2019 (4) TMI 1652 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - addition partly sustained by the CIT(A) being the dividend income actually earned by the assessee in the year under consideration - as contented by assessee that no disallowance on account of interest can be made u/s 14A by applying Rule 8D when there is actually a net income received by the assessee on account of interest and the disallowance u/s 14A cannot exceed the said amount actually claimed by the assessee - DR has contended that these submissions now being specifically made by the learned counsel for the assessee for the first time before the Tribunal require rectification and an opportunity may be given to the AO to verify the same - HELD THAT - We find merit in the contention of DR and the assessee has not raised any objection in this regard, we restore this issue to the file of the AO for deciding the same afresh after considering the submissions made on behalf of the assessee before the Tribunal. Ground of the assessee s appeal are accordingly treated as allowed for statistical purpose. Disallowance of long term capital loss on sale of shares - period of acquisition of the shares - acquisition of shares on the basis of share certificates issued on amalgamation in lieu of the shares originally purchased/acquired by the assessee - HELD THAT - As contended that the period of acquisition of these shares thus was September, 1988 and June/July, 1992 as rightly claimed by the assessee for working out the indexed cost of acquisition while computing the long term capital loss and the authorities below were not justified in taking the dates of acquisition of said shares on the basis of share certificates issued by M/s. Amarjyoti Prop (P) Ltd. on amalgamation in lieu of the shares originally purchased/acquired by the assessee in the year 1988 and 1992. Since this contention raised by the assessee is duly supported by the certificates issued by M/s. Amarjyoti Prop (P) Ltd. confirming the relevant dates of acquisition of the corresponding shares by the assessee originally in the year 1988 and 1992, we are inclined to accept the same. AO is accordingly directed to allow the long term capital loss on sale of shares of M/s. Amarjyoti Prop (P) Ltd. as claimed by the assessee - Decided in favour of assessee.

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act.
2. Disallowance of long term capital loss.

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

The assessee, an individual, declared a total income of ?1,87,68,010/- with exempt dividend income of ?2,36,300/-. The Assessing Officer (AO) applied Rule 8D to disallow ?5,35,092/- under section 14A. The Commissioner of Income Tax (Appeals) restricted the disallowance to the actual dividend income earned. The assessee contended that no disallowance should be made as there was a net interest income. The Tribunal agreed and directed the AO to verify the interest expenditure and income, restoring the issue for fresh consideration. The Tribunal allowed the appeal for statistical purposes.

Issue 2: Disallowance of long term capital loss:

The assessee claimed a long term capital loss of ?2,74,282/- on the sale of shares of a company. The AO recomputed the loss at ?1,93,633/- based on incorrect purchase dates. The Commissioner (Appeals) upheld the AO's decision. The assessee argued that the shares were acquired in 1988 and 1992, not as per the share certificates issued later. Supported by certificates from the company confirming the acquisition dates, the Tribunal accepted the assessee's contention and directed the AO to allow the claimed long term capital loss of ?2,74,282/-. Consequently, the appeal was allowed.

In conclusion, the Appellate Tribunal ITAT Kolkata addressed the disallowance under section 14A and the long term capital loss issues in favor of the assessee, directing the Assessing Officer to reconsider the disallowance and allow the claimed loss. The judgment highlights the importance of accurate documentation and acquisition dates in determining tax liabilities and exemptions.