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Income Tax Appellate Tribunal, A Bench, Mumbai
O R D E R
Per Rajesh Kumar, AM
This appeal filed by the assessee is directed against the order of the CIT(A)-53, Mumbai dated 31.12.2015 and it relates to A.Y. 2011-12.
The grounds raised by the assessee read as under: -
1) The Learned CIT(A) has erred in law & on facts in upholding & enhancing the disallowance made u/s 14A of the Income Tax Act, 1961 in the order of Income Tax passed by the Assessing Officer u/s. 143(3) of the Income Tax Act, 1961 which is invalid and bad in law. 2) The Learned CIT(A) has erred in law & on facts in upholding imposition of interest under Section 234B and 234C of the Act in the order of Income Tax passed by the Assessing Officer u /s. 143(3) of the Income Tax Act, 1961 which is bad in law.
The brief facts of the case are that the AO, in the assessment proceedings, noticed that the assessee has earned dividend income of `39,60,000/- and has not attributed any expenses in connection with earning of such income. Accordingly the assessee was issued show cause
M/s. Awas Developers & Construction P. Ltd. notice as to why expenditure should not be worked out in terms of Section 14A of the Income Tax Act, 1961 (hereinafter "the Act") read with Rule 8D of I.T. Rules, 1962 and after considering the reply the AO worked out the `65,67,768/- disallowance at comprising proportional interest of `52,31,989/- under rule 8D(2)(ii) by taking the interest expenditure at `3,05,88,578/- and `13,35,679/- under Rule 8D(2)(iii) and added the same to the income of the assessee while framing assessment under Section 143(3) dated 24.03.2014.
In the appellate proceedings the learned CIT(A) enhanced the disallowance under Section 14A of the Act by taking interest expenses at `5,48,15,023/- and thus working out the disallowance under Rule 8D(2)(ii) of the I.T. Rules at `1,85,55,147/-. As regards disallowance under Rule 8D(2)(iii) of `13,35,679/- the learned CIT(A) observed that the same was in excess of actual administrative expenses debited in the Profit & Loss `6,05,917/-. Account and restricted the same to Thus the total disallowance was worked out at `1,91,77,949/- comprising `5,885/- under Rule 8D(2)(i) and `1,85,55,147/- under Rule 8D(2)(ii) and Rs. 6,05,917 under rule 8D(2)(iii).
The learned A.R. at the outset submitted that so far as this disallowance under Rule 8D(2)(i) and Rule 8D(2)(iii) of `5,885/- and `6,05,917/- are concerned the same are not pressed and accepted the order of CIT(A). However the enhancement of interest disallowance under Rule 8D(2)(ii) and addition on disallowance under Rule 14A r.w.s Rule 8D to the book profit under Section 115JB are pressed and prayed before the Bench to adjudicate the same. The learned A.R. submitted before the Bench that the learned CIT(A) has taken a figure of interest which is different from the interest amount considered by the AO of `3,05,88,578/- while calculating the disallowance whereas the learned CIT(A) considered the amount of interest `5,98,14,023/- for working out the diallowance. The learned A.R. stated that the said amount of interest relates to both the activities of the assessee, i.e. investments as well as F&O and therefore the same need to be apportioned between the two, namely F&O and M/s. Awas Developers & Construction P. Ltd. investments yielding dividend income. The learned A.R. prayed before the Bench that the same needs to be verified and examined at the level of AO so that proper apportionment could be made and disallowance can be worked out in terms of Section 14A r.w. Rule 8D(2(ii)). The learned A.R. also submitted that the disallowance under Section 14A r.w. Rule 8D need to be dealt with in accordance with the ratio laid down by the Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd. (2017) 82 Taxman 415 (Del-Tribunal) (SB) as the learned CIT(A) has wrongly dismissed the appeal of the assessee on this ground holding that the disallowance under Section 14A r.w. Rule 8D is required to be added to the books profit under Section 115JB of the Act.
The learned D.R., on the other hand, relied on the order of the learned CIT(A).
We have heard the rival contentions and perused the material on record. So far as disallowance under Rule 8D(2)(i) and 8D(2)(iii) are concerned, the learned A.R. has not pressed the same and accepted the order of the learned CIT(A). So far as disallowance under Rule 8D(ii) is concerned we find from the order of the CIT(A) that the CIT(A) has taken a different figure of interest of `5,48,15,023/- which relates to the activity of investment as well as F&O section and we find merit in the contention of the learned A.R. that the disallowance has to be worked out after making apportionment of the said interest expenditure between these two activities. Accordingly we restore the issue back to the file of the AO with the direction to examine the same and workout the disallowance after apportioning interest between F&O and investment and make the disallowance as per law after affording reasonable opportunity of being heard to the assessee. So far as the issue of addition of disallowance under Section 14A r.w. Rule 8D to book profit under Section 115JB is concerned the same is covered by the decision of the Special Bench in the case of Vireet Investment Pvt. Ltd. (supra) in favour of the assessee. Accordingly we direct the AO to decide the same in terms of the Special Bench decision in the case of Vireet Investment Pvt. Ltd.