1 ACIT v. Indexport Ltd.
ITAT ‘D’ Bench, Mumbai
Before Sushma Chowla (JM) and Abraham P. George (AM) ITA Nos. 1941 and 2200/Mum./2004
A.Y. : 2000-01. Decided on : 29-1-2009 Counsel for revenue/assessee : Sanjay Agarwal/ Nishant Thakkar
Rule 8D read with S. 14A of the Income-tax Act, 1961 — Expenditure disallowable with reference to exempt income — Disallowed expenditure is the subject matter of appeal before the Tribunal — Whether Revenue justified in its contention to apply the ratio of the Special Bench decision rendered in the matter — Held, Yes but the disallowance cannot exceed the amount originally disallowed by the AO.
Per Sushma Chowla :
Facts :
One of the issues before the Tribunal was regarding the disallowance of expenditure u/s.14A. The AO had disallowed the aggregate sum of Rs.15.2 lacs consisting of interest of Rs.8.46 lacs and other expenses of Rs.6.74 lacs under the said provisions of S. 14A. The interest amount was computed by applying the ratio of investment attributable to tax-free income earned by the assessee to total investments, including the current assets, to the sum of interest paid by the assessee. The other expenses were estimated at 10% of the total of other expenses incurred by the assessee. On appeal, the CIT(A) gave partial relief by restricting the disallowance of other expenses at 5% of the total of such expense. Being aggrieved with the order of the CIT(A) qua the other expenses, the assessee as well as the Revenue, both appealed before the Tribunal.
Before the Tribunal, the Revenue challenged the order of the CIT(A) in giving partial relief to the assessee and also sought to apply the ratio of the decision of the Special Bench in the case of Daga Capital Management Pvt. Ltd. in support of its contention for the enhanced sum of disallowance.
Held :
The Tribunal noted that the Special Bench in the case of Daga Capital Management Pvt. Ltd. has held that the provisions of Rule 8D are explanatory in nature and are applicable to all the pending cases. Therefore, even though the Tribunals in the case of the assessee in respect of the earlier years had fully allowed the expenses incurred, including the interest paid, following the Special Bench decision, it remitted back the matter to the AO with a direction to recalculate the disallowance. However, the order passed was with a condition that the amount of disallowance should not exceed the amount originally disallowed by the AO.
Case referred to :
ITO v. Daga Capital Management Pvt. Ltd., 26 SOT 603 (Mum.) (SB)
