ITAT confirmed addition to proportionate amount u/r 8D(2)(ii) (of Income Tax Rules, 1962)

1. Advaith Motors Pvt Ltd was a dealer in motor cars, and spares.

2. It filed its return of income declaring an income of Rs.5,02,32,420.

3. AO noted that assessee had earned dividend income of Rs.3,90,135 which was claimed as exempt.

4. Assessee had only offered Rs.56,55,867 as expenses relating to exempt income.

5. AO held that assessee had not admitted any amount for indirect expenditure attributable to the earning of the tax free income.

6. AO re-computed the disallowance u/s 14A (of Income Tax Act, 1961).

7. CIT(A) deleted such disallowance.

On appeal, the ITAT held as under:

8. ITAT followed the Tribunal’s decision in assessee’s own case wherein it was held that for application of Sec.14A(2) (of Income Tax Act, 1961), it is necessary for the AO to show that he is not satisfied with the correctness of the claim of the assessee with regard to the expenditure claimed to have been incurred for earning exempt income.

9. It was also held that this condition applies even where the claim is one of no or nil expenditure .We are of the opinion that the CIT(A) was justified in restricting the addition to the proportionate amount of Rs.18,90,931/- applying Rule 8D(2)(ii) (of Income Tax Rules, 1962).

Case Reference - The Deputy Commissioner of Income-tax Vs M/s Advaith Motors Pvt.Ltd.

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE

BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND

SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER

ITA No.525(B)/2015

(Assessment year : 2011-12)