2018 (2) TMI 1899 - AT - Income Tax

Disallowing u/s. 14A r.w. Rule 8D - computing book profit under MAT provision in proceedings u/s. 143(3) - HELD THAT - Tribunal s order in assessee s cases itself in assessment years 2007-08 and 2008-09 dated 22.06.2016 reversing a similar Section 14A disallowance even after introduction of the computation formula in question under Rule 8D of the Income Tax Rules. DR fails to rebut this factual position. We however noticed that the issue stands covered as per the above tribunal s decision only qua the former limb of proportionate interest expenditure disallowance. The latter limb of administrative expenditure disallowance has nowhere been discussed either in CIT(A) s order in question or before the tribunal. CIT(A) s above extracted findings also nowhere specifically deal with the instant administrative expenditure issue. There can hardly be any dispute that such an administrative expenditure has to be disallowed post assessment year 2008-09. We therefore accept learned Departmental Representative s corresponding submission regarding this administrative expenditure issue aspect. The impugned disallowance is therefore revived to the extent of 7, 21, 908/- only. The Revenue s former substantive ground is therefore partly accepted in above terms. Impugned Section 14A r.w. Rule 8D disallowance is to be added in MAT computation - Issue is not more res integra in view of tribunal s special bench decision in case of ACIT vs. Vireet Investment P. Ltd. 2017 (6) TMI 1124 - ITAT DELHI holding that such a disallowance is not to be added in MAT computation. Revenue s instant latter substantive ground is therefore declined.

Summary

Issues:
1. Disallowance under Section 14A r.w. Rule 8D for assessment year 2009-10.
2. Whether disallowance under Section 14A r.w. Rule 8D is to be added in Minimum Alternate Tax (MAT) computation.

Issue 1: Disallowance under Section 14A r.w. Rule 8D for assessment year 2009-10:

The Revenue's appeal contested the CIT(A)-9, Ahmedabad's decision to reverse the Assessing Officer's disallowance of an amount under Section 14A r.w. Rule 8D of the Income Tax Rules. The Assessing Officer had disallowed an amount of ?94,40,092/-, which included proportionate interest cost and administrative expenditure, in the computation of book profit under MAT provision. The CIT(A) considered the appellant's contentions and case laws, including the availability of non-interest bearing funds for investments yielding exempt income. Relying on various judgments, the CIT(A) concluded that no disallowance under Section 14A was warranted in this case, directing the Assessing Officer to delete the disallowance of ?94,40,092/-.

Issue 2: Whether disallowance under Section 14A r.w. Rule 8D is to be added in MAT computation:

Regarding the inclusion of the disallowance under Section 14A r.w. Rule 8D in the MAT computation, the tribunal referred to a special bench decision in the case of ACIT vs. Vireet Investment P. Ltd., where it was held that such disallowance is not to be added in the MAT computation. Consequently, the Revenue's substantive ground on this issue was declined, and the appeal was partly allowed, reviving the disallowance to the extent of ?7,21,908/- only.

In conclusion, the appellate tribunal partially allowed the Revenue's appeal concerning the disallowance under Section 14A r.w. Rule 8D for the assessment year 2009-10. The tribunal upheld the CIT(A)'s decision to delete the disallowance of ?94,40,092/- based on the availability of non-interest bearing funds for investments yielding exempt income. However, the tribunal declined the Revenue's request to include the disallowance in the MAT computation, following the precedent set in a special bench decision.