2018 (2) TMI 1978 - AT - Income Tax

Disallowance u/s 14A - assessee has already suo motu offered a disallowance - HELD THAT - We find merit in the submissions of the assessee as the facts and issue involved in the case are squarely covered by the aforesaid decisions of the Hon ble High Courts in CIT Vs. Max India Ltd 2016 (11) TMI 1012 - PUNJAB AND HARYANA HIGH COURT and CIT Vs. Kapson Associates 2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT Disallowance is restricted to 6.43 lacs u/s 14A of the Act that has been suo motu offered by the assessee. Any further disallowance made by the Assessing officer or confirmed by the CIT(A) is hereby ordered to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
- Disallowance under section 14A of the Income-tax Act
- Application of Rule 8D of the Income Tax Rules
- Confirmation of addition by the Commissioner of Income Tax (Appeals)
- Availability of own sufficient funds for investment
- Appeal against the order of the Assessing officer

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning the disallowance under section 14A of the Income-tax Act. The assessee had earned dividend income of ?25 lacs and voluntarily offered a disallowance of ?6.43 lacs under section 14A. However, the Assessing officer applied Rule 8D of the Income Tax Rules and calculated a higher disallowance of ?13.95 lacs, resulting in an addition of ?7.51 lacs. The assessee contested this before the Ld. CIT(A), who upheld the Assessing officer's decision, leading to the appeal.

During the proceedings, the assessee argued that it had total reserves and surplus of ?57 crores, out of which investments were made only to the tune of ?18.37 crores, indicating the availability of own sufficient funds for investments. Citing relevant case laws, the assessee contended that if there are enough own funds available, the presumption is that investments are made from those funds, and no disallowance under section 14A should be applicable. Additionally, the assessee had already voluntarily offered a disallowance of ?6.43 lacs. The Tribunal found merit in these arguments, noting that the case fell within the scope of previous court decisions, including 'CIT Vs. Max India Ltd' and 'CIT Vs. Kapson Associates'.

Consequently, the Tribunal ruled in favor of the assessee, restricting the disallowance to the amount of ?6.43 lacs that was self-offered. Any further disallowance made by the Assessing officer or confirmed by the CIT(A) was directed to be deleted. As a result, the appeal of the assessee was allowed, and the order was pronounced in the Open Court.