2020 (3) TMI 936 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - claim of the assessee is that when sufficient own funds were available for making investment in the shares, then there cannot be any disallowance towards expenditure - HELD THAT - Details of the date of investments in the shares and availability of funds on the date of investments are not available on record. Therefore, as submitted for the assessee, the matter needs to be re-examined by the AO. Orders of both the authorities below are set aside and the entire issue of disallowance made under Section 14A read with Rule 8D is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the actual dates of investments made in the shares, availability of the assessee s own funds on the date of investments and the investment which earned the exempted income and thereafter decide the issue afresh in accordance with law, in the light of the judgment of Apex Court in Maxopp Investment Ltd. 2018 (3) TMI 805 - SUPREME COURT after giving a reasonable opportunity to the assessee. Applicability of Section 14A and the expenditure for earning exempted income. The issue raised in the cross-objection is also remanded back to the Assessing Officer for reconsideration.

Summary

Issues involved:
1. Disallowance under Section 14A of the Income-tax Act, 1961 for assessment year 2013-14.

Analysis:

1. Disallowance under Section 14A:
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) -3, Chennai, concerning the exclusion of investments made in subsidiary companies. The Departmental Representative argued that Section 14A of the Income-tax Act, 1961 is applicable even if investments are made in subsidiary companies, citing the judgment in Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640. On the other hand, the assessee contended that since it had sufficient funds for investments, there should be no disallowance. However, the lack of details regarding the dates of investments and the availability of funds led to the decision to remit the issue back to the Assessing Officer for reconsideration. The Tribunal set aside the orders of both authorities and directed the Assessing Officer to re-examine the matter, considering the actual dates of investments, availability of funds at the time of investments, and which investments earned exempted income. The decision-making process was to align with the judgment in Maxopp Investment Ltd., ensuring a reasonable opportunity for the assessee to present its case.

2. Cross-objection and Expenditure for Exempted Income:
The cross-objection raised by the assessee regarding the applicability of Section 14A of the Act and the expenditure for earning exempted income was also remanded back to the Assessing Officer for reconsideration. Both the appeal of the Revenue and the cross-objection of the assessee were allowed for statistical purposes, emphasizing the need for a thorough re-examination of the issues at hand.

In conclusion, the judgment by the Appellate Tribunal ITAT Chennai addressed the complexities surrounding disallowance under Section 14A of the Income-tax Act, 1961, emphasizing the importance of a detailed assessment of investments, funds availability, and exempted income to ensure a fair and just decision-making process.