2018 (7) TMI 2321 - AT - Income Tax

Disallowance u/s. 14A - HELD THAT - We direct the AO to recompute the amount of disallowance u/s. 14A by following this decision of Vireet Investment (P) Ltd 2017 (6) TMI 1124 - ITAT DELHI if any judgement of any High Court is available by the time the issue is decided by the AO then the same may also be considered for deciding this issue. Accordingly this issue is decided in favour of the assessee for statistical purposes. Non-granting of TDS credit - HELD THAT - AO has made addition of interest income and the AO has noted that TDS was deducted against this income. But before allowing credit of TDS for this amount it has to be seen whether TDS was paid to credit of Central Government by concerned deductors or not. Hence feel it proper to restore this matter also back to the file of AO for fresh decision on this aspect and to allow credit of such TDS as per law after providing adequate opportunity of being heard to the assessee.

Summary

Issues Involved:
1. Disallowance under section 14A of the Income Tax Act.
2. Non-granting of TDS credit.
3. Disallowance of expenditure at 10% of total expenditure on an estimate basis.

Detailed Analysis:

1. Disallowance under section 14A of the Income Tax Act:

For Assessment Year 2011-12, the appellant contested the disallowance made by the AO under section 14A of the IT Act. The appellant argued that only those investments which yielded dividend income during the relevant year should be considered for disallowance computation. The appellant relied on the Special Bench decision in the case of ACIT Vs. Vireet Investment (P) Ltd., which held that "only those investments are to be considered for computing average value of investment which yielded exempt income during the year." The Tribunal directed the AO to recompute the disallowance following this decision. If any High Court judgment is available by the time the issue is decided by the AO, it should also be considered.

For Assessment Year 2012-13, a similar issue was raised, and the Tribunal directed the AO to follow the same approach as in Assessment Year 2011-12, considering the Special Bench decision and any available High Court judgments.

2. Non-granting of TDS credit:

For Assessment Year 2011-12, the appellant claimed that the AO did not allow credit for TDS of Rs. 5,293/- deducted on interest income added by the AO. The Tribunal found that the AO had noted the TDS but did not allow credit for it. The Tribunal restored the matter to the AO to verify if the TDS was paid to the credit of the Central Government and to allow the credit as per law after providing an adequate opportunity of being heard to the assessee.

3. Disallowance of expenditure at 10% of total expenditure on an estimate basis:

For Assessment Year 2012-13, the appellant contested the disallowance of 10% of total expenditure by the AO. The appellant argued that the expenses were necessary as the year was the last year of the assessee’s business. The Tribunal noted that there was no business income in the year and major expenses like interest on Sundaram Finance Housing Loan and processing fees were not allowable as there was no rental or business income. However, since the Tribunal cannot increase the disallowance while deciding the appeal, it upheld the CIT(A)'s decision to disallow 10% of the total expenses.

Conclusion:

The appeal for Assessment Year 2011-12 is allowed for statistical purposes, directing the AO to recompute the disallowance under section 14A and verify the TDS credit. The appeal for Assessment Year 2012-13 is partly allowed for statistical purposes, directing the AO to recompute the disallowance under section 14A and upholding the disallowance of 10% of total expenditure.