2016 (7) TMI 1256 - AT - Income Tax

Disallowance made u/s 14A - proceedings initiated u/s 154 - CIT(A) deleted disallowance - Held that - We hold that the assessee has got sufficient own funds to make the investments and when that point is not in dispute, no disallowance could be made u/s 14A of the Act read with Rule 8D(2)(ii) of the Rules. - Decided against revenue Whether the disallowance u/s 14A read with Rule 8D could be made in the proceedings u/s 154 - Held that - We find that the revenue had come on appeal before us on this ground on the pretext that the ld CIT-A had held that the issue of disallowance u/s 14A read with Rule 8D is a debatable issue and hence cannot be made in the proceedings u/s 154 of the Act. But we find from the ld CITA s order that this aspect has been dismissed and in fact had been held in favour of the revenue. Hence the revenue cannot have any grievance on the same. We also find that the assessee had not preferred any appeal before us against this finding of the ld CITA. Accordingly the ground no.2 raised by the revenue is dismissed as infructuous.

Summary

Issues involved:
1. Condonation of delay in filing appeal by the revenue.
2. Justification of deleting disallowance made under section 14A of the Income Tax Act.
3. Applicability of disallowance under section 14A read with Rule 8D in proceedings under section 154 of the Act.

1. Condonation of Delay:
The appeal by the revenue was delayed by 26 days, and a condonation petition was filed. The delay was condoned, and the appeal was admitted for adjudication.

2. Disallowance under Section 14A:
The main issue revolved around the deletion of disallowance made under section 14A of the Act. The revenue contested the deletion of disallowance of ?92,89,825 made by the assessee voluntarily. The revenue argued that borrowed funds might have been used for investments, necessitating examination. However, the assessee contended that borrowed funds were only used for the intended purpose of fixed assets, not investments. The Appellate Tribunal found that the assessee had sufficient own funds for investments, as evidenced by share capital and free reserves. Relying on judicial precedents, the Tribunal held that no disallowance could be made under section 14A when the assessee had enough own funds for investments. The Tribunal dismissed the revenue's appeal on this ground.

3. Applicability of Rule 8D in Section 154 Proceedings:
The revenue also raised a point regarding the applicability of disallowance under section 14A read with Rule 8D in proceedings under section 154 of the Act. The Tribunal noted that the issue was debatable but found that the contention was dismissed in favor of the revenue by the Commissioner of Income Tax Appeals (CITA). Since the assessee did not appeal this finding, the Tribunal dismissed the revenue's ground on this issue as infructuous.

In conclusion, the Tribunal upheld the decision of the CITA to delete the disallowance under section 14A and dismissed the revenue's appeal. The judgment was pronounced on July 13, 2016.