2017 (2) TMI 1014 - AT - Income Tax

Addition u/s 14A - Held that - The assessee had made investments of shares from earlier years and assessee had shares of his sister concern and that is statistical investment. Therefore no expenditure was incurred. Moreover assessee had not exempted income during the year under consideration. Therefore when assessee has not earned any dividend from exempted income and when the tribunal has allowed the claim of the assessee in earlier orders for A.Y. 2009-10 wherein held no disallowance u/s. 14A can be made in a year in which no exempt income has been earned or received by the assessee. We allow the claim of the assessee. Addition towards debit balance written off - Held that - The assessee submitted that the write-off amount is business loss carried in course of business. Therefore we are of the view that when the tribunal has restored this file to A.O, we respectfully following the same we restore this file as per the decision of in the assessee own case in A.Y.2009-10 wherein the tribunal has held assessee is directed to demonstrate that the impugned creditors have been written back in the subsequent years to the satisfaction of the Assessing Officer and the Assessing Officer is directed to verify the same and if the claim of the assessee is found correct the additions should not be made.

Summary

Issues:
1. Disallowance under Rule 8D read with Section 14A of Income Tax Act, 1961
2. Disallowance of sundry balances written off

Analysis:

Issue 1: Disallowance under Rule 8D read with Section 14A of Income Tax Act, 1961

The appeal was filed against the order of CIT(A) for the assessment year 2010-11, challenging the disallowance of ?14,78,690 under Rule 8D read with Section 14A of the Income Tax Act, 1961. The Assessing Officer calculated the disallowance as the assessee had made investments without segregating expenses related to exempt income. However, during the hearing, it was argued that no expenses were incurred as the investments were old and strategically made. The tribunal allowed the claim based on the decision of the Delhi High Court, stating that no disallowance can be made if no exempt income was earned. The tribunal followed its own precedent from A.Y. 2009-10 and allowed the claim, directing the Assessing Officer to delete the addition.

Issue 2: Disallowance of sundry balances written off

The second ground of appeal related to the addition of ?82,53,393 towards sundry balances written off. The Assessing Officer observed that the assessee had not provided evidence for the write-off of advances given to contractors. The AO added the write-off amounts to the income of the assessee, which was confirmed by CIT(A). During the hearing, it was argued that a similar addition in A.Y. 2009-10 was restored to the file of the AO by the tribunal for verification. Following the same reasoning, the tribunal in the current case also restored the issue to the AO for further examination. The tribunal directed the AO to verify the claims made by the assessee regarding the write-offs and decide accordingly.

In conclusion, the tribunal partly allowed the appeal on both issues, directing the AO to delete the disallowance under Rule 8D and restoring the issue of sundry balances written off for verification.