2023 (7) TMI 1357 - AT - Income Tax

Disallowance of expenditure u/s 14A r.w.r. 8D - as per assessee no disallowance of interest expenditure u/r 8D(2)(ii) can be made, as the assessee had sufficient interest free fund available by way of reserves and surplus to take care of the investment made in assets yielding exempt income - HELD THAT - As there are no current investments in the impugned assessment years. All the investments have been carried over from earlier assessment years. It is further noticed, the assessee had sufficient interest free funds available with it by way of share capital, reserves and surplus. That being the factual position emerging on record, we hold that no disallowance of interest expenditure can be made under rule 8D(2)(ii). Hence, we direct the Assessing Officer to delete the disallowance made under Rule 8D(2)(ii) for both the assessment years under appeal. As regards the disallowance made under Rule 8D(2)(iii), respectfully following the ratio laid down in Vireet Investments (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI we direct the Assessing Officer to consider only those investments which have yielded exempt income during the relevant assessment years for computing average value of investments. Grounds are partly allowed.

Summary

Issues Involved:
The appeal involved the delay in filing, disallowance of expenditure under section 14A of the Income-tax Act, 1961 read with Rule 8D for assessment years 2011-12, 2012-13, and 2013-14.

Delay in Filing the Appeals:
The appellant sought condonation of a 101-day delay in filing the appeals due to COVID-19 restrictions. The delay was condoned by the tribunal, and the appeals were admitted for adjudication.

ITA Nos. 142 & 143/Del/2021 (A.Yrs. 2011-12 & 2012-13):
The issue revolved around the disallowance of expenditure under section 14A of the Income-tax Act, 1961 read with Rule 8D. The Assessing Officer had disallowed significant amounts of expenditure attributable to earning exempt income, which the appellant contested before the first appellate authority.

Upon hearing both parties, it was noted that there were no current investments in the relevant assessment years, and the appellant had sufficient interest-free funds available. Consequently, the tribunal directed the Assessing Officer to delete the disallowance made under Rule 8D(2)(ii) for both assessment years.

Regarding the disallowance under Rule 8D(2)(iii), the tribunal directed the Assessing Officer to consider only those investments that yielded exempt income during the relevant assessment years for computing the average value of investments. Grounds were partly allowed, and certain grounds were dismissed as not pressed.

ITA No. 144/Del/2021 (A.Y. 2013-14):
In this appeal, the appellant did not press the grounds raised, leading to the dismissal of the appeal. Consequently, ITA Nos. 142 & 143/Del/2021 were partly allowed, while ITA No. 144/Del/2021 was dismissed.

In conclusion, the tribunal addressed the delay in filing the appeals and the disallowance of expenditure under section 14A of the Income-tax Act, 1961 read with Rule 8D for the assessment years 2011-12, 2012-13, and 2013-14. The tribunal allowed certain grounds, dismissed others as not pressed, and ultimately partly allowed the appeals.