Matter restored to AO where he had not given any reasons for disallowance
Matter restored to AO where he had not given any reasons for disallowance
Assessee company was into trading and investment. During assessment proceedings, AO found that assessee had received dividend income of Rs.3.75 crores, and had not apportioned any expenditure related to the exempt income. He made disallowance of Rs.3.12 crores u/s 14A (of Income Tax Act, 1961) r.w. Rule 8D (of Income Tax Rules, 1962). First Appellate Authority upheld AO's order. On appeal, the ITAT held that AO had not given any reasons for disallowance. It restored the matter to AO.-501137
1. Assessee-company,engaged in the business of Trading and Investment. The Assessing Officer (AO) completed the assessment, u/s.143(3) (of Income Tax Act, 1961), on 30.11.2011,determining the income of the assessee at Rs.4,59,08,300/-. During the course of assessment proceedings,the AO found that the assessee had received dividend income of Rs.3.75 Crores,that it had not apportioned any expenditure related to the above mentioned exempt income. He held that at least a part of the administrative expenses had to be attributable to earning of the exempt income. Invoking the provisions of section 14A (of Income Tax Act, 1961) r.w.Rule 8D(Rules) (of Income Tax Rules, 1962),he made a disallowance of Rs.3.12 Crores.
2. First Appellate Authority upheld the order of AO.
3. On appeal, the ITAT held as under:
"We find that the AO made a disallowance of Rs.3.12 crores as against the total expenses of Rs.4.14 lakhs incurred by the assessee, that the AO had not given any reason or basis for disallowing the said amount, that the AO and the FAA had mechanically applied provisions of Rule 8D (of Income Tax Rules, 1962). Disallowance u/s.14A (of Income Tax Act, 1961) could be made if the assessee claimed some expenditure against the exempt income. The reason behind the section 14A (of Income Tax Act, 1961) and Rule 8D (of Income Tax Rules, 1962) is to deny double benefit to the assessee i.e. claiming exemption on one hand and claiming expenditure on the other.But it was never intended by the legislature that disallowance should be made in a routine manner without considering the basic fact i.e. amount of expenditure incurred by the assessee. The assessee had advanced certain arguments that are listed at para 4.2 at pg No.3 of the order of the FAA. We find that the FAA has not dealt with the submissions made by the assessee. In these circumstances, we are of the opinion that the matter needs further verification and investigation. Therefore, in the interest of justice we are rendering back the issue to the file of AO for fresh adjudication who would decide the issue after considering the latest judicial pronouncement of the Hon'ble Jurisdictional High Court and the Hon'ble Delhi High Court. First effective ground is decided in favour of the assessee,in part.”
Case Reference - Income-tax Appellate Tribunal -"A"Bench Mumbai
Before S/Sh.Rajendra,Accountant Member and Amit Shukla,Judicial Member
./I.T.A. No.4014/Mum/2013 / Assessment Year: 2009-10
M/s. Krishiraj Trading Ltd. Asstt. CIT-6(2)
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