2014 (6) TMI 836 - AT - Income Tax

Disallowance of interest Applicability of Rule 8D of the Rules Investment in shares Held that - CIT(A) was of the view that a disallowance has to be made in accordance with the provisions of rule 8D(2)(iii) - nothing is borne out from the record that which are the expenses which do not have any bearing or cannot be said to be attributable for earning of exempt income and which expenses are directly relatable to other business activities - In the absence of details, the formula prescribed under rule 8D(2)(iii), has to be applied - provisions of rule 8D is applicable from the AY 2008 09 thus, the order of the CIT(A) is upheld Decided against Assessee. Grant of interest u/s 244 of the Act - Self assessment tax paid Held that - Self assessment tax is payable on the income shown in any return of income required to be furnished under various provisions of the Act, after taking into account, the amount of tax, if any, paid earlier which can also include advance tax - the self assessment tax includes any amount of tax which has already been paid under the provisions of the Act - the assessee has paid the tax for the purpose of its taxable income for the AY 2008 09, in the month of July 2008 - due date for filing the return of income was 30th September 2008 - If the tax has been paid prior to the date of filing of return of income, then it has to be construed as amount of tax already paid as contemplated in clause (i) of sub section (1) of section 140A. The tax paid by the assessee for a sum of Rs. 4.50 crores, is nothing but tax paid under self assessment tax for the purpose of section 140A and once that is so, the assessee is entitled for interest under section 244A Relying upon Commissioner of Income-tax Versus Vijaya Bank 2011 (7) TMI 582 - KARNATAKA HIGH COURT thus, the assessee is entitled to refund of self assessment tax along with the interest u/s 244A, which is to be calculated from the date of payment of tax till the date of refund Decided in favour of Assessee.

Summary

Issues Involved:
1. Disallowance of interest expenditure under section 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09.
2. Disallowance of administrative expenses in relation to exempt income under rule 8D(2)(iii).
3. Non-granting of interest under section 244A on self-assessment tax paid.

Analysis:

Issue 1: Disallowance of Interest Expenditure
The appellant challenged the disallowance of interest expenditure by the Assessing Officer under rule 8D(2)(ii) for investments in shares made out of own and surplus funds. The appellant argued that the disallowance was based on a previous year's order and had sufficient surplus funds for investments. The Tribunal upheld the Commissioner (Appeals)'s decision to restrict the disallowance at Rs. 1,38,036, considering the utilization of loans for business purposes and investments made from cash credit bank accounts. The Tribunal found the decision reasonable and legally correct, dismissing the appellant's contentions.

Issue 2: Disallowance of Administrative Expenses
Regarding administrative expenses disallowance under rule 8D(2)(iii), the appellant contended that no expenditure was attributable to investment or earning exempt income. The Commissioner (Appeals) upheld the disallowance, stating that indirect expenses related to earning exempt income must be considered. The Tribunal agreed with the Commissioner (Appeals), applying rule 8D(2)(iii) as no specific details were provided to differentiate expenses. Previous Tribunal decisions were cited to support the application of rule 8D, leading to the dismissal of the appellant's grounds.

Issue 3: Non-Granting of Interest under Section 244A
The appellant claimed interest under section 244A on self-assessment tax paid before filing the return of income. The Commissioner (Appeals) denied interest, stating the tax was paid on an estimated basis before filing the return. The Tribunal disagreed, citing section 140A(1) that includes self-assessment tax as tax already paid under the Act. Relying on precedents, the Tribunal allowed the appellant's claim for interest under section 244A from the date of payment till the refund date, contrary to the Commissioner (Appeals)'s decision.

In conclusion, the Tribunal partially allowed the appellant's appeal, upholding the disallowance of interest expenditure and administrative expenses but granting interest under section 244A on self-assessment tax paid. The judgment provides a detailed analysis of each issue raised by the appellant, applying legal provisions and precedents to reach a reasoned decision.