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Income Tax Appellate Tribunal, DELHI BENCHES: ‘D’, NEW DELHI
Before: SHRI N.K.BILLAIYA & SMT. BEENA A PILLAI
ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal filed by Assessee arises out of order dated 31.05.2016 passed in MA no. 329/Del/15. 2. Brief facts of the case are as under Assessee is a Non-Banking Finance Company (NBFC) engaged in making investments in telecom sector and related ventures and to promote the formation and mobilization of capital and investments on behalf of its promoters. Assessee filed its return ITA 2885/Del/2013 A.Y.:2009-10 Teletec Finsec India (P) Ltd. vs. ITO, Ward 16(2), N.Del. of income declaring an income of Rs.16,20,970/- on 30.09.2009, which was selected for scrutiny assessment. Notice u/s 143(2) of the Income Tax Act, 1961 (the Act) was issued and served upon assessee. Thereafter, notices u/s 143(2)/142(1) of the Act were issued. In response to these notices, representatives of assessee appeared from time to time and filed relevant details. 2.1. It has been observed that assessee has earned dividend income of Rs.2,66,48,014/-. Ld. AO observed that assessee made suo moto disallowance at Rs.2,66,480/-. Dissatisfied with the suo moto disallowance, Assessing Officer computed the disallowance under Rule 8D at Rs.77,79,104/-. 2.2. Aggrieved by the addition made by Ld. AO, assessee preferred appeal before Ld. CIT(A), who upheld the addition made by Ld. AO. 2.3. Aggrieved by the order of Ld.CIT(A) assessee was in appeal before this Tribunal. This Tribunal passed order dated 16th June, 2015 allowing the assesse’s appeal, by observing as under: “6. The assessee submitted the following calculation of disallowance u/s 14A read with Rule 8 D. Particulars Amount in Rs. (i) Disallowance of direct expenses under Rule 8D(2)(i): Interest, Demat charges and bank charges cannot be considered as these have also been incurred in relation to taxable income also. (ii) Interest Expenditure under Rule 8D(2)(ii): (A) Expenditure on interest : 9,857 (B) Amount on investments on which exempt dividend income was earned: As on 1.4.2008 5,05,35,749 As on 31.3.2009 23,82,261 Average Investments: 2,64,59,005 (C) Total Assets: As on 1.4.2008 21,30,96,841 As on 31.3.2009 19,69,83,035 Average Assets: 20,50,39,938 ITA 2885/Del/2013 A.Y.:2009-10 Teletec Finsec India (P) Ltd. vs. ITO, Ward 16(2), N.Del. A * (B/C) 1,272 (iii) 0.5% of Average Investment (0.5% * B) 1,32,295 (iv) Total: 1,33,567 Suo-moto disallowance made by the assessee u/s 14A r.w.r.8D 2,66,480 Excess disallowance made by the assessee - 1,32,913.
A perusal of the above demonstrates that the disallowance made by the assessee, is in excess to the disallowance with the working under 14 A r.w.s. 8 D disclosed. The Ld.DR could not controvert the above stated calculations on merits. 6.1. Under these circumstances we have to uphold these contentions of the assessee and delete the addition. As on merits the assessee gets relief, we do not go into the various legal contentions raised by the assessee as it would be an academic exercise. In the result assessee’s appeal is allowed.” 2.4. Revenue preferred Miscellaneous Application M.A. No.329/Del/15 due to an alleged apparent mistake on record. This Tribunal passed order dated 31st May, 2016, by observing as under: “4. After hearing rival contentions, we find that a mistake apparent on record has crept into the order of the Tribunal for the reason that the total asset figure taken by us for the purpose of arriving at average assets is factually incorrect. The break-up of dividend yielding investments and other investments was not examined by the ITAT which is a mistake requiring rectification. Thus we recall our impugned order dt. 01.04.2008 and direct the Registry to post the case for hearing afresh.” Thus, this Tribunal recalled order dated 16.06.2015 in order to rectify value of total assets figure taken by this Tribunal for ITA 2885/Del/2013 A.Y.:2009-10 Teletec Finsec India (P) Ltd. vs. ITO, Ward 16(2), N.Del. purposes of arriving at average assets, was factually incorrect. It was observed that breakup of dividend yielding investment and other investment was not examined while considering disallowance under section 14 A read with Rule 8D, while passing the original order dated 16.06.2015.
