THE PR. COMMISSIONER OF INCOME TAX-4 vs. GE CAPITAL SERVICES INDIA

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ITA/468/2017HC DelhiDLHC01286659201623 August 2017Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MS. JUSTICE PRATHIBA M. SINGH2 pages
AI SummaryDismissed

What did the High Court hold?

The ITAT had confirmed the deletion of the additions made by the AO on an ad hoc basis. The Court found no substantial question of law and agreed that disallowances under Section 14A must be on a reasonable basis.

What were the facts?

The Revenue appealed against an ITAT order that deleted additions made by the Assessing Officer under Section 14A. These additions pertained to interest on borrowed funds used for investments yielding exempt income and management/administrative expenses related to dividend income.

What were the issues?

Whether the ITAT erred in deleting additions made under Section 14A for interest on borrowed funds and management expenses related to exempt income. Whether disallowances under Section 14A must be based on a reasonable basis.

Which sections of the Income-tax Act were involved?

Section 14A,Section 260A

AI-generated summary — verify with the full judgment below

ITA 468/2017

Page 1 of 2

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI 2 +

ITA 468/2017

THE PR. COMMISSIONER OF INCOME TAX-4 ..... Appellant

Through: Mr Puneet Rai, Standing Counsel

versus

GE CAPITAL SERVICES INDIA

..... Respondent

Through: Mr Amaya Pant, Advocate

CORAM: JUSTICE S.MURALIDHAR JUSTICE PRATHIBA M. SINGH

O R D E R %

23.08.2017

1.This is an appeal under Section 260A of the Income Tax Act, 1961 (‘Act’) directed by the Revenue against the order dated 6th June, 2016 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA Nos.2808/Del./2007 and 2898/Del./2007 for the Assessment Year (‘AY’) 2001 – 2002.

2.

The short question sought to be urged in the present appeal by the Revenue is whether the ITAT erred in confirming the order of the Commissioner Income Tax (Appellate) deleting the addition made by the Assessing Officer (‘AO’) under Section 14A in the sum of Rs.12,65,44,530/- on account of interest paid on the borrowed funds utilized for making investment in shares yielding exempt income.

3.

The further ground urged is that the ITAT erred in deleting the addition of

ITA 468/2017

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Rs.25 lacs made by the AO on account of purported management/administrative expenses and other costs attributed towards earning dividend income.

4.

A perusal of the impugned order passed by the ITAT reveals that both the disallowances were made by the AO on ad hoc basis. The ITAT relied on the order passed earlier by a coordinate Bench of the ITAT for AY 2000- 2001 deciding an identical issue in favour of the Assessee. The ITAT noted that there was no change in the facts and circumstances or the legal position requiring a different view to be taken.

5.

In any event, the Court finds that the disallowances were made by the AO on ad hoc basis. As explained by this Court in CIT v. State Trading Corporation Ltd. [decision dated 17th August, 2012 in ITA No.344/2012], even prior to Rule 8D, the disallowance under Section 14 A of the Act had to be on some reasonable basis.

6.

Having heard Mr Puneet Rai, learned Standing Counsel for the Revenue and having perused the order passed by the ITAT, the Court is not inclined to frame any question of law. The appeal is accordingly dismissed, but in the circumstances, with no orders as to costs.

S.MURALIDHAR, J.

PRATHIBA M. SINGH, J. AUGUST 23, 2017 rd

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