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Income Tax Appellate Tribunal, DELHI BENCH “F” BENCH NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI L.P. SAHU
ORDER
PER AMIT SHUKLA, JUDICIAL MEMBER:
The aforesaid appeal has been filed by the revenue against impugned order dated 27.11.2013, passed by the ld. CIT (Appeals)- 31, New Delhi for the quantum of assessment passed u/s 153A/143(3) for the A.Y. 2009-10. The grounds raised
by the Revenue reads as under:- “1. The order of Ld.CIT (A) is not correct in law and facts.
2. On the facts and in the circumstances of the case, Ld.CIT (A) has erred in deleting the addition of Rs.88,86,377/- made by AO u/s 14A of I.T. Act r.w.r 8D of IT Rules 1962. Page 1 of 6
On the facts and in the circumstances of the case, Ld.CIT (A) has erred in accepting the additional evidences without providing any opportunity to the AO which is in contravention to Rule 46A of IT Rules 1962.
The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
Despite service of notice to the respondent assessee, none appeared nor has any adjournment application been filed. On earlier occasions also despite issuance of notices on the given address, the assessee has not responded. Therefore, we are proceeding to decide the appeal of the department on merits.
3. The brief facts qua the issue of disallowance u/s 14A are that the ld. Assessing Officer noted that the assessee company has made investment of Rs. 5,57,48,277/- on which dividend income has been earned, however there is no mention of any quantum of dividend income which has been earned and claimed as exemption by the assessee. Merely by the fact that the assessee has made investment, the Learned Assessing Officer has proceeded to make the disallowance of expenditure as per the formula laid down in Rule 8D(2) and accordingly, disallowance was worked out at Rs. 93,00,035/-. The said disallowance included disallowance of interest expenditure of Rs. 88,86,377/- under Rule 8D(2)(ii) and indirect expenditure of Rs. 4,13,658/- under Rule 8D(2)(iii).
4. The Learned CIT (Appeals) did not appreciate the manner in which the ld Assessing Officer has proceeded to make the disallowance without complying with the mandatory requirement of the provisions contained in section 14(2). The assessee’s main plea Page 2 of 6 before the Ld. CIT (Appeals) was that there is no secured loan which has been raised during the year and it has only availed a temporary over draft facilities from the bank which is also on account of discounting charges/fee etc. Thus, the loan facility has been purely for discounting the amount payable on purchased bill and hence it cannot be held that the overdraft account has been used for making of any kind of investment and consequently, no disallowance of interest can be made. Ld. CIT (Appeals) after considering the said explanation and on verification of this fact he deleted the disallowance of interest made under rule 8D(2)(ii). He has further noted that the assessee was into investment activity and has made investment in the group companies and since the assessee could not given any break up of indirect expenditure, therefore, he confirmed the disallowance under Rule 8D(2)(iii) which was made by taking 0.5% of the average value of investment. Against the said disallowance, there is no appeal filed by the assessee.
Before us the Learned CIT DR submitted that there is no detail mentioned either by the Assessing Officer or by the Learned CIT(Appeals) in respect of quantum of dividend and also the order of the Assessing Officer is also not speaking as to how he has proceeded to make disallowance, therefore, the matter should be restored back to the file of the Assessing Officer for proper adjudication as despite several notices, the assessee could not appear before the Tribunal to give proper explanation and present the correct facts of the case.
After considering the relevant finding given in the impugned order as well as the submission made by the Learned CIT DR, we Page 3 of 6 find on perusal of the assessment order that the Assessing Officer has mechanically made the disallowance u/s 14A only on the ground that the assessee has made investment of more than Rs. 5.57 crores and proceeded to compute the disallowance under rule 8D. Such an approach of the Assessing Officer cannot be appreciated, because he has neither analyzed the quantum of exact exempt income as well as the nature of accounts maintained and expenditure debited by the assessee. So far as the disallowance of indirect expenditure is concerned, as per the formula laid down in Rule 8D (2)(iii), the same has been confirmed by the Learned CIT(Appeals) against which there is no appeal and thus, this disallowance stands confirmed. The only issue remains is with regard to the disallowance of interest expenditure under Rule 8D (2)(ii). In this regard we find that there is a categorical finding of the Learned CIT(Appeals) that firstly, the assessee has no secured loans; and secondly, Over Draft facilities obtained from the bank is purely on bill discounting and hence such an OD facility could not have been diverted for the investment purposes. On these facts ostensibly there cannot be any disallowance of interest expenditure and nothing has been found that there is any diversion of interest bearing funds for making such an investment. Thus, on the present facts as discussed in the impugned order, the conclusion of the Learned CIT (Appeals) to the extent of deletion of interest disallowance is affirmed and consequently the ground raised by the revenue is dismissed.
As regards the second ground taken by the revenue that there is a violation of Rule 46A, we do not find any merits on such ground for the reason that nothing has been brought on record as to what was/were the additional evidence/s filed by the assessee before the Page 4 of 6 Learned CIT(Appeals). There is no whisper regarding any additional evidence which can be said to have been admitted by the Learned CIT (Appeals) especially qua the deletion of interest disallowance. So far as the finding on interest disallowance is concerned the same appears to be based on the figures mentioned in the balance sheet and as explained by the assessee from the materials on record, therefore, the Revenue without pointing out as to what additional evidences have been filed before CIT (A) cannot clamour about violation of rule 46A. Thus, ground no. 2 is devoid of any merits and hence same is dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 27.04.2017.