SH. R.N. SAHNI,NEW DELHI vs. ADDL. CIT, NEW DELHI

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ITA 496/DEL/2014Status: DisposedITAT Delhi27 May 2016AY 2008-092 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the disallowance should have been considered under Section 14A, which the Assessing Officer had not applied. The matter was therefore restored to the Assessing Officer for re-examination under Section 14A.

What were the facts?

The Assessing Officer disallowed interest amounting to Rs. 16,56,886/- on the grounds that borrowed money was used for investment in shares. The assessee argued that no dividend income was received.

What were the issues?

Whether the disallowance of interest on borrowed funds used for share investment should be considered under Section 14A, and if so, how it should be calculated when no dividend income is earned.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL

Before: SHRI G.D. AGRAWALG.D. AGRAWAL & AND BEFORE SHRI G.D. AGRAWALG.D. AGRAWAL & AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARGSHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG

For Appellant: Shri P.N. Mehta, FCA
For Respondent: Ms. Susan D. George, Senior DR
Hearing: 24.05.2016Pronounced: 27.05.2016

ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP :- PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP This appeal by the assessee for the assessment year 2008-09 is directed against the order of learned CIT(A)-XI, New Delhi dated 28th October, 2013.

2.

The only ground raised by the assessee in this appeal reads as under:-

“On the facts & circumstances of the case the Commissioner (Appeals) is wrong in confirming the order of the Assessing Officer for disallowance of interest amounting to Rs.16,56,886/-.”

3.

We have heard the arguments of both the sides and perused the material placed before us. We find that the Assessing Officer disallowed the interest of `16,56,886/- on the ground that the borrowed money has been utilized for investment in the shares of M/s Alps Hotels Pvt.Ltd. In our opinion, in such circumstances, the 2 ITA-496/Del/2014 disallowance, if any, should have been considered as per provision of Section 14A. The Assessing Officer has not at all applied Section 14A. It was also claimed by the assessee that no dividend income was received and, therefore, on application of Section 14A, there would be no disallowance in view of the decision of Hon'ble Delhi High Court in the case of Cheminvest Limited Vs. CIT-VI in order dated 2nd September, 2015 and CIT-IV Vs. Holcim India P.Ltd. in ITA No.486/2014 & 299/2014, order dated 5th September, 2014. In our opinion, the entire matter needs re-examination from the angle of Section 14A. We, therefore, set aside the orders of authorities below and restore the matter to the file of the Assessing Officer and direct him to re-examine the issue from the perspective of Section 14A and make the disallowance in accordance with law, if any. Needless to mention that he will allow adequate opportunity of being heard to the assessee.

4.

In the result, the appeal of the assessee is deemed to be allowed for statistical purposes. Decision pronounced in the open Court on 27.05.2016.

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