CYRUS INVESTMENT P.LTD,MUMBAI vs. DCIT 1(1), MUMBAI

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ITA 3672/MUM/2015Status: DisposedITAT Mumbai12 May 2017AY 2010-114 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal set aside the matter to the AO for fresh adjudication, considering the assessee's method of disallowance and providing an opportunity for substantiation.

What were the facts?

The assessee, a NBFC company, earned exempt income and made a suo-moto disallowance under Section 14A. The AO applied Rule 8D, leading to a disallowance that was partially reduced by the CIT(A).

What were the issues?

The primary issue was the correctness of the disallowance made under Section 14A read with Rule 8D for expenses incurred in relation to exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI D.T. GARASIA, JM & SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Shri Beharilal, Ld. AR
For Respondent: Shri Arun Kumar, Ld. DR

Per Manoj Kumar Aggarwal (Accountant Member)

1.

The captioned appeal by the assessee for the Assessment Year [AY] 2010-11 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-2 [CIT(A)], Mumbai dated 18/03/2015 qua confirmation of Section 14A disallowance read with rule 8D(2)(iii) for Rs.47,39,650/-.

2.

Briefly stated, the assessee, being resident corporate assessee, was assessed for impugned AY u/s 143(3) at Loss of Rs.2,19,62,779/- after certain adjustments / disallowances as against returned loss of Rs.2,88,06,195/- e-filed by assessee on 15/10/2010. One of the disallowance suffered by assessee was Rs.68,43,416/- u/s 14A read with rule 8D. The assessee was engaged as NBFC Company during the impugned AY and earned exempt income of Rs.27.58 Crores against which it made suo-moto disallowance of Rs.169.28 Lacs u/s 14A on account of following items:-

No. Particulars Amount (Rs.) 1. Interest 1,50,29,000/- 2. Legal & Professional Expenses 3,17,792/- 3. Demat Charges 59,170/- 4. Dividend Collection Charges / 15,22,316/- administration expenses (5%) Total 1,69,28,278/- However, not-convinced, AO applied Rule 8D and worked the said disallowance as Rs. 237.71 Lacs which comprised of Rs.154.20 Lacs u/r 8D(2)(i), Rs.21.03 Lacs u/r 8D(2)(ii) & balance Rs.62.46 Lacs u/r 8D(2)(iii). Resultantly, the assessee suffered net disallowance of Rs.68.43 Lacs which was assailed with partial success before Ld. CIT(A)

Cyrus Investments Private Limited Assessment Year 2010-11 vide impugned order where the Ld. CIT(A) deleted addition u/r 8D(2)(ii) for Rs.21.03 Lacs after noting that the same was already disallowed u/r 8D(2)(i) which reduced the said disallowance to Rs.47.39 Lacs. Still aggrieved, the assessee is in appeal before us.

3.

At the outset, Ld. counsel for Assesse [AR] contended that similar issue arose in assessee’s own case for AY 2008-09 & 2009-10 which reached up-to the level of Tribunal and the issue in both the years has been set aside to Ld. AO for fresh adjudication after considering the method of disallowance adopted by the assessee and therefore, the instant issue, on similar lines, may also be set aside to Ld. AO with similar directions. The Ld. DR raised no objection against the same.

4.

We have heard rival contentions and perused relevant of the Tribunal and find that the issue in earlier two AY vide order dated 19/01/2015 for AY 2009-10 & ITA No.2622/Mum/2013 order dated 08/04/2015 for AY 2008-09 has been set aside to AO for fresh adjudication. Therefore, without delving much deeper into the issue, on similar lines, we set aside the matter to Ld. AO for fresh adjudication after appreciating the method of disallaowance adopted by the assessee and re-adjudicate the same as per law after affording reasonable opportunity of being heard to the assessee. The assessee, in turn, is also directed to substantiate his claim forthwith failing which Ld. AO shall be at liberty to decide the same on the basis of material available on record.

5.

The Ld. AO is also directed to re-work book Profit u/s 115JB and carry forward / set-off of losses, if applicable.

Cyrus Investments Private Limited Assessment Year 2010-11 6. Resultantly, the assessee’s appeal stands allowed for statistical purposes.

Order pronounced in the open court on 12th May, 2017.

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