L/h Manjusha Anil. Lodha , Late Shri Anil B. Lodha, Nashik V. Assistant Commissioner of Income-tax, Circle - 1, , Nashik

ITA 995/PUN/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4080 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 10-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.995/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year: 2014-15 L/h Manjusha Anil Lodha, Late Shri Anil Bansilal Lodha, Mangal Bhavan, Opp. Swami Vivekananda School, Panchawati, Nashik-422003. PAN : AAGPL1981M Vs. ACIT, Circle-1, Nashik. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 1, Nashik [‘the CIT(A)’] dated 15.05.2019 for the assessment year 2014-15. 2. Briefly, the facts of the case are that the appellant is an individual engaged in the business of contractors and trading in Assessee by : Shri Pramod S. Shingte Revenue by : Shri Arvind Deasai Date of hearing : 04.08.2022 Date of pronouncement : 23.08.2022 ITA No.995/PUN/2019 2 shares. The return of income for the assessment year 2014-15 was filed on 30.11.2014 declaring total income of Rs.1,25,59,730/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-1, Nashik (‘the Assessing Officer’) vide order dated 16.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at total income of Rs.1,41,55,990/- after making addition of Rs.15,96,255/- u/s 14A of the Act. The factual background of the above additions is as under : During the course of assessment proceedings, the Assessing Officer found that the appellant earned exempt income, however, no expenditure was disallowed. Accordingly, he computed the disallowance u/s 14A r.w. Rule 8D of the Income Tax Rules, 1962 (‘the Rules’) of Rs.21,13,372/- includes disallowance of Rs.18,23,630/- and disallowance under clause (iii) of Rule 8D(2) of Rs.2,89,742/-. 3. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) contending that no interest expenditure was incurred to earn the exempt income as the own funds are more than the investments. However, the ld. CIT(A) rejected the above contentions by holding that the assessee should have bifurcated the ITA No.995/PUN/2019 3 utilized interest bearing funds. However, the ld. CIT(A) restricted to the total disallowance to the extent of exempt income of Rs.15,96,255/-. 4. Being aggrieved by the order of the ld. CIT(A), the appellant is in appeal before us in the present appeal. 5. The ld. AR taking us through the order of ld. CIT(A) at pages no.7 to 9 submits that own funds of the appellant were stood Rs.22,49,74,846/- whereas the cost of investment is only Rs.6,11,72,904/-. Thus, he submits that in view of the well settled position of law that when the own funds far exceeds the investments, no disallowance of interest under Rule 8D(2) is called for. However, he submits that as regards to the computation of disallowance under limb (iii) of Rule 8D(2), the matter may be set- aside to the Assessing Officer with direction to compute the disallowance under Rule 8D(2)(iii) by considering the value of those investments which yielded the exempt income alone for the purpose of computing the average value of investments. 6. On the other hand, ld. CIT-DR placing reliance on the orders of the lower authorities submits that the disallowance be restricted to the exempt income. ITA No.995/PUN/2019 4 7. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the manner of computation of disallowance under limb (iii) of Rule 8D(2) of the Rules. From reading of the assessment order, it is not clear as to how the Assessing Officer had arrived at average value of investments. Even the ld. CIT(A) had not clearly dealt with as to the manner of computation of disallowance under limb (iii) of Rule 8D(2) of the Rules. Therefore, for the purpose of computing the disallowance under limb (iii) of Rule 8D(2) of the Rules, we restore the matter to the file of the Assessing Officer for the purpose of computing the disallowance under Rule 8D(2)(iii) of the Rules with direction that the amount of disallowance should be computed by considering the value of those investments, which yielded the exempt income alone for the purpose of arriving at average value of investments, in view of the decision of the Hon’ble Delhi High Court in the case of in the case of Joint Investments Pvt. Ltd. vs. CIT, 374 ITR 694 (Delhi), the decisions of Hon’ble Madras High Court in the cases of ACB India Ltd. Vs. Assistant Commissioner of Income Tax, Marg Ltd. Vs. CIT, 318 CTR (Mad.) 148 and CIT Vs. Shriram Ownership Trust 318 CTR (Mad.) 233 and also by the ITA No.995/PUN/2019 5 Hon’ble Karnataka High Court in the case of Pragathi Krishna Gramin Bank Vs. Jt.CIT, 95 Taxman.com 41 (Kar.). Thus, the issue raised by the appellant stands partly allowed. 8. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced on this 23 rd day of August, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 23 rd August, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A) -1, Nashik. 4. The Pr. CIT-1, Nashik. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.