KISHORE MUSALE,MUMBAI vs. DCIT 18(3), MUMBAI

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ITA 4677/MUM/2014Status: DisposedITAT Mumbai02 September 2016AY 2008-093 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that interest on a housing loan, if linked to construction, should not be included in the disallowance calculation under Rule 8D(2)(ii). The matter was restored to the Assessing Officer for re-examination.

What were the facts?

The assessee challenged the disallowance made under Section 14A of the Income Tax Act, specifically concerning the inclusion of interest on a housing loan in the disallowance calculation under Rule 8D(2)(ii). The assessee argued this interest was for a specific purpose and should not be considered for disallowance.

What were the issues?

Whether interest on a housing loan can be included in the disallowance of expenditure under Section 14A read with Rule 8D(2)(ii) when it is for a specific purpose.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” Bench, Mumbai

Before: Shri B.R. Baskaran (AM) & Shri Sanjay Garg (JM)

For Appellant: Shri Manish Jaju
For Respondent: Shri A. Ramachandran
Hearing: 25.8.2016Pronounced: 2.9.2016

O R D E R Per B.R. Baskaran (AM) :-

The assessee has filed this appeal challenging the order dated 29.1.2014 passed by learned CIT(A)-29, Mumbai and it relates to A.Y. 2008-09.

2.

Though the assessee has raised many grounds, learned AR submitted that the grievance of the assessee is with regard to the disallowance made u/s. 14A of the Act. Learned AR submitted that the Assessing Officer has made disallowance u/s. 14A of the Act as per Rule 8D of the Income Tax Rules. He submitted that the disallowance made by the Assessing Officer consisted of disallowance made u/r. 8D(2)(ii) and 8D(2)(iii) of the I.T. Rules. He submitted that the Assessing Officer, while computing interest disallowance u/r. 8D(2)(ii), has included interest pertaining to housing loan. Learned AR submitted that the assessee has taken housing loan for specific purpose of constructing the house and hence the said interest should not have been taken into account for working the disallowance u/r. 8D(2)(ii) of the I.T. Rules.

2 Kishore Musale

3.

On the contrary, learned Departmental Representative submitted that the submissions made by the assessee have been considered by learned CIT(A) in para 25 of his order.

4.

We have heard the rival contentions on this issue and perused the record. Provisions of Rule 8D(2)(ii) provides for disallowance of indirect interest expenditure, meaning thereby, interest expenditure which could be allocated to other activities of the assessee should be excluded for the purpose of Rule 8D(2)(ii) of the I.T. Rules. In the instant case, it is the case of the assessee that the Assessing Officer has included interest payable on housing loan. Since the housing loan could be linked to the construction of the property and if the same has been used to construction purposes, we are of the view that there is merit in the contention of the assessee. However, as submitted by learned Departmental Representative, this fact requires examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by learned CIT(A) on this issue and restore the matter back to the file of the Assessing Officer with the direction to examine the disallowance made u/s. 14A of the Act by duly considering the contentions of the assessee and take the decision in the light of the discussion made (supra).

5.

In the result, appeal filed by the assessee is treated as allowed for statistical purposes.

Order has been pronounced in the Court on 2.9.2016

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