresh decision.

What were the issues?

Whether the disallowance under Section 14A was correctly computed by the AO as per Rule 8D. The AO's failure to follow the prescribed method for calculating disallowance.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC-B” BENCH : BANGALORE

Before: SHRI ARUN KUMAR GARODIA

For Appellant: Shri V. Srinivasan, Advocate
For Respondent: Shri A. Ramesh Kumar, JCIT (DR)
Hearing: 17.01.2019Pronounced: 25.01.2019

Shri Noratanmal Choraria, Nos. 175 & 176, 3rd Floor, The Income Tax R T Street, Officer, vs. Above Ravivarma Apartments, Ward – 2 [2] [5], Bangalore – 560 053. Bangalore. PAN: AFFPC4543L APPELLANT RESPONDENT Appellant by : Shri V. Srinivasan, Advocate Respondent by : Shri A. Ramesh Kumar, JCIT (DR) Date of hearing : 17.01.2019 Date of Pronouncement : 25.01.2019 O R D E R

Per Shri A.K. Garodia, Accountant Member

1.

This appeal is filed by the assessee and the same is directed against the order of ld. CIT(A)-2, Bangalore dated 19.09.2018 for Assessment Year 2013-14.

2.

The grounds raised

by the assessee are as under. “[1] The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2. The learned CIT[A] is not justified in upholding the disallowance u/s. 14A of the Act amounting to Rs. 3,58,787/- under the facts and in the circumstances of the appellant's case.

3. The learned CIT[A] failed to appreciate that the disallowance computed purportedly u/s. 14A of the Act was opposed to law as the appellant had not utilized interest bearing funds for making the investments that yield tax free income under the facts and in the circumstances of the appellant's case.

4. Without prejudice to the above, the disallowance made is highly excessive, opposed to law and facts of the appellant's case and therefore, the same deserves to be deleted.

5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-B of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled.

6. For the above and other grounds that may be urged at the time of nearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund Page 2 of 2 of the institution fees as part of the costs.”

3.

The ld. AR of assessee made various arguments. At this juncture, this was the observation by the bench that whether there is mixed funds or not and if there are mixed funds then for proportionate disallowance of interest expenditure, Rule 8D has to be followed. In reply, it was submitted by ld. AR of assessee that this is true that there are mixed funds but the AO has not followed Rule 8D also because as per Rule 8D, the amount of average investment in shares and average total assets has to be considered whereas the AO has considered investment in shares as on 31.03.2013 and total value of asset as per balance sheet as on 31.03.2013 and in this regard, he drawn my attention to page no. 3 of the assessment order. He submitted that the matter may be restored back to the file of AO for fresh decision as per Rule 8D. the ld. DR of revenue supported the orders of authorities below.

4.

I have considered the rival submissions. In view of the discussion above, as per which, it is seen that the AO has not computed the amount of disallowance u/s 14A as per Rule 8D. Hence, I set aside the order of CIT(A) and restore the matter back to the file of AO for fresh decision as per Rule 8D after providing adequate opportunity of being heard to assessee.

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.

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