2020 (3) TMI 1450 - HC - Income Tax

Disallowance u/s. 14A r/w.r. 8D - sufficiency of own funds - Tribunal held that when the net worth as on 31.03.2010 is in excess of the investment made yielding the exempt income, disallowance u/s. 14A r/w.r. 8D is not required to be made - HELD THAT - Tribunal has affirmed the order of the FAA and in addition relied upon the aforesaid decision of the Court. The issue raised is squarely covered by the decision of this Court in the case of CIT v/s. Reliance Utilities Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT After hearing learned counsel for the parties and on perusal of the order passed by the Tribunal, we do not find any error or infirmity in the view taken by it. Decided against revenue.

Summary

Issues:
1. Interpretation of Section 14A r.w.r. 8D of the Income Tax Act, 1961.
2. Reliance on a judgment of the jurisdictional High Court.

Analysis:
1. The appeal before the Bombay High Court involved the interpretation of Section 14A read with Rule 8D of the Income Tax Act, 1961. The primary question raised was whether disallowance under Section 14A r.w.r. 8D is necessary when the net worth exceeds the investment generating exempt income. The Tribunal had held that in such a scenario, disallowance is not required. The appellant challenged this interpretation, arguing that disallowance should be made regardless of the net worth exceeding the investment.

2. The second substantial question of law revolved around the reliance placed by the Tribunal on a judgment of the jurisdictional High Court in the case of CIT vs. Reliance Utilities & Power Ltd. The appellant contended that the Tribunal erred in relying on this judgment as it was allegedly distinguishable based on the facts of the case. However, the High Court noted that the issue at hand was already settled by a previous decision of the Court in the case of CIT v/s. Reliance Utilities & Power Ltd., [2009] 178 Taxman 135 (Bombay).

3. Upon reviewing the Tribunal's order and considering the arguments presented by both parties, the High Court found no error or infirmity in the Tribunal's decision. The High Court concurred with the Tribunal's interpretation of the law regarding the applicability of disallowance under Section 14A r.w.r. 8D when the net worth exceeds the investment generating exempt income. Consequently, the High Court dismissed the appeal, ruling in favor of the respondent-assessee.

Conclusion:
The High Court of Bombay upheld the Tribunal's decision, affirming that disallowance under Section 14A r.w.r. 8D of the Income Tax Act, 1961 is not required when the net worth exceeds the investment yielding exempt income. The Court also validated the Tribunal's reliance on a previous judgment of the jurisdictional High Court, ultimately dismissing the appeal filed by the revenue.