Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH `D’ NEW DELHI
Before: SHRI CHANDRA MOHAN GARG & SHRI O. P. KANT
This appeal by the assessee has been directed against the order of the CIT(A)-XV, New Delhi dated 30.9.2013 in Appeal No.220/11-12/CIT(A)-XV for AY 2009-10.
The grounds raised by the assessee read as under:-
“1. That the learned Commissioner of Income Tax (Appeal), erred in rejecting assessee's contention that the disallowance under section 14A cannot exceed Rs. 13,35,040/- being the amount of dividend income received by the assessee company, thereby confirming the addition of Rs. 21,87,713/- made by the I.T.A.No. 6586/Del/2013 Assessment year: 2009-10 assessing officer u/s 14A of the Income Tax Act, resulting in addition to returned Income to that extent. 2. That the learned Commissioner of Income Tax (Appeals) erred in holding that disallowance under Rule 8D has been correctly worked out in accordance with the provisions of Rule 8D.”
We have heard the rival submissions and carefully perused the relevant material placed on record. At the very outset, learned counsel of the assessee submitted a copy of the order of the ITAT Delhi ‘C’ Bench in for assessment year 2009-10 dated 29.4.15 in the case of Indus Valley Investment & Finance (P) Ltd. vs DCIT and submitted that in the similar set of facts and circumstances, the Tribunal in the case of assessee’s group company has directed that the disallowance u/s 14A should not exceed the exempt income and therefore, the disallowance was restricted to the exempt income. Learned counsel of the assessee has drawn our attention towards para 4 of the Tribunal order (supra).
Learned Departmental Representative strongly supported the orders of the authorities below, however, he fairly accepted that in the similar set of facts and circumstances, the amount of disallowance has been restricted to the exempt income.
I.T.A.No. 6586/Del/2013 Assessment year: 2009-10 5. Firstly, it would be appropriate to reproduce the relevant part of the order of the Tribunal (supra) which has been relied by the learned counsel of the assessee which reads as follows:-
“4. We have heard the rival submissions and perused the relevant material on record. It is observed that the total exempt income earned by the assessee is to the tune of Rs.25.38 lac, against which an addition of Rs.1.05 crore has been made. The Hon’ble Delhi High Court in Joint Investment Pvt. Ltd. Vs. CIT, vide its judgment dated 25.2.2015, has held that the disallowance u/s 14A cannot exceed the amount of exempt income. The Hon’ble Delhi High Court in the case of CIT vs. Holcim India Pvt Ltd. (2014) 90 CCH 081-DEL-Hon'ble High Court , has held that there can be no disallowance u/s 14A in the absence of any exempt income. The rationale behind these judgments is that the amount of disallowance u/s 14A should not exceed the exempt income. Since the total exempt income in the instant case is Rs.25,38,020/-, we direct that the disallowance u/s 14A be restricted to Rs.18,01,968/- (Rs.25,38,020-Rs.7,36,052/-). The remaining amount of disallowance is directed to be deleted.”
In view of above, it is observed that in the similar set of facts and circumstances, the total exempt income earned by the present assessee is Rs.13,35,040 against which an addition of Rs.21,87,713 has been made by the Assessing Officer u/s 14A of the Act. As noted by the Coordinate Bench of this Tribunal that in the case of Joint Investment (P) Ltd. vs CIT (supra), the Hon’ble Delhi High Court has held that the disallowance u/s 14A of the Act should not exceed the exempt income. The Tribunal also noted that the Hon’ble Delhi high Court in the case of CIT vs Holcim India Pvt. Ltd. (supra) held that there can be no disallowance u/s 14A in the absence of any exempt income.
I.T.A.No. 6586/Del/2013 Assessment year: 2009-10 Finally, the ratio laid down by the Jurisdictional High Court noted that the disallowance should not exceed the exempt income during the relevant financial period. In the present case, since the total exempt income of the assessee is Rs.13,35,040 and the assessee had suo moto offered disallowance of Rs.1,81,388 under Rule 8D(2)(iii) of the Income Tax Rules, 1962 being 0.5% of the average value of the investment in the shares of Apollo Tyres Ltd. on which such dividend income was earned. Hence, we direct the Assessing Officer that the disallowance u/s 14A be restricted to Rs.11,53,752 (Rs. 13,35,040 – Rs.1,81,388) and the remaining amount of disallowance is directed to be deleted.
In the result, the appeal of the assessee is partly allowed.