CORBEL ESTATE AND INVESTMENT P.LTD,MUMBAI vs. ADDL CIT 6(2), MUMBAI

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ITA 1082/MUM/2014Status: DisposedITAT Mumbai16 May 2016AY 2009-104 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer should follow the formula prescribed in Rule 8D for calculating interest and administrative expenditure disallowances. The AO was directed to re-examine the claim as per law.

What were the facts?

The assessee's appeal concerned disallowance of interest expenditure. The Assessing Officer made a disallowance under Section 36(1)(iii), and the CIT(A) directed restriction to interest expenditure in the P&L account but did not mandate following Rule 8D for disallowance.

What were the issues?

Whether disallowance of interest expenditure should be calculated as per Rule 8D, and whether the CIT(A) erred in not directing the AO to follow the prescribed rules.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI

Before: Shri Joginder Singh & Shri Rajendra

For Appellant: Shri Prakash Bapat, Shri V. K. Agarwal -DR
Hearing: 16/05/2016

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 05/12/2013 of the ld. First Appellate Authority, Mumbai.

2.

During hearing of this appeal, the ld.counsel for the assessee, Shri Prakash Bapat, did not press grounds number 1 to 3 with respect to disallowance of interest expenditure of Rs.279 lakhs, therefore, these grounds are dismissed as not pressed.

1.

2.1. The only ground pressed by the assessee is with respect to not directing the Assessing Officer to restrict the disallowance u/s 14A read with Rule-8D to Rs.392.40 lakhs in place of Rs.728.02 lakhs. The crux of argument advanced on behalf of the assessee, is identical to the ground raised. Our attention was invited to computation of income. On the other hand, the ld. DR, Shri V. K. Agarwal, defended the conclusion arrived at in the impugned order.

2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee had disallowed Rs.7.28 cores on its own while calculating the disallowance u/s 14A of the Act.

The Assessing Officer made a disallowance of Rs.4.64 cores invoking the provisions of section 36(1)(iii) of the Act. The Ld. Commissioner of Income Tax (Appeal) had directed the Assessing Officer to restrict the disallowance to the extent of interest expenditure claimed in the Profit & Loss Account. However, he did not accede to the request of the assessee that while making the disallowance, provisions of section 14A read with Rule 8D(ii) should be followed. He held that the exempt income consisted of dividend income only and hence disallowance was justified. We are of the opinion that while calculating the interest expenditure or the administrative expenditure, Assessing Officer should follow formula prescribed in the Rule 8D of the Rules.

Therefore, the Assessing Officer is directed to examine the claim of the assessee in accordance with law and to calculate the interest disallowance as per Rule 8D, therefore, this ground for the assessee is allowed for statistical purposes.

Finally, the appeal of the assessee is partly allowed for statistical purposes.

This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 16/05/2016.

Sd/- Sd/- (Rajendra) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 16/05/2016 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.

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