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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D. S. SUNDER SINGH
आदेश / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER
This appeal is filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-8, Chennai dated 26.10.2015 and pertains to assessment year 2010-11.
All the grounds of appeal are related to the disallowance made by the 2. assessee under section 14A r.w. Rule 8D of Income Tax Rules. For the assessment order 2010-11, the Assessing Officer received a sum of Rs.67,51,987/- as dividend but not made any disallowance of expenditure
:: 2 :: incurred in relation to the earning of dividend income. Therefore, the Assessing Officer invoked the provisions of section 14A r.w. Rule 8D and disallowed the amount of Rs.1,29,29,556/-.
Aggrieved by the order, the assessee went on before the Commissioner of Income Tax(Appeals) and argued that the assessee made investments from its own funds and also dealing in share trading and hence the provisions of section 14A are not applicable in the assessee’s case. The Ld. CIT(Appeals) considered the submissions of the assessee and dismissed the assessee’s appeal, placing reliance on the judgment of Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd., (328 ITR 81) (Bom), CIT v. Reliance Utilities & Poser Ltd. [2009] 313 ITR 340 / 178 Taxman 135 (Bom.) and Third Member decision of the Hon’ble ITAT, Mumbai D Bench in the case of D.H. Securities (P) Ltd. Vs. DCIT [146 ITD 1].
Aggrieved by the order of the Ld. CIT(A), the assessee filed appeal before this Tribunal and argued that the aseesee has own funds from which it has made the investments and the assessee is also dealing in shares and securities and hence, the provisions of section 14A are not applicable in this case. Further, the Ld.AR submitted that on identical facts in the assessee’s own case for the assessment year 2008-09 and 2009-10 in & 1456/Mds/2013, Hon’ble ITAT, Chennai remitted the issue back to the file of the Assessing Officer for consideration afresh.
On the other hand, Ld.DR relied on orders of the lower authorities.
We have considered the submissions of both the parties and perused the material placed before us. On identical facts in assesse’s own case for the assessment year 2008-09 and 2009-10 in & 1456/Mds/2013, Hon’ble ITAT, Chennai remitted the issue back to the file of the Assessing Officer with the following directions.
“We have perused the orders and heard the rival submissions. Impugned assessment year being 2009-10, Assessing Officer was entitled to invoke Section 14A read along with Rule 8D. Nevertheless, argument of the assessee before the A.O. was that it had not incurred any expenditure in relation to the investments which had resulted in tax-free income. Assessee had specifically mentioned that it had not incurred any expenditure for earning the dividend income of Rs.1,08,367/-. Assessee also mentioned that investments made in the earlier years were from surplus funds with it. Assessing Officer though he mentioned that the claim of the assessee was not acceptable, had not made a verification as to whether interest expenditure incurred was in relation to term loans raised from M/s IL&FS, which were used for purposes other than investments which earned tax-free income. Rule 8D can be invoked only if Assessing Officer was not satisfied with the correctness of the claim of the assessee regarding the expenditure incurred for earning 8 & 1456/Mds/13 the tax-free income. Co-ordinate Bench of this Tribunal in the case of ACIT v. Best and Crompton Engineering (I.T.A. No. 1603/Mds/2012 dated 16.7.2013), as well as Calcutta Bench of this Tribunal in the case of ACIT v. Champion Commercial Company Ltd. (I.T.A. No. 644/Kol/2012) have held that unless and until interest expenditure was incurred by the assessee for making investments resulting in taxfree income, a disallowance under sub-clause (ii) to Rule 8D(2) could not be done. Since an analysis of the claim of assessee that it had incurred no expenditure for earning tax-free income was not done by the lower authorities, we are of the opinion that the matter requires a fresh look by the Assessing Officer. We, therefore, set aside the orders of authorities below and remit the issue regarding disallowance under Section 14A back to the file of the A.O. for consideration afresh in accordance with law”.
Since the facts are identical, respectfully following the decision of Coordinate Bench, we set aside the orders of the lower authorities and remit the :: 4 :: issue to the file of the AO with a direction to analyze the claim of the assessee that no expenditure was incurred and decide the matter afresh in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 23rd November, 2016, at Chennai.