In the backdrop of the above, we shall advert to the submissions advanced by Ld.Counsel. 3.1. Ld.Counsel submitted that assessee being a NBFC engaged in business of making investment in telecom sector and related ventures, to promote formation and mobilisation of capital and investment. He submitted that only investments yielding exempt income could be considered for disallowance under section 14 A of the Act which includes only mutual funds in the instant case. 3.2. It is submitted by Ld.Counsel that Assessing Officer considered opening and closing value of investments, aggregating to Rs.1,55,20,81,458/-. Ld. Counsel placing reliance upon decision of Hon’ble Delhi High Court in the case of Maxopp Investments Ltd vs CIT reported in 347 ITR 272, submitted that no satisfaction has been recorded by Ld. AO, regarding his dissatisfaction with correctness of claim of assessee, in respect of the expenditure. He submitted that even Ld.CIT (A) has not validly recorded satisfaction. 3.3. The next plea raised by Ld.Counsel was that, investment which actually yielded exempt income should be considered for purposes of computing disallowance as per Rule 8D. He placed reliance upon decision of Hon’ble Delhi High Court in case of ACB India Ltd vs ACIT in dated 24/03/15. 4 ITA 2885/Del/2013 A.Y.:2009-10 Teletec Finsec India (P) Ltd. vs. ITO, Ward 16(2), N.Del. 3.4. Finally Ld.Counsel submitted that disallowance is erroneous, as it exceeds actual expenditure incurred. He submitted that gross business income for year under consideration amounted to Rs.3,67,91,169/- which comprises of the following: interest income (taxable) - Rs.1,00,75,454/- dividend income - Rs.2,66,48,014/- He submitted that total expenditure debited to Profit and Loss account amounted to Rs.36,71,882/-, out of which expenditure attributable to earning of exempt income cannot exceed Rs.4,52,292/-. He further submitted that Assessing Officer disallowed sum of Rs. 53,775/- on account of ROC fees while computing disallowance under Rule 8D, which is not acceptable. 3.5. On the contrary, Ld.CIT DR submitted that now as on date disallowance under section 14 A read with Rule 8D will have to be computed as per directions of Hon’ble Supreme Court in the case of CIT vs. Maxopp Investments Pvt.Ltd., reported in 91 taxmann.com 154.
We have perused submissions advanced by both sides in the light of the records placed before us. 4.1. It is observed from order of recall dated 31/05/16 passed in MA No. 329/Del/2015 (supra), this Tribunal observed a mistake apparent on record crept in the order dated 16.06.2015. This Tribunal in recall order observed that total asset figure taken for purposes of arriving at average assets, was factually incorrect. It was observed that breakup of dividend yielding investment and other investment has not been examined while considering disallowance under section 14 A read with Rule 8D, while passing original order dated 16.06.2015. 5 ITA 2885/Del/2013 A.Y.:2009-10 Teletec Finsec India (P) Ltd. vs. ITO, Ward 16(2), N.Del. 4.2. It is observed that it is for limited purpose that order dated 16.06.2015 of this Tribunal has been recalled. Ld. Counsel before us raised various jurisdictional issues in respect of recording of satisfaction by Ld.AO/CIT(A), as well as disallowance not to exceed actual expenditure which does not arise out of MA order dated 31/05/16. Tribunal recalled its order, only restricting to the correction of total assets figure to be considered for the purposes of arriving at average assets. Accordingly other contentions raised by the Ld. Counsel stands rejected.
In order to rectify this mistake we direct Ld. AO to compute, disallowance after verifying dividend yielding investment and other investment, keeping in view the ratio laid down by Hon’ble Supreme Court in the case of CIT vs Maxopp Investments Pvt.Ltd reported in 91 taxmann.com 154 (2018).
In the result, issue recalled by this Tribunal is set aside to Ld. AO for computing disallowance as per law by considering ratio laid down by Hon’ble Supreme Court in the case of CIT vs. Maxopp Investments Pvt.Ltd (supra).
Accordingly appeal to the extent of recall is allowed for statistical purposes. Order pronounced in the Open Court on 24/07/2018. Sd/- Sd/- (N.K.BILLAIYA) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dt. 24th July, 2018 • Manga ITA 2885/Del/2013 A.Y.:2009-10 Teletec Finsec India (P) Ltd. vs. ITO, Ward 16(2), N.Del.