2013 (5) TMI 996 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of interest and other administrative and indirect expenses u/s 14A of the Act.
2. Admission of additional evidence by the Tribunal.
3. Rectification of the Tribunal's order u/s 254(2) of the Act.

Summary:

1. Disallowance of Interest and Other Administrative and Indirect Expenses u/s 14A of the Act:
The assessee, engaged in printing currency notes, invested Rs. 20 Crores in mutual funds. The AO disallowed interest and other expenses proportionately under Sec. 14A, despite the assessee's claim of no income or expenditure incurred for these investments. The AO referred to the ITAT Delhi Special Bench decision in Cheminvest Ltd. v. ITO, which held that Sec. 14A applies even if no income is earned. The AO applied Rule 8D(2) of the IT Rules, disallowing Rs. 13,25,315/-. The CIT(A) confirmed this disallowance. However, the Tribunal, considering the investment was made on the last day of the previous year, concluded no interest disallowance could be made for AY 2008-09 and directed the deletion of the disallowance.

2. Admission of Additional Evidence by the Tribunal:
The Tribunal admitted additional evidence, including bank statements and documents showing the investment in mutual funds was made from an overdraft account and the funds were received from RBI. The Tribunal found these documents necessary for proper appreciation of the case and admitted them despite opposition from the DR. The Tribunal held that the additional evidence confirmed facts not disputed by the Revenue and did not remand the matter to the AO.

3. Rectification of the Tribunal's Order u/s 254(2) of the Act:
The Revenue filed a miscellaneous petition arguing the Tribunal should have remanded the issue to the AO for examining the additional evidence. The Tribunal held that its discretion to admit additional evidence and not remand the matter was within the parameters of Rule 29 of the ITAT Rules. The Tribunal found no apparent error in its order and dismissed the Revenue's petition.

4. Disallowance of Indirect Expenses under Rule 8D(2)(iii):
The Tribunal noted that it had not adjudicated on the disallowance of Rs. 6,15,000 under Rule 8D(2)(iii) for indirect expenses. The Tribunal remanded the issue to the AO for fresh consideration, directing the AO to objectively examine the assessee's claim that no indirect expenses were incurred and make a disallowance only if the claim was found incorrect.

Conclusion:
The Tribunal's order was modified to delete the disallowance of Rs. 7,10,315 under Rule 8D(2)(ii) and remand the disallowance of Rs. 6,15,000 under Rule 8D(2)(iii) to the AO for fresh consideration. The Revenue's miscellaneous petition was dismissed, and the assessee's petition was allowed to the extent indicated.