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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri George Mathan, JM & Shri B.R. Baskaran, AM
This is an appeal filed by the assessee against the DIN & Order No. ITBA/NFAC/S/250/2021-22/1035582106(1) dated 15.09.2021 of the learned CIT(A), NFAC, Delhi in appeal No. CIT(A), Kochi-2/10008/2016-17 for AY 2013-14.
Shri Sunil Chandi Eapen, CA appeared on behalf of the assessee and Smt. J.M. Jamuna Devi, Sr. DR appeared on behalf of Revenue.
It was the submission of the learned A.R. that the only issue in assessee’s appeal is against the disallowance made by invoking provisoins of Section 14A of Income Tax Act, 1961 read with Rule 8D of Income Tax Rules in respect of assessee’s investments in Mutual Funds. It was the submission that the AO had noticed that the assessee had investments of Rs.6,88,00,000/- in Mutul Funds which had earned assessee exemption income under Section 10(34) of the Act to the extent of Rs.3,19,746/-. It was the submission that the assessee had its own surplus funds available
2 M/s. Ramnath & Co. to an extent of Rs.6,42,00,000/- and it has also been accepted by the learned CIT(A) for the immediately preceedings assessment year being 2012-13 in DIN & Order No. ITBA/NFAC/S/250/2021-22/ 103466161615(1) dated 05.08.2021 for AY 2012-13. It was the submission that as the assessee had adequate surplus funds of its own no disallowance under Section 14A r.w. Rule 8D is liable to be made. The learned A.R. drew out attention to ther order of the learned CIT(A) for AY 2012-13, which is on page 41 of the paper book.
In reply the learned D.R. submittedthat as the assessee had exempt income under Section 10(34) of the Act provisions of Section 14A r.w. Rule 8D did apply.
We have considered the rival submissions. Admittedly the assessee has substantial surplus funds. The learned CIT(A) has also recognised this in his order for ay 2012-13 being immediately preceedng year wherein the learned CIT(A) has deleted the disallowane by holding that the assessee had surplus funds of Rs.6,42,00,000/- as against investment of Rs.5,44,00,000/- in the immediately preceding assessment year. In these circumstances as it is noticed that the assessee does have surplus funds of its own, the AO is directed to recompute the disallowance under Section 14A r.w. Rule 8D by excluding the funds to the extent of surplus funds available with the assessee. The AO should also keep in mind that the disallowance under Rule 8D(2)(iii) is to be restricted only to the value of such investments from which assessee has earned exempt income.
In the result, the appeal filed by the assessee is partly allowed.
Dictated and pronounced in the open Court on 10th February, 2022.