2020 (9) TMI 274 - AT - Income Tax

Disallowance u/s. 14A r.w.r. 8D - assessee is pleading that its capital as on 31.03.2013 was at ₹ 4.27 crores, while its investments in shares on that date was at ₹ 2.81 crores only, all these investments were made long back, the assessee has not borrowed any loan towards any investment which earned exempt income and it has not claimed any interest expenditure as an expenditure from any of its income and therefore, section 14A r.w.r. 8D is not applicable. HELD THAT - Since these aspects have not been examined, we are of the view that this issue requires a fresh examination. Therefore, we remit the issue back to the AO for a fresh examination. The assessee shall lay relevant materials in support of its contention before the AO and comply with the requirements of the AO in accordance with law. The AO is free to conduct appropriate enquiry as deemed fit, but he shall furnish adequate opportunity to the assesssee on the material etc to be used against it and decide the matter in accordance with law - Assessee s appeal is treated as partly allowed.

Summary

Issues:
1. Disallowance under section 14A r.w.r. 8D for assessment year 2013-14.
2. Applicability of section 14A r.w.r. 8D on the assessee's case.
3. Claim of interest expenditure when not claimed in the return.

Analysis:

Issue 1: Disallowance under section 14A r.w.r. 8D for assessment year 2013-14
The assessee appealed against the order of Commissioner of Income Tax (Appeals) regarding disallowance under section 14A r.w.r. 8D for assessment year 2013-14. The Assessing Officer computed the disallowance at a significant amount, leading to the appeal by the assessee before the CIT(A).

Issue 2: Applicability of section 14A r.w.r. 8D on the assessee's case
The assessee, a big HUF firm with various investments and income sources, argued that section 14A r.w.r. 8D should not be applicable in its case. The assessee highlighted that its investments were made long back, no loans were taken for investments earning exempt income, and no interest expenditure was claimed as an expenditure. The Tribunal found these aspects not adequately examined and remitted the issue back to the AO for a fresh examination. The AO was directed to allow the assessee to present relevant materials and comply with legal requirements.

Issue 3: Claim of interest expenditure when not claimed in the return
The assessee contended that since it did not claim any interest expenditure in its return, the Assessing Officer should not have disallowed any expenditure. The Tribunal noted this argument and directed the AO to conduct a fresh examination, giving the assessee adequate opportunity to present its case and decide the matter in accordance with the law.

In conclusion, the Tribunal partly allowed the assessee's appeal, remitting the issue of disallowance under section 14A r.w.r. 8D back to the AO for a fresh examination. The decision emphasized the importance of a thorough review of the relevant facts and compliance with legal procedures in such cases.