M/S SWARAJ ENGINES LTD.,MOHALI vs. DCIT, C-6(1), MOHALI

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ITA 775/CHANDI/2018Status: DisposedITAT Chandigarh21 November 2018AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessee did not incur interest expenditure on borrowed funds, the disallowance of interest expenditure under Section 14A was unjustified. Following its own previous decisions on identical facts, the Tribunal also deleted the disallowance of administrative expenses.

What were the facts?

The assessee appealed against the disallowance made under Section 14A of the Income-tax Act, 1961, concerning both interest expenditure and administrative expenses. The assessee argued that no interest-bearing loans were taken and that a suo motu disallowance for administrative expenses had already been made.

What were the issues?

Whether disallowance under Section 14A is justified when no interest-bearing funds were borrowed and whether further disallowance of administrative expenses is warranted after a suo motu disallowance.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 20.3.2018 of the Commissioner of Income Tax (Appeals)-2, Chandigarh [hereinafter referred to as CIT(A)].

2.

At the outset, Ld. Counsel for the assessee has submitted that the only issue raised / pressed upon in this appeal is regarding disallowance u/s 14A of the Income-tax Act, 1961 (in short 'the Act'). He has further submitted that the lower authorities have made / confirmed the disallowance u/s 14A of the Act in respect of the disallowance out of the interest expenditure as well as on account of administrative expenses.

ITA No. 775/Chd/2018- Swaraj Engines Limited, Mohali 2

3.

So far as the issue relating to disallowance out of interest

expenditure is concerned, the Ld. Counsel for the assessee has submitted

that the assessee during the year has not raised any secured or unsecured

loans and no interest expenditure has been incurred by the assessee on any

loan. The only interest paid by the assessee was in respect of delay on

payment of excise duty and service tax. The Ld. DR also could not

contradict this factual aspect pleaded by the assessee. Since the assessee

did not borrow any interest bearing funds during the year, hence, there is

no question of disallowance of expenditure out of the interest expenditure.

In view of this, so far as the disallowance u/s 14A of the Act in respect of

interest expenditure is concerned, we do not find any justification on the

part of the lower authorities in making / confirming the same. Moreover,

the Ld. Counsel for the assessee has also relied upon the decision of this

Tribunal in the own case of the assessee in relation to the earlier

assessment years 2012-13 and 2013-14, wherein, identical issue has been

raised in ITA Nos.1258 & 1259/Chd./2016 and the Tribunal vide order

dated 1.6.2017, on identical facts has decided the same in favour of the

assessee.

4.

So far as the issue relating to the disallowance on account of

administrative expenses is concerned, though the Assessing officer has

made the disallowance by applying the provisions of Rule 8D(2)(iii) of the

Income Tax Rules, however, the assessee, before the Assessing officer,

had demonstrated the working of the administrative expenses. Identical

issue came into consideration before the Tribunal in the earlier assessment

years in ITA Nos. 1258 & 1259/Chd/2016 vide order dated 1.6.2017,

ITA No. 775/Chd/2018- Swaraj Engines Limited, Mohali 3

wherein, the assessee had made identical pleadings claiming that he had already disallowed salary of one employee, 10% salary of his supervisors (Company Secretary) and further 46.30% of the total administrative expenditure. The Tribunal taking into consideration the working of the suo

moto disallowance of administrative expenditure, held that there was no justification of further enhancement of the administrative expenses, therefore, the impugned addition made by the lower authorities were deleted.

5.

Since there are no distinguishing facts in the year under consideration, hence, following the decision of the Tribunal in the earlier years in the own case of the assessee, the disallowance on account of administrative expenditure is also ordered to be deleted.

6.

In the result, the impugned additions made by the lower authorities u/s 14A of the Act are ordered to be deleted. Order pronounced in the Open Court on 21.11.2018

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 21.11 . 2018 “आर.के.”

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

ITA No. 775/Chd/2018- Swaraj Engines Limited, Mohali

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