M/S. CARBORUNDUM UNIVERSAL LTD.,CHENNAI V. DCIT, LTU-1, CHENNAI

ITA 79/CHNY/2025

AI Insights

The case involves M/s. Carborundum Universal Ltd., the appellant, contesting the disallowance of Rs. 21,00,000 under Section 14A read with Rule 8D(2)(iii) of the Income Tax Rules, 1962, which was confirmed by the Commissioner of Income Tax (Appeals), Chennai-16. The disallowance was initially made by the Assessing Officer, who included all investments listed in the balance sheet, not just those yielding exempt income. The appellant argued that only the investments which yielded exempt income should be considered, referencing the Special Bench decision in ACIT v. Vireet Investments (P) Ltd. The Departmental Representative supported the lower authorities' decision, emphasizing the rule's requirement for the average value of all investments. The Tribunal sided with the appellant, directing a recalculation of the disallowance in line with the cited precedent.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107235 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Other Referred Cases: ACIT v Vireet Investments (P) Ltd [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB)
• Laws Referred To: Income-tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Assessee Lawyers: R. VIJAYARAGHAVAN
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 92CA; 14A

Judgement Text

"आयकर अपीलीय अिधकरण, ‘सी’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0019ी एबी टी. वक , \u0011ा ियक सद! एवं \u0019ी जगदीश, लेखा सद! क े सम( BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.79/Chny/2025 िनधा9रण वष9 /Assessment Year: 2011-12 M/s. Carborundum Universal Ltd., No.43, VI Floor, Parry House Moore Street, Chennai GPO Parrys, Chennai – 600 001. Vs. The Joint Commissioner of Income Tax, Large Taxpayer Unit-1, Chennai. [PAN: AAACC 2474P] (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीलाथ की ओर से/ Appellant by : Shri R. Vijayaraghavan, Advocate GHथ की ओर से /Respondent by : Ms. R. Anitha, Addl. CIT सुनवाई की तारीख/Date of Hearing : 27.03.2025 घोषणा की तारीख /Date of Pronouncement : 17.04.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2011-12 arises out of the order of Learned Commissioner of Income Tax, Appeal, Chennai-16 [hereinafter “CIT(A)”] dated 22.11.2024 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) r.w.s 92CA of the Income-tax Act,1961 (hereinafter “the Act”) dated 31.03.2015. ITA No.79/Chny/2025 :- 2 -: 2. The groundS of appeal raised by the assessee are as under: “1. The order of the Commissioner of Income Tax (Appeals), Chennai-16, is contrary to the law, facts and circumstances of the case. 2. Disallowance u/s.14A r.w. Rule 8D: 2.1 The CIT(A) erred in confirming the disallowance u/s.14A r.w. Rule 8D(2)(iii) amounting to Rs.21,00,000/- by taking the total investments as appearing in the balance sheet as against those investments which are capable of earning exempt income. 2.2 The CIT(A) ought to have appreciated that the investments which yielded exempt income during the year was Rs.13,50,74,218. 2.3 The CIT(A) failed to appreciate that in ACIT v Vireet Investments (P) Ltd [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB) it was held that only those investments which yielded exempt income during the year are to be considered for computing average value of investment. 3. Appellant craves leave to adduce additional grounds at the time of hearing.” 3. The only ground of appeal in this appeal of assessee is against confirming the disallowance u/s. 14A r/w. Rule 8D(2)(iii) of the Income Tax Rules, 1962 (hereinafter “the Rules”) amounting to Rs. 21,00,000/- by taking the total investments as appearing in the balance sheet as against those investments which are capable of earning exempt income. The A.O in the assessment order has made disallowance of Rs. 1,12,08,900/- including the disallowance of Rs. 21,00,000/- under Rule 8D(2)(iii) of the Rules. On appeal, the Ld. CIT(A) confirmed the disallowance made under Rule 8D(2)(iii) of the Rules. ITA No.79/Chny/2025 :- 3 -: 4. The Ld. Authorized Representative (A.R) of the assessee has submitted that the Special Bench after of ITAT, Delhi in the case of ACIT v. Vireet Investments (P) Ltd., [2017] 82 taxmann.com 415 (Delhi – Trib.) has held that only those investments which yielded exempt income during the year are to be considered for computing average value of investment for the purpose of disallowance under Rule 8D(2)(iii) of the Rules which has not been followed by A.O and Ld. CIT(A) and therefore, the A.O may be directed to compute the disallowance u/s. 14A as per the decision of Hon’ble ITAT, Delhi Benches. 5. On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities and argued that the Rule only prescribes for average value of investment. 6. We have heard the rival submissions, and perused the materials available on record. The Ld. CIT(A) has confirmed the disallowance of Rs. 21,00,000/- computed under Rule 8D(2)(iii) by the A.O. The Hon’ble Special Bench of ITAT, Delhi in the case of ACIT v. Vireet Investments (P) Ltd., supra, has held that only those investments which yielded exempt income during the year are to be considered for ITA No.79/Chny/2025 :- 4 -: computing average value of investments. However the Ld CIT(A)/AO have computed the disallowances on average value of all the investments. As the issue is covered by the decision of Hon’ble Special Bench decision in the case of ACIT v. Vireet Investments (P) Ltd., the A.O is directed to compute disallowance u/s. 14A r/w. Rule 8D(2)(iii) of the Rules accordingly. In view of the above, the appeal filed by the assessee is allowed. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced on 17th April, 2025. Sd/- Sd/- (एबी टी. वक ) (ABY. T. Varkey) \u0011ाियक सद! / Judicial Member (जगदीश) (Jagadish) लेखा सद! /Accountant Member चे\u0010नई/Chennai, \u0013दनांक/Dated: 17th April, 2025. EDN/- आदेश क\u0016 \bितिल\u0019प अ\u001aे\u0019षत/Copy to: 1. अपीलाथ\b/Appellant 2. थ\b/Respondent 3. आयकर आयु\u0010/CIT, Chennai 4. िवभागीय ितिनिध/DR 5. गाड\u0019 फाईल/GF "