9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (11) TMI 268 - AT - Income TaxDisallowance allege that assessee has paid interest @ 9% per annum on the loan taken by it whereas it has charged interest @ 6.5% to 7% from M/s. PT Minda Asian Automotive Ltd., Indonesia. i.e. joint venture company alleged that loan was given by the assessee without any business exigencies - explanation given by the assessee that it will get return in future Held that - Assessee is a 50% shareholder of the joint venture exploring the business possibility and made the investment in the joint venture - loan was given in foreign currency to an Indonesian company. Assessing Officer ought to have compared the libor rates prevalent in the international market at that point of time - assessee has demonstrated that such rate was in between 4% to 5%. It has charged the rate in between 6.5% to 7%. Thus, in such situation, even on this count also, no disallowance can be made - disallowance deleted Disallowance under sec. 14A - CIT(Appeals) has observed that Rule 8D will not be applicable in the present case in view of the decision of Hon ble Bombay High Court in the case of Godrej Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ) wherein it was held that Rule 8D has been brought on the statute book w.e.f. 24.3.2008 and it will be applicable from assessment year 2008-09 Held that - Disallowance has to be worked out after taking into consideration the surrounding circumstances. From the order of Learned CIT(Appeals), it does not reveal that Learned CIT(Appeals) has considered the relevant details before restricting the disallowance to Rs.1 lacs on an estimate basis - matter reamanded back to Assessing Officer for readjudication
Issues:
1. Addition of Rs.6,81,247 made by Assessing Officer to the total income of the assessee under section 40A(2)(a)(b) of the Income-tax Act, 1961. 2. Disallowance under sec. 14A by Assessing Officer and restriction of disallowance by Learned CIT(Appeals) to Rs. 1 lac. Issue 1: Addition under section 40A(2)(a)(b) of the Income-tax Act, 1961: The appellant, a company engaged in leasing finance and trading, filed its return for the assessment year 2007-08. The Assessing Officer noted that the appellant, a 50% shareholder in a joint venture, charged a lower interest rate to the joint venture compared to the rate it paid on a loan. The Assessing Officer added Rs.6,81,247 to the appellant's income. The appellant contended that section 40A(2)(a)(b) was not applicable as it was earning interest income, not paying it. The appellant argued that the loan was given to a foreign company and the interest rates should be compared to international market rates, which were lower than what the appellant charged. The ITAT Delhi, after considering all aspects, allowed the appeal and deleted the disallowance, citing the business exigencies and the absence of any disallowance ground based on the interest rate charged. Issue 2: Disallowance under sec. 14A: The Revenue's appeal focused on the disallowance under sec. 14A, which the Assessing Officer set at Rs. 36,61,921 but was restricted by the Learned CIT(Appeals) to Rs. 1 lac. The Assessing Officer applied Rule 8D of the Income-tax Rules, 1962 for the disallowance. However, the Learned CIT(Appeals) held that Rule 8D was not applicable for the assessment year 2007-08 based on a decision of the Bombay High Court. The ITAT Delhi noted that in the absence of Rule 8D, the disallowance under sec. 14A should be determined based on surrounding circumstances and investment details. The ITAT Delhi allowed the Revenue's appeal, setting aside the decision of the Learned CIT(Appeals) and remitting the issue back to the Assessing Officer for readjudication in accordance with law. In conclusion, the ITAT Delhi allowed the appeal of the assessee regarding the addition under section 40A(2)(a)(b) and allowed the Revenue's appeal on the disallowance under sec. 14A, remitting the issue for further consideration by the Assessing Officer.
|
