PRANAVA ELECTRONICS PRIVATE LIMITED,BANGALORE vs. DCIT, BANGALORE

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ITA 1312/BANG/2013Status: DisposedITAT Bangalore12 August 2016AY 2009-103 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that while disallowance under Section 14A is not disputed, the computation must be done as per Rule 8D. The matter was restored to the Assessing Officer for recomputation.

What were the facts?

The assessee challenged the disallowance of Rs. 32,31,799 under Section 14A of the Income-tax Act. The Assessing Officer did not compute the disallowance as per Rule 8D, and the assessee admitted to using mixed funds for investments.

What were the issues?

The key issue was the correct method of computing disallowance under Section 14A, specifically the application of Rule 8D when mixed funds were used for investments.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH : BANGALORE

Before: SHRI SUNIL KUMAR YADAV & SHRI A.K. GARODIA

For Appellant: Shri K.R. Pradeep, CA
For Respondent: Shri A.R.V. Sreenivasan, Jt. CIT(DR)
Hearing: 04.08.2016Pronounced: 12.08.2016

Per Sunil Kumar Yadav, Judicial Member

1.

This is an appeal preferred by the assessee against the order of the CIT(Appeals)-III, Bangalore dated 16.07.2013 on the solitary ground that the CIT(Appeals) has erred in upholding the disallowance of Rs.32,31,799 u/s. 14A of the Income-tax Act, 1961 [“the Act”], without establishing nexus between the funds and investments.

2.

During the course of hearing, the ld. counsel for the assessee has candidly admitted that mixed funds were invested in shares and mutual funds. While making the disallowance, the Assessing Officer has not made computation as per Rule 8D of the I.T. Rules. Therefore, the matter may be restored back to the AO for computation of disallowance as per Rule 8D of the I.T. Rules.

3.

The ld. DR did not object to this contention of the assessee.

4.

Having heard the rival submissions, we are of the view that there is no dispute with respect to disallowance u/s. 14A of the Act, but the sole controversy revolves around the application of the provisions of Rule 8D of the I.T. Rules. We, therefore, set aside the order of the CIT(Appeals) and restore the matter to the Assessing Officer, with a direction to recompute the disallowance u/s. 14A of the Act as per the provisions of Rule 8D of the I.T. Rules.

5.

In the result, the appeal of the assessee is allowed for statistical purposes.

Pronounced in the open court on this 12th day of August, 2016.

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