EDC Limited., Panaji V. The Assistant Commissioner of Income Tax, Circle-1(1), NFAC, Delhi, Panaji

ITA 98/PAN/2022

AI Insights

The case involves EDC Limited, the appellant, contesting an order from the National Faceless Appeal Centre (NFAC), Delhi, which confirmed the addition made by the AO under Section 14A read with Rule 8D of the Income Tax Rules for the assessment year 2018-19. The primary contention was regarding the method of calculating disallowance related to expenditure incurred in earning exempt dividend income. The AO had adopted a methodology under Rule 8D(2)(iii), which the appellant challenged, arguing that only the investments yielding exempt income should be considered. The Tribunal, referencing a Special Bench decision, agreed with the appellant's position and remanded the matter back to the AO for re-assessment using the correct methodology.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132795 (ITAT-PANAJI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 22-09-2022
• Other Referred Cases: Vireet Investment (P.) Ltd. vs. ITAT, Delhi
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.S. SHIVSHANKAR
• Keywords: Rule 8D
• Section: 14A

Judgement Text

आयकर अपीलीय अधिकरण न्यायपीठ पणजी में । IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI (Through Virtual Court) BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.98/PAN/2022 धििाारण वर्ा / Assessment Year : 2018-19 EDC Limited, EDC House, DR. Atmaram Borkar Road, Panaji, Goa – 403001 PAN : AAACE4614K .......अपीलार्थी / Appellant बिाम / V/s. Asst. Commissioner of Income Tax, Circle – 1(1), Panaji Goa ......प्रत्यर्थी / Respondent Assessee by : Shri Rahul Sarda Revenue by : Shri P.S. Shivshankar सुिवाई की तारीख / Date of Hearing : 12-09-2023 घोर्णा की तारीख / Date of Pronouncement : 21-09-2023 आदेश / ORDER PER S.S. VISWANETHRA RAVI, JM : This appeal by the assessee against the order dated 29-07-2022 passed by the National Faceless Appeal Centre, Delhi (“NFAC”) for assessment year 2018-19. 2. The assessee raised four grounds of appeal amongst which the only issue is to be decided is as to whether the CIT(A), NFAC, Delhi justified in confirming the addition made by the AO u/s. 14A r.w.s. 8D(ii) of the Rules. 2 ITA No. 98/PAN/2022, A.Y. 2018-19 3. At the outset, we note that the assessee earned dividend income of Rs.74,52,725/- which was claimed as exempt income. According to the AO, the assessee itself disallowed an amount of Rs.53,562/- for the purpose of expenditure incurred towards earning of the said dividend income. The AO, however, proceeded to adopt the methodology contemplated under Rule 8D(2) of the Rules. Since, the assessee not followed the methodology as contemplated under Rule 8D(2) of the Rules, the AO made disallowance at 1% on whole investment under Rule 8D(2)(iii) of the Rules taking into account the total average investment of Rs.18,04,08,859/-. On perusal of the assessment order, we note that the assessee calculated average investment at Rs.1,07,12,445/- which have yielded the dividend income of Rs.74,52,725/-, but however, the AO did not satisfy with the said submissions as made by the assessee to consider those investments which yielded exempt income for the purpose of computing disallowance of expenditure. The assessee reiterated the same submissions before the CIT(A), but however, CIT(A) confirmed the order of AO. Before us, the ld. AR drew our attention to the order of Special Bench of ITAT, Delhi in the case of Vireet Investment (P.) Ltd. reported in 82 taxmann.com 415 (Delhi-Trib.) (SB) at page 51 of the paper book. The ld. AR requested to remand the issue to the file of AO for its fresh consideration with a direction to take into account those investments which were yielded exempt income for the purpose of disallowance of expenditure. It is settled principle that those investments which yielded income shall be considered for the purpose of computing expenditure in relation to exempt income. The ld. DR did not dispute the finding of Special Bench of Delhi Tribunal. Thus, taking into consideration the facts and circumstances of the case, we deem it proper to remand the issue to the file of AO to make disallowance considering those investments which yielded exempt income for its fresh consideration. The assessee is liberty 3 ITA No. 98/PAN/2022, A.Y. 2018-19 to file evidences, if any, in support of its claim. Thus, the grounds raised by the assessee are allowed for statistical purpose. 4. In the result, the appeal of assessee is allowed for statistical purpose. Order pronounced in the open court on 21 st September, 2023. Sd/- Sd/- (R.S. Syal) (S.S. Viswanethra Ravi) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददिांक / Dated : 21 st September, 2023. रधव आदेश की प्रधतधलधप अग्रेधर्त / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. धवभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण, पणजी, / DR, ITAT, Panaji. 5. गार्ा फ़ाइल / Guard File. //सत्याधपत प्रधत// True Copy// आदेशािुसार / BY ORDER, वररष्ठ धिजी सधिव / Sr. Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